Ask Liz Weston

Get smart with your money

Q&A

Q&A: When your friends seem to have more money than you: Getting over money envy

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Dear Liz: I am a 41-year-old man who is married with small children. I have finally reached the point financially where I am meeting or exceeding personal goals for retirement, college savings and reduced monthly expenses. I have a high income. I drive a piece-of-crap car because it’s paid for, but I am still hemorrhaging cash! Yet my peers are buying second homes at the lake or in ski country. What am I doing wrong?

Answer: Congratulations! You’re doing a lot right with your money, and you may not be doing anything wrong. To borrow a phrase, you can’t judge your insides by other people’s outsides.

Some of your peers may have inherited money, or received infusions from generous parents. More likely, they’re not saving enough, or at all, for retirement or their children’s educations.

They also may be deeply in debt. Although their lives may look good on the outside now, their futures may be a lot less flush.

You can’t know how other households conduct their financial affairs, so keep focusing on your own situation and how you can make it better. If you feel like you’re hemorrhaging cash, track where the money is going for a while. If you discover as a family that you’re spending on things that aren’t important to you, you and your spouse can look for ways to redirect spending to better support your values.

Q&A: Are those 529 college savings plans still a good idea?

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Dear Liz: Last week we had an infant come into this world and we’re already thinking about college. I know you’ve addressed this before, but things change and I was wondering if the 529 plan is still the way to go. If our son decides not to go to college, what are the tax consequences?

Answer: Congratulations! Yes, state-sponsored 529 college savings plans are still a great way for many families to save for future college costs. The money grows tax deferred and withdrawals are tax free when used for qualified education expenses.

Even if your son opts not to go to a four-year college, he will probably need some kind of post-secondary education. Withdrawals from 529 plans can be used to pay for any accredited school in any state, including community college and trade schools.

On the off chance that he doesn’t get any kind of schooling, or conversely gets a full ride, you can change the beneficiary so that the money pays for the education of a sibling or other close relative, including yourself. And if nobody wants to use the money for schooling, you can simply withdraw it. The earnings will be taxed and subject to a 10% penalty.

Q&A: A collection of advice on selling collections

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Dear Liz: I concur with your advice regarding selling collections. I am a retired licensed marriage and family therapist. I’ve witnessed clients struggle with caring for a loved one and their things. One family started taking photos of their loved one with much-treasured collectible objects, and recording the stories told about them. This offered increased connection and understanding across the generations. With this recorded story, it was easier to release and sell the things. And there were a few treasures that family members asked to keep, pleasing their elders immensely!

Answer: What a lovely idea! As collectors know, it’s all about the story, and many would embrace the chance to share theirs.

Dear Liz: A friend collected and has some wonderful pieces of Japanese items such as antique tonsu chests and porcelain, some of which are quite valuable. When she was updating her estate plan, her attorney suggested she ask me, as a friend and fellow collector, to be an advisor to her family about disposing of these items after her death (assuming she predeceases me). My contact info was then shared with her loved ones. Another trick I have seen is to have copies made of receipts with identifying information and prices paid placed inside drawers of valuable furniture. Whether these items are sold at auction, estate sale or upscale consignment, the information is extremely valuable in helping to determine authenticity. Naturally, this information should also be stored with legal documents. Prior to a recent surgery I also shared my information with my sister and went over the location in my files for all pertinent information. It can be difficult for heirs to differentiate Baccarat crystal, vintage Wedgwood china and top-quality French copper from goods sold in discount chains. Once they know what the items are, the internet and EBay make it easy to get a sense of the value of items for sale. Hope you find this helpful.

Answer: Very much so, and I’m sure readers will as well. Thanks for the tips!

Dear Liz: Regarding your advice to the collectors and the impact on the executors, there can be another wrinkle: disagreements on valuations among the heirs.

I’m the executor for my parents’ estate and my mother spent a considerable amount of time and resources collecting art. Unfortunately there is little documentation on the art and it is in a niche market where it will be hard to get accurate values.

I’ve decided that when the time comes, I will use what little documentation my mother had to establish values and then divide the art collection among the heirs. If the heirs want to liquidate the art, that is their choice. It takes me out of the middle of squabbles over whether or not I got a “good” price for something. And it gives me time to decide for my portion of the collection what pieces I want to keep for myself and what I want to sell. This obviously only works when the heirs are people and not organizations and they have the ability to take the collection rather than a check.

Answer: Oh, boy.

If you are the executor, you will have a fiduciary duty to the estate. What that means is that you will be legally required to act in the estate’s best interests, rather than in your own. Cherry picking a collection is an excellent way to violate that duty and potentially get yourself sued. Another way to invite lawsuits is to rely on scanty, out-of-date documentation to establish values without attempting to get current appraisals.

If you really don’t want the hassle, ask your mother to designate, in writing, who gets what. She should discuss this with an estate planning attorney to see if her estate documents need updating or if she can include a letter detailing her bequests.

Q&A: A bill shows up twice in a credit report. Now what?

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Dear Liz: I have been doing everything to raise my credit scores, which were horrible. I see some medical bills on my credit reports that seem identical. Should I try to dispute them or just let them go? I heard that if you try to dispute them, it allows the creditor to restart the clock on paying them, potentially keeping them on your report for seven more years.

Answer: You heard wrong, fortunately. Disputes don’t extend the limit on how long negative information can be reported.

You may be confusing the seven-year credit reporting time limit, which is part of the federal Fair Credit Reporting Act and restricts how long negative information stays on a credit report, with state statutes of limitation.

Statutes of limitation are supposed to limit how long a creditor may sue you over a debt. (The key phrase is “supposed to.” Collectors do file lawsuits on debts that are too old, hoping that the debtor won’t show up in court to point that out.)

Statutes of limitation can range from two to 15 years, depending on the state and the type of debt. In some states, it’s possible to restart the statute of limitations by making a payment on a debt, or even acknowledging that the debt is yours. (In California, the statute of limitations is four years for most debts.)

You’ll want to avoid either until you’re sure the bills are correct. You can start by disputing the bills with the credit bureaus.

If that doesn’t remove the duplicates, you can contact each collection agency in writing. Ask them to validate that the unpaid bill actually belongs to you and that they have the right to collect. Mention that if they cannot validate the debt, you want the bill removed from your credit reports. Also ask the collector to respond to your letter within 30 days.

Removing any duplicates may help your scores. Actually paying the collections typically won’t. It’s up to you whether you want to try settling the debts and risk reviving the statute of limitations, or simply wait until the debts fall off your credit reports after the seven-year mark.

Q&A: To sell or not to sell that collection

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Dear Liz: You’ve twice advised collectors to sell their collections while they’re still alive, rather than leave the task to an executor who won’t have the collector’s intimate knowledge of the market for these items. Collectibles bring joy to the collector and are probably most valued the closer the end approaches. It would bring sadness rather than joy to unload them right at that point in life. Right now, I’m trying to declutter my house and even the stuff that has been moldering in boxes for decades hurts a little to let go of. I’m named as the executor in a buddy’s trust and will need to move his tools. Even if his old arthritic hands can’t operate the lathe anymore, he looks at the machine and I can see the memory of turning a bowl in the expression he wears. I say, accept the responsibility of an executor fully.

Answer: If you haven’t served as an executor, you may not fully understand how daunting and time consuming the task can be even without having to deal with a large collection.

No one is suggesting that people divest themselves entirely of a prized collection. But letting go of stuff can be immensely freeing, as well as a real gift to the people we leave behind.

If you need motivation to continue your decluttering, consider reading Margareta Magnusson’s book, “The Gentle Art of Swedish Death Cleaning: How to Make Your Loved Ones’ Lives Easier and Your Own Life More Pleasant.”

Q&A: When paying debt hurts credit score

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Dear Liz: You recently answered someone whose credit scores dropped more than 30 points after they paid off a mortgage. You mentioned that the big drop was probably because the mortgage was the person’s only installment loan. Credit scores like to see active use of both types of credit, installment loans and credit cards. Because this person’s scores were so high, they almost certainly were still actively using credit cards. But you should remind people that if they stop using credit, eventually they won’t have any credit scores at all.

Answer: Consider them reminded. There’s no need to carry balances; just using credit cards regularly is enough.

A few other readers wrote in suggesting the letter writer get a personal loan as a way of increasing their scores. Although personal loans can be a great help to people building credit, there’s really no point in increasing scores once they’re above about 760 on a 300-to-850 scale. Higher scores only get you bragging rights, and it would be a little silly to pay a lender unnecessary interest to get those.