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

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: An emergency kit document hack

Dear Liz: Thanks for answering my question about storing hard copies of financial services records for emergency preparedness. My wife and I finally reached a compromise: We printed out our account numbers, but we attached code names to them that only we would recognize. Now both of us are comfortable that even though someone might have our account numbers, they’ll never know which financial institution to contact.

Answer: That’s a terrific compromise that keeps your important financial information accessible to you but not to an identity thief.

Q&A: This son’s failure to launch is hurting his parent’s finances

Dear Liz: I have a 24-year-old son who has been trying to get through college for nearly seven years. I have helped him with direct gifts and by co-signing loans, but I am pretty tapped out. He tells me he has one year left but has no way to pay for it. He is disorganized and not particularly motivated, although he does talk about things he’s learning and I think is at least somewhat committed to school (he maintains about a B to C average at the state school he attends). He has moved back home to save money and is working full time but had gone many months without a job in the last year. He accumulated credit card debt and generally is a financial disaster.

Do I take out a second mortgage or co-sign another loan, which would be a stretch for me, or do I watch him drop out of school, which seems a really harsh life lesson? I know he might be able to take a year off and then go back, but let’s be honest — if he takes a break, it becomes less likely that he’ll ever return.

Answer: You sound like you’re more than tapped out. You already may be overextended because those private education loans you co-signed are just as much your responsibility as his — and he doesn’t sound like a terrific credit risk, at least at this point. Doubling down by borrowing more money doesn’t seem like the wisest choice for either of you.

Taking a break from school could increase the chances he won’t get his degree, but it also could give him time to get his financial life in better shape and perhaps tackle some of the issues impeding his progress. His disorganization and slow pace through school could point to an underlying problem such as a learning disability or attention-deficit/hyperactivity disorder (ADHD). His college may have a counseling center that could connect him with resources to help, or you could ask your family physician for a referral.

Q&A: How to evaluate consumer options and not get cheated

Dear Liz: Although I’m able to pay my bills, it’s the decisions regarding cable, telephone, Internet and various insurance options that drive me nuts! I’ve tried to seek out independent groups that discuss such issues, but none exists in my area; and these decisions are not covered by my financial planner, nor do I wish to pay a senior money manager for this advice. As an elder orphan, I’m finding these decisions and others regarding repairs, workmen, etc. very stressful. Friends don’t really want to help and be held “responsible” if their recommendations don’t work out. What do you suggest?

Answer: Sometimes it feels like a full-time job to evaluate your options as a consumer and not get snookered. This isn’t an issue that’s unique to older people. But as we age, our financial decision-making abilities tend to decline, and we become more vulnerable to fraud or bad decisions. So you’re smart to want a trustworthy helper to guide you.

A lot of Internet sites clamor to be that helper, but not all are as objective as they seem to be. They may be steering you toward the companies that pay them the most. Make sure you read a site’s disclosure statements so you understand what its conflicts of interest might be.

One outfit you can trust is Consumer Reports, which has a print magazine as well as an online subscription with objective advice on thousands of products and services. Consumer Reports doesn’t accept advertising and has been helping people make smarter decisions since 1936.

Finding good people to work on your home is trickier. Sites such as Angie’s List and Yelp offer reviews from other consumers and can help lead you to reputable firms. You shouldn’t take the results as gospel, though, because both rely on advertising from the companies being reviewed.

If you don’t feel up to the task of researching and sorting your options, please reconsider your aversion to hiring a daily money manager. You typically can pay such a manager by the hour to help you make these decisions. You’ll also have a chance to “test drive” his or her services since you may well need help with paying bills and other financial tasks down the line.

Q&A: Job hopping can be a good strategy for young workers

Dear Liz: I am a millennial and just started a new job at a very small company. I really like the work I do and the leaders of the company. However, I don’t make enough to move out of my parents’ home and be financially secure. I live in the Washington, D.C., area and make $50,000. For an entry-level position it’s a good salary, but this area is so expensive. I wanted to stay at this company for at least two years to add stability to my resume. Now I’m considering moving to a cheaper area so I can move out on my own and not face a financial strain. But I don’t want to be a millennial job hopper, and I don’t want to disappoint my boss.

Answer: Being a millennial job hopper can actually be a good thing in the long run. A 2014 study for the National Bureau of Economic Research found that people who switch jobs more often early in their careers have higher incomes later in life. Economists Martin Gervais, Nir Jaimovich, Henry Siu and Yaniv Yedid-Levi contend that young job-changers are more likely to find their true calling, which leads to greater productivity and higher income. Sticking with one job can mean settling for paltry raises, while changing jobs can mean bigger jumps in pay.

Changing locations, meanwhile, can be a powerful way to boost your standard of living. Living on a below-average income in a city with above-average costs can be a recipe for misery, so congratulations on being willing to explore alternatives. Since you’re living in one of the costliest cities in the U.S., those alternatives include most of the U.S.

The good news is that you have a job and a place to live, so you can take your time searching for what’s next. In the meantime, you can build up your savings to help pay for the move.

As for disappointing your boss, understand that most bosses are grown-ups. They realize that people can and do move on to better opportunities.

Q&A: Auto loan GAP coverage

Dear Liz: In 2012, I financed a 2008 Honda at my credit union. The car was priced at $16,500. With a trade-in, the loan came to $22,000. GAP coverage was factored into the loan payments, which were $464 a month. Last year, the car was wrecked and deemed a total loss by the insurance company. They paid the “book value” of $8,860 to the credit union. However, $6,000 remained on the loan. The GAP coverage paid $3,000 and now the credit union is saying I owe the remaining $3,000. They said the GAP would only pay a percentage of the balance because the car was “over financed” back in 2012. This seems to be unfair, and I feel like the lender should get the money from the GAP provider (per the contract that was signed when the car was financed). Is it possible for the GAP provider to refuse to cover the whole balance left on the loan? I will be meeting with the loan officer next week to discuss payment options.

Answer: You’ve discovered one of the many reasons why you don’t want to roll debt from a previous vehicle into a car loan to purchase its replacement.

Many people do exactly that, though. When trading in a car for a new vehicle, nearly 1 in 3 people roll debt from the old loan into the new one, figures from car comparison site Edmunds.com show. The average amount of negative equity in January was $4,814.50. With used cars, 1 in 4 people with a trade-in roll debt from their old car into the replacement loan, with an average negative equity of $3,595.30.

GAP (Guaranteed Auto Protection) coverage would seem to be the solution, since it’s designed to pay the lender the difference between the loan on the car and what the car is worth. Most GAP policies, though, won’t cover the debt you brought over from the previous vehicle. That leaves you in exactly the position you thought you would avoid, which is having no car but a pile of debt to pay off.

A better approach to car buying is to make a significant down payment, such as 20% of the purchase price, and keep loan terms to no more than four years. You can’t buy as much car that way, but you won’t end up owing far more than the car is worth.

Q&A: Loaning money to family

Dear Liz: My cousin borrowed some money from us because he said they were behind on their house payments. It was only a small amount, but we said we wanted to sit down with him and his wife to discuss this. He agreed to meet with us in the evening of the day he received our check, but of course he called and said they couldn’t make it. We see them every week at church, and she doesn’t act as if anything was happened, while he avoids eye contact. It’s been three months and they haven’t made a single payment. I can’t imagine how I would feel if I found out that my husband was hiding something like this from me, and I don’t know if we should press the issue or just consider it a personal loss and lesson for the future. Any suggestions?

Answer: Loans to family and friends often become inadvertent gifts, so you were smart not to hand out more than you could afford to lose.

You already know everything you need to know about your cousin, which is that he lacks integrity as well as financial management skills. It’s possible that either or both of these facts would be news to his wife, but chances are good that she already knows. So there doesn’t seem to be much point in embarrassing her if you’ve already decided not to pursue the debt.

Q&A: How to help family while on a limited budget

Dear Liz: My son, who is almost 50, is mentally and emotionally challenged. He has been unemployed and homeless for years. Although not a criminal, he’s been in jail a few times because of his explosive, combative nature. There seems to be no help for him in the state where he lives. I do send a few dollars for his basic needs when I can, but must be careful with my budget. Do you have any tips that might be helpful in this situation?

Answer: You’re living with a heartbreaking situation. You want to help, but given your age and financial circumstances your ability to do so is limited. Unless you set some boundaries, you could run through your savings and possibly wind up homeless yourself.

You’ll find some helpful resources at the National Alliance on Mental Illness (www.nami.org), which offers information and, in many locations, support groups for families. Another place to find comfort, insights and suggestions would be a 12-step group for co-dependency, such as Co-Dependents Anonymous (www.coda.org), Al-Anon (www.al-anon.org) and Nar-Anon (www.nar-anon.org). Substance abuse often accompanies mental illness, so you may find it helpful to talk to others who have dealt with problem drinkers (Al-Anon) or addicts (Nar-Anon).

Every state has at least some resources for the mentally ill. You can start your search at MentalHealth.gov to see what might be available where your son lives and let him know the options. But as the members of any support group will tell you, you cannot fix another human being or force him to change. What you can do is to take care of yourself.

Q&A: Loose change and the ‘Big One’

Dear Liz: In your column about saving loose change, another reason to keep a couple of coffee cans full of coins is for when we have the “Big One.” ATMs and banks and stores that rely on computers will be down, but loose change and small bills will be spendable.

Answer: Every disaster preparedness kit — which every home should have — should include some cash for emergency spending. But the cash should be in the form of bills, not change, which will add unnecessary weight to your kit if you have to evacuate. A few hundred dollars in bills are easily carried — not so the 20 or 30 pounds of change that make up an equivalent amount of spendable money.

Q&A: The benefits of loose change

Dear Liz: I just had to giggle at the husband who wanted to save his coin change for an emergency. Yes, this seems so silly now, but back in the day prior to debit cards my mom started saving all her loose change in a coffee can when my husband and I got engaged. Ten months later, she had saved enough for my wedding dress! When we had our first child, we started saving all our loose change, and 10 years later, we had saved enough for a trip to Disneyland. Obviously, we are saving less and less change since we so seldom use cash anymore, but we still keep a coffee cup to collect the loose change and still manage to turn in about $100 a year to the bank.

Answer: The key is to regularly deposit the coins, rather than letting them pile up. But a few readers cautioned that it might be worth carefully sorting through older stashes of coins:

Dear Liz: You gave a good answer to the question about cans of coins. You also should advise the party that if the cans have older coins — pre-1965 — the value of those dimes, quarters and half-dollar coins is tied directly to the price of silver. At $20 per ounce, 90% silver coins are worth about fourteen times their face value. A dime would be worth about $1.40, a quarter about $3.50, and a half-dollar about $6. At the same silver price of $20, 40% silver half-dollars are worth about $2.50 each. If you use a commercial sorting service you will lose the value of these coins. If you sort them while watching TV as I do, you will recover it. Lastly, if you do roll the coins, return them to the bank immediately. If your house is burglarized, as mine was, the rolls of coins on your desk will be gone in an instant.

Answer: Ouch. Sorry for your loss. You aren’t the only one to find gold (or rather silver) in your coins:

Dear Liz: I inherited much loose change. I started going through it and found a nice can of Buffalo nickels (each worth more than a nickel) and 22 pounds of silver quarters (made before the sandwich coins) worth $7,744 less handling and processing fees. It still came to a tidy sum. Let your letter writer know that it may pay to sort through that mountain of loose change.