Ask Liz Weston

Get smart with your money

The Basics

Q&A: Loaning money to family

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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

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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’

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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

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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.

Q&A: Saving loose change

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Dear Liz: My husband recently told me that he has saved many coffee cans full of loose change over the years. When I suggested we might at least roll the change to make it easier to count should we ever need it, he was not interested! I understand he just wants it available in an emergency, but just the transportation of these things to a coin counter (that may or may not be available) makes me want to find a better way to honor his idea of saving change in a more realistic way. Perhaps roll while watching TV, then ask a bank to convert to dollar coins as a way to reduce the bulk?

Answer: It’s hard to imagine how your husband expects to deploy those coins in an emergency. Does he envision lugging them to the grocery store or gas station? Does he imagine any retailer would accept a coffee can of change as payment? Many retailers won’t even accept rolled coins, since they don’t know what’s inside those wrappers.

Converting the coins into bills, or better yet to savings in a bank, is a far more practical option. You can use commercial coin sorters, but they typically take a hefty cut. Coinstar, for example, charges a 10.9% service fee, although that is waived if you choose to be paid with a retailer’s gift card or voucher.

Another place to check is your bank. Some have coin sorters available to customers, although you may have to deposit the result rather than take it immediately in cash.

Alternatively, your bank may supply you with wrappers — or it may not accept change at all. The only way to know is to call and ask.

If you do decide to roll the change, consider making a small investment in a coin sorter. You can spend $200 or more on a commercial version, but there are well-reviewed versions on Amazon that cost around $25.

Q&A: Keeping financial records

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Dear Liz:I have a garage full of old financial records. I believe I need to keep only seven years of information for tax purposes. Is that correct? However, I have decades of receipts on house repairs and improvements since I believe there is some cumulative tax credit that might someday be important. Also, I have kept receipts on personal and household purchases in case of a loss that required an insurance claim. Am I keeping too much paper?

Answer: Yes. Here’s what you need to know.

Many tax experts recommend hanging on to your tax returns indefinitely, but you can shred most supporting documents after seven years when the risk of audit ends (unless you’re significantly underreporting income or committing fraud).

When it comes to assets such as homes or stocks, you should keep supporting documentation for as long as you own the asset plus seven years.

That includes receipts for home improvements, but not repairs. You can’t take a deduction for either home repairs or improvements, but the cost of improvements may help you reduce any taxable profit should you sell your home. In Publication 530, the IRS defines an improvement as something that “materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses.” Examples include putting an addition on your home, replacing an entire roof, paving your driveway, installing central air conditioning or rewiring your home. You can’t include improvements that are no longer part of your home. If you install carpeting and then rip it out to install hardwood, for example, you can no longer include the carpeting cost as an improvement.

You would have to have a considerable profit for those receipts to come in handy. The first $250,000 of home-sale profit, per person, is tax free. If you’re married, that means you wouldn’t face capital gains taxes on your home sale unless your profit exceeded $500,000.

Keep in mind that the IRS accepts electronic records. If you’re concerned about tossing paperwork you might later need, consider scanning everything first and maintaining a backup copy off site, either in the cloud or in a safe-deposit box.

Chances are good your insurer also accepts electronic records and scans of receipts, but call and ask first. Keeping receipts for insurance purposes is a good idea, as long as you cull the ones for items you no longer own.