Ask Liz Weston

Get smart with your money

Divorce

Tuesday’s need-to-know money news

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School Kids DiversitySaving on back-to-school shopping, tool to make managing your money easier, and what you need to do financially when your marriage comes to an end.

Be Smart on Back-to-School Shopping
How to fill their backpacks without emptying your wallet.

8 Money Tools You Should Try
8 tools to make managing your money much easier.

How To Reduce Your Debts Without Spending Unnecessarily
You shouldn’t have spend money to get out of debt.

Save Your Way to $1 Million Dollars
It might be easier than you think!

We’re Getting A Divorce, Now What?
Ways to protect yourself financially when your marriage comes to its end.

Tuesday’s need-to-know money news

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Champagne glassesFinancial survival tips for before the wedding and after the marriage ends, freedom from credit card debt, and beating the retirement clock.

Engaged? You Might Need Money Therapy
Things you should know before you walk down the aisle.

How Does Divorce Affect Bankruptcy and Mortgage
Things you should know for when the walk down the aisle fails.

Declare Your Independence From Credit Card Debt
Life, liberty and the pursuit of zero debt.

How to Get Help From a Student Loan Mediator
Student loan battles don’t have to be fought alone.
What to Do When You Haven’t Saved Enough for Retirement
How to get by when time isn’t on your side.

Career change in midlife requires caution

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Dear Liz: I went through divorce three years ago (after 20 years being together). I’m now 41 and broken financially and emotionally. I’m wondering if I should sell my small place and move in with my mother or stay broke and tough it out so I can keep my own place. I work part time, which was fine when I was married. Should I return to college and start a new “second half of life career”? I love my job and I’m torn.

What do you recommend? I can’t survive on my income alone and pay my bills. It’s never ending and I’m stressed beyond measure!

Answer: Recovering from a big setback such as a divorce is tough. But continuing to struggle in a situation that doesn’t work makes little sense. You need enough income to cover your bills and save for the future.

If you sell your place and move in with your mother temporarily, you could continue working part time in the job you love while getting a degree that would qualify you for a better, full-time job. You’ll need to make this investment carefully, since you’ll have only a couple of decades for the money you spend (or borrow) to pay off. A two-year degree might make more sense than a four-year course of study, for example.

You’ll want to pick a well-paying job in an industry that’s growing, and you should limit the amount of student loan you take on to no more than you expect to make your first year out of school. The Bureau of Labor Statistics has a list of the fastest-growing jobs, and their median salaries, at http://www.bls.gov/ooh/fastest-growing.htm. Your local community college probably also has a career services center where you could talk to counselors about your options.

Split credit accounts when you split with a spouse

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Dear Liz: I just finished paying off my last credit card and checked my credit report as I am now separated from my wife. I found we had one joint account that she had not been paying. There are two stretches of five months each of no payment.

I immediately called up the creditor and paid off the balance and the creditor closed the account due to the lack of payments. This one account killed my credit score. I also found two old accounts on my credit report that are both still active but I have not used them for years. Both accounts are in good standing.

I was thinking that if I started using the accounts again, paying them off each month, it would boost my credit score faster. I am looking to buy a house this summer and would have an easier time with a better score. Do you think using the old accounts would help improve my score faster or do you think my score would be better if I closed those accounts?

Answer: Closing accounts can’t help your credit scores and may hurt them. You should avoid closing any credit account when you’re trying to improve your credit rating.

Your experience shows why it’s so important to separate financial accounts when you’re separating from a spouse. Failure to pay any joint account can hurt both parties’ scores. This would be true even if you were divorced and had a divorce decree making her responsible for the debt. Your creditors don’t have to pay attention to such agreements.

Lightly using a few credit cards can help you recover from missteps like this one. “Lightly” means charging 10% or less of their credit limits, and you should pay the balances in full each month, since carrying credit card debt doesn’t help your scores. You shouldn’t expect your scores to bounce back overnight, however. If you had good scores before this incident, it may take you a few years to recover completely.

Will the new credit score change your life?

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YCS4 coverIn case you missed them, here are some of the issues I’ve been writing about recently:

A much-heralded new version of the VantageScore could offer big benefits to consumers, but only if lenders actually start to use it. Read all about it in “New credit score could change lives.”

HSAs still aren’t a household acronym, but more companies are offering these health care accounts–and yours might be next. For the right people, HSAs can be a way to supercharge your retirement savings since they allow you to invest unused cash contributions in stocks. But you also run the risk of having the market wipe out your health care funds right when you need them. Read “Should you invest health care funds?” for more.

Divorce doesn’t necessarily separate your credit obligations, and a vengeful or oblivious ex can really mess up your credit. Learn what you should know before and after your split in “Don’t let your ex trash your credit.”

Are you giving identity thieves the clues they need to hack into your life? If you use social media, the answer may be yes. Read “Secrets you should yank off Facebook now.”