Reader Mailbag: Absence

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Banking troubles
2. Getting rid of a timeshare
3. Scholarships and taxes
4. Housing money for the future
5. Loan arrangement question
6. Where should we keep savings?
7. Wanting to be a parent
8. Savings account activity fee
9. Prioritizing low interest debt
10. Closing credit card impact

My children just spent five days with their grandparents. I missed them and was thrilled to see them yesterday.

I haven’t seen my sister-in-law in months. I missed her and was thrilled to see her today.

Does absence make the heart grow fonder?

Q1: Banking troubles
I am having trouble with [large bank #1]. They posted a check twice to my account, once as an electronic transaction and second as a physical check. This was a rent check. The rental complex says that [large bank #1] needs to contact [large bank #2]. [Large bank #1] is blaming the company and I just want my money returned. Is it really possible for the same check to be cashed twice?

They told me they would reimburse the money but have failed to do so and it has been over two weeks. Is there anything you can do to help me or to point me in the right direction?
– Kwame

You need to keep hammering away at the customer service with your own bank. Call them and keep escalating until you get answers. This should be fairly straightforward, as both payments should have the same check number on them.

Once this is resolved, come up with a better way of paying your rental complex. Somewhere along the payment path, there was an error, and it’s really hard to tell where that error is. The best step you can take to avoid it in the future is to look for a direct payment method.

This right here is the reason why I focus so much on customer service when selecting a company to do business with, particularly with larger financial concerns. If the company you bank with, buy your computer from, buy your car from, buy your furnace or air conditioning unit from, or any other major purchase has poor customer service, then the “deal” they give you really isn’t a deal.

Q2: Getting rid of a timeshare
My husband came into our marriage with a time share he purchased with his girlfriend at the time. He owns it 100% as he bought his girlfriend out of it. They are on good terms and agreed that he owns it 100% (although it’s still in her name). We now pay $1000 a year towards owner dues as it’s “mortgage” is paid off.

We NEVER use it (2 weeks in Florida in August near Disney World – we live in Seattle) and both want to sell it as we feel it’s a waste of money. What is the best way to sell a timeshare? At this point I’m willing to GIVE it away as we’ve wasted enough money paying for something we never use. It’s part of a global timeshare organization so you can trade in weeks and go elsewhere (the basic timeshare stuff), but it’s just not the kind of vacations that we like to take.

Can you let me know what’s the best way to sell a timeshare (not looking to make any money) or any advise on what to do with it? That $1000 is something I’d like to put towards a vacation we’d actually go on!
– Tricia

First of all, you need to have the timeshare in your name before you can make such moves. If the timeshare is in his ex-girlfriend’s name, you need to legally obtain it from her before you sell it or else have her involved in the sale.

Unwanted timeshares are a market where there are many more sellers than buyers, so you’re going to have to sell at a pretty low price to get it off your hands in a reasonable amount of time. This article provides some advice on selling a timeshare.

If you price it low enough using such methods, you will eventually sell it.

Q3: Scholarships and taxes
I have a quick question on taxes for scholarships. A friend who comes from a really poor family (single mother, 2 children, youngest with heavy incidence of downs and ~15000 of income) went to an exclusive college on the east coast on a full ride (its a ull-need college) with the standard federal loans. Junior year, she was told that she was filling her taxes wrong and that she owed the IRS thousands.

The key problem is about 12,000 in the college bill that goes to room and board on campus. She has a “scholarship” from the college that covers that amount. However since room and board aren’t deductible expenses for tax credit purposes, the amount she would have had to pay the college if she hadn’t gotten that scholarship isn’t tax free and she owes taxes on that amount.

Since that brings her from having no income to having 12,000, and from a dependent to an independent, she’s been desperately looking for a job so that at least she can have an income stream to start paying down the back taxes she owes and the taxes she owes for this year, though she tells me that its accruing interest at the rate of about 10 a day.

I just question whether its right that she owes taxes, since her income is in essence money that the college agreed not to charge her. Isn’t that the same as say buying a computer on sale? What’s stopping an enterprising college that wants to up its tax deductions from deciding to up the room and board charge by say 1,000 and then giving all of its entering students a 1,000 deduction on that cost as a door prize?
– Marlie

A scholarship (or portion of a scholarship) that covers room and board is a taxable scholarship. It’s no different than someone working at a job, earning money, and using that money for food and rent. They don’t get a deduction for that.

She should consider negotiating with the IRS before paying anything. Often, you can state hardship and make the IRS an offer and they’ll accept the offer.

I’m not sure what you mean by that plan you describe. Are you saying that they essentially offer a room and board scholarship that also includes the tax costs on that scholarship? It’s possible, but most colleges would probably prefer to cover more students with scholarship money than worrying about the taxes of fewer students.

Q4: Housing money for the future
My wife and I are co-pastors, splitting one position. Just over a year ago we accepted the call to our current church. We moved from one part of the country to another. In our old town, we had purchased a house. We were fortunate to sell it before moving here. We had purchased the house for $199,500 and sold it for $182,500. Our equity ended up being about $32,000. My wife and I agreed not to make any substantial moves with the 32K for a year and that time is up. It’s in a low-interest savings account. As part of our call and compensation here, we live in a parsonage. We hope to be here 8-10 years. Each year we put $2,000 each into a Roth and we have a retirement plan with our denomination. For lack of a better term, the 32K is “housing money for the future.” Any thoughts about what to do with it?

– Charlie

Since you’re on the cusp of where the stock market becomes a good investment with that ten year time frame, I would probably encourage you to split it between something conservative (like your savings account) and a broad-based index fund. Index funds are basically collections of large numbers of stocks in one investment, which protects you from the failure of a single company. I buy index funds through Vanguard.

Another option to seriously consider is to use that remaining “housing money” to bump your Roth contributions up to the maximum each year for the next several years. Contribute $2,000 out of pocket as you were doing, then add enough to it to maximize your Roth contributions for the year.

The advantage of doing this is that you can always pull out the contributions later, but if you put them into the Roth IRA, they’re helping you build for retirement. If you move on to another calling that also has a parsonage, this will have been the best move, in my opinion.

Q5: Loan arrangement question
I am going to finance a loan for my “significant other”. We have been together for 10 years but are not married, so I do realize that I need to get an Attorney involved to draw up a legal agreement that would protect me. Here is the financial scoop:

He is purchasing land for $60,000.00 which will be deeded to both our names. He is putting down $20,000.00 and needs to borrow the remaining $40,000.00. He could borrow (through the bank) against my CD, which would cost him 2% more than I am receiving on the CD, which would be 4.98% as I receive 2.98% on the CD. I have funds available that are not currently invested in a CD, which I can use for the loan. I told him that I would charge him interest, somewhere between 1/2% and 1% over current CD rates, which would be in the 3.48% to 3.98% range. I’m hoping for a win-win situation here – he gets a loan for less than what he would be paying the bank and I receive more interest than what the bank would pay me.

My question is this: Is there some type of software out there (preferably free) that would calculate the interest on this loan in the same manner that the bank would be calculating interest plus also calculate what is applied the principal, what is applied to the interest and display the new principal balance due after each payment is made? It would also need to be able to apply payments to principal only as I do have him convinced that the best thing with a loan is to pay as much as you can on the principal in order to save on paying excessive (and unnecessary as far as I am concerned) interest. These calculations would be done either monthly or every two weeks (however he prefers to set up the loan) and then again when he pays on the principal. Yeah, I know that I am asking for a lot here. Any suggestions you could make would be appreciated! Thank you!
– Kelly

You can use pretty much any mortgage calculator to get the numbers you need for most of those scenarios, plus a little bit of simple calculator math. You would have to re-run the calculator after each payment, of course, to adjust things based on the extra amount he’s paid. You’ll also have to determine an initial term for the loan.

So, for example, let’s say you lend him $40,000 at 3.5% over 10 years (120 months). You’d just toss those numbers into a mortgage calculator, like the one at Bankrate, and find that he’d owe you $395.54 per month. Click on the “Show amortization table” button and you’d see that the first payment would include $116.67 in interest.

He then makes a payment that month, probably equal to at least the $395.54 amount stated. You then take that payment he gave you, subtract $116.67 from it, and then subtract that amount from the $40,000 principal. So, if he paid you $500, you’d subtract $116.67 from that, meaning he paid $383.33 toward the principal. Now, subtract $383.33 from the principal ($40,000) to see how much he still owes – $39,616.67.

The next month, you do the same calculation. He still owes $39,616.67 in principal at 3.5% over 119 months. You do the same thing again with the Bankrate calculator, tossing those numbers in, and you’d see that the interest on that month’s payment would be $115.55. Just keep going with that – subtract it from what he pays you, then subtract that principal payment from the current principal balance, then recalculate for the next month.

Since you’re describing a variable payment system, there’s no automated way to do it. You have to recalculate each month. However, it’s pretty easy to do it.

Q6: Where should we keep savings?
We live in the San Francisco bay area, so our emergency savings is fairly large ($30k with the goal to be $60k eventually). This is a huge amount of money that is not being put to much work in terms of earning interest. It’s currently in a regular savings account earning next to nothing.

My question is which scenario is better: maximizing the interest I could get in a saving by shopping around OR putting some or all of it in a CD and then just pulling it out on the off chance that I would need the cash?

It feels like I could make more interest in a CD since there is only a small chance that we’ll have to pull out the money for an emergency anyways. Is there a big penalty on pulling out money from a CD?
– Kate

I would not put all of it in a CD. I would at least keep a couple months’ worth of living expenses in cash before doing anything else with the rest, because the penalties for cracking a CD make it not worth the benefit you’d get.

Now, for the excess: there’s no reason not to do something with it that would earn more money. A CD is one route – it’s very stable and safe, but it doesn’t earn potentially as much as other options.

If CDs are the choice for you, then I would suggest staggering them, even if it minimizes your return. Put 25% of your money in a 6 month CD, another 25% in a 12 month CD, another 25% in an 18 month CD, and the rest in a 24 month CD. This way, you have a CD maturing every six months, helping you with changes in your life as they come along. If a CD matures and you don’t need it, just buy a 24 month CD as soon as it matures to keep the “every six months” cycle going.

Q7: Wanting to be a parent
My husband and I have no non-mortgage debt except for ~5k in student loans whose interest rates are around 4%. We aren’t too concerned about paying those off immediately. We have 250k in a mortgage (1700 monthly payment), 26k in a savings account, and about 8k in a 401k that we just started last year. I am 25, he is 29. He makes about 70k and I make about 65k.

In October we found out that we can’t have children without using IVF (in vitro fertilization). Our (completely out of pocket) costs will be $12,000 for the procedure and ~$2,000 for medications. This will leave us with 12k in the bank. My question for you is do you think we should take out a loan to finance our medical expenses? I know we can pay for everything in cash but it would mean our emergency fund would dip pretty low. We have specifically been saving up for this since October but now that push comes to shove, I feel really loathe to part with so much cash! On the other hand, we are pretty good at saving quickly (the only reason our emergency fund is only 26k is because we used about 20k to fix up a home in our dream neighborhood. My husband felt very strongly that we needed to have a place to bring a child to).

I know that one alternative would be adoption, however, it is just as expensive, takes longer, and since I was adopted I have some strong feelings about having children that are genetically related to me. We aren’t opposed to adoption but want to try getting pregnant before we move on to that.
– Emily

I would wait. You do not want to have a child in a situation where your finances are less stable than you would like, and it sounds like both a loan and spending your emergency savings would do that. Focus on living cheap and saving more for the time being. Whenever you choose not to eat out, view that as the first gift you’re giving to that future child.

You are 25, which means that you do have some time left on the biological clock. I would give it one year of intense saving before making the leap into doing this.

I’m not going to dig into the morality of adoption versus in vitro fertilization, as that’s a personal choice that is clearly influenced by some personal life experiences here, and I would ask that the readers do the same.

Q8: Savings account activity fee
I have an interest bearing savings account and was just ‘dinged’ for $15 for ‘excessive activity’ — having more than 6 transactions in the account during one month. I was shocked. I had never had this happen before, and so was very surprised. I called the bank to ask about it, asking if they could waive the fee since this is my first time, and they said it was a Federal law and they couldn’t waive the fee.

You might want to warn people to be careful of hidden fees if they’re using their savings as a back-up to their checking account (I had no clue about this one). I had been moving money from savings to checking as I went through the month. And, when I got extra income, I put it back into the savings account. Little did I know…
– Carol

This isn’t a standard fee across all banks. There are federal restrictions with regards to the maximum number of withdrawals from a savings account in a month (six). Some banks just handle that internally, issuing a warning to the customer. Other banks charge fees. Your bank’s policy may be something different.

However, there are restrictions that require banks to close accounts that repeatedly cross the “six withdrawals a month” limit.

Every bank has different policies with regard to fees of all kinds. The best thing you can do is carefully research various banks and find comments online about them. Remember, of course, that the comments you read online will be strongly bent toward the negative, as people tend to complain about bad service and rarely talk about good service.

Q9: Prioritizing low interest debt
I am 24 years old and currently employed by the college I graduated from two years ago. I make a decent salary (over $30,000) and have been socking away payments to my HUGE student loans (~$40,000 in student loan debt at various interest rates between 2.5-6%). I’ve paid over $6000 off in 1.5 years, in addition to being VERY close to paying off my only credit card with a balance of $800 (previously at over $3,000) via a modified snowball method. My credit card has an AMAZING 1.25% APR with a $4,500 limit. It’s been like that for a few years, and I’m not about to ask any questions about why my rate is so low just in case it is a mistake by the company – I only pay $2 a month in interest! I have a big tax return coming, which could wipe out my credit card debt OR be directed to other debt or savings.

I also have: a $3000 car loan at 6% interest, $1,000 in an emergency savings fund, and no retirement. I really want to buy a laptop after I pay down my credit card, to help me in my side job as a graphic designer for small businesses. The graphic design supplements my snowball funds for debt repayment and building savings. I pull in $200 a month from this side job and I think with a new computer, I could make even more!

My questions are: With an interest rate so low on my credit card, should I just pay my minimum payments and direct my focus on building savings? Also, if I DO pay off my credit card and have a ZERO balance, how likely is it that the credit card company notice it and hike up my interest rate? If I want to buy a computer on credit (I KNOW I should save, but I think I can pay it off on credit rather quickly!) should I put it on my 1.25% card even though the rate may someday go up, or get an 18 month 0% card?
– Megan

My experience has showed me to never, ever trust a credit card interest rate. All it takes is a slight change in corporate policy at a credit card company for your 1.25% APR to go to 19.9% APR and your $2 a month in interest quickly becoming $50. There are some debts that are stable and reliable, like a fixed rate mortgage – this is not one of them.

Saying, “I want a computer now so I’ll buy it on credit because my APR is low” means that your balance and payment history just became more tempting for the credit card company to lift your interest rate. Yes, it might push you to seek out a balance transfer or something, but they’re likely going to make more money in the short term than they would have in the long term leaving your rate alone.

Simply put, I don’t trust credit card companies in terms of interest rates and fees. Credit cards are useful tools for convenient buying, but if you’re carrying a balance, you’re asking for rate hikes and annual fees.

Q10: Closing credit card impact
I recently heard that you can hurt your credit score by opening and/or closing a credit card? Is this true?

– Steve

Each credit card you obtain or close has some impact on your credit score. It’s usually a small impact, though, and it’s not always negative.

MyFico notes that credit scores are made up of five components: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, and 10% types of credit used. Generally, opening or closing a credit card has no impact at all on 65% of your credit score.

A new credit card will affect the “new credit” part of your report, generating a slight negative that goes away. It does not impact the length of your credit history. It does alter the types of credit used a bit, but the impact is minimal.

Closing a credit card won’t affect the “new credit” part of your report. It alters the types of credit used a bit, but that impact is minimal. It might impact the length of your credit history if you’re cancelling your oldest card; otherwise, it will have no impact.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Barb says:

    Q2: Not very useful advice. For the record both I and a friend have timeshares with Shell Vacations San Francisco that we will give away 100% FREE, and we will pay the $250 transfer fees. No title search is needed as Shell will not transfer title unless the timeshare loan (if any) is paid in full and the annual maintenance fees are current. Any takers? bfannin88 is me at hotmail if you are interested. The annual maintenance is around $650 to 700 per year.

    Also for the record most of the places a google search turns up that offer to sell timeshares are pretty sketchy. When they say they have a buyer, and yet they want YOU to send them money, that just smells wrong to me. However the vacation properties themselves are pretty nice, if you want that kind of vacation. Here’s hoping! :)

  2. Borealis says:

    Is there anybody that is happy they bought a time share property a few years later?

  3. Melissa says:

    Q6, Kate – What are the interest rates on the CDs you are looking at? You might find some banks that have higher rates for their savings. I’m shopping around for a new savings account right now. Ally bank has 1.1% interest, ING orange has 1.0%, and Smarty Pig has 1.35%.

    Q7, Emily – Can you use a Health Savings Account to pay for some of the IVF treatments? If you can, at least you could pay for the IVF pre-tax.

  4. Kelly from Q5, I wrote a program (a few months ago) that will handle your situation like a champ. It creates your mortgage’s amortization schedule, showing each payment and how the payment is applied to interest and principal. And, you can apply extra payment directly to the principal (once interest is paid up, of course). And it can handle the monthly or every-to-weeks schedule.

    It’s free, and it’s here:
    http://www.amorty.com

    I hope that helps, this software was pretty fun to write and I just want people to make use of it!
    Derek Illchuk

  5. valleycat1 says:

    Q5 – you don’t have to recalculate interest/ principle paid each month. There are free online amortization schedule calculators that will give you the payment breakdown for the entire life of the loan. One example I just found in a search is at myamortizationchart dot com. You just select – show amortization schedule by month – when you plug in the #s.

  6. CAGirl says:

    Q6- Bankrate is a good source, but I would look first in excel. I wanted a spreadsheet that I could update & found a great one by searching their templates for “amortization schedule”. I’m using it to track my payments on a personal loan. At the top you fill in the loan amount, rate, & lender/ borrower info. Each month that I make an extra payment I put it into the principal column & it automatically recalculates the remaining principal & interest. Plus, I now have a spreadsheet detailing every payment made over the life of the loan.

  7. wisnjc says:

    Q3: Check out Pub 970 from the IRS, which describes in detail taxes and education (scholarships, loans, credits, etc.)
    Is the 12K credited to the student bill, and happens to be the amount of room and board expenses? You also mention the student has loans. Loans can be taken out and applied to room and board, leaving the school scholarship money to be applied to tuition, fees, and books, making it tax free money.
    Again, see Pub 970 from the IRS (if you are in the US) as the definitive authority here.

  8. Pat S. says:

    Q9- I think the best thing to normally do with a tax return is use it to achieve the goals you are working on already. Paying down debt, sticking it in the emergency fund. Don’t treat the money any differently than your normal salary… because it is your normal salary. The government just took it and gained interest with it for the year and is giving it back to you while keeping the interest. May want to adjust your withholdings!

  9. LB says:

    Q1- I think the advice about using direct payments to pay for rent is premature and out of touch. It’s premature to try to make a major change in how you’re paying because so far this is a one-time error. Also, I have rented for years (planning to buy this fall!) and I have never had a landlord or property management company which allows direct payments. What Trent said about calling your bank frequently and escalating your call is good advice for getting your money back right now. If it turns out that this is not an isolated problem, you can always pay with a cashier’s check- which is much less convenient but won’t be double-cashed.

  10. wisnjc says:

    Q4: I would consider a target “retirement” date account from a brokerage for at least part of this money. Pick the date that corresponds most closely to when you will need this money. Each year the fund is automatically balanced to become more conservative. It is a nice way to try and moderate the markets ups and downs if you decide you want to invest money for a 10 year time frame.

  11. Jonathan says:

    Borealis – Yes, my in-laws are very happy with their timeshares.

    Q5 – You can also set this up in excel pretty easily. It’s just a matter of understanding how the interest and principal are calculated, which Trent explains a bit in his answer. A typical bank loan compounds interest monthly. This means that the accrued interest is added to the principal balance once per month, at which time the interest owed goes back to $0 but interest then begins accruing on the new higher principal balance. The interest that accrues each month is calculated by multiplying the principal balance by 1/12th of the annual interest rate (i.e. 3.5%). So a $40,000 loan at 3.5% interest would accrue $40,000 * 0.035 / 12 = $116.67 in interest. Any payment amount in excess of $116.67 goes toward principal.

    In Excel or any other spreadsheet program, you can set up a formula that calculates a new month’s principal as [Previous month's principal + monthly accrued interest - payment]. Or you can just download a free amortization schedule spreadsheet from the internet – I found this with a quick google search, for example: http://www.vertex42.com/ExcelTemplates/simple-amortization.html – This table requires that you do the math to divide the interest rate by the number of annual compounding periods – so instead of entering 3.5% for Rate, you enter (3.5%/12 = 0.2917%). Then just replace the payment amount each month with the amount actually paid.

    You can use this spreadsheet for biweekly payments by changing the rate from 1/12th of the annual interest to 1/26th. As far as the ability to apply extra principal-only payments at odd intervals, I’d recommend just applying those to the standard monthly or bi-weekly payments for simplicity. The difference in interest costs between a payment applied the week before it’s due and the week it’s due are fairly negligible, especially considering you’re dealing with your significant other of 10 years rather than a bank.

    Hope this helps!

  12. Nick says:

    Q1: Unfortunately, yes, it’s possible (but not very common) for a check to clear electronically and as a physical draft. From working in the banking sector for a few years in customer service, it was not uncommon to see banks clear the item as an ARC and as a physical check. Essentially with an ARC, they read the routing number and account number on the bottom of the check and submit it as an ACH to your bank. But what happens if they don’t destroy the check? They clear it again. Your bank should be able to process something called a “draft” or “check” adjustment through the Federal Reserve. Our institution was really good about crediting our Members while the process took place to grab the money back from the other bank, but unfortunately your big bank may not treat you as nicely.

    Best of luck!

  13. valleycat1 says:

    Q9 – Another idea is to use the tax return to buy the computer, then put whatever’s left toward the car loan or savings, whichever is more important to you at this point.

  14. Steve says:

    Q3 – most of the $12k should be covered by the standard deduction and exemption. The last few thousand would then be taxed at 10%. So it’s only a few hundred bucks.

  15. JJ says:

    Q5: Forget the internet calculators. Here’s the easiest way to do the math, IMHO:

    First, open up a new, blank spreadsheet.

    Next, position the cursor in the first cell.

    Then, just type in a big, fat zero …because you suddenly realize that loaning money to a significant other is a colossally bad idea, no matter how much interest anyone earns or saves.

    JJ

  16. AnnJo says:

    @Kelly, Q4,

    If you have the slightest knowledge of spreadsheets like Excel or Quattro Pro, you can easily construct your own amortization table, and some versions of those already have amortization schedule scenarios built in. Whenever you make an additional principal payment, you simply add that amount to the payment for that month and the schedule recalculates itself.

  17. Kevin says:

    @valleycat1:

    “You don’t have to recalculate interest/ principle paid each month. There are free online amortization schedule calculators that will give you the payment breakdown for the entire life of the loan.”

    Right, as long as they’re just consistently making the expected loan payment each month.

    In Trent’s example, however, the person was paying extra each month, which throws off the amortization schedule, necessitating a recalculation each time they pay more than the minimum. Trent was correct.

  18. Andrew55 says:

    Q1–I agree with Trent that you can’t minimize the value of good cutomer service. I had central air installed this past summer, and used a local–and slightly more expensive company. Everyone told me their customer service was excellent, and, when the unit malfunctioned later on, they were there within an hour of my call to fix it. They also–at no charge–installed a winter cover for the unit.

    I would add that for all major financial events you should go local if at all possible–use a credit union or a small independent bank instead of a large national, use well-recommended local contractors for home repairs and upgrades, etc. etc. Not only will you receive far superior customer service, you will be striking a blow against the depressing homogenization of American life.

    Q7–Please bear in mind that not all IVF procedures are successful. It is entirely possible that you will need multiple rounds and that $12000 will not begin to cover your expenses.

  19. Andrew says:

    Q1–I agree with Trent that you can’t minimize the value of good cutomer service. I had central air installed this past summer, and used a local–and slightly more expensive company. Everyone told me their customer service was excellent, and, when the unit malfunctioned later on, they were there within an hour of my call to fix it. They also–at no charge–installed a winter cover for the unit.

    I would add that for all major financial events you should go local if at all possible–use a credit union or a small independent bank instead of a large national, use well-recommended local contractors for home repairs and upgrades, etc. etc. Not only will you receive far superior customer service, you will be striking a blow against the depressing homogenization of American life.

    Q7–Please bear in mind that not all IVF procedures are successful. It is entirely possible that you will need multiple rounds and that $12000 will not begin to cover your expenses.

  20. Lex says:

    Re: IVF. Don’t wait unless you want to. You hace already waited enough and you are good at putting money aside. You can afford it. Does that figure freezing embyos for a FET? Id only take a loan if you can get a really low rate on it and pay it off quickly. Does your RE offer several-try guarantees with money back if it doesn’t work? Good luck!!’

  21. Randy says:

    @Kelly, question 5
    I don’t understand why you are loaning money to your significant other for the land, when your name is going on the deed? Doesn’t that mean you own it together? He pays the entire bill, and interest to you? Then you both own the property? Sounds like a real win for you, unless I am missing something.

  22. Des says:

    RE: IVF

    The chances of a successful IVF session only go down with age, and multiple tries gets expensive quick. As someone else noted, try paying from an HSA so it is before taxes. In your case I would say if you are emotionally ready to be a parent, do it sooner rather than later. You are obviously more financially prepared than many (most?).

  23. Ellen K. says:

    Q7, Emily: Our twin daughters were conceived via IVF/ICSI. We paid out of pocket, about $13K including meds. IVF treatments are tax deductible as medical expenses. Your income is high enough that you might not be able to take the deduction, though, so you should look into an FSA or HSA. My advice is to time an IVF cycle so that all of the expenses fall in one calendar year. A lot of people schedule a cycle for fall and a second one for late spring, after tax refunds. IVF loan programs are an option, except there can be a lot of restrictions, and sometimes clinics have very high success rates but also high numbers of embryos transferred. Look at the CDC data; don’t just look for the least expensive clinic.

    You do have the advantage of youth on your side, and it’s a huge advantage. But you do want to make sure your finances are stable enough so that you can afford more than 1 cycle or have money left for alternatives. Also stay on top of your health insurance coverage for everything related to obstetrics, maternity, and newborn and NICU. Compare what your employers offer. My husband’s company switched to a high-deductible policy just before my pregnancy. Ouch — even for an uncomplicated twin pregnancy and no NICU time.

    Good luck to you.

  24. Courtney says:

    I am a parent via IVF and it was worth every penny. Even at your young age, I would encourage you not to wait. It’s a long process–much longer than you think. Your doctor is the one who can best advise you on the difference in your chances if you delay.

    Also, I work for the federal government and have a health plan that covers IVF. We paid about $3100 out of pocket for our son’s cycle. You may want to see if you can find an employer that has insurance coverage for IVF.

    Best of luck to you–it’s a challenging and stressful thing to go through but the rewards are worth it!

  25. spaces says:

    Q8, it’s a federal anti-terrorism / anti-money laundering law, and I believe it only applies to electronic transfers. If you go to your bank in person, you should be able to move money back and forth freely, subject, of course, to the conditions of your agreement with the bank.

  26. spaces says:

    Re: IVF. I encourage a second opinion. It’s rare to jump to IVF without trying less invasive, and less expensive, means. Unless it’s something unusual like both tubes blocked, in which case if you’re been trying for long enough to do your year, do all that testing with your RE, and be writing here, I would encourage you not to wait! Parenthood is awesome.

  27. Genny says:

    Re: Adoption and IVF-just wanted to sympathize-as an adopted child who (successfully) had IVF ten years ago, I wanted to note to readers that being adopted really hurts you in your chances to adopt since you have no family medical history. You’d think it (being an adopted child) would make you a better candidate for adoption since you understand what it is like to be adopted, but it actually hinders you in the adoption process. In my opinion, very unfair but you could also argue from the adoption agencies’ viewpoint they want adoptive parents with proven medical histories. Anyway, just wanted to make that note before potential posts of “How dare you choose IVF over adoption!” Been there, done that. God blessed me with a beautiful daughter and I am so grateful. Hope everything works out for Emily and her husband.

  28. Gina says:

    Q7: You’re younger than I was, but for us IVF turned out to be a lot less effective than they (two different practices) talked it up. I don’t know your specific challenges, but for every first-round success there’s a crowd of repeats and about 20% total no-go’s. If you settle on the IVF route, make plans for three rounds, so if the first fails you’re not left feeling without options.
    In my own experience, after three failures, we went with an adoption. It didn’t take as long as expected, it cost a lot more than expected, and we couldn’t be happier with our son.
    Best of luck to you!

  29. Des says:

    Reg D (which prevents more than 6 withdrawals) isn’t an anti-terrorism measure – it is to prevent people from using their checking account as a savings account. Banks are allowed to lend more money than they have on deposit (google ‘fractional reserve banking’), but the amount they can lend is limited by the Federal Reserve. There are higher restrictions on funds in checking accounts, because it is assumed that funds in those accounts are going to be fluid, whereas savings accounts are assumed to be more stable (growing slowly over time).

  30. Riki says:

    There’s a morality issue related to IVF vs. adoption?

    That seems like an odd comment to make.

  31. Gail says:

    @Borealis:
    “Is there anybody that is happy they bought a time share property a few years later?”

    We are! My inlaws gave us a lovely timeshare week as a wedding present – it’s at a place where they also own a week, and we’d stayed with them there previously. We LOVE it. So much so, that now we have kids, we’ve just bought a week there in a larger place and the inlaws have bought the previous property back from us, so we can all go there at the same time.

  32. Rob says:

    Wow. The Regulation D stuff gobsmacked me. I’ve got my finances structured around a large number of transfers between multiple savings accounts per month. Turns out I never encountered RegD because my credit union structures their savings accounts in a way that RegD doesn’t apply. Learn something new every day, I suppose.

    Thankfully, checking accounts are not affected by RegD.

  33. Amanda Parks says:

    Q7- I would go for parenthood at this point. Sounds like you are in a good financial situation (but DO think about if you plan to stay home with baby- losing half your income could be tough).

    Also, if you ARE contemplating adoption, look into adopting through foster care. ALL adoption costs are covered and there are tons of kids waiting for a forever family :).

  34. Suba says:

    Q7 I disagree with Trent here. If you want to be a parent and if you wait, save money and find out because you waited you can’t have a successful IVF anymore, can you take it? Sometimes more money is just not worth it. I know how long IVF will take, not every try is successful and the more time you wait, the more difficult it is going to get. For people who are not very fortunate enough to get pregnant naturally (I am in the same category here), the normal biological clock is not very accurate. There are a lot of other things you could do to increase your success as well. So get a thorough option of all your options and start trying. Just my 2c

  35. Riki says:

    Megan (#9)

    If you’re thinking about investing in a laptop as a business-related expense, there are several imporant things to consider:

    – WHY do you need the laptop? Is there something wrong with your current machine that can’t be fixed by a quick upgrade to the HD or RAM?

    – HOW are you going to turn that computer in more jobs, therefore increasing your income? If it won’t allow you to make more money, it falls more into the “want” rather than the “need” category.

    – If so, how many jobs will you gain? What is your projected income from each, and how long will it take you to pay for the computer and start making a profit?

    – What kind of computer do you NEED for the business? Are you talking $1000, or $4000? Spending too much and too little are both problematic when you have a business that relies on that machine for success.

    I run a very successful photography business using a 3.5 year old machine (with a few upgrades). My computer is necessary for my work (just as important as the camera, in fact), and I can understand why you would want a new machine, but I think it’s important that you analyze your needs carefully and determine specifics before buying a computer using the excuse that it’s for work. If you can specifically account for how and why the machine will benefit your side business, buying it on credit (or partially on credit) isn’t necessarily a bad option. But if you decide to do that, you should have a very specfic business plan in place.

    I’ve done that very thing for my business and it was the best move I ever made, but each purchase was very carefully thought out. Don’t do it lightly, or you risk perpetuating that debt-repayment-more debt cycle.

  36. Tirzah says:

    Re: Q5, I’ve designed Excel spreadsheets to do this plenty of times. Half an hour up front plus adjusting the interest rate per month and you’ve got everything at your fingertips all the time.

  37. Courtney20 says:

    Riki – some people (not me) think that it is ‘selfish’ to go to extreme lengths to create a genetically related child when there are already children in the world who need homes.

    Des – I think you meant “prevent people from using their savings account as a checking account” :-)

  38. jackie says:

    @Q5 – Excel has a built in amortization schedule. To find it right click on a tab and go to insert>spreadsheet solutions>loan amortization. If you unprotected the sheet you can add a column for payments received and fiddle with it to make it meet your needs. I would suggest using the scheduled payment column to input payments received, and using colors or something to distinguish between received and scheduled payments. Doing that will let allow the spreadsheet to update and correct for over/under payments.

  39. Rob says:

    You can actually figure a mortgage payment yourself with pencil and paper.

    Banks derive payment amounts by calculating the future value of the loan over x periods and then divide by the periods. The formula is pretty simple:

    FV = PV x (1+i)^n

    FV = Future Value
    PV = Present Value
    i = periodic interest (annual rate/number of periods per annum.)
    n = number of periods

    FV = 40000 x (1+(0.0398/12))^360 = 131,749.00

    Monthly Payment = 131,749.00 / 360 = 365.97

    Each month, calculate the interest:
    (Balance x daily interest)x days in month and then subtract the result from the effective payment. Use whatever is left over to pay down the balance

    (40000 x (0.0398/365)) * 31 = 135.21
    365.97-135.21 = 230.76
    40000-230.76 = 39769.24

    Put that information in a spreadsheet and you’ve got what you need.

  40. jackie says:

    My detailed comment is in moderation, probably forever. In short:

    @Q5 – Excel has a built in amortization schedule. It’s easy to use and if you unprotect the sheet you can edit it to fit your needs.

  41. jackie says:

    Kelly, Excel will do what you need with their built in loan amortization schedule.

  42. Jeanette says:

    Does absence make the heart grow fonder? Yes, IF you already care for those who are not present.

    If you don’t, you really don’t notice the absence of their presence!

  43. leah says:

    @Q7 – I agree with “spaces” who commented above. My husband and I found out that are a lot of specialists who aren’t familiar with some of the latest, less costly and less invasive techniques for achieving pregnancy. IVF is sometimes pushed as a simple, one-size-fits-all solution (that’s also a good money maker). A second opinion and some more research on your own (google NaPro Technology for one example) might help you find less costly alternatives to IVF. We’re glad that we did!

  44. Telephus44 says:

    Q2 – Good luck on the timeshare. We didn’t even try selling it, but we tried donating it and no one wanted it. We ended up paying someone ($3000) to take it. Worst financial move we ever made (taking it, that is. My MIL bought it for us for Christmas because she thinks we don’t take enough vacations. If I had known then what I know now, I would have refused to sign the papers).

    Also, I agree with Steve #10 about Q3. I find it difficult to believe you’d owe thousands of dollars – if it’s taxable income, filed amended returns and the standard deduction and exemption should cover a lot of it. Also, who told her she’s been filing wrong? The IRS? The school? I’d read pub 970 and check with a tax professional.

  45. Marle says:

    Q1 – Scholarships are definitely income, however, an income of $12,000 a year shouldn’t incur taxes in thousands. That’s wrong.

    The letter writer states that the income changed her friend from dependent to independent, but no that wouldn’t, and I’m assuming that’s part of the problem. You can claim someone as a dependent on your taxes if they meet certain requirements (your child, etc) and you provide more than 50% of their support. If you claim someone as a dependent, they aren’t allowed to claim their own deduction and exemption, since you are. My guess is the mom claimed the daughter, leaving the daughter to be taxed on the entire $12,000, which is about $1,200 a year in taxes. My feeling is that since the daughter is entirely supported by loans and scholarships she isn’t dependent and she should be taking her credits instead of the mom, or if she is dependent that the mom should (morally, not legally) cover the costs for her she can’t afford. However, neither of those options are really good here. The mom only makes $15,000 a year herself, and can’t afford to pay taxes on $12,000 she’s not getting. She’s also probably barely making it while claiming two kids, and can’t afford to pay the back taxes recalculated with one less deduction. If the daughter hates her mom, she could probably try to convince the IRS that her mom shouldn’t have claimed her and that she should be able claim herself and lower the back taxes. If that works, then she’d save herself thousands but the IRS will be sending her mom bills for past taxes. I wouldn’t do that.

    In a perfect world, people with $12,000 in income wouldn’t be taxed at all. But we don’t live in that world, and unfortunately I have no advice for her.

  46. Jeannine says:

    Q7 – I would like to know how many readers had $12,000 saved and jobs that paid as well as Emily’s before they had their first child. If you are ready to commit to the emotional roller coaster that IVF can be, go for it. As another commenter stated, be sure that you know this is your only/best option and exactly what it entails. You can continue to replace the money that you took from your savings until your child is born – which doesn’t seem like a problem since you have decent incomes and relatively little debt. Just be aware that IVF doesn’t always work on the first try and think about how much you are willing to endure/spend with no guaranteed result. We were lucky enough to have one child naturally (by some miracle), but would have had to do IVF for another. Ultimately we decided against it, but that was the right decision for us, maybe not for you. You have a much better chance for success the younger you and your spouse are.

  47. Michelle says:

    Q2- No, you won’t sell it. We ended up donating ours. We paid the Florida Veterans Association $800 and they accepted it. We got to write off $5000 on our taxes, and we were happy to be done with it. They are a legit charity, we checked them out, and the $800 was a title transfer fee.

    Donate it, and be rid of the thing. Unless you take a vacation twice a year, it’s not worth the headache and maintenance fees.

  48. Emily says:

    Hi, OP of Q7 here. First of all, a huge thank you for all the comments. It’s always nice to be reminded that other people have gone through IVF too.
    IVF is actually the least invasive option for our particular medical situation. We were trying for about a year before we met with our reproductive doctor and like others have noted, that testing process alone took awhile!
    If IVF #1 does not work (we have about a 40% chance) and subsequent FET do not work, then we are prepared to give up that dream and move on to adoption. We felt like we needed one shot to try IVF though.
    Also, thank you to those who acknowledged the emotional draw of having a child. In all other aspects of our lives, we are (pretty) good at making sound financial decisions, but this one has so many emotions tied to it that some outside perspective has been nice.

  49. Adam P says:

    I wouldn’t wait for IVF, to Q#7. You’re in good shape. Despite Trent’s professional opinion that your biological clock has tons of sand left in the hour glass, the ealier the better and you are quite young to be in the shape you’re in. Which means you’re not going to be a stupid parent. The world needs more parents like you and your husband.

  50. Todd says:

    They say that absence makes the heart grow fungus.

    -“Blame It On Me” by Barenaked Ladies

  51. Dawn says:

    Re: Q7 IVF – My husband and I did IVF twice! The first time it failed, so we had to go in for another cycle. Fortunately, my insurance plan covered most of it and we only had to pay around $5,000. But if you are not covered, then I wouldn’t wait to do it. Do it now, it may take a few tries. And you’re so young, you want to be able to have a few extra chances. I am about 8 years older than you and it took two years of trying (IUI’s, IVF) for a single pregnancy to take. Good luck!

  52. jessie says:

    @Riki, sadly, there is a huge debate, because people love to tell other people what their families should look like.

    @Emily, I work in reproductive health, and deal a fair amount with fertility. As other readers have said, my (caveat: non-medical) advice is to start IVF now, if you are otherwise ready to be a parent. Loans probably aren’t the best idea, but if you have the cash, start using it. Sadly, as one commenter mentioned, it often takes longer than you think, and is much more expensive than you think. I don’t know the nature of your complications, but (a) age won’t help, (b)if you have very serious complications that require many, many tries, you want to know that ASAP, and (c) if you want more than one kid, see (a) and (b) above. If you’re really concerned, use this time to earn as much money as you can – sell stuff, take a second job, go hella-frugal, whatever – so if you’re fortunate enough to conceive quickly, you aren’t strapped for cash. In my mind, this is an ‘emergency’ of sorts because time is really a factor, and after all, families are what we save money FOR. Again, my two cents, and whatever you decide, BEST OF LUCK!

  53. JS says:

    Q2: What about giving away or selling chunks of time at the timeshare as a short-term solution? My husband’s parents love their timeshare, but one year they had a few days left over. So they gave us a weekend at one of the locations for our first wedding anniversary, which was much appreciated. Is there anyone you know who might like a visit to one of the locations as a gift, thus saving you money on the cost of the gift you would have bought otherwise? Or if you know someone who is visiting that location, you could rent the timeshare to them for their vacation. I doubt you can make up $1000 a year, but it would help save money until you got rid of it.

  54. Amanda says:

    Q 5. You might be creating a tax issue with below market loan. Talk to a CPA prior to proceeding.

  55. jim says:

    Q7 Emily :

    Don’t wait. Go ahead and get a loan if you want.

    You’ve got the cash to pay it out of pocket, but if you don’t want to empty your savings then a short term loan is OK.
    You’re making $135k a year combined and sounds like you’re in pretty good financial shape. I see no reason at all to wait for financial reasons. You’re probably in better financial shape than >90% of the people who have kids for the first time.

    I see no reason to wait. If theres no reason to wait then don’t wait. Waiting *could* negatively impact your chances of success (or not), thats something to talk to your doctor about. Don’t rely on Trents assumption waiting is safe.

    2nd opinion wouldn’t hurt. IUI or other efforts might be worth a shot and much less costly. But again thats for the Doctors to say.

    I would recommend you shop around for different IVF clinics in your area to compare cost and check out their SART success rates. SART (dot) org for info on IVF success rates. You may find substantial differences in success rates between local clinics.

    HSA can be used to pay for IVF with pre-tax funds. If neither has or can’t get an HSa plan then you could use the qualified medical expense deduction on your itemized tax form to claim part of the cost as a deduction.

    If you haven’t yet then I’d also double check to make sure either of your employer insurance plans offer any fertility benefits.

    Best wishes.

  56. Amy says:

    Q7 – As an estatic new mom to an IVF baby, I say don’t wait. Like others have mentioned, the process is a long one and there are no guarantees that it will work the first time. And a second try doesn’t happen quickly either. Shelling out the money freaked me out too (all out of pocket for us) but now that I can hold my sweet baby girl, the money is forgotten. Trust me – if you are sucessful on the journey it will be the best money you have ever spent.

  57. cynthia says:

    i probably read through the letter too quickly, but I am really confused on the loan situation. If the property is 60,000 and will be in both names don’t they each pay 30,000? Then she would only be loaning 10,000 to her partner and the rest of the 40,000 would simply be her share.

  58. Melissa says:

    Q7 – Not an ethical, but a monetary statement. Remember that adoption expenses are a tax credit up to around $12,000. I would say it is both okay to wait until your financial situation is ready or to start now because you don’t want to wait. Examine all options and choose what feels right.

  59. K says:

    I agree to go ahead with the IVF, but be sure to double check your employers’ plans since many do cover it, and use an FSA if possible to save taxes. I think it is important to have 6 month emergency fund, but you will be able to replenish that quickly, even before the baby is born.

  60. mary m says:

    Q4)”We had purchased the house for $199,500 and sold it for $182,500. Our equity ended up being about $32,000.” I’m confused, how is that not a $17,000 loss?

  61. Jacque says:

    Q10 – If the credit card you are closing has a significant credit limit compared to your overall available credit, you could really increase your debt to credit ratio, which would have a huge impact on your credit score. This would be in the catageory of the “30% amounts owed” that Trent mentions. For example, say you have 4 credit cards with $2000 limits each and 2 are maxed out. That’s a $4000/$8000 debt to credit ratio, or 0.5. If you close one of the empty credit cards, you now have a $4000/$6000 ratio, or 0.67. That’s a large leap in debt to credit ratio and your credit score will get dinged for it. Depending on all factors, it might be 20 points or it might be 100 points. Unless you have some compelling reason to close a credit card account, just don’t do it. Put the card in the filing cabinet and forget about it. If it has a high credit limit, use it once every month or so and pay it off so that you’re sure the issuing company won’t close it. Don’t hurt your credit because you want to simplify your accounts.

  62. bogart says:

    @Emily — I’m so sorry you’re dealing with infertility. I’m another IVF mom here who is in the “don’t wait” camp (though getting a second opinion, depending on your diagnosis, isn’t a nutty idea; neither is looking into the more expensive but reduced-risk-if-you-need-more-than-one-cycle-to-get-pregnant multiple-cycle packages). Melissa Ford has a great book on pursuing parenthood using medical assistance (and/or paths such as adoption) and a great blog (though her day-to-day entries are less about infertility than they used to be — she’s a mom to twins through IVF). You can find her main blog here: http://www.stirrup-queens.com/ , and it has information about the book and lots of other resources. I hope you may find it helpful.

  63. Tom says:

    #38 – they purchased a house for 199,500 – probably put a down payment, and reduced the balance over time with mortgage payments. When they sold for $182,500 the mortgage balance was not $199,500, so they received $32,000.

    (Though, in essence you’re right. If they put down a 20% down payment, that would have been about $40k, so anyway you slice it they didn’t recoup that money.)

    Thanks to Michelle for her mention of donating a timeshare. My mom has been looking to unload her timeshare for years. As a place to vacation, it’s wonderful, but there is just no way to justify the cost.

  64. Joan says:

    Q#1. Trent. Grandson just had his idenity stolen by someone in Ireland. His bank informed him about the problem immediately. The only way this person overseas could have gotten his bank information is by grandson buying items online with his debit card. Problem is not solved as yet, but bank is working on it. This would be a good article for you. Buying online is dangerous, using a bank debit card is worse.

  65. Houstin says:

    You have given Q1 a very bad answer. January 2010 I had just signed up for BillPay with Wells Fargo Bank (formerly Wachovia). On 1/27 my S.S. Direct Deposit from the fed was deposited. I had authorized the above to use BillPay instead of a check. On 1/28 the BillPay amounts of regular amounts was deducted. On 1/28/2010 the bank (Wells Fargo now) deducted the same amounts and on 1/29 the Bank hit me with NSF Charges because of the double deductions. Then the Bank would skip a day and hit me again. This continued until thay, The Bank, had run up a minus $770.00 against a S.S payment of $838.00. They wiped me out and nothig got paid and I had to tap my mutual fund and a savings account to pay my bills. BillPay finally acknowledged that something went wrong but since they were a 3rd party they could refund nothing of the red ink. And The Bank would do nothing yes, no refund of all the NSF charges. I changed to another smaller bank and changed my direct deposit S.S. for the next month.

    I have a file folder full of newspaper articles where the BIG Banks had screwed the customer in one way or another. I was lucky. This big bank problems is not just with Wells Fargo, just that they were the worst. But of the big 4 – 6 big bank chains, they will get additional money any way they can because they are shareholder and upper exec profits driven.

  66. Kevin says:

    @mary m (#38):

    Because they’d been paying down the loan during that period. $199,500 was the PURCHASE price. By the time they sold for $182,500, they’d obviously paid down the mortgage quite a bit (they only owed $150,500, by my math).

  67. Essie says:

    For tax purposes, if you loan someone money, you need to look at the AFR (Applicable Federal Rate) http://www.irs.gov/app/picklist/list/federalRates.html

    Charge at least the AFR so that the money is not considered a gift. Be sure to document the loan. On your tax return you need to claim the interest as income. I financed a mortgage to a relative and give them a interest statement for their tax return.

  68. Ok. This loan arrangement question is something that really bothers me about this site. People are trusting Trent to be an authority on something that he is not an authority on. In regards to this question, there are potential tax implications between relatives lending each other money related to “imputed interest.” Yeah. If you don’t have a degree in accounting (like me), look it up. Stop giving advice under the guise that you know what you are talking about. Grr.

  69. SLCCOM says:

    Generally speaking, I haven’t seen good results when unmarried couples purchase homes or property together. Keep in mind, the time share purchased by guy and EX-girlfriend…

  70. Amy says:

    Q7:
    Maybe one of both of you have an HSA or FSA that you can get into through your work. Another option is that some major companies do offer insurance coverage for IVF. Bank of America, FedEx–I am sure there are others, too. So if either of you could do work there, maybe that is something to look into.

    It’s hard to wait but if a little planning would decrease your actual out of pocket costs, it can be worth it.

    Good luck!

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