Reader Mailbag: Childhood Toys

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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. How much for college?
2. Information security
3. Repay loans? Save for retirement?
4. Investigating a mutual fund
5. New central air while retired
6. Vision coverage
7. Trading by mail
8. Helping Mom
9. Credit type question
10. Habitual borrowing

Our two oldest children have recently discovered a treasure trove of the childhood toys of their parents. Watching our children play with the things we played with during our childhood has been quite fun for Sarah and myself, particularly when they mix them in with their own toys and create all kinds of crazy new adventures.

Q1: How much for college?
How much do you expect to contribute to your children’s college experience? I’m not a big fan of the idea of paying the whole bill b/c I think they need to take some ownership and I’m also not planning on pushing them to college right away if they don’t show that they have a really concrete idea of what they want to study etc. But I also adored my college experience so I want it to be available to them.

- Andy

Like you, I don’t intend to pay for all of the college education of my children, for several reasons.

For one, I don’t think it’s financially good for myself or my children for me to sacrifice retirement savings for their college education. This causes me to have to work for longer and have a higher likelihood of being a burden on those children when I’m old.

For another, I think there are valuable lessons learned when you’re facing the real cost of a college education instead of just believing someone else is paying for it. Either you have to pay for it yourself or you have to earn it from somewhere.

I do intend to help them significantly with their costs. I’m not going to just write a check, however.

Andy had another question of interest, too.

Q2: Information security
Do you feel like all your online financial interactions (bank accounts, transactions, investments) are secure? I think the movie The Net (with Sandra Bullock)from my college days has had a lasting impact on my confidence with all my information being ‘out there’.

- Andy

There’s virtually no way you can live today without some amount of your information online. Yes, that does mean we all have some small risk of identity theft.

I personally try to minimize that risk whenever I can. I avoid signing up for services that require me to share personal data without providing some enormous benefit in return. Mint is a good example of this, where you’re sharing personal data with a middle man for what I consider to be a very small benefit.

All you can do is be vigilant. Look at your credit report regularly. Watch your credit card bills for strange payments. Don’t slack off with this, either.

Q3: Repay loans? Save for retirement?
I just graduated with my masters, have not found a full time job yet, and am debating what to do with my student loans. I have $67k worth of loans that I start paying in November (given that I find a job). I am going to be a teacher and worried that my salary won’t be enough to cover the monthly loan payment unless I consolidate or do the income based payment plan. I also obviously want to start saving for retirement as soon as possible. However, I also realize that extending the life of the loan will mean owing a lot more in the long run. Should I try to make the regular payments and pay them off in ten years? Or is that too unrealistic?

- Ellen

Your first priority is to find a job. Don’t worry about choosing between retirement and student loan repayment yet. A bird in the hand is always worth two in the bush.

Once you have that job, I would make sure that I was picking up all of the matching funds from my employer. For example, if your employer offers a match on the first 4% of your salary, contribute 4% so you can get that match. After that, I would contribute enough so that your total contribution including matches is 10%. Beyond that, I’d hammer on the student loans.

If you don’t find a job, keep those student loans in forbearance. While this won’t help with the overall cost of the loan, it will help you from getting behind on your debts.

Q4: Investigating a mutual fund
What procedure do you use to investigate a mutual fund?

- Sharon

Most of the information I look for is in the prospectus for that fund, which you can often find online or, in a few cases, request from the investing house that’s running the fund.

Key things I look for are the investment philosophy behind the fund, the fees they charge, and the types of investments the fund contains. I tend to stick to index funds, which typically have a very straightforward philosophy, low fees, and clear delineations on what’s invested.

I don’t put much value into “superstar” fund managers or the things that are said in the financial press about the funds. Those are usually just the result of PR.

Q5: New central air while retired
I need to get a new furnace and while I’m at it, central air. I just retired April 1st. I do have enough money in my retirement fund to pay for this. But i wonder if I should get a home improvement loan at 8% interest from my states housing development office instead. I’m 64, will be 65 in a few months, and I’m afraid to start chipping away at the retirement fund. What do you think?

- Kathy

It’s really hard to give an accurate answer here without a full picture of your retirement situation. Is your retirement just Social Security plus the money you have in a 401(k)? Do you have a pension, too? Does your monthly income in retirement greatly exceed your monthly expenses, or are you cutting it close? All of these factors would change which decision you should make.

My conclusion would generally be that the less dependent you are on the regular income from your retirement savings, the more I would lean toward using it instead of taking out an 8% loan. The interest on an 8% loan is almost always going to be higher than what you’ll earn in your retirement account.

If you’re really tight, a loan might be unavoidable as long as it’s coupled with cutting back on expenses. You may find, though, that you have to get some additional income to make ends meet.

Q6: Vision coverage
We had our yearly benefits meeting at work this week, which has caused me to take a look at my various insurance coverages. Here is some background: I am a divorced mother of 3 (1 in college no longer living at home, 1 in middle school, 1 elementary). My ex-husband passed away three years ago. I live together with my fiance; we own a home. He recently lost his job and is in the process of applying for disability due to a chronic illness from which he suffers.

Through work, I purchase medical insurance (with includes a vision benefit), dental insurance, and I also pay for additional life insurance (very cheap – $6/pck?) on top of the small amount that is provided to me free by my company. (It has no cash value but if I die, it will pay 3 x my salary.) I also (through my employer) pay for additional AFLAC policies – cancer, accident, and hospitalization.

I have the opportunity to buy additional vision coverage for about $7.00/month (note that only one of us wears glasses and even those are just for reading) and also short-term disability (which I had when I was still child bearing, but stopped purchasing after I had my last child). We are changing companies so I could reenroll in short term disability now during the “open enrollment”.

My questions are: should I buy the additional vision coverage? (I think I just answered that question for myself…) Should I buy the short-term disability? And what are your thoughts on the AFLAC coverages? Being a “single parent”, I am really trying to make sure we would be covered in all possible scenarios. But money is also tight, I do have some debts I am paying down, and I don’t want to pay for something I really don’t need.

All of these things would run me a little over $200/pck. Thoughts?
- Shanda

I don’t think the vision insurance is worthwhile at this point.

The question of further insurance is a tricky one that has more to do with your own comfort level than anything. You can never insure against everything. The best you can do is cover yourself against the most common calamities and assume the risk of some of the less likely ones.

Where’s that cutoff line? It’s different for each person and it has more to do with your ability to sleep at night than anything else. The more you insure, the more “what-ifs” you’re preotected against, but the less money you have for your everyday life. That’s a balancing act, and everyone has a different balance that’s right for them.

I can’t tell you what’s right. All I can say is that you are insuring against a lot of risks that others aren’t insured against. You have to decide for yourself where the line is.

Q7: Trading by mail
You’ve mentioned that you do a lot of book and video game and DVD and board game trading through the mail. How do you do this?

- Robert

I do my book and DVD trading through PaperBackSwap and SwapADVD. I just mail out ones I don’t want to watch or read any more and get new ones in the mail in exchange.

I usually trade video games at a local used video game store. I found that, if I traded by mail, I often got very scratched disks.

As for board games, I usually participate in online “math trades” organized by BGG. In these trades, you just list some games you have that you’re willing to trade, look at the list of games that everyone has posted, and then mark down which of your games you’d be willing to trade for some of the games listed. After that, a computer program makes the longest list of trades possible (many of them involve person A sending a game to person B, B sending to C, C sending to D, and then D sending a game to A, for example).

Q8: Helping Mom
I am 26 years old and work in the insurance industry. I have been reading your posts religously now for about a year now. Thank you for your wonderful posts. I currently make 46,000 with great benefits like a paid company car and 6% 401k match. Since reading your post, I have started contributing 6% to my 401k and 5% to a Roth IRA thorough employer w/ Vanguard. Currently I have just over $7000 in retirement savings, $8500 in savings (of which I will be using 5k for furniture and move to East Coast w/ my boyfriend). I also have $2500 in an HSA accout as I carry a high deductible health plan. My credit score is currently 641. I wish it was a lot higher, but I’m working to repay some old debts that my ex-boyfriend and I took out. Totally dumb, but that’s the topic of another conversation. In debt, I have $15,000 in student loans that I pay $125/month at 5.8%. $3,500 in a credit card (the debt w/ ex-boyfriend). I also have an auto loan on an 07 vehicle my mother currently pays $305 w/ $10,000 left in loan. I transfered the car to her as my new company gave me a company car, and selling it made no sense since I was upside down on loan. All I pay on company car is $67 every two weeks for taxes and insurance.

I feel as though I am on the right track financially. Sadly, I cannot say the same for my family. My family all lives above their means. My mother recently came to me with the request for me get a loan approved for “her home” in Las Vegas, NV. The home would be in my name and my mother would pay all costs. My mother has a bad credit score after a lenghty divorce and poor decisions. We currenly live in San Francisco, but she would like to move to LV to be closer to family. I have a married older sister, uncle, and dad that live there. As you know, with the housing crash, there are a lot of empty homes in LV. My mother has her heart set on moving into a home valued at $40-50k. She could provide 8K down. She feels this would be a comfortable payment for her. In fact, much less than she’s currently paying to rent. With my move to east coast, and no other family around, I am starting to feel guilty. While I would like to help her, I feel as though this is LARGE responsibility. I can only think of cons to this arrangement. Is there any way we can arrange this so that there is a benefit for her and I? Is it even a good idea?
- Kelly

Most of the discomfort you’re feeling likely comes from a sense that your mother isn’t financially reliable, and you seem to have good reasons for feeling that way. If her credit is in poor enough shape that she can’t get a $32,000 mortgage loan, then I’d be worried about lending to her, too.

I think it’s reasonable to assume that there’s a good chance your mother might not make the payments she’s promising. Can you financially handle the situation in which your mother doesn’t pay? If you can’t, then you shouldn’t go forward with this. You have to simply tell your mother that you don’t have the means to make it work.

You can discuss a contract, but in the end, you’re still going to be on the hook for the house unless you pursue legal action against your mother. Are you really going to do that?

Q9: Credit type question
My husband and I have just paid off our car note. We have 2 credit cards which we use sparingly and pay in full each month. We also have 3 mortgages. One is for our primary residence. We also did an 80/20 on our retirement home, which we also use as a vacation home/weekend retreat. In hindsight, I know we should have waited to buy the retirement home, but we can’t change that now.

In about a year, we will need to refinance the 20% note for our retirement home. It’s a 5 year with a balloon payment (another mistake). Although we have been trying to pay it down, a laid-off has hindered that and refinancing is necessary. Currently, our credit scores are 798/800, something we have strived to achieve and want to maintain. How is the lack of different types of current credit accounts going to hurt our credit score? We don’t want to borrow money just to keep our credit scores up, but we don’t want them to go down because we have so few types of credit.

I know that the types of credit only account for about 10% of the credit score, but that would knock our scores down to the low 700′s, which I have a hard time accepting. Is there anything we can do about this?
- Lilith

If you have multiple mortgages and multiple credit cards, you won’t lose too much due to lack of diversity in your credit score. I’ve had only a mortgage and some zero-balance credit cards for quite a while now and my credit score is quite high.

Generally, this portion of your credit score only suffers if you have a ton of debt and it’s only one type of debt. Even in that case, it does not have a significant negative effect – 10 or 20 points, perhaps.

Remember, this is all anecdotal. Credit agencies do not release the exact methods for how credit scores are calculated.

Q10: Habitual borrowing
I have a friend that often asks to borrow $5 or $10 at lunch or when we’re out for drinks. At first, I did this without asking, but I’ve come to see he never pays anyone back. How should I handle this?

- Lenny

For starters, don’t loan him money. This is a black hole for you and it’s not worth continually dumping in cash.

If you want to recoup some of the money, go out to lunch and ask to borrow money from him. Recoup the money as best you can through borrowing. Make it clear that he can knock it off the tab of what he owes you.

If that feels uncomfortable, just stop going out to lunch or out for drinks with this person, or else just say you don’t have the cash to spare. He’ll move onto someone else pretty quickly.

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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49 thoughts on “Reader Mailbag: Childhood Toys

  1. #2 made me laugh. The Net has absolutely no basis in reality. There’s no single system that could be compromised like there is in that movie.

    Even if Mint was hacked…I’m not sure what the benefit would be? Someone can see I bought a coffee 3 days ago? I guess they could attempt to login to my bank and transfer money, but I’d probably catch on quick. Or get an alert from Mint. ;)

  2. RE: Q6 – Vision Coverage

    If I were in our shoes, I don’t think I’d take the extra vision coverage. In my personal experience (I’m blind as a bat), I pay a large chunk out of pocket each year even with a good vision plan. My husband has very minor vision problems, and has always found himself adequately covered with a standard vision plan. Sounds like you are more in the latter category.

    If someone in your family needs glasses at some point (say your elementary school child), you’ll likely be paying some out of pocket anyway because most vision plans don’t fully cover anything but basic (read: ugly and unfasionable) frames. Lenses are all over the board in terms of pricing, but if your family doesn’t have a history of bad vision, chances are a standard vision plan will cover frames that fit your needs.

    Note: The above comments are based on my experience going to an optometrist. I have never gone to a Lens Crafters-type place for my eye needs, so can’t speak to that experience or their pricing.

  3. What exactly does “I do intend to help them significantly with their costs. I’m not going to just write a check, however.” mean?

  4. Dh and I both wear glasses, mine a very strong prescption and we’ve found vision insurance worth it.

    It doesn’t cover everything, but it covers enough.

  5. I don’t want to sound like I am attacking anyone. The number of people who have applied for Social Security disability since the recession has increased significantly. The Wall Street Journal had an article about Puerto Rico ( I think my spelling is wrong). The people in the article had jobs but, when they lost them, decided to apply for SSD, instead of looking for a new job. Why? if they were able to hold down a job prior to losing it during the recession, why aren’t they looking for a new job? In many states, you can collect up to 99 weeks of unemployment. It seems that in spite of having a chronic illness, they were able to work and are now using unemployment benefits to cushion them to apply for SSD. It seems like a back door way to collecting an unending unemployment benefit. What changed in Q6, that the fiancee with a chronic illness who had a job, can no longer look for work, but is instead applying for SSD? Did the illness worsen after losing the job? If he hadn’t lost his job but it worsened, would he have continued at the job or quit? Can he afford SSD because he has a fiancee who will now be the primary wage earner? I am assuming that he had the chronic illness prior to losing his job.

  6. I really feel sorry for people who are graduating with huge student loans like #3; I always felt like my $25,000 or so in loan debt was a lot (10 years ago) but $67,000 (or more!) would be tremendous. At first I took the maximum deferrment which was 8 years, but after a few years I got tired of seeing the $400 or so come out every month and asked for an accelerated payment so I could be done. Very glad I did that!

    I just can’t imagine going through school, borrowing such huge amounts, and not know I have a job lined up though. I think Trent gave good advice to this person: find a job first, make sure you’re saving for retirement before you ever see the money, make the minimum payment on the loans and live within your means as best you can with the rest.

    Once established in life and earning more money with a few years of work experience, then go ahead and tackle the student loan debt would be my take on it.

  7. #10, confront him about it, or start asking him everyday if he has your money.

    Trent’s answer of trying to steal back just boggles my mind.

  8. A friend who habitually “borrows” $5 or $10 and never pays it back is not a friend but is, rather, an opportunist. Anyone who allows this “borrowing” to occur more than once or twice is a doormat.

    #10 should, very pleasantly and cheerfully, present this person with an itemized bill and a due date.

  9. I agree on the reply to #3, but i think having more detail would make it easier to decide. For example, what is the interest rate(s) of the loan(s). my College loans were locked in at 3.25% so I’ve always made the minimum payment under the theory that I could do better than that investing the money in my retirement account.

  10. Q10: I actually like Trent’s suggestion a lot. I would not look at it as a way of recouping the money (I would go into it with the expectation that he’s not actually going to agree to “loan” any money), but rather as a way of calling him out without turning it into a big confrontation.

    It’s not stealing because he can always say no. Which is what Lenny should be saying to him from now on.

    As for the money that’s already been “lent,” I’d consider it a loss. Don’t expect that you’re ever going to be repaid – that way, if he does pay up, it’ll be a pleasant surprise.

  11. Q10 again: I’m guessing that this problem arises (and has been allowed to persist) because the group is going to places where the bill comes at the end of the meal. So the “friend” orders (and eats) food that he knows he doesn’t have the money to pay for, and then when the check arrives, the rest of the group is forced to either cover for him or not pay what they owe.

    So one option is start going to places where you pay before you get your food. This doesn’t limit you to fast food – there are a lot of niceish places, especially for lunch, that operate on a counter-service system.

    Of course, another option is to stop inviting him out with you. I assume you have a reason for not wanting to do that, if you haven’t done it already.

  12. Q6- Since my husband became disabled last year we no longer have vision insurance and I realized it was not much of a benefit after going to the Dr. this year without it.(Vision Insurance for one person was 13.00 per month ($156 yr). Medical insurance covers the cost of an eye exam once a year so that was free. It does not cover the cost of a “corrective lens screening” so that cost me $25.00 at the eye doctor which would have been free with the vision insurance. However, the big savings came with the cash discounts for my rx glasses.. they cost about the same out of pocket as with vision insurance, so there was actually a savings this year of almost the entire annual premium.

  13. Q3: As a teacher, you might be eligible (under the income-based repayment) to have the balances of your loans forgiven after 10 years. If that turns out to be the case, then it sounds like a no-brainer: Go for the IBR, and do not make any extra payments. Anything extra that you pay is just going to reduce the amount that’s forgiven after 10 years – basically, it’s just throwing money away.

  14. Q8 – Don’t buy the house & let mom live in it. If anyone mentions the tax advantage, the homeowner deductions apply only when it’s your primary residence.

    Does mom already has a job offer in Vegas or is she likely to be able to get a job there in today’s market? One that pays enough to support herself? Or is she living on alimony or other funds that won’t change if she moves?

    You mention the house payment would be less than what she’s currently paying in rent, but SF is much more expensive than Vegas, so you need to be comparing rent in Vegas vs the house payment.

    Also, if she continues to have other people make major purchases for her (essentially private loans) such as cars, houses, or whatever, none of that will go toward improving her credit scores.

  15. Q1: Way to not answer the question. So you’re planning to pay some of your children’s college costs but not all of them. How much is “some”? Is it 5%, 50%, or 95%? Is it “I’ll pay what it would cost for you to live at home and go to the local state school – if you want to go somewhere more expensive, you can raise the rest of the money yourself”? That’s the question.

    And I have the same question as Gretchen – what does it mean that you’re “not going to just write a check”? If it means that your offer of financial support is contingent on your children making certain choices, that’s not cool. Of course, you’re within your rights to do it, since it’s your money, but it’s a form of coercion, and it’s not conducive to building a good relationship with your newly-adult children.

  16. You don’t often hear that the movie The Net “has had a lasting impact” in any way.

    Q3 Ellen : If you qualify for income based repayment then I’d do it. THeres really no downside to IBR that I can see if you qualify. The interest is deferred and doesn’t compound. So it doesn’t make the bill go up extra large past the interest you’d be required to pay anyway.

  17. Johanna,

    “If it means that your offer of financial support is contingent on your children making certain choices, that’s not cool.”

    We don’t know if thats what Trent means. But if it is something along those lines then, Why isn’t that cool? To me it depends on what the contingencies might be. Why shouldn’t a parent footing a portion of the bill have some say in how the money is spent? Why should a child expect a big fat pile of money with no strings attached nor guidance from their parents?

  18. Valleycat #15 : “If anyone mentions the tax advantage, the homeowner deductions apply only when it’s your primary residence.”

    Actually you can deduct the interest expense and property taxes for a 2nd home. e.g. See IRS topic 505. “Qualified residence interest is interest you pay on a loan secured by your main home or a second home.”

  19. “If it means that your offer of financial support is contingent on your children making certain choices, that’s not cool.”

    Why would anyone jump to the conclusion that Trent means this? There are so many variables in the situation I am not surprised that Trent didn’t provide a more detailed and exact plan regarding his financial investment in his kids college education. The fact that he isn’t giving us details in no ways make me suspicious that he must be trying to hide something.

  20. Jim,

    It’s not cool when parents use their financial resources to basically force their kids to do what the parents want.

    For example, Timmy wants to be an accountant but Daddy is only going to pay if he declares engineering as a major. These types of parents DO exist. Or Timmy wants to go to an out of state school, but Mom refuses to pay anything unless he stays in state.

    If the parent is just saying “you need a 3.0 or higher” for continued support, that’s a bit different.

  21. @jim: In addition to what Ryan said, I’m also thinking of situations in which the parents want to force the kids to do what the parents want in ways that have nothing to do with “how the money is spent.” For example, “If you don’t (stop dating him/her, start going to this church, participate in that extracurricular activity, accept that award), I’ll cut off your funding.” These types of parents exist too.

    @Jonathan: I’m not jumping to any conclusions. That’s why I said “if.”

  22. @jim again: Also, there’s a big difference between coercion and guidance. You’re a smart guy, so I know you know this.

  23. I guess I disagree here, having been the person who became an accountant without any money from my parents.

    If my parents said we’ll pay your school if you become a doctor and I didn’t want to be a doctor I wouldn’t have hated them for withholding. It’s their money to do what they want, I never expected anything once I was 18. I worked in highschool and during university and took out loans that I paid back to cover the rest. I got a small scholarship here and there as well.

  24. Q9 – My credit has always consisted of 1 mortgage (30 yr fixed) and 2 credit cards that I pay off monthly. It’s been this way for over 10 years – no school loans, no car loans, nada. My credit score is 810. I don’t think you’ll see a drop in your score. If you do it will be small (maybe 20 points) and it probably won’t be more than a year. As long as you pay your bills on time, every time you should be fine.

  25. Wow. I’m lucky that my parents gladly paid for my college education (all costs above what was covered with scholarships & grants) with no strings attached. And at the time they had 3 of their 5 kids in college. And no, we were not rich & it wasn’t easy for them, just a priority they had that we all get the education.

  26. The problem with making college solely your child’s responsibility,* or making your financing contingent on very specific things, or only contributing a tiny amount, is that your child’s ability to get most financial aid will be based on your income/expected contribution regardless of your willingness to pay. Yes, some kids get tons of merit scholarships but you should recognize that if you refuse to pay for college, unless your child is a very top student, you’re likely guaranteeing that they will have significant debt load.

    * Which, of course, Trent isn’t planning on doing, but just speaking as a general matte.r

  27. @Adam P: If you really would have (1) declined your parents’ offer of funding to become a doctor and (2) not resented them for it, then more power to you, but can you at least see that you’re somewhat exceptional in that regard? It takes a lot of courage to defy your parents’ expectation that you pursue a career that’s not right for you, and I’m sure it only makes it more difficult when there are large amounts of money involved.

    And as I said, parents are within their rights to do what they want with their own money. But people are within their rights to do all sorts of things that are unethical, unkind, or unwise.

  28. When I see that each and every reader mailbag has a hearth-wrenching story of student debt strangling graduates, I cannot help but find really disturbing that Trent would treat his children’s future education so lightly. Does he know what the economy will be in 15 years ?

    I am with Valleycat and Katie (excellent comments!). I was lucky that my father paid for my college and bachelor degree on the only condition that I graduate (I did). Same thing for my brother and sister. Our family revenue was too high for us to qualify for financial aid. Merit scholarship are way scarce here in Canada. Working (always low-paying, tiring jobs) while studying full time can really take a toll on success and health.

    Thanks Dad for letting me begin my professional life without a smothering debt!

  29. Trent never said anything about coercion or forcing his kids to do anything. So I guess I don’t see why we’re having the conversation about doing that is a bad thing.

    In other news you shouldn’t beat your dog.

  30. And yet, many people do beat their dogs, and apparently don’t see anything wrong with it…

  31. Maybe it’s I’ll write a check if you never get a dog.

    Who knows?

    (And I’m personally fine with strings, especially something like “maintain the GPA ” or whatever.)

  32. It’s always slightly horrifying to me that people graduate with such huge student loans, knowing that their chosen field will not pay that well. Accumulating $67K in student loan debt when one is planning on being a teacher is confusing to me, personally. I realize I don’t have all the details, but the first two years of most degrees can be purchased at most community colleges for a pittance, with most community colleges having a partnership agreement with a university, so that all credits transfer.

    I wholly agree that college prices are astronomical and I understand they are rapidly increasing at a break neck pace, but at the same time when I hear stories of people who are neck deep in debt for an English degree, or a poli sci degree, or a Lit degree, it’s hard to muster sympathy. This idea of a college degree being worth all costs is incredibly damaging.

  33. @Q8, you make $46K per year and your mom is asking you for help in buying a 50K home that she will put 8K towards the downpayament for. (I would suggest that it be documented as a loan to you, and you do the purchasing and hold the house in your name).

    The monthly mortgage payment will be below $400. With insurance, it might be $450.

    Does your mom currently come up with $450 a month for her current living situation?

    I don’t see a lot of risk here for helping out your mom who has, as you have said, made some decisions that haven’t worked out, along with some purely bad decisions. I’m guessing she has enough money to pay the bills, but not good enough credit to get her hands on a lump of cash.

    make clear that if she can’t pay the mortgage you will have to get another renter or she’ll have to find some other way to come up with the money. Maybe other people in the family can help in that event. Talk about that up front. Talk to your other family members about it too, up front.

    Have her deposit the money for the rent/mortgage directly in a savings account electronically every month so you don’t have to be making trips to the bank, and you pay the mortgage directly.

    You can handle this expense even if she bogs on it. And you hold title to the property.

    If you really feel like she’s going to shaft you, that’s another story, both emotionally and financially. But I don’t see the how this is hard for you to do in a practical sense.

  34. @q10, just tell your friend, gee, jim, i’ve been going over my finances and I see I’ve lent you almost $50 over the last 2 months. I think I need you to pay me back. I just can’t keep lending money out because I feel like it’s already affecting our friendship. I hope you understand. Are you ok? Are you having some financial problems?
    ____

    I have lent money to people in the past and then just decided to step completely out of the system. Told them I didn’t want to lend them any more money, and wasn’t interested in hearing about when they were going to repay me–you know what, don’t bother, you haven’t paid me back by now, just keep it.” Some people are really users–and they tend to hold the prospect of getting your money back to you as a perverse incentive to be nice to them by lending them even more money! So giving up on the idea of getting the money back, in some cases, is actually a good way to just stop the whole setup.

  35. @q8, some other thoughts: also consider suggesting to Mom and to other family members that two or more family members buy the house together as an investment property and she can pay rent.

    this way it is more of a group decision, and you spread the risk among family members, and if you feel she is likely to not be able to make good on her promises, she has more people to deal with if she is considering doing that–and you’ll have more allies and support in the event she can’t meet her obligations because other family members will be affected in the same way as you are. From your end, the impact is smaller on you if she doesn’t make the payments, too.

    You could even consider setting up an LLC between two or three of you to buy the property, if you have enough of a cash down payment between you all to meet bank requirements for such a commercial type purchase.

  36. “quite fun for Sarah and myself,” NO Trent, it’s supposed to be “quite fun for Sarah and me,”. Your passion for writing ought to include correct grammar. It’s good practice for your great American novel.

  37. Daria at #6 may not want to SOUND like she’s attacking anyone, but the truth is that that’s exactly what she’s doing, whether or not she thinks she sounds that way, and whether or not she wants to not sound that way.

  38. Q #6 I do not have vision insurance, but my medical covers my costs. Normally they only pay for a vision checkup once a year. So, I went to my eye doctor several years ago and went to pay my co-pay. He said to wait until the insurance paid their share. He told me that medical will pay if you have a medical diagnosis for your eye problems and I have a dilly, according to him.

    I have ocular hypertension. He practically climbs into the chair with me to check deep into my eyes. (Doesn’t have to now as they have a machine that takes a picture of the back of your eyeball.) My pressure is high enough that he can’t believe I don’t have permanent damage to my eyes. He says if I ever go to another eye doctor to let them know to get his records. They might think I was in immediate danger of losing my eyesight.

    He was right. Almost all my eye visits are now paid by Medicare and my insurance.

  39. Q #1 I also agree with Trent. I did not help by giving my daughter a check. She did her student loans and I sent money if she needed it. I did not intend to pay for all her college. She was an adult and if she wanted an education, she could learn how to achieve it and I would help when necessary. She came out of college with $12,500 in college loans – the maximum at the time. She finished in 1986, so it has gone up considerably. This is how my parents helped me.

    And what does it hurt for college students to work at a job while in college? Even if it is a nothing type job. It will help pay the bills and make them appreciate their jobs later on in life more. I went to college full time and most of the time worked 40-48 hours a week and still got mostly A’s and B’s. It didn’t scar me at all.

  40. @Georgia: Trent has said before that he thinks the real value of a college education comes not from time spent on classwork, but from time spent networking and making connections with fellow students. I don’t know if I agree with that, but for those who do: Every hour spent working a “nothing type job” is an hour not spent making those connections. So in that sense, it does hurt.

    And from a purely financial perspective, if a full-time student really has so much time on her hands that she can afford to spend 10 or 20 or 40 hours a week working a minimum-wage job without sacrificing anything of importance, she’s actually far better off using that time to take extra classes and graduate early. That’s because she saves money on tuition *and* she can get started on her post-college career that much earlier. It’s a win-win.

  41. @Q6. It sounds like you are insured for every contingency separately. At $200 a paycheck that is a lot of money. $2400 if you are paid monthly, $5200 if you are paid every 2 weeks. That could be a great emergency fund for you. What you might consider is some long term disabilty insurance not attached to your job.

    I would take a long hard look at the boyfriend situation too.

  42. “has been quite fun for Sarah and myself” and
    “I don’t think it’s financially good for myself or my children”? Two citations from the grammar police in the space of two paragraphs is not good.

    I have a feeling Trent is trying to avoid the error he has fallen into in the past, of incorrectly using “I” in those phrases, but still can’t bring himself to use the lowly but correct “me” that belongs there.

    If you have trouble with pronouns when speaking of pairs, imagine the sentence without the other person.

    Would you say, “it has been quite fun for myself” or “it’s financially good for myself” if Sarah or the children were not in the sentence? Probably not. (I would hope not.)

    “Me” is not a bad word. Yes, it’s regularly abused by people saying “me and so-and-so did such-and-such” but that’s not its fault and it doesn’t deserve to be shunned every time you speak of two people including yourself.

  43. @Johanna, I didn’t think Adam P’s point of view was all that exceptional, at least not for a person of basic integrity, nor is it “unethical, unkind or unwise” to decline to subsidize an adult child’s educational choices if you don’t agree with them.

    Parents who offer to subsidize an education only if the student chooses a particular career path are making an offer the student can and should decline if it is not consistent with the student’s own goals, but they are being no more “coercive” that the college who won’t give the student his/her desired education for free. That subsidy will almost certainly entail some sacrifice for the parents, often a great deal of sacrifice. It is for them alone to decide whether the sacrifice is worth it, and it seems to me that the only “unkindness” is trying to second-guess their decision without any knowledge of the facts.

  44. @Q8 on the Mom’s Las Vegas house purchase – how has she been on making the car payments? I agree that there needs to be an assurance that her source of income, whether it be job or something else, will continue after a move, but if there’s a good and reasonably lengthy track record (at least a year) of timely payments on the car loan, and she’s changed the habits or circumstances that brought about her earlier bad decisions, helping her out on this house purchase doesn’t seem like a huge risk.

    There should be a lot more research done on the housing market in LV before a purchase, though. I understand some neighborhoods have as many vacant units as occupied ones, and that inevitably leads to further property value declines, higher crime rates and higher taxes down the road. Just because house prices have plummeted doesn’t mean they can’t go lower – think Detroit.

  45. @AnnJo

    The problem is, whether it’s fair or not, it does lead to resentment from the children. Particularly when there are multiple children, because if child A actually *wants* to be a doctor (to use the example) and gets their education paid for and Child B wants to be an accountant and doesn’t …

  46. @AnnJo: My friends who are professors (mostly of chemistry) tell me all the time about students who are pre-med not because they want to be, but because it’s what their parents expect. And I remember running into plenty of students like that when I was in college myself. I don’t know how often money was coupled to those parental expectations, but I suspect at least sometimes. Whether these students lack “basic integrity” or not, they do exist.

    During the college (or college-age) years, the parent-offspring relationship changes from an adult-child relationship to an adult-adult relationship. That transition can be really rocky when the parents keep trying to micromanage every aspect of the child’s life using every piece of leverage they have. (In case it’s not obvious, I’m speaking from experience.)

    In my haste to make my original point, I mistakenly said that it’s wrong for parents to place any conditions at all on college funding. It’s not. But there are reasonable and unreasonable conditions (and plenty of parents impose unreasonable conditions). For example:

    Reasonable: Maintain a 3.0 GPA. (At most schools, if you show up for class and take your studies seriously, this is easy.)
    Unreasonable: Maintain a 4.0 GPA. (Even the very best students are liable to get an A- now and then, especially if they’re really challenging themselves.)

    Reasonable: Have a plan to use your degree to get a job that will allow you to support yourself, with no further help from the parents.
    Unreasonable: Become a medical doctor.

    Unreasonable: Anything that’s unrelated to the actual education (who your friends are, what you do in your free time, etc.)

  47. I don’t think the accountant/doctor is really a very good example. Most of the situations that I have witnessed relate to children that want to incur large amounts of debts to major in subjects that generally lead to poor paying jobs…or jobs that are very difficult to land. I have known those who paid a hefty amount so that their children could pursue their “passion” in art,music,fashion and a few other “trendy” degrees only to end up having their kids work at a local bank or as a waitress becuase there were no jobs in their chosen fields. I have no problem with a parent stipulating that the money be spent on a more useful degree… and all of my children know that this will be the case. They can minor in another area if they so chose.

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