Reader Mailbag: Golf

I spent a good chunk of yesterday attempting to teach my children (four and two years old) the fundamentals of golf. The results were interesting.

The younger one, my daughter, thought the best way to get the ball in the hole was to pick up the ball and put it in the hole.

The older one would swing every time with as much power as his little body could muster and would either miss entirely or knock the ball quite far, often much further than the hole.

Maybe they need one on one lessons.

I am searching for an excel spreadsheet template, or similar product, that will produce an combined amortization for several “parents plus” student loans. We have a total of five such individual loans, and we make a single payment monthly to Dept of Ed. that is applied over the several loans. They each have different Int rates, and staggered starting dates, as we have not consolidated the loans related to our youngest, who has one more year of college remaining. I would like to start snowballing (as Dave Ramsey would put it) these loans, and would like to chart the best candidates for prepaying principal, if that is possible.

I have looked at MS at Home, Templates, page and asked this question on a forums page, but did not see anytype of response.
- Sandy

If you’re looking for just a debt reduction calculator, I’d look at the spreadsheet available from Vertex42, a site that just makes lots of Excel templates. I downloaded it and it seems at least close to what you’re looking for.

If you’re doing that, though, it’s vital that you also prepare an overall budget so that you have some idea of what you can realistically afford to put towards the snowball. The best free spreadsheet for that (by far) is Charlie Park’s PearBudget spreadsheet, which is really good.

Excel really can do many of the tasks that you might want to use Quicken or other software for if you don’t mind manually filling in the data.

It’s older parents with dementia. When older people start with dementia they can’t handle their finances like they used to (or maybe worse than they used to). They often will hide it too. I have personally seen this in some friends and also in our own family. They will run up huge credit card debt which they think they can pay but can’t. The credit card companies will then take advantage of them by calling and demanding huge payments by intimidating them. Then, often, they don’t even remember authorizing payments and can’t make it until next payday. They let sorry family members and friends take advantage of them (with “loans”) because of their generous nature or because, in their mind, they still have that unlimited income. Sometimes a family member will move in with them “to help them out” when they are actually helping themselves to their income and free-loading. If would advise any responsible child of an older adult to keep their eyes open for clues that this could be happening. It’s hard to get the parent to admit it and a pure nightmare to get it cleaned up.
- Cindy

This is absolutely true. I witnessed this in my own family within the last few years, as my grandmother began to slip into dementia a bit during her final year or two of life.

She began making lots of strange choices, spending money in very strange ways, and often failing to make ends meet at the end of the month after having no problem whatsoever doing so for decades beforehand. It caused untold problems.

The best thing to do to prevent this is to talk about it now, before dementia ever even has a chance to begin. Plan for this with your parents. Come up with a power of attorney arrangement that allows you to protect your parents from themselves when the time comes.

Please would you let your readers know how you’re progressing with your Rubik’s cube challenge. I was really intrigued when you first mentioned this in The Simple Dollar.
- James

I can do most of the solving of a Rubik’s Cube very quickly. I can solve a single face in about twenty to thirty seconds and line up the adjacent rows with about another ten. After that, I get really, really slow for some reason.

The thing is that I haven’t really mastered (or figured out) about half of the solution, but I’m really fast at the other half. I’m not really sure why this is, other than I need to practice a lot more mostly at the second half of the solution.

I practice with it on occasion even now.

What are your thoughts on pre-paying a mortgage if the person does not plan on owning the house for very long?

I bought my place in Nov. 2008 and plan on staying here maybe another 5 years. I currently owe $143,350 on a fixed 30-year loan at 6.375%. Lately I’ve had an extra $100-200 at the end of the month, and I am trying to decide whether to pay down the mortgage or invest the money. I have no other debt, have a very comfortable emergency fund, and am maxing out my Roth IRA. I am 27 and single with no kids, so I am comfortable taking some risk with the money. I feel to some extent like I should be paying the mortgage off, but it is not a huge stressor for me, and knowing that I will never pay it off entirely is not really motivating me to put more money toward it. I think I would be happiest with whichever route saves/earns me more money in the end.

What I would love your help with is calculating how much I could save in interest vs. how much I could earn by investing at a reasonable rate of return (either way, assuming $100/month for 5 years). There are lots of amortization calculators online but they all seem to show savings over the life of the loan, not a shorter period. I am struggling with how to calculate this.
- Andrea

If you put extra money into your mortgage, you’re essentially buying an investment that says “I return 6.375% a year (or maybe less, depending on your tax situation) but I am very illiquid.” In other words, it’s a solid, steady return, but in exchange for that, you don’t have the opportunity to get that money out very easily.

As a short term investment (five years would be short term), the stock market is akin to gambling. It’s truly impossible to estimate how much your five year return would be in a broad-based stock investment. It might be 0%. It might be 15% per year.

If you’re looking for a very stable investment over that time frame, your mortgage is probably your best bet. Other highly stable investments don’t return as well as your mortgage does right now.

My husband took a buy-out/retirement offer from his work, after 33 years of service. He’s 51 and has wanted to retire for about 25 years now. (semi joking)

His original plan was to find a part-time job earning about $5,000. per year, continue to pay some taxes and contribute to Social Security. From what we were told, if he does not pay into SS, he will be penalized when he reaches retirement age.

He is loving his life right now and really has no desire to find a job. Is it possible to pay into SS on your own? We live quite well off his pension and have ample money to contribute to SS. I can’t seem to find this info anywhere!
- Kelli

For your husband’s situation, the comment that he has to keep working in order to receive Social Security benefits likely isn’t true. You need to check out the annual document you receive from the Social Security Administration to make sure, but it’s likely that if he has been working full time for 33 years, he’s accumulated more than enough work credit to earn his full benefit when he retires.

You might want to read through this great Social Security primer from CNN Money for more information on that.

If he doesn’t want to work and doesn’t have a financial need to work, working just to pay more into Social Security isn’t really necessary.

I’ve begun the search for a used car somewhere in the range of $7-12K. One problem that I feel I will encounter is how to pay for the car. I fear that I may not be able to get a loan with a decent rate, or at all, because of the fact that my debt is very high, even though I’ve never missed a payment, I wouldn’t have a co-signer, and my FT employment history is very short at only 4 months. Do you have any suggestions for finding a decent loan with a decent rate for someone fresh out of school?
- Andre

My first suggestion would be to get a co-signer. I had a co-signer on the first vehicle I ever purchased (thanks, mom and dad!); without it, my student loan situation (and likely my burgeoning credit card debt) would have made such a loan a complete non-starter.

If you don’t have anyone who can co-sign the loan with you, your best avenue is to just keep building your credit in a positive direction right now. Keep making your loan payments on time (each time you do this and your debt goes down a little, that’s a positive). You should also make sure you’re seeking out a full time position in terms of employment, both for the higher income and for the stability.

I don’t know exactly what your credit looks like, but you may be eligible for a car loan now. You might want to check your credit report from the government and then use a FICO score estimator just to see where you’re at.

I am in my early twenties, and for some time now I’ve been dating this man and things look promising. What worries me about him is that he has a “spender” mentality- he’s had his parents’ financial support for most of his life (and his mom’s pampering), and his idea of “holding back” is not spending who knows how much on collector comics, etc. His paycheck is small. He’s listened to me about reducing his spending (eating out once every week and a half is an accomplishment), but the root of the problem seems to be that he likes to own stuff- something I can’t wrap my mind around. It is not enough to watch a movie, for example, but the more fancy the purchase is the happier he is (HD, blue ray, etc.) In a few months he is enlisting in the armed forces, something I hope helps. Regardless of how this relationship turns out, what can I do to help him overcome this destructive mentality?
- Katherine

Very rarely can someone else force a person to change their behavior or mindset. The need to change has to come from within.

Maturity might be part of the answer. He might also need to hit financial bottom at some point, or have his pampering cut off from his parents. Something has to change for his mind to change and if he’s able to survive doing what he does now, he really doesn’t have that motivation.

The military might help with this, but it also might not make one bit of difference. It depends on how his mind processes what he picks up there.

The best thing you can do is keep your finances separate for as long as possible and don’t bail him out of trouble. Yes, it’s a “sink or swim” mentality, but if you give him a life raft, he’ll think he can keep on “swimming” the way he always has.

I knew that I had some old debt sitting in collections but I had been ignoring them, focusing instead on the current debt I’ve had. I recently pulled my credit report so I could focus on paying down these debts and was shocked at what I found. I owe over $6,000 to one hospital for medical expenses from when one of my daughters’ was a month old, and $2,500 to the medical group and hospital system we are a part of.

The hospital debt is broken up into 2 collections. At the time, we had Medi-Cal (low income health insurance in California) who said if we paid the first $1,800 they would pay the rest. I don’t know if that still applies because it’s gone to collections.

The medical group is a lot of little debts, ranging from $50-200 with only one debt being significantly higher than that ($700). I honestly don’t know what they were for at this point. The medical group itself doesn’t seem to care much because we still see them regularly and no one has even mentioned how much I owe or that I owe.

I really want to take care of these debts, but I don’t know where to start. I don’t get harassing phone calls or letters about these debts. I’ve been told that I can settle for less than I owe, but since it’s the same companies for multiple debts, I’m not sure how they would settle. I really want to pay these off, but I don’t know where to start. Right now I could pay lump sums on a lot of the little debts, paying one off every month. There is no way that I could pay off the lump sum of the larger debts right now and I wouldn’t have a lump sum to pay the $6,000 to the hospital for at least a year.

Do you have any advice on what to do with all this medical debt?
- Jacqueline

I’m going to assume that you’re committed to paying these debts off instead of just trying to dodge them.

The first thing you need to do is go through your records and figure out what all of these debts actually are. Make sure that they’re legitimate and not based on identity theft or other mistakes.

Once you’ve done that, call up Medi-Cal and find out if the debt consolidation still applies. My guess is that it does not if they’ve sold off the debt to someone else, but I’m not entirely sure what the situation is based on this question.

After that, you’re probably using the right approach in just paying off each of these debts as you can afford to.

Good luck. This is going to just take some time and patience to resolve.

I’m in my late 20′s and currently between jobs. I have no debt, no big financial responsibilities, and $75K in savings. I’m also in a long distance relationship with my boyfriend of 3 years. He lives in Europe. We are trying to be together, but it is very hard.

I moved to his country for a year to be with him. I had a job that I liked, but it was low paying and not something I’d want as a career. So I moved home, worked, and saved some money. He is looking to move here with me, but he is not as mobile as I am. I also live in a city that has a high cost of living, so living here on 1 income is hard enough, let alone no income.

Now I’m considering giving up on my local job search and moving back to be with him. I am not 100% certain that he is “the one”, but he is important to me and I am willing to give it a shot. My problem is that I know it is not a financially-responsible thing to do. We have talked about it and he is able and willing to support me. But I read blogs like The Simple Dollar and have many financial goals for myself, and do not like to be financially dependent on my partner. I could earn more working here than living and working in Europe – but then I would be without him.

Is this worth it?
- Ginger

If you have $75K sitting in the bank, there’s no question what you should do: go. Go there, get a low-paying job for a year, and just spend that time figuring out if he is the one for you.

If you are in a situation where there is a life-altering decision in front of you and you have at least some economic stability, you should always take the road less traveled.

If you don’t, you’ll regret it for the rest of your years, and that’s not something that’s worth holding in your head.

A background on me: 28 years old, no wife, no kids, great stable job. I now only have two pieces of debt: a mortgage with a $165K balance @ 5.25%, and a $21K student loan that still has about 15 years left, but it has an interest rate of only 2.13%. I now have about $7K in my emergency fund, good for around two months of expenses. I’ve also got about $16K in a brokerage account. I currently contribute about 9% of my $90K base salary to a 401(K) and my company throws on an additional 3%, and I also contribute another 4% to a Roth 401(k). On top of my base salary I get an additional $30K to $35K a year in cash and stock bonuses.

As of right now I have a little over a grand left to spend each month after all of my expenses. My question for you is, what should I do with it? Should I bump my emergency fund up a couple months? Pay down my mortgage? Increase the money I put in my 401K or my brokerage account? Surely I shouldn’t pay off the 2.13% student loan, right? Any help would be greatly appreciated!
- Nick

Again, this is all about goals. Where do you want to be in five or ten years? Your answer to that question changes what you should do here.

Do you want to switch careers or go back to school in five years? If that’s the case, you want to hammer your debts hard, as reducing your monthly expenses is the best thing you can do for that, and bolster your cash emergency fund quicker.

Do you hope to be considering marriage and children? If that’s the case, cash savings or even investing would probably be the best thing to do.

Do you hope to be earning as much as possible and be shooting for retirement as early as you can? I’d have every dime possible jammed into retirement accounts and what you can’t jam into there jammed into brokerage accounts.

It’s all about your goals. Where do you want to be in five years? Figure that out first.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Nicole says:

    re: the medical debt
    Chances are you do not actually owe anything. Hospitals and insurers are terrible at talking with each other.

    When I had my wisdom teeth out (something I would not have done if it had not been insured!), the hospital sent me two separate bills but my insurer only processed one of them. I would then send the second one back to the insurer, again and again. They didn’t deny it or anything. I’d talk to them and they’d say, just resubmit the second bill, and I would and they wouldn’t do anything and the hospital would resend the bill. This went on for something like 8 months, maybe a year.

    Finally some ladies from the collection agency called. Knowing that it was not MY bill to pay, I gratefully sicced them on the insurance company and they got it figured out within a week. It also didn’t affect my credit score.

    So my advice: figure out if you were really supposed to pay more than 1800. If so, then try to get it sorted out with both parties and let the collection agency do the hard work. Then demand to get it removed from your credit report (generally you do this in writing– there are forms and things available online or in total money makeover if you have a copy).

  2. Andi says:

    I’d have to completely disagree with the advice on finding a co-signer. It will completely change your relationship with the co-signer – what if something does go wrong, is it worth it? Look for a less expensive car – they’re out there, just not as flashy and try to pay cash. If that’s absolutely not an option get a smaller loan.

    It’s hard to get out of debt with a car payment around your neck every month.

  3. Johanna says:

    @Nick: Is your mortgage on a house or a condo? If it’s a house (where you’re responsible for all of your own maintenance and repairs), then you probably want to put some more money in the emergency fund, or in a separate fund, to cover those irregular expenses. Even if you live in a condo, a two-month emergency fund sounds a bit slim to me, but that depends on your personal tolerance for risk.

    Another option to consider is giving some money to charity (or giving more, if you already give some). Having a job that pays more money than you know what to do with makes you incredibly fortunate, and it’s a great opportunity to do some good in the world.

  4. Ellen says:

    Kelli – re social security
    1. no, you can’t pay into social security independently of working.
    2. the Social Security website is very good & easy to use. Trent is right that once you earn your benefit, waiting a few years to collect doesn’t penalize you. As I understand it, they take the average of the highest-paid 10 years, so working just a little bit to continue to pay in probably won’t affect your benefits (but you would have the income in the meantime!).
    3. If your husband collects a public pension, that website probably also has good info on how the pension & SS interrelate.

  5. Ellen says:

    Andre – join a credit union – they generally offer good rates on car loans. Otherwise, I’m with Andi’s comments above – buy what you can afford & once you get your other debt paid down & establish more of a work history, you’ll be in a better position for the next car purchase. Check out Consumer Reports’ annual issue on cars for their ranking of reliable used cars – we found it invaluable the several times we were in the market for one.

    Also, if you live in a large town or city, try nearby smaller towns – they often have better deals.

  6. J says:

    I completely disagree with the co-signer advice. Andre doesn’t indicate WHY he needs the car — and evidently he has been getting to work somehow for the last four months, so I’m assuming he needs the car to get to work. He indicates that he has a pile of debt and is fresh out of school. I’m betting the job pays well enough to service the loans, and he’s seeing his other friends get cars and he wants one, too. I know, I’ve been there and I’m sharing my hindsight based on what I did — which was to take out a loan when I could have spent comparatively little money on the car I already had and kept it running another 2-3 years, easily.

    My advice would be one of the following:

    1) Keep doing what you’ve been doing and save up some money for the car. If you have a car already, great. Keep driving it until the wheels fall off of it.

    2) Save up enough or a down payment on the car that would get you the loan without a co-signer. Call local banks, credit unions, AAA. They should be able to run your credit and tell you the terms and options. Talking about a loan is free and you at least get an idea of where you need to be.

    3) Reduce the amount of the car you are looking for. Maybe a $3K or $5K car is just as good. Maybe a $2K car. Maybe you keep what you have and spend $500-$1K to keep it running another year.

    4) Ask around with your family/friends and see if someone is looking to sell or trade a car soon. You might be able to make a cash deal where they get more than what a dealer is offering for trade, and you could pick up a car from someone you trust and who could provide you a complete list of the car’s maintenance and/or known demons. Or they might just give it to you. I’ve heard of this happening with many parents who will give, or at least, “extended borrow” a car they were going to trade in.

    Above all, before you get tied up in a cycle of debt, read “The Total Money Makeover” and know exactly what you are getting into. Pay close attention to the part on co-signing.

  7. J says:

    My above comment should have read “he does not need the car to get to work”

  8. jim says:

    Kelli: Social security retirement benefits are based on your top 35 years of income. If your husband has worked 33 yers with higher income level then working more years at a relatively low $5k rate won’t have much impact on the benefit rate. Working extra years at this point could change the benefit rate as little as $10 a month at full retirement. How much it will matter will depend on the exact earning history. Its not likely to have a considerable impact though.

    Nick: If I were you I’d beef up my cash savings. You have a good income but not much in savings. Since you don’t really know what what else to do with your money keeping it in cash liquid certainly wouldn’t hurt.

  9. Crystal says:

    Andrea, I’d still prepay since I hate debt and it is a stable rate of return. Good luck!

    Andre, are you 100% sure you need a car? If so, I’d get something cheaper.

    Katherine, I’d tread carefully and not push too much. He knows how you feel and is making his own decisions. I’d be very careful with this relationship until this is worked out.

    Ginger, I’d go back to be with him too. It’s romantic and won’t kill you financially. Good luck!

    Nick, I’d prioritize and attack like suggested. I’d personally invest half (Roth IRA, IRA, more 401k, stocks, savings, etc) and attack the mortgage with the other half. When the mortgage is paid off, I’d kill whatever student loans are left.

  10. DrFunZ says:

    Your daughter is correct. The best way to get a little ball in a little golf hole is to put it in by hand. Actually hitting the ball with the club might be the sport, but in terms of being efficient and effective, your daughter has it right. I recommend her as a CEO when she grows up. Learn to play golf for the clients you want to woo – but in order to be successful, keep putting the ball in the hole yourself and skip the club!

  11. deRuiter says:

    Nicole, “When I had my wisdom teeth out (something I would not have done if it had not been insured!)” This is why health care is going broke. This is the type of attitude which will result in rationing of health care. This is also part of the reason health care costs are runaway, if Nicole had been a self pay patient, she would not have spent the money. Katherine, RUN, don’t walk, AWAY from this spoiled, profligate Mama’s boy. He will drag you down financially. …”what can I do to help him overcome this destructive mentality?” There is nothing YOU can do except get sucked into the spending malestrom. People don’t change unless they initiate change. He will come to see you as a second Mommy, picking on his spending habits, not so nice as he real Mommy who encourages and enables him. Why do you want to sacrifice yourself? The military isn’t going to “fix” this over spender! Whatever you do, don’t jointly file income taxes with this man, and don’t comingle your funds. This way the IRS won’t come after you when the marriage failes, and you may not end up in financial ruin. What makes you think this overspender is “the one”? Is it the challenge that you think you can “fix” his finances which, with his family as back up, have worked fine for him and his toys his entire life?

  12. littlepitcher says:

    Not all “strange spending” by senile dementia parents can be ascribed to their mental state. My mother had huge amounts of gas spending on her credit card, despite the fact that she seldom drove during the last year of her life. A year or so later, I discovered that a woman working in the neighborhood had purchased a car identical to hers, acquired her credit card number from a dishonest clerk at the convenience store, and her entire family was charging gas on it (and who knows what else!) Check those charges carefully and you may find that the senile parent is being victimized by an identity thief.

  13. Nicole says:

    #11 de Reuter

    No, I would have ended up with a much much higher bill for impacted wisdom teeth a few years later including structural jaw damage, possibly with an emergency room visit and I would have defaulted on the bill anyway destroying my credit because as a graduate student I was making 18K/year living in an expensive city. According to the dentist I had about a 2 year window to get them removed before it would become a major problem. 2 years later I was still a graduate student on the same insurance plan. There’s no law that says that insurance companies in that state have to cover impacted wisdom teeth– they choose to do it because it is less expensive for them than the alternative. The insurance company is being rational. You think I wanted to have surgery to yank out my teeth without a real medical reason to do so? Wisdom teeth removal is not exactly a vanity surgery. The moral hazard there is pretty minimal.

    I’m tired of arguing about insurance with people who don’t understand the basic framework of public finance. If you would like to have an informed debate, I strongly suggest reading the Public Finance textbook by Jon Gruber. It is written at undergraduate level and should be understandable even if you don’t have a PhD in economics.

  14. es says:

    Mailbag question: While I’ve been dreaming of moving out of Maryland for over 20 years, it hasn’t happened for a variety of reasons: didn’t get into my first choice college in TX; couldn’t get a job out of state; and marrying a man who won’t leave is family. Anyway, in my spare time, I make virtual moves to places which seem interesting to me. Most recently we’ve been focused on saving for college tuition for my 1st and Kindergartener. I was thinking of moving to a place with a reasonable cost of living, mid size city with museums, culture and fun things to do, good K-12 schools and good public universities. My latest find was Virginia Beach, VA or Raleigh, NC. What are your thoughts about moving to a location based on education goals for your kids? This is of course with the understanding that your kids might not actually use these resources.

  15. J says:

    @es, I think you should move based on what YOU want, not what you think your kids might want, or some “grass is greener” assessment of K-12 education.

    If you live in MD (I’m assuming you have some proximity to DC), you already have access to the museums and fun things to do. Droves of people pick DC as a destination just for that reason.

    I’ve also experienced that the “cost of living” thing is very relative. I make what would be considered a fortune where my parents live (in the Midwest), but it’s very competitive for my area. Were I to move to where my parents live, sure, the “cost of living” would be cheaper — but I would make less money. So I’d end up living pretty much the same lifestyle, anyway.

    Also, keep in mind what 20 years of living anywhere gets you — you have proximity to family, a network of friends and neighbors, you know how to get everywhere, and so on. But living somewhere 20 years can also be boring and people want change sometimes. So moving can be an adventure, too — and a change of pace. It’s a big country and there are lots of interesting people in it.

    So if you want to move, talk it over with your husband, since he has a significant stake in it (not seeing his family as much) and go if you want to. But go because it’s something you want to do — and don’t be surprised when your actual lifestyle and socioeconomic group is pretty much the same.

  16. Michele says:

    Regarding old debts… you really need to find out if they are indeed your debts. Many companies will sell old debts, even debts discharged in bankruptcy to collections companies for fractions of pennies. Many people will pay, or agree to pay, validating the debt again even though they have no legal responsibility to pay (not getting into the moral aspect of whether or not to pay). I had a friend who had student loans discharged because of medical reasons, the debt was sold and she didn’t fight it and now is paying for it which in and of itself is not a bad thing, but they slapped a penalty on it that was $30,000 more than the original loans.

  17. Joan says:

    Michele #16 is right about companies selling old debts for pennies on the dollar. The original debtor has charged off the debt and has received tax credits for it. You should always get the collections company to send you a copy of the original contract; if they are unable to do so, you may not owe them (the debt collectors) any money. Once you pay anything on the debt, it can again be put on your credit report for another seven years. Always make sure that the debt is legit. Go to Fair Debt Collection.com for more information. These people can be very intimidating. Never, Never give them any more information than they already have. After all, you don’t know who that person really is on the other end of the phone.

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