Reader Mailbag: Vehicle Shopping

My wife and I have looked at somewhere around a dozen vehicles in the last month as we search for a replacement for my truck that will be capable of seating five (and preferably capable of seating more).

Rather than rushing in and just buying the first option we find that minimally matches our needs, we’re being patient. We have the cash sitting there to write a check for the vehicle we want in the price range we want.

Now we wait. And test drive. And wait again.

I have a friend who [in my opinion] is not in very good financial shape and has just borrowed a lot more money from the bank to purchase some more property hoping to make a return on it & for this to help him financially in the long run. It was bought as an investment but I find it very risky. If him or his wife lose their job and are not able to lease/rent the property commercially, then they will be in a lot of trouble. Their finances were not good to begin with and I was horrified that the bank even loaned them the money. If this was 20 years ago, this wouldn’t have been possible, the bank would have never lent them the money but I am finding that banks are more and more willing to put people in financial jeopardy, they don’t care. Although I highly believe in investing money, I don’t believe that going way over your head [even if it is for the right reasons] is ever a good idea. I wanted to suggest that they reduce their costs, pay off a lot of debt before they got into this situation but decided against it.

All that being said, I came very close to telling him not to do it but knew it could put some stresses on the friendship. I have some regrets but at the same time, he is an adult and in my opinion it was not my place to determine whether he should have done it or not.

How do you feel about confronting friends with possible bad financial decisions? Friends are supposed to try to prevent each other from big mistakes but is it crossing the line if we meddle with their bad financial choices?
- Tina

I don’t think you should “confront” your friend about it. The best thing you can do here is to try to help him logically think through what he’s doing a little bit more.

The route I would take is simple. I would tell him that I’m really interested in how he’s able to make these investments and ask to see how he pulls it off because you’re thinking of trying it, too.

As he explains it, ask lots of questions. Make some of them positive ones so he can talk about the positives of what he’s doing, but make sure some of them do address the seemingly heavy risks of what he’s doing, like asking “what happens if you lose your job?”.

At the end, you can simply say, “I’m glad that works for you, but it’s just way too much risk for me. I would never want that much risk on my shoulders, because if even a little thing goes wrong, the whole thing crashes down.” Or something to that effect.

March Madness picks, please (so we can laugh at how awful your picks are)!
- Len

My brackets are usually pretty boring. I have a couple 11s over 6s and one 12 over a 5 (Cornell is the best Ivy League team I’ve watched in a very long time) – other than that, I have almost all the favored teams winning the early rounds.

My Final Four is Kansas, Kansas State, Kentucky, and Duke. I have Kansas and Kentucky in the national title game, with Kansas winning it all.

Of course, most of this will turn out to be wrong, as it does with most of the brackets people pick.

My boyfriend and I are seriously contemplating marriage and therefore are thinking about how we would combine our finances after the wedding. We know that we would like to have children fairly soon and that I would be a stay at home mom, at least for the first few years. So I was thinking that when we get married, we should live off of just his income from the very first day to get a better idea of how things would work and to resist lifestyle inflation.

I haven’t worked out all the details but wanted to get your opinion on the concept. Basically, his income (approx 100k a year) would pay for our housing, food, car, discretionary spending, utilities, some savings, and the minimum payment on the consumer debt we both bring into the marriage (we’re working on getting rid of it and have stopped accumulating more.)

My income (approx 60k a year) would be divided into long term savings – to build a healthy emergency fund, and extra debt payments to hopefully get rid of all of our debt before we have kids.

My thinking is that I want to know that we’ll be okay when we make the switch to a single income – I don’t want to be dependent on both incomes. What do you think of the plan and do you have any suggestions?
- Mary

That makes complete sense. I think that’s a very good plan.

One thing to consider, though, is taxes. When you go to a single income, you will be paying a lot less in income taxes. Not only will your family’s total income go down a lot (meaning you drop into a much lower tax bracket), you’ll also have a bundle of deductions and credits in the form of your baby. That will help some, especially to offset the expenses of the baby.

I would try very hard to not touch your income unless you find yourself not pregnant in a couple of years and want to use a large chunk of your savings to wipe out debt.

I’m debating on cashing out my IRA early (the value is approximately $10,000) and using the funds to pay off two credit cards. Do you have any advice concerning this idea? I know a 10% penalty will be assessed for the early withdrawal, but I’m tired of carrying the debt.
- Rob

There’s not only that penalty, but there’s also the indirect penalty of losing money in your IRA. That means less money at retirement. Yes, the $10,000 doesn’t seem big now, but in thirty years, that money will be on the order of $100,000.

In this situation, the decision should really rest on how much retirement savings you have in total. I would run a retirement calculator both with and without your IRA savings and see how much the removal of that IRA money would actually affect your retirement picture. If it turns something workable into something impossible, then I wouldn’t do it. If you’re okay either way, then it’s more up to you.

Honestly, though, I would be very reluctant to ever take money out of a Roth IRA to pay off consumer debt.

How can I become more responsible for my own finances?

Currently, I assume my husband manages all finances. I mean everything, buying a car, filing taxes, selecting and paying for services (gas bill, electric bill, and insurance), paying the mortgage and paying credit cards, etc.

I’ve become aware (creditors calling, tax lien placed on my credit union account) of mismanagement (bills not paid on time, creditors calling, credit cards not paid, taxes not filed since 1996) but find myself lacking courage to ask what’s going on, and not having access to significant accounts (SCHWAB investing, on line access of joint bank accounts) to find out for myself.

I get short answers when I ask my husband questions [...] I read your blog and enjoy being financially fit and enjoy living frugally, but I have no control over my husband’s behavior, although I believe his is frugal and financially capable, just lazy I guess.

Other than working on our obvious poor communication and the relationship part myself, do you have advice for me?
- Shelly

I excised some of your story, but I think that you really need to get at least some sort of grip on the financial situation in your household.

I’d suggest reading Financial Infidelity by Dr. Bonnie Eaker Weil, for starters. The book covers more or less the exact type of situation you find yourself in – a situation of not trusting your partner when it comes to finances.

At some point, you need to sit down and talk your way through this with him. That means working on your communication, first and foremost. If he refuses to participate, then there are some deeper marital issues going on beyond just your finances, and you should consider seeking marriage counseling.

My husband and I are in the market for a new or late-model used car and have been doing some research on local dealerships. It seems that nearly all of them have switched to a no-haggle system. Is there any way we can still negotiate to save money on a vehicle or are we really locked in on a price?
- Ellie

“No haggle” pricing is nothing more than price fixing. It simply means that they’re part of a large group of dealers and manufacturers that are agreeing to keep their prices at a certain level.

Unfortunately, there’s not much you can do with such dealerships. My own experience – and the experience of quite a few readers – is that their prices are the bottom line, period. They won’t negotiate and will wave at you as you walk off the lot. Your best bet is to search hard to find dealers who don’t do it this way and negotiate there.

I suspect that this arrangement won’t last for too long, as it’s virtually identical to the “trust” situation in the late 1800s. Competition between dealers and manufacturers is leaving the marketplace and they’re all effectively acting as one company. That’s a monopoly.

Today’s post advised a young couple to do something else with the excess over $25,000 in an emergency fund. You also mentioned that you live off of your hefty emergency fund during those months when income isn’t so steady. May I ask the size of your emergency fund? Or, alternatively, how many months’ living expenses does the number represent and what do your monthly expenses total?
- Melinda

Our emergency fund right now covers living expenses for a little over a year. Of course, our living expenses are going to go up a bit when the new baby arrives.

That’s quite a bit higher than I would suggest for people who have a steady job. The regularity of a paycheck means that you don’t have to have cash reserves for the months when income is low.

I will say this: there were several months in the middle of last year where our income for that month was below our expenses. It was made up for by a handful of stellar months. It’s for that reason that we have such a hefty fund – we can live through a run of poor months and still be okay without having to make panic-based career shifts.

My wife and I bought a house about 3 years ago, right at the peak of the housing market. Since then I’d estimate that our home has lost about $50,000 or about 20% of its value. The house is fantastic and we love our neighborhood, so up until now I hadn’t really cared all that much because we weren’t planning on going anywhere.

That was all before we decided to start a family. We still love the house, and with our first child on the way, we’ll have plenty of room for the three of us. However; we’d like to continue to grow our family over the next few years and the house just wouldn’t work for our family of four.

We’re aggressively saving for retirement currently, but at the same time, we’d like to start putting some money away so that when we’re ready (within 5 years for sure) we can either add on to the house or move to a larger home in the neighborhood. We’re going to start allocating enough money each month so that even if the housing market doesn’t improve we’ll have plenty saved up to move into roomier environs 5 years from now. I guess my question just boils down to where to put the money? Should we be putting it all into CDs or another safe investment like that or paying off more of our mortgage each month? I’m leaning towards a split of 2/3 into cash/liquid investments and 1/3 into paying off the 2nd mortgage for 20% of the house value on the house that’s carrying a 9% interest rate, but I’d be interested to hear what you or your readers have to say.
- Pat

Put it towards whatever earns you the most on interest.

What’s the interest rate on your home loan? Your smaller one seems to be 9% – what’s your bigger one? Do you have any other debts? What’s the best rate you can get on a CD?

The best thing you can do right now is throw your money towards the highest interest rates. If it’s that mortgage, throw all of it towards the mortgage (assuming, of course, that you have some sort of emergency fund).

When you get to the point of buying another home, the equity in your first home will help you to make it happen.

I am looking to shift gears in my career. I currently work at a small conculting engineering company as the resident Quality Assurance person. When I took the job, I had just been let go from a position I hated. This job has been much better, except for the last two years.

I love to edit other people’s work… And am supposed to be doing just that but for the 40+ hours I spend pushing paper for QA. I’ve not edited a single document in nine months.

Basically, I’m looking into an Asst. Editor position at a web based PR firm.

Switching jobs would mean at least two things: one, a significant pay decrease from $45k to $35k and two, there is a possibility of working nights (1p to 10p).
The pay decrease would be tough but not impossible … Working nights even for six months would be an almost impossible adjustment.

I have run the financial numbers on switching careers and my concern right now is that the economy may take another steep dive & I don’t want to switch jobs/career paths only to find myself unemployed or severely under employed.

Other than sticking to my current position which I’ve become disillusioned with and being miserable, I am stuck as to what I could do… I love to edit, but haven’t found a suitable way to include that in my day-to-day activities without switching jobs.

Any suggesstions, things/areas I may have overlooked?
- Danielle

I think you’ve got the general picture right. I also think you should seriously look at changing careers.

One big thing I would do is start building up some cash savings right now before you make the switch. Focus on spending as though you’re earning $35K now and sock the rest away into savings. That way, when you actually do make the switch, you’re not at the mercy of Murphy’s Law right off the bat.

Keep in mind that it’ll likely take some time to find a job in that field. Start shopping for one now and recognize that it won’t happen overnight. Good luck.

My parents purchased a whole life policy for me when I was 1. I’m not sure what to do with it. It has a cash value of about $4000 right now, a death benefit of $50,000 and an accidental death benefit rider of $40,000, with a guaranteed purchase option of $10,000 every three years. The current premium is $200 per year. This past year it earned 6% (before cost of insurance was taken out) and is guaranteed to earn 4%. The current premium is $200.

I currently don’t have a term life insurance policy, but will be purchasing one in the next couple of months. I’m not sure if I should cash this out, keep paying, or stop paying and keeping the insurance until the cash value runs out.
- Adam

You need to evaluate whether this policy is worthwhile as it stands right now. It may or may not be, but there’s not enough information in this letter to know.

First of all, are you engaged in any occupations or hobbies that might violate the accidental death benefit rider? In other words, are you doing anything that causes an elevated risk of accidental death? If so, the company may refuse to pay the rider, making your policy only worth $50,000 if you die. If not, it’s worth $90,000.

Then, get some quotes on term insurance for whatever that amount is. Be honest when getting the quotes. See how much your premium would be for a term policy matching the value of your whole life policy.

Once you have that quote, see how much more you’re paying for the whole life policy compared to the term. Is that difference worth the investment benefit you’re getting at this point? Or would it be better to cash out that investment and put it elsewhere?

I saw a horrible message about you on [link to messageboard removed]. Somebody certainly has an axe to grind! Why don’t you go there and defend yourself?
- Kelly

Honestly, I don’t really care.

There are a lot of people out there who use the anonymity of internet messageboards to blow off steam. I run a website that has hundreds of thousands of readers. It’s not surprising at all to me that some of those people blow off steam in my direction. If I spent my time worrying about it, I’d worry about nothing else.

Yes, sometimes in doing that, I overlook actual legitimate issues and complaints. It’s a tradeoff, but it’s a tradeoff that needs to happen to maintain some degree of sanity and personal happiness.

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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42 thoughts on “Reader Mailbag: Vehicle Shopping

  1. Ellen says:

    Adam – another consideration as to whether to keep the insurance is whether you have any dependents who would need the protection of the life insurance proceeds if you die. (And if that’s the case, $50,000 isn’t very much.) If you are single with no dependents, then you don’t really need life insurance. If you are young & need (i.e. have a wife and/or other dependents) or just feel more secure having some life insurance, $200 a year would probably buy much more through a term policy, so I agree with Trent’s advice there on that. Depending on your lifestyle & other considerations, you might even be better off cashing out & using that + the premium amounts to get a long term disability policy now while you’re younger & the rates are lower.

  2. DivaJean says:

    In regards to Mary’s letter-

    They seem already planning to eliminate debt BEFORE having a family:

    “Basically, his income (approx 100k a year) would pay for our housing, food, car, discretionary spending, utilities, some savings, and the minimum payment on the consumer debt we both bring into the marriage (we’re working on getting rid of it and have stopped accumulating more.)”

    But then you wrote:

    “I would try very hard to not touch your income unless you find yourself not pregnant in a couple of years and want to use a large chunk of your savings to wipe out debt.”

    It is my recommendation that her she continue work FOR NOW with all her income going towards debt and emergency funds. They should be living off his income only and her money going dirctly into paying off debts. Once they get the debt gone and the emergency funds up to snuff, then she could consider backing off hours.

  3. Shevy says:

    I find myself much more concerned with Shelly’s situation than I was with Michelle’s from your Mar 11 mailbag. (Michelle is the woman whose husband has been bad with money since before their marriage and who has continued to open credit card accounts and run them up even though he’s not supposed to.) In that mailbag, pretty much all the commenters were united in saying that Michelle needed to divorce her husband.

    I actually wasn’t a member of that camp. So, why am I more worried now?

    Michelle had it financially together. She was making good money, had assets in her own name, was aware of what was happening and had the financial ability to pay off his debts (although she had reached the point where she was no longer willing to do so).

    Shelly appears to have none of those positives and more significant negatives. She appears to have little or no say in financial choices (for example, in a new car purchase), no understanding of what is happening with the household money (she hasn’t got online access to their JOINT bank account), doesn’t know what their debt situation is really like (while creditors are calling and there is a lien on a bank account!), etc. When she asks about things, her husband brushes her off!

    My guess is that she (and her husband) may be older and she may not be working, although it isn’t discussed in the portion of the email that was printed.

    She is being financially controlled and has very limited understanding of what is going on (referring to her husband as frugal and financially capable, though lazy!). She’s the one who needs serious help and needs it now.

    I have two guesses as to what is going on. First, it seems that her husband is a very controlling person, controlling her in a manner that actually amounts to abuse. She may not have worked in a number of years and doesn’t have the courage to insist that she be included in understanding their financial picture. This would be a case of “my wife will never work” and “don’t worry your pretty little head about that” taken to the extreme. I once worked for a relatively young woman who had been totally controlled and dominated in her marriage. When she finally escaped (and it was an escape), she didn’t even know how to write a cheque. Several years later she was a business owner with several employees! So, even someone who is deliberately kept in the dark and without access to money can change their situation and become knowledgeable and successful.

    The other possibility is that her husband has some kind of significant debt problem. He may be a gambler or a substance abuser and money that should be going to pay credit cards or the mortgage is going to buy drugs or pay back loan sharks or is getting dropped at the tables or the track because that “one big win” is right at hand. Obviously, if this is the case, he’s not going to be telling Shelly much about their finances and is going to be saying things like, “everything’s fine” and making up short excuses for why this or that is happening. She could wake up one morning and find that their home had been foreclosed upon or worse, that he’d decided the only way out was a final solution, either by himself or taking her along to “save” her from the unpleasant reality.

    The bottom line is that he appears to be financially incompetent, may be mentally ill, addicted, or abusive and is unwilling to change. Shelly needs to get help *now* and possibly to be very careful how she does so (in order not to put herself in physical danger).

    Michelle’s husband may also be addicted (to buying things) or may be bipolar and spending recklessly in manic phases or may be very seriously ADD and have no impulse control. While it’s frustrating and Michelle has to decide how to deal with him over the long term, none of his behaviors scare me. Shelly’s husband’s behavior makes me want to get her out of there *now* before something really bad happens.

  4. Krista says:

    @ Shelly – I hate to be harsh, but I laughed out loud at this statement: “I read your blog and enjoy being financially fit”. If you don’t even have access to your bank accounts and you were unaware that your taxes hadn’t been filed for the last FOURTEEN YEARS, you’re about as far from financially fit as possible.

    You need to immediately demand access to every piece of financial information. Every account, every tax slip, every investment. This isn’t a situation where you can gingerly work on your communication skills, this is a seriously dangerous situation that you need to correct – yesterday.

  5. Johanna says:

    I disagree with the advice to Tina. Telling your friend you’re interested in real estate investing when you’re really not is otherwise known as “lying.” And while I’m not saying that you should never, ever lie to your friends, this is not one of those times when you should.

    That’s because it’s almost certain, I think, that Tina’s friend will see through the lie. Even if it’s not obvious from the beginning (which is might be, if Tina has a history of being cautious with money and if her friend is perceptive enough to notice that), it will be by the time she stops asking him questions, pretends to completely change her mind, and starts lecturing him. And from that point on, any time she talks to him about anything, he’ll be wondering, “Is this just another trap where she tries to trick me into saying something she disapproves of so she can berate me again?”

  6. Johanna says:

    Also, +1 to Shevy and Krista.

  7. JonFrance says:

    I agree with Johanna. The time to speak up was before he made the investment (say “just playing devil’s advocate” if you think he’s taking it the wrong way).

    If you manage to convince him now that he made a dumb move he’ll just end up saying “where were you when I bought this land?”

  8. Johanna says:

    Also also, to Danielle: You say your job used to be enjoyable and involve a lot of editing – do you know why it changed? Is somebody else doing the editing now? Was somebody else previously doing the paper pushing that you’re doing now? Or have the needs of the company changed? If you don’t understand why your duties have changed, are you on good enough terms with your boss (or with any of the people whose stuff you used to edit) to ask about it?

    I’d say that trying to figure out if there’s any way to make your present job enjoyable again should be the first step (if you haven’t done it already), before you start looking seriously at different jobs.

  9. jgonzales says:

    Danielle, have you considered freelance copy editing while keeping your current job? I know there are several companies online that hire freelance copy editors for pretty regular work. Demand Studios is one for sure.

  10. John S says:

    I love letters like Mary’s. Their household income is $160k and she’s worried they might not be able to get by on “just” $100k. What planet are these people from?

  11. anna says:

    @ John S, it all depends on where they live. There are parts of New York City or Southern California where $100k/year is nothing. In the Midwest where I live, $100k/year is middle upper class.

  12. Mary- you sound like you have a good head on your shoulders. I think its a good idea to try and live off of your husbands salary. I would go one step further if it works (maybe after 6-9 months) and see if you can live on 75% of his salary. This would leave him some breathing room if his job was not working out and he could switch jobs without the pressure of being tied to his 100K salary.

  13. lurker carl says:

    Mary, y’all should live off your salary and bank the larger paycheck. When you stop working to raise kids, you’ll already be able to live off far less than his paycheck and able to continue to save when your income stops.

    Shelly, you need to contact a lawyer.

  14. Ryan says:

    In the sake of full disclosure, are you willing to provide the link to the site of your detractor? I am just curious to know what someone could possibly complain about.

    Thank you!

  15. Courtney says:

    @ John S: “Their household income is $160k and she’s worried they might not be able to get by on “just” $100k.”

    If they get married and start living on $160K, then no, they’re not going to be able to get by on ‘just’ $100K; at least not without some major cutbacks. I think Mary has the right idea – live on one income now, and it will be easier rather than harder if/when a baby comes.

  16. Brittany says:

    @3 Shelvy- -Spot on. Trent– This woman needs help escaping from an abusive marriage, not financial literacy books.

    Along Johanna’s line about lying to your friend–agreed, especially since you don’t need the lie to use the strategy. If the person is a good friend, shouldn’t you, as a good friend, take that kind of interest in his/her live anyway?

  17. kim says:

    Trent, I would go for more seating. We have three kids and just traded in our 5 seat vehicle after 5 years of squished kids, constant bickering, inability to transport friends or help with carpools. We bought the 5 seater when my oldest children were 4 and it seemed fine. However, it proved to be very inconvenient by the time my twins were in kindergarten and had a bit more of a social life and structured activities. We now have seating for seven and it is soooo much better!

  18. Des says:

    @John S.

    They probably live on the planet where people max out their retirement funds. For two people to max out their 401ks and IRAs takes $43,000. They will probably pay 30k in taxes on 100k salary. If they max out a 529 for their kiddo, there goes another $4k. That leaves them with $23,000 to live on. I don’t know what planet you live on, but $23k a year just isn’t that much money on where I come from. Once you factor in responsibly saving, $100k goes pretty quick.

    Just because someone makes more than you doesn’t mean they’re rolling in money (a common misconception.)

  19. DivaJean says:

    John said:

    “I love letters like Mary’s. Their household income is $160k and she’s worried they might not be able to get by on “just” $100k. What planet are these people from?”

    I didn’t even register how high their income was- crazy- dat.

    And here my family of 6 lives on $54K…with a 15 year mortgage of $100K getting paid off in on only 8 years (estimated to be paid off in the next 1 1/2 years).

  20. Kat says:

    DivaJean, if you have a 100k mortgage, either you put a HUGE amount down, or you live in a low cost of living area that likely also has low propoerty taxes. There are areas of the country in which a little starter house with two bedrooms is over 300k and has 10k in property taxes a year. I love where I live, but I can see how people who “only” make $100k a year can be having trouble getting by in this area (suburb of NYC), and the average salaries of people here are higher than in places were a nice house can be bought for 100k. I make about $100k, and trust me, it doesn’t mean I am “rich” by any means, though perhaps if I could find a 100k job in your area, I would be.

  21. Sharon says:

    Shelly – I took over our household finances once I began working from home as I had more time. Perhaps if you’re not working you can us this as a reason to take over paying the bills. You also need to see a lawyer as per others’ comments you may find yourself homeless if your husband keeps not being fiscally responsible.

  22. almost there says:

    Trent, you told Rob “Yes, the $10,000 doesn’t seem big now, but in thirty years, that money will be on the order of $100,000.” I say poor advice. I see where you are thinking that money invested in the stock market may have in the past earened that much but in reality it is unlikely to earn anything near that much. I invested in growth mutual funds (IRA) since 1984 and at the start of ’09 had earned less than 1% on my
    original investment, not including dividends reinvested. Yes it has come up some from then but the return would have been safer in mm cds.Also with the rate of inflation that the government lies about that 100K will be chump change. My parents thought a 25K life insurance policy in the mid 1950s was a lot (5 years wages for a teacher). But today it won’t last my mom more than a year if my dad were to pass. But on the other hand, this blog is for entertainment only.

  23. Kelly says:

    Regarding Pat’s question of getting a larger house in a few years because their current one “won’t work” for a family of four. I’m making assumptions, but my guess is that’s not true. Growing up, I lived in a 900 sq ft home with a brother, sister and both parents. We managed just fine. When we did move, our house was about 1,600 sq ft, small by today’s standards but PLENTY large enough for all of us. Sure my sister and I shared a room, but it worked. I’m 37, BTW so this wasn’t the dark ages. (Although some of you whipper snappers might think otherwise.)

    I think expectations are SO high now for what’s considered “enough” for a family to live in. If they can afford a larger house when they think they need it, great. But why move from a house they love. Again, totally making assumptions on this particular person’s situation. I’ve just seen and heard the same thing over and over from growing families.

  24. Michelle says:

    ROCK CHALK JAYHAWK BABY!!!

  25. brooke says:

    i can’t believe no one commented on the bracket answer!! UK will totally beat Kansas!!! Spoken like a true Kentuckian, right? :-)

  26. Jennifer says:

    I bought a car from a “no haggle” dealer and while I couldn’t negotiate the price of the car I was able to negotiate the trade in value of the car I traded in slightly. I can’t remember exactly how much but a little bit.

  27. kristine says:

    Diva and John, depends on where you live. In NYC metro area, 100K is squeaking by. The average rent for a small place is 2000, and mortgages are much, much more. The average house on LI costs half a mill. The kind of house that would go for 120 in VA. A train ticket to commute to work each is $20 something dollars. a day. Basic liability car insurance, for a 10 year old car, with a safe driver discount, is 1400/ year. NY State taxres are pretty high too. But the beaches are terrific!

  28. margaret says:

    re Shelly – I totally agree with comment no 3. Your situation is terrible. In Canada, if you have failed to file you taxes, but then YOU go to the CRA (like your IRS), they will waive the penalty fines on the amounts owed. If you wait until the CRA starts investigating you, it’s too late. So it might be beneficial to you to contact the IRS yourself. Of course, if this would put your life in danger, please focus on rescuing yourself from your situation first. That might sound over dramatic to you, but that’s just how bad your situation sounds to someone outside of it.

  29. Sharon says:

    Shelly,

    Before I did anything in your shoes I would get prepared to leave. The situation sounds, at best, volatile. Here is the advice I found about being prepared to leave an abusive relationship:

    MAKING PREPARATIONS. In advance, make sure you have a safe place to stay. Call a domestic violence victim service program and find out which services and shelters are available as options if you need them. Keep their address and phone number close at hand at all times.Always keep a packed bag packed hidden in a safe place (locked in a car trunk with only one key or with a trust relative or friend), in case you need to leave quickly. The bag should contain important items you will need for you and your children, including clothing, money for phone calls, transportation, one month’s expenses, diapers, court documents (divorce, custody papers, restraining order, etc.), identification (social security, driver’s license, etc.), birth certificates, school/medical records, marriage license, prescription medications, credit cards, checkbooks, ATM/credit/debit cards, work permits, green cards, insurance papers, bank books, telephone/address books, car and house keys, car title, house deed/lease agreement, mortgage payment book, insurance papers and medical records, school and health records and any medications, eyeglasses, hearing aids, etc.

    After that I would spend sometime skimming the grocery money or whatever money you have access to for an emergency fund for you. The credit card companies cannot send you or your husband to jail…the IRS can. This fund needs to be secret and cash.
    Find out the divorce laws in your state. Is it communtiy property?
    Figure out what debt he has by getting a copy of BOTH your credit reports. Some bills may be in your name. I don’t know what the legal issues are on pulling his credit report since you are the spouse but someone is bound to know the answer somewhere. If that is illegal you may just have to make copies of as many things as you have access to in the house.
    THEN you can talk to your husband. You need to be able to talk to him from a position of strength. Not weakness. Then you can see about healing your finances and marriage. But you need to know that you can walk away if you must.

  30. de Ruiter says:

    “I read your blog and enjoy being financially fit and enjoy living frugally, but I have no control over my husband’s behavior, although I believe his is frugal and financially capable,” DENIAl, you’re in denial. FOURTEEN YEARS AND NOT PAID TAXES, YOU’RE ABOUT TO GO TO JAIL. At least your money worries will be over and the fact that you’re going to lose your house to the IRS in a seizure won’t matter as we taxpayers will be supporting you in prison for tax evasion.
    “creditors calling, tax lien placed on my credit union account) of mismanagement (bills not paid on time, creditors calling, credit cards not paid, taxes not filed since 1996″ The man is taking you down and you’re complicit. THIS IS YOUR FAULT, YOU’RE GOING TO JAIL. You need a tax lawyer immediately and to file for divorce. Your husband is taking you to prison with him for tax evasion, and you are living in a dream world. You don’t need online access to your joint bank accounts, GO TO THE BANKS AND DEMAND STATEMENTS OF ALL ACCOUNTS, THEN REMOVE ALL THE MONEY (IF ANY IS THERE) AND GET YOURSELF TO A TAX ATTORNEY. WAKE UP, DEFEND YOURSELF, YOU ARE LIVING IN LA LA LAND AND ABOUT TO HAVE A RUDE AWAKENING WHEN THE IRS ARRESTS YOU. The IRS is more likely to let you stay out of prison if you start to fix this mess before they find you. DUMP THIS LOSER, NO MATTER HOW MUCH YOU “LOVE” HIM, HE DOESN’T “LOVE” YOU. The Christmas panty bomber folded when his Mother was threatened with criminal procedures, your husband thinks less of your welfare than some suicidal terrorist thinks of his family.

  31. DivaJean says:

    SOmeone thought I must have put a huge amount down on our house-

    We put a little more than 20% down- from the sale of hubby’s first home (it was a HUD home and despite the work put into it, very little profit was made in the endeavor- plus she had been in debt from some poor choices). My home had to go into a short sale due to the crazy real estate market– and the fact that it had been broken into and copper pipes were ripped out- a big problem in our area.

  32. JonFrance says:

    @de Ruiter

    I want to read your blog!

  33. Shevy says:

    @de Ruiter
    Are you sure? Canadian & US tax law must be really different then, because in Canada only the actual person who *deliberately* evaded paying taxes would possibly face jail. In reality, the CRA would assess what he owes, add the fines and the interest and start garnishee procedures if he didn’t start paying it down. If that didn’t work, say he quit his job to avoid paying, then they’d look at taking the house or jailing him. But they wouldn’t come after the wife. It’s not her income.

    Besides, he may not *owe* any taxes. You’re making that assumption. But not filing doesn’t mean not paying income taxes. Those are deducted off your pay before you ever see the money. If they’ve been taking the right amount off his paycheques all along he’s probably within $50 to $100 per year either way. If he really is lazy (as Shelly suggested) or is financially phobic in some way or is just plain ignorant he might end up owing a couple of thousand dollars, or the government might owe *him* up to that much. But I sincerely doubt they’d cart him off to jail over such a small amount. If it turned out he was hiding income all those years it would probably be a different story. But again, his income. Not hers. She hasn’t done anything wrong.

    I think Shelly should be scared by the situation she’s in and should take steps to keep herself safe while she extricates herself, but I’m worried you’re going to terrify the poor woman into doing something rash and endangering herself in the process.

  34. Shevy says:

    Oh, and for those who found it amusing that Shelly “enjoys living frugally”, I imagine she really does live frugally. In a situation like she’s described she’s almost certainly on a pretty short leash when it comes to money and probably has been for years. Her husband likely has whatever toys he wants (or feeds his addiction) while she pinches pennies and uses coupons to get through the month.

  35. Kat says:

    DivaJean, even with major defects, NYC suburbs have houses that would be much more than you paid. I was thinking NJ, where the property taxes are the highest in the country and car insurance rates aren’t much better, but another commenter mentioned NY state’s expenses when you are close to the city. It doesn’t matter if the house has no plumbing, or if it is water damaged to the point of being unlivable unless completely redone, or if it is on toxic fumes, I didn’t find anything that was under 400k in areas that I would be living to live in (and I wasn’t being that picky, really, just avoiding the really BAD crime areas). So, the choices would be to move to somewhere like where you live, where the same exact job would pay less, but with that salary I could afford a house. That’s the trap people get stuck in when they are in high cost of living areas, to move means a LARGE drop in salary, but the drop in cost of living expenses aren’t considered as much….

  36. SoCalGal says:

    Sorry friends, but Ohio State will win the NCAA tournament this year.
    And excellent advice to Shelly. Get your ducks in order & be prepared to leave when you start demanding information from your husband. Good luck.

  37. SLCCOM says:

    The IRS has the “innocent spouse” rule, too. Shelly should document that she has zero control over finances before she leaves as well. I strongly agree that she should have all her ducks in a row and be prepared to run before she has her discussion. Her situation has the potential to explode into violence.

    The whole life policy calculation: canceling life insurance because you don’t need it today can mean that when you do need it you are unable to get it at all. What if he is single today and falls in love in 5 or ten years and needs life insurance then but is unable to qualify? You also have to consider what you will be able to get term life insurance for in ten and twenty years, particularly when the magical thinking of “I eat right and exercise” fails and you are sick or injured. The chances that he can get that much coverage for so little are small. The ability to add $10,000 coverage every 3 years is great. And where these days are you going to get that kind of return on your investment? Personally, I would hang on to it, add to it and think of it as insurance that you’ll have insurance when you need it. But do add disability insurance to your portfolio!

    People also do a lot of magical thinking about life insurance. They figure, “I don’t have kids and my spouse will be able to work, so I don’t need it.” Bad assumption. Anyone can get sick or seriously injured any time. At worst, the life insurance will provide a financial cushion for the surviving spouse who is able to work to use as an emergency fund, retirement fund, or even for a nice trip to Hawaii to help recover from the trauma of your death. At best, that life insurance can be applied to help a now-injured or ill spouse continue to keep the house and have a life to the degree that injury or illness permits.

    I agree that people are expecting much larger houses for their family! My folks had a three-bedroom home and two kids. Also consider that a large house often means very little home life as everyone is scattered in their spacious rooms, instead of spending time as a family.

    Thinking that the housing market is going to recover in the next 5 years and that your home will no longer be underwater is, in my opinion, over-optimistic. If you REALLY need more room, be sure to crunch the numbers carefully about selling versus adding on. My bet is that adding on is going to be the better option, particularly when you factor in the costs of selling, buying and moving, which can be extremely high.

  38. mary says:

    Shelly, I hope you read these comments and get help before it’s too late-will be praying for you. Mary

  39. Emily C says:

    Pat-

    We currently have a family of four in 550 square feet.

    With another on the way, and a move in the process, we will be legally required to live in a 3-bedroom dwelling.

    Follow Trent’s advice, and then reconsider the need for a move at all. Try making it work first.

  40. Todd says:

    I’ll echo what Emily C. writes. We have a family of four in 1500 square feet, and we feel like we have plenty of room. Our kids had sleepovers in homes where the master bedroom was on a different floor of the house from the kids’ rooms, and it really worried them as elementary school-age kids. We like being all on one level, and being together and doing things in the same rooms of the house.

    They’re teenagers now and they want a little more time with their friends, so my wife and I sometimes watch TV or read in our bedroom and let the kids have the common areas. But they often come get us to play a game or watch something with them–and we like their friends. I think the friends like that we all spend a lot of time together, while many of their parents with huge houses are rarely home in the evenings.

    We live by the same principal with our car, BTW. We all drive around in a Ford Focus, and the kids have never once asked why we don’t get a minivan.

    Every family has their own preferences, of course, but I just wanted to chime in and say that having kids doesn’t “require” a big house and a van.

  41. Todd says:

    I’ll echo what Emily C. writes. We have a family of four in 1500 square feet, and we feel like we have plenty of room. Our kids had sleepovers in homes where the master bedroom was on a different floor of the house from the kids’ rooms, and it really worried them as elementary school-age kids. We like being all on one level, and being together and doing things in the same rooms of the house.

    They’re teenagers now and they want a little more time with their friends, so my wife and I sometimes watch TV or read in our bedroom and let the kids have the common areas. But they often come get us to play a game or watch something with them–and we like their friends. I think the friends like that we all spend a lot of time together, while many of their parents with huge houses are rarely home in the evenings.

    We live by the same principal with our car, BTW. We all drive around in a Ford Focus, and the kids have never once asked why we don’t get a minivan.

    Every family has their own preferences, of course, but I just wanted to chime in and say that having kids doesn’t “require” a big house and a van.

  42. Darin says:

    I don’t know that I agree with your statement about “no haggle” prices at a car dealership being the equivalent of “price fixing”. For the dealers in my area, it’s referred to as “internet pricing” or “bottom line” pricing, meaning they put their best price out on their web site because so many people are doing car shopping on the internet. It’s not like the price at one dealership is identical to another on the same make and model. They know that people are going to go with the one with the lowest price. Sounds like competition to me.

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