Reader Mailbag: Post-Christmas Thoughts

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. Adding another credit card user
2. Re-selling debt
3. Figuring out life insurance
4. What makes people negative?
5. Babies and emergency funds
6. Paying for pet medical expenses
7. Unwanted gifts
8. Handling pet cleanup
9. Planning for after graduation
10. Favorite Christmas gift

I’m actually finishing up this reader mailbag late on Christmas Day, after the rest of the family has collapsed in a heap of exhaustion.

There are few things more fun than watching a pile of grandparents, parents, and children all huddled together in a room, sharing memories and gifts and excitement and laughs.

Forget the presents. The best part of today was the people.

Q1: Adding another credit card user
I was thinking of adding my partner of 2 years as an authorized user on my credit card (low limit) to use for gas and household expenses – all budgeted items. The reservation I have is that she just recently walked away from her house (after 3 years of nonpayment and a dismissed bankruptcy). She is unemployed due to a medical condition but is covered under COBRA. Her debts are 4-5+ years old and are considered uncollectable. My credit is outstanding and my only debt is the mortgage. Anyway, do you have an idea of what it would do to the interest rate, credit report, etc for her and myself?

– Veronica

It shouldn’t affect your credit report at all, except perhaps an indirect effect.

As for the impact it will have on your card, it has more to do with the policies of the specific bank you’re working with than anything else. Generally, my experience has been that an authorized user doesn’t impact the interest rate or the credit limit of the card at all, though there are certainly quite a few anecdotal cases out there about limit reductions and the like.

This is where the indirect effect might happen. If your credit limit lowers, this will have a small negative impact on your credit score, but it shouldn’t be enough to drastically impact the loans you might get or other things. There are actually a few courses of action for responding to a credit limit cut.

Generally, however, adding someone as an authorized user has little impact on the main cardholder and a positive impact on the credit of the new authorized user, assuming the new authorized user uses the card responsibly.

Q2: Re-selling debt
I have an old credit card account which was charged-off years ago. I recently found out the debt was sold to another debt collection agency with a “new” charged-off date of 2009. Is it fair practice for creditors to keep re-selling old debt just to remain within the 7 year limitation before the debt must drop from my credit report? If not, what should I do?

– Fred

That’s generally not an acceptable policy. However, actually tracking this down and fixing it is next to impossible. Neither agency involved has any interest in changing this for you – it’s not good business for either of them – and trying to sue them to make them change it will probably cost you more than it’s worth.

Companies that buy and pursue old debts are generally not the most fun businesses to work with. They’re in a business of pursuing debts from people who don’t pay their debts. They’re debt collectors. They’re going to turn what screws they can to get their money.

The best way to get rid of this permanently is to negotiate with the company that holds it. Make them a low offer to pay it off and have it removed from your report. This is the best permanent solution to the problem.

Q3: Figuring out life insurance
I’m 25 years old and make a nice salary but I am really very very tight budgeted. My wife is in college and watches our daughter all day. I want to get life insurance but I’m not sure which one is good for me. I could get 30 year term for a 700 dollars a year. Or i could get universal for $4360 a year. The perk with the universal is that it is like a savings account where after 20 years I’ll have money in the account to use towards my childrens wedding or college. Plus I’m paying for private schooling which is a whole diffrent ball game. Should I get universal and be tight with my money or should I get term and free up my now funds but not have the same security in the future.

– Andy

You should get a term policy, then open up a 529 college savings plan for your daughter. That’s the plan I would follow.

If you lock yourself into a more expensive policy and then lose your job, you have a good chance of losing that policy. If you have a term policy and are contributing to a 529 and lose your job, you can cut contributions to your 529 and not lose your insurance.

Besides that, most of the numbers I’ve seen comparing a universal policy to a term policy and an investment shows that the term and investment combo tends to win out both in the short run and (usually) the long run.

Q4: What makes people negative?
I’ve been dreading my family’s Christmas celebration this year because it’s always so negative. Everyone just sits around and ridicules people that aren’t there, famous people, and when the drinks start flowing they often ridicule each other in a very hurtful way. I don’t enjoy it at all. Why do people do this?

– Emily

Everyone channels their feelings and emotions toward the world in a different way. This is definitely a negative channeling of emotions, but it’s how some people vent.

I generally prefer to vent in a positive way. When I’m frustrated, I work it out alone. Sometimes, I work it out through my writing – some of the characters in the fiction I write are truly deplorable people.

When I’m around others, I try to see the positive in each situation. (The only thing I tend to be sarcastic about is politics, actually.) I find that the more effort I put into channeling my feelings into something positive, the more positive I generally feel about my life and the things around me. Positivity breeds positivity and negativity breeds negativity.

Q5: Babies and emergency funds
We are expecting our first child any day now. We have been very good at budgeting very well so far. We’ve budgeted for or been given all the furniture, clothes, diapers, etc. that we will need, at least for the first 6 months or so. We’ve been good about not over buying everything the baby industry claims you “need.” We have also budgeted for all the medical expenses that we will need to pay for. However, there is still a number of last minute things popping up that we just didn’t realize we would need to pay for. Part of this is probably part of being new parents and not knowing what to expect. Do you think it will be easier to budget better for subsequent children? Is it ok to use our emergency fund to pay for those purchases we didn’t budget for?

– Lauren

It will be much easier to budget better for your subsequent children. The biggest reason is that you’ll already have an awful lot of things on hand, and the second reason is that you’ll actually know what you need through experience rather than the advice of others.

Each parenting experience is different. Some parents find certain things very useful, while others find them useless. It has a lot to do with the house you live in, your neuroses about hygiene, and other such factors.

As for the emergency fund, this pretty much falls under the umbrella of what I would use it for. I would just focus on replenishing that fund as quickly as possible after you tap it.

Q6: Paying for pet medical expenses
We have a 4 year old dog that we love to death and that we consider part of our family. She is going through some health issues and the vet thinks that she may have an auto-immune disease that is very difficult and costly to treat.

We have already decided that we will pursue the treatment (we are not putting her down). The biopsy procedure along cost me $1200 and the treatment (steroids) are expensive and could last for 6 weeks (or for the rest of her life in 25% of the cases).

I charged the $1200 to a no interest credit card (for about a year) and I have $1700 in savings. I am wondering if I should use my savings to pay the credit card and try to pay the treatment out of pocket or if I should keep my savings and hopefully build more until my no interest period is up? My husband is unemployed (has been for a year), but I make enough for us to survive on my pay. The minimum payment on the card is only about $20 a month.
– Monica

It really depends on how much the steroid treaments are going to cost you and whether they’re permanent.

If I were in your shoes, I would probably leave this amount on the zero interest credit card for as long as I possibly could and see what happens with the steroids. If they’re needed permanently, then I’d spend some time focusing on reworking your budget so that you can afford these as a normal monthly expense. This might be a difficult shift and you might find emergencies during that period very painful, which is why I’d keep that emergency fund intact for now.

I’m going to assume that no cost is too expensive for this dog. Given that’s the case, there’s a good chance that this experience is going to push you into debt. If the steroids are a permanent thing, work with your doctor (and with comparison shopping online) to find the best possible price on the maintenance medication. Also, your husband shouldn’t be afraid to seek employment below his station. There are lots of jobs to be found out there if you’re willing to work them.

Q7: Unwanted gifts
What exactly do you do with an unwanted Christmas gift? I’m never sure what to do when someone hands me something weird.

– Ernie

When I open anything, I try to be polite and thankful about it, whether it’s something awesome (making it easy) or something awful (making it hard).

I don’t feel bad about re-gifting if the gift is really appropriate for someone else I know. I view it as simply passing along a good idea.

If it’s something that I don’t want and I can’t regift it, I’ll hold onto it for a while and eventually take it to Goodwill.

Q8: Handling pet cleanup
I have two pugs, and no yard. Both dogs are walked three times a day and each will do their business 2-3 times per day, so I’m using up to 6 bags per day and that gets expensive. Currently, I purchase the generic “Bags on Board” bags, but I cringe at the thought of paying so much for something that I’m just going to toss. I’m wondering if you have any ideas for a more frugal disposal of dog waste. Grocery bags/bread bags are not an option – I don’t buy that many groceries and I already reuse these bags as trash bags. I don’t take the paper, so I don’t have those types of bags either. It needs to be something that I can bring with me on our walks. Do you have any suggestions?

– Jeff

A friend of mine used to use a Dirt Devil type device with a hose attachment for this purpose. She had a small dog and this worked great for her.

Another friend of mine would carry a cloth bag and used a rubber glove to pick the waste up and put it in the bag. She’d then clean the bag at home (I think she had several of them and would just keep them in a bin in the garage and wash them all together).

You could also use the rubber gloves with something like a Rubbermaid container that you use just for this purpose.

Q9: Planning for after graduation
I will graduate in May with my bachelors degree and want to start getting together a plan for financial stability.

After graduation I’m hoping to move to Washington D.C. where I know I’ll probably have to intern for a while to get a full-time position. It’s very likely that these internships won’t pay anything so I’m starting to save up now. At the moment I have about $1,000 saved and anticipate a tax refund of $2,000 will go toward the fund as well. I save about $50 a week. As it stands now, my boyfriend will be moving with me and we anticipate that he will be able to find a full-time position to help support us. But of course we know that you can never bank on getting hired right away.

I will have about $30,000 in loans (all federal but both subsidized and unsubsidized) and no credit card debt (because I don’t have a credit card). A few questions-

1. Should I get a credit card? I’m afraid that if I get one I will start spending more than I’m earning with the mindset of “oh well I’ll pay it back.” I just really don’t want to fall into that trap especially when I know money is going to be tight.

2. How much should I plan on saving up if I anticipate interning until around January?

3. As to student loans- have you ever published a guide for students graduating college on steps to take to start out on the right foot with repaying student loans? What can I do now to prepare for repayment?
– Shawn

Effective credit card use is about willpower. If you doubt your willpower, I’d either not get one or get one and put the card somewhere where you’ll never use it (just to build a bit of credit). If you don’t think you can do it responsibly, don’t do it.

Housing in D.C. is insanely expensive. You need to start looking at housing opportunities right now. If you’re lucky, your internship will help you with this. If not, with your current savings, you’re either going to be building up debt or living in a car or living in a large group apartment.

The best thing you can do right now for repayment is simply to minimize the amount of debt you take out. The less debt you’re in when you graduate, the better. The next most important step is to make your choices toward securing good employment.

Q10: Favorite Christmas gift
What was your favorite gift that you received this year for Christmas?

– Elaine

I received an Arduino.

If you’re confused as to what I’m talking about, it’s a programmable microcontroller.

If you still have no idea what I’m talking about, think of it as a small piece of equipment that you can program with your computer to independently do simple tasks. For example, my first project with it (which I started earlier), was to make an electronic set of dice where all you have to do is touch a button and a dice face lights up, showing a random number between one and six. I hope to eventually build a Christmas light controller that takes the audio from a radio station of my choice and converts it into light patterns on the lights.

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.