Tuesday, October 18, 2016

Caring for your parents financial investment

Dear Dave: My mom is 95 years old, and she’s in amazing health. Financially speaking, she has about $150,000 in Certificates of Deposit, money market accounts, and savings bonds. Is there a better place she can invest her money? — Anonymous

Dear Anonymous: Certainly there are other investment vehicles that will make much more money than CD's, money markets and savings bonds. However, at your mom’s age people aren’t generally investing for the long haul, unless they’re investing it for their heirs.

If she’s comfortable with her finances, I’d suggest just leaving things alone. Don’t try to force her into something new. At her age she may still have bad memories of the Great Depression and a negative perception of the stock market. In a case like that, mutual funds might make her fearful. I wouldn’t take the chance of robbing a 95-year-old lady of her peace to try and do the “proper” thing with money.

However, if she’s agreeable to the idea of doing a little better with her money, you could start by moving a little into growth stock or balanced stock mutual funds. But do something like this only if the change won’t upset her and leave her fretting over her money. What we want for your mom is financial peace. — Dave

Monday, October 10, 2016

Your home is an Asset

Your house is definitely an asset; it's the mortgage that's a liability. Some folks may try to position a house as a liability simply because it costs you money. But the truth is your home will make you more money than it will cost you over time. Therefore, it is an asset.

Some of the saddest situations I've seen in all my years of teaching are seniors who have paid-for homes and nothing saved or invested. 

Money isn't the most important thing on earth, but it is a fact of life. That's why I encourage people to build an emergency fund of three to six months of expenses and begin saving for retirement before they tackle paying off their homes.

Tuesday, October 4, 2016

Should a Husband help pay Wife's debt ?

Dear Dave: I make $2,100 a month after taxes, and I have accumulated $46,000 in credit card debt. My husband makes more than I do, but he won't help me. He says I got myself into this mess, so it's my job to stop being irresponsible and fix it on my own. Do you have any advice? — Peggy

Dear Peggy: You've got a load of debt hanging over your head right now, but I think you've got bigger problems than that. You told me you're married, yet it sounds to me like you two are living entirely different and separate lives. This seems more like a roommate situation than a healthy, loving marriage.

I don't like your husband's attitude, but he does have a valid point in one respect. You were irresponsible with money, and now you've got a pile of debt on your hands. My big question is this: Where was he while all this was going on? Were you hiding it from him? And where was the communication and decision making, financial and otherwise, couples should engage in? Married people can't live this way and win in their relationship or with money.

The two of you desperately need to seek marriage counseling together. This relationship is on the rocks. You and your husband obviously have no trust or respect for each other, and there's a definite lack of communication, unity and shared goals. I don't know what happened to bring things to this point, but the preacher didn't pronounce you guys a joint venture when you got married; he said you were now one.

A little maturity, extra work and living on a simple budget will go a long way toward fixing most personal finance issues. But your marriage is in big trouble, Peggy. Please seek help!

Monday, September 26, 2016

Wife's dad is paying half of our car payment monthly

DEAR DAVE: My wife and I are debt-free except for a car and our house. The car is financed through her mom, and her dad agreed to send us half of the payment each month. We owe $7,700 on the car, and we have enough cash right now to pay off the car in full with plenty left over. Should we do this, even though her dad is making $100 of the payment each month?

— Dustin

DEAR DUSTIN: If her father had agreed to send you guys $100 each month, ask him to continue doing that for the duration of the agreement. Then, you guys pay off the car now with your cash. There's nothing dishonest about this, as long as you explain the plan to her parents and they're agreeable.

The reason for this approach is twofold: It gets the debt paid off, and then you can get the car put in your name. Plus, a situation like this represents drama just looking for a place to happen, if it hasn't already. Family relationships take on a weird vibe when money has been loaned and borrowed.

If they're not agreeable to the idea, that's OK. All you can do is ask. But one way or another, I'd be out of this situation before the sun goes down.

Wednesday, September 21, 2016

Best way to build wealth is to become debt free

DEAR DAVE: My husband and I own three commercial buildings in Boise, Idaho, that are leased out long-term. We owe about $500,000 on one and $400,000 on each of the others, and they earn $190,000. The only other debt we have is a small amount left on our mortgage. I know you don't like debt, but is it OK to owe on commercial properties that are making good money?

— Dawn

DEAR DAWN: I own several commercial buildings and I don't owe a dime on any of them. So, I can't tell you that I think it's okay to have debt on commercial buildings. I believe the best plan for building wealth is to become debt-free.

Now, from the situation you've described, that doesn't necessarily mean you guys should be in panic mode and start selling everything in sight. But I do think that you should systematically work your way out from under these debts over the next few years.

If I were in your shoes, I'd go ahead and get the house paid off first. Then, I'd take a look at these commercial properties and begin working the debt snowball on them. Start throwing as much money as you can at the smallest debt, while making minimum payments on the other two. When you get it paid off, roll that amount over — along with every dime you can dig up — and attack the second largest one. Follow these steps until you pay off all of your commercial properties.

It might take up to 10 years in your case, because we're talking about at least $1.3 million in debt. If you have a bunch of equity in one you don't particularly like, you might consider selling it and throwing the cash at the remaining two. But whatever the timeline, I'd develop a game plan to get rid of this debt.

Wouldn't it be cool to have all that paid for? Talk about cash flow!