Dear Dave: I'm going through a divorce that's about to become final in two weeks. I moved in with my parents temporarily while I save up money to get my own place and start over. I make $30,000 a year, and it looks like I'll have around $43,000 in debt when the divorce is finalized. Should I pause my debt snowball in order to financially get back on my feet again? — Adam
Dear Adam: Yeah, that's what I would do. There are reasons to pause the debt snowball, and one of those can be going through a divorce. Not only are there expenses, but you may end up with payments you don't even expect.
I think the motivation and the heart behind the debt snowball is that you gain momentum and traction, and you do it quickly when you're in a positive emotional position. You may not have that right now, so I think pressing pause and building up for expenses that may come — plus getting your own place — is a good idea.
Just rent the cheapest spot you can as soon as possible. Then, once you get in there and get your life in operational mode again, you'll be ready to rock on!
Monday, May 30, 2016
Tuesday, May 24, 2016
How to help a heroin recovery addict
Dear Dave: My husband is a recovering heroin addict. He's been clean for two years, but I still feel we shouldn't keep cash in the house or give him unsupervised access to a bank account. He agrees with these precautions, even though he does need a little pocket money from time to time. We've also started your plan to try and get control of our finances, so how would you suggest handling a situation like this? — Meghan
Dear Meghan: First of all, congratulations on his being clean for two years. That's awesome! The longer he stays clean, the more he'll begin to normalize his mechanical activities with things like money.
I agree with not putting him in charge of large sums of money just yet. However, we work with addicts all the time at my company, and I don't agree that you can't have any money in the house when he has been clean for two years. You might not want a big pile of cash lying around, but there's no reason you can't run the envelope system out of your purse. I mean, at this point if you can't trust him to stay out of your purse, then you've got other major issues in your marriage.
I think you need to be on a debit card and the envelope system. I also think you need to be controlling about 98 percent of the money for now. For what he's doing, I'd work daily cash allowances and expand that to weekly when you're comfortable with it. Also, ask for some accountability from him as to where the pocket money goes. Ask him to keep receipts, and turn them in as if he were working for a company and taking a petty cash withdrawal. That holds him accountable for spending it on what he said he was spending it on, and it's healthy for someone who's a recovering addict.
When someone's fresh recovering from being an addict, and especially because heroin is so addicting, I probably wouldn't let him legally have access to the household account for a while longer. He can look at it, and you two can make financial decisions together, but you are in control of it. I wouldn't want it where he can just reach over and clean out the account if he has a relapse.
Obviously, this guy has gotten some healing and I'm very proud of you both. Heroin is a big deal and a hard habit to kick. The fact that he has done it this long is awesome!
Dear Meghan: First of all, congratulations on his being clean for two years. That's awesome! The longer he stays clean, the more he'll begin to normalize his mechanical activities with things like money.
I agree with not putting him in charge of large sums of money just yet. However, we work with addicts all the time at my company, and I don't agree that you can't have any money in the house when he has been clean for two years. You might not want a big pile of cash lying around, but there's no reason you can't run the envelope system out of your purse. I mean, at this point if you can't trust him to stay out of your purse, then you've got other major issues in your marriage.
I think you need to be on a debit card and the envelope system. I also think you need to be controlling about 98 percent of the money for now. For what he's doing, I'd work daily cash allowances and expand that to weekly when you're comfortable with it. Also, ask for some accountability from him as to where the pocket money goes. Ask him to keep receipts, and turn them in as if he were working for a company and taking a petty cash withdrawal. That holds him accountable for spending it on what he said he was spending it on, and it's healthy for someone who's a recovering addict.
When someone's fresh recovering from being an addict, and especially because heroin is so addicting, I probably wouldn't let him legally have access to the household account for a while longer. He can look at it, and you two can make financial decisions together, but you are in control of it. I wouldn't want it where he can just reach over and clean out the account if he has a relapse.
Obviously, this guy has gotten some healing and I'm very proud of you both. Heroin is a big deal and a hard habit to kick. The fact that he has done it this long is awesome!
Monday, May 16, 2016
Your medical bills are personal to you but just another account to a debt collector
Dear Dave,
I’ve had a judgment filed against me for an old, unpaid medical bill. The original amount was $2,500, but now it has increased to $3,200. Can I negotiate this with the lawyer? I’ve asked him for a detailed statement of the account several times, but all I’ve gotten is a payment booklet. — Bill
Dear Bill,
When it comes to paying off bills or debt, you should always pay what’s owed if you have the money. There’s a moral, as well as legal, responsibility involved. That being said, if you don’t have $3,200, offer him whatever you’ve got — $2,000 or the original $2,500 as a settlement. Make sure he understands that you’re not offering to pay the amount you have on the debt, but that it’s being offered as settlement in full if the debt is cleared.
The reason you haven’t gotten what you’ve asked for so far is you may have been talking to some low-level staffer or paralegal. If you have been talking directly to the lawyer, then he’s probably running a small debt collections or debt lawsuit machine. That means you’re just one of dozens of widgets coming down the line.
To you, this is very personal. But to him, you’re just another account. You might have to do something to get his attention and wake him up.
If this is the case, he probably gets a piece of whatever he collects. So, if he gets a third of $2,000 or $2,500 it might make his house payment this month. You could also talk to the hospital administrator, too, and let them know you’ll bring a couple thousand down there today if they’ll accept it as payment in full. At this point, you’ve just got to do something to get off the conveyor belt.
— Dave
I’ve had a judgment filed against me for an old, unpaid medical bill. The original amount was $2,500, but now it has increased to $3,200. Can I negotiate this with the lawyer? I’ve asked him for a detailed statement of the account several times, but all I’ve gotten is a payment booklet. — Bill
Dear Bill,
When it comes to paying off bills or debt, you should always pay what’s owed if you have the money. There’s a moral, as well as legal, responsibility involved. That being said, if you don’t have $3,200, offer him whatever you’ve got — $2,000 or the original $2,500 as a settlement. Make sure he understands that you’re not offering to pay the amount you have on the debt, but that it’s being offered as settlement in full if the debt is cleared.
The reason you haven’t gotten what you’ve asked for so far is you may have been talking to some low-level staffer or paralegal. If you have been talking directly to the lawyer, then he’s probably running a small debt collections or debt lawsuit machine. That means you’re just one of dozens of widgets coming down the line.
To you, this is very personal. But to him, you’re just another account. You might have to do something to get his attention and wake him up.
If this is the case, he probably gets a piece of whatever he collects. So, if he gets a third of $2,000 or $2,500 it might make his house payment this month. You could also talk to the hospital administrator, too, and let them know you’ll bring a couple thousand down there today if they’ll accept it as payment in full. At this point, you’ve just got to do something to get off the conveyor belt.
— Dave
Monday, May 9, 2016
Family member as executor of your Will
Q. I’ve always heard that you shouldn’t ask a family member to be the executor of your will. What are your feelings about this?
A. I don’t necessarily agree with this line of thinking. In my mind, a family member who is competent and has integrity can definitely be the executor. “Executor” just means they execute, thus the name. They’re going to execute the wishes of the will. If the family member has the business acumen and trustworthiness to execute the wishes and directives in a will, then that’s perfectly fine.
Just remember to use some common sense, too, when choosing an executor. If you have an extremely complicated estate, say 80 pieces of real estate with investments and everything, you probably don’t want your 22-year-old niece, nephew or grandchild who just graduated college in charge of things. I would advise choosing someone with a little more life experience, and maybe some success in the real world.
The people who say family shouldn’t do this are the same ones who say you shouldn’t have family in your business. You can have family in both. You just have to have good boundaries, clear roles, and honest, mature people. Make sure you give clear instructions and explanations for your decisions, too. Sit down with your family, explain who the executor’s going to be, and why, along with what the will says. It’s also not a bad idea to have an initial reading of the will while you’re still alive. This communicates your wishes personally and takes some of the pressure off of the executor.
A. I don’t necessarily agree with this line of thinking. In my mind, a family member who is competent and has integrity can definitely be the executor. “Executor” just means they execute, thus the name. They’re going to execute the wishes of the will. If the family member has the business acumen and trustworthiness to execute the wishes and directives in a will, then that’s perfectly fine.
Just remember to use some common sense, too, when choosing an executor. If you have an extremely complicated estate, say 80 pieces of real estate with investments and everything, you probably don’t want your 22-year-old niece, nephew or grandchild who just graduated college in charge of things. I would advise choosing someone with a little more life experience, and maybe some success in the real world.
The people who say family shouldn’t do this are the same ones who say you shouldn’t have family in your business. You can have family in both. You just have to have good boundaries, clear roles, and honest, mature people. Make sure you give clear instructions and explanations for your decisions, too. Sit down with your family, explain who the executor’s going to be, and why, along with what the will says. It’s also not a bad idea to have an initial reading of the will while you’re still alive. This communicates your wishes personally and takes some of the pressure off of the executor.
Monday, May 2, 2016
An average House increases in value more than a Condo
Dear Dave: I know when it comes to investing you like mutual funds and paid-for real estate. What do you think about using condominiums as investment properties instead of single-family homes? — Jason
Dear Jason: I don’t really have a problem with condos as paid-for investments. I own a couple of them myself. When it comes to making this kind of investment for the first time, however, I would advise that you keep a few things in mind.
Based on equal price and equal neighborhood, the average single-family home will probably increase more in value over the years. Now, a nice, well-placed condo will obviously go up in value faster than a traditional house in a lesser neighborhood. So speaking in an overall sense, they’re not bad investments if you do your homework.
You have to think about what you’re getting into and also take into consideration a number of variables. What are the HOA dues or condo fees going to be? Is the condo association being managed well? That and the neighborhood are the two biggest concerns I have when buying a condo. A lot of condo associations are very poorly managed. And if they don’t provide proper maintenance or keep a certain percentage of the complex owner-occupied versus rental, the condo association or complex can lose the ability to get normal permanent financing. If they can’t get FHA, VA or conventional financing, the values are going to drop like a rock — because you’ve only got cash buyers and investment buyers at that point.
Research on these kinds of things doesn’t take an awful lot of work. Just call the management company, and the realtor who’s involved if it’s listed, and ask for the documentation. Most of the time this sort of stuff is public information, so it’s not hard to access. Some other questions you might ask are: What are the reserves for the roof? What are the reserves for paint and the parking lot? Are they collecting enough to pay their bills, and are they actually paying their bills?
Then you start looking at things from a buyer’s perspective. Would I want to live in here and have my wife and children here? Would a normal, reasonable person want to live here? If the answers are yes, then you’ve probably got a good, solid condo complex. — Dave
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