Free Money Finance

Help a Reader: Refinancing a Mortgage

Here's an email I recently received from a reader:

I am currently in a fixed rate mortgage with 27 years left to pay and a balance of $104,000.  My interest rate is 8.62%.  Is it wise for me to try to refinance at a lower interest rate in order to lower my monthly payment or should I just stay put and ride out the storm?  My eventual goal is to sell the house if the market ever turns back around so I don't plan on riding out the entire 30 years anyway.  Right now we are upside down in our mortgage so to sell is not an option.

What advice do you have for her?

Help a Reader: Where to Save

Here's an email I recently received from a reader:

I read one of your older 2008 posts about what order to invest in (meet company matching in your 401k before opening a Roth IRA), and I wondered if you have cash left after that, do you then open another Roth IRA if you’re married?  Or do you go back to increasing your 401k?  In case it depends on some stuff, here’s our quick financial summary...

My husband and I are 26 and live in Houston, TX.  He is a middle school teacher ($43000) and I am an office worker ($35000).  We live on about $40,000 a year (a little less).  As of now, we do not have any plans to have kids…being a middle school teacher or a wife of one makes you a true believer of birth control. :-)

We bought our $130,000 1750 sq. ft. home as a foreclosure for $114,000 2 1/2 years ago and put 20% down on a 15 year loan at 5.375%.  Since I overpay the mortgage, we have $78,000 and 8 years left.

We have one car loan on his 2007 used Prius at a 4.1% rate and have about $12,000 left ($330 a month).  My Chevy Aveo is paid off and is only 4 years old with 37,000 miles.  I will drive it until it won’t drive anymore and then get a used Prius as well (ours really does get 46-52 MPG for my hubby and I hate stopping all the time to fill up in my tiny car…10 gallon tanks stink).

We have no other debt.  We do use credit cards for almost everything (I love my Discover), but we use them for the rewards and to budget.  They get paid off every month.

We have $15,000 in ING Direct in case one of us loses our job (emergency fund)…that should be able to supplement us for a full year if only one of us was unemployed or 4-6 months if we both lose our jobs at the same time.  For retirement, we put 6% to my 401k which is matched at 6% (12% total to a Vanguard Target Fund).  We also contribute to his state pension, I’ve been contributing the maximum $5,000 to my Roth IRA for the last two years (Fidelity Target Fund), and my husband invests about $2,500 a year in the stock market (we really like Johnson & Johnson right now, but our money is spread out over 9-11 stocks).

And my husband is currently getting a masters, which we have been paying for 100%...but he graduates Dec 2010.

So, when we have some extra money starting when my husband graduates ($625 a month), do we get another Roth IRA, increase my 401k, put more in stocks, pay off the car, or put it towards the house?  Or do that in some combination?  Also, are we on track to retire in our mid-fifties as planned?  His pension could start at age 52 since that would be 30 years of working in a school disctrict.

What advice do you have for her?

Help a Reader: Paying for Tuition

Here's an email I recently received from a reader:

Who can I contact that would give money to help with my daughters college tuition? She's about to finish college in December but her loans are far from over and we are struggling to pay them.  We have a parent loan besides her having her own loans that she'll start paying in June of 2010. Please let me know if you can help.

To be clear, she's asking if there's any money available to help pay tuition costs this semester -- the semester we're currently in (and the last for her daughter). Anyone have any suggestions for her?

Help a Reader: Asking for a Discount

Here's a comment left on my post titled Asking for Discount Nets Guy $40k, which (again) talks about how we can all save money by asking for discounts:

So this has been talked about here many times before with many people posting success stories.

I have always been skeptical of this. No one ever seems to be willing to give me a discount.

I have a recent example of exactly what almost always happens to me.

I recently purchased a ring for my wife for our anniversary at a reasonably respected jewelry (not a mall jeweler). The sales clerk asks me if there was an occasion and I told her I had an anniversary coming up (so she knows that I am probably going to buy something somewhere eventually). I picked out a ring with a sapphire (September birthstone) and then told here I wanted to browse at others and think about it and of course she is telling me about how if I come back she can't guarantee me if the ring will still be there etc etc etc. Typical sales tactic. I pay no attention to that but I try to give the impression I am still thinking about it and I ask her if that is the best price they can do. The terse answer is no, we have the best price in town because of x,y,z etc, on she goes and that’s the price no movement. I wanted the ring the hassle wasn't worth it to me so I paid the price and bought the ring.

2 weeks later I notice they have lowered their prices on most sapphire rings by about 5-8% (end of September sapphire sales probably winding down).

Now if it’s this easy to get a discount and they are willing to lower their prices only 2 weeks later (albeit probably due to some seasonal factor), why do I find no success asking for a discount 2 weeks earlier.

This is my experience every single time I have asked for a discount. I can honestly say if I ever got a discount by asking, I don't recall it.

So, do I suck at this? Do I somehow give off a vibe that says this rube will pay any price you ask? (which I won't, I have walked away from many deals because they wouldn't move on price).

What am I doing wrong or is this actually not as easy as the anecdotal stories of those who have had success with it?

Any ideas for him? Or any suggestions of "best practices" that makes the chances of success in asking for a discount better than average?

Help a Reader: Investing in Real Estate

Here's an email I recently received from a reader:

I am married with a 4 year old daughter and a 6 month old son. I will be turning 29 next week. For 28.5 of those years, I was a complete spendthrift with the attitude of "why make money if you can't spend it." Today, I can give you roughly 29,250 reasons why (that's not even counting student loans!). You see I have large balances on 2 credit cards and a small business loan that I am paying. With your help, and the help of other personal finance blogs on the net, today I can proudly say that my lifestyle has changed. No longer do I charge expenses on the credit card. In fact, both of my credit cards have been cut to pieces the day I said enough was enough. No longer do I pay minimum balances on my debts. I have successfully paid off a small furniture credit card and several small medical bills utilizing the snowball method of debt relief. I am now paying $1,050/month towards the credit card with the lowest balance. I plan to have it paid within 4-5 months. No longer do I spend money on frivolous wants. No longer do I ignore the coupons that arrive in Sunday's paper... The list can go on, but the point has been made; I am a changed man.

Since my transformation, I have opened a savings/emergency account. I currently transfer $30/week thanks to a small raise I received from work. We're living off of the same amount of money, yet, I get to watch my savings grow. I also opened a Roth IRA via Sharebuilder this month. I only started with $100, but I want to get into the habit of paying into that account.

I pay mortgage on a 2 bedroom condominium (about $850/month for mortgage, PMI, & escrow + about $200/month in HOA). We've only been there 2.5 years, so I pretty much owe the full amount. We really like the location in the small city where I live. We are also roughly 50 paces from my mother-in-law. After my mother passed away, I decided it was important for my daughter to live near her grandmother, so we moved from 900 miles away to 75 feet away.

Now for my question: The lady in the condo right next door to us is moving. She hasn't listed the condo for sale, but she has approached us and wanted to know if we are interested and that she'd give us first 'dibs' on the place. It is a 3 bedroom and is literally adjacent to our 2 bedroom. We did not discuss the price at all, but she said she'd be willing to do owner-financing.

In short, if the price is right, should I buy it?

My thought is this, buy the condo and move my family right next door since its a bigger place. Then, rent out the 2 bedroom where we are currently living. In the time that I spend looking for renters, I can use the 'snowball' that I've accumulated from paying off credit card debt to carry the second mortgage. Meanwhile, back to paying minimum balances + any little extra on debt. As soon as someone starts renting, I can return my snowball to its rightful place; paying credit cards. Once credit cards & loans are paid, I'd like to continue (the majority of) that snowball to the mortgage of one of the properties.

Long term, I would consider opening up the two condominiums and creating a large 4 bedroom 4 bath living space with tons of extra space (i.e. home office etc.) Or simply rent both units and find a house somewhere else with my family.

The pros

• more space for my family
• having a rental property right next door
• potential to one-day join the condos into a super-condo

The cons:

• complete and utter fear of having a second mortgage
• ~$500/month in HOA fees (for both units)
• living in a condo vs a house
• delaying paying off my loans

I value your advice and would very much appreciate your two cents.

I gave him my advice and asked if it was ok to share this with all of you. He said he'd love to hear your thoughts. So, what suggestions do you have for him?

Help a Reader: Getting Needed Experience

I recently received the following email from a reader:

Sorry for this extremely long email but I have found your blog very helpful and am not sure where else to go for great advice.

I’m at the stage where I am wanting to take the next step in my career but am unsure of how to go about it, given the current employment market. Some background information - I am 23, live in Sydney and work at one of the major financial services companies in Australia. I will have completed the Advanced Diploma of Financial Planning (not sure what the equivalent is in your country) at the end of this year and intend to study beyond this. I want to become a paraplanner and am currently on secondment in this area, having worked in administration before this. My contract is up at the end of October and I would like to move elsewhere at this time.

Basically my issue is that I am finding it hard to get a new position as a paraplanner due to the fact everywhere wants experience and I don’t have it. I have applied for several jobs but the only issue is experience, which has been a consistent problem since I started working. I know that I can definitely do the work and do it well but I just need to get a position first. I have been thinking about my career a lot lately and have come up with two options.

1 – stay in my current role where they are likely to make me permanent until I have one years experience

2 – get a job in a financial planning firm as an administrator and get promoted into a paraplanning position

I really don’t want to stay at my current job, as a paraplanner or in my old position. I am not enjoying it and won’t be able to last another nine months. I have tried to enjoy it but I don’t like the environment and the fact I continually run out of work. I would prefer to go to an actual financial planning firm where they are able to recommend numerous products and there will be more scope for learning and responsibility. This leaves me with the option of starting as an administrator and getting promoted – however this is obviously going to take time.

I am not interested in become a financial planner in the future, my long-term objective is to be a career paraplanner and start my own paraplanning business where I contract out to numerous firms. The first step though is to move into a position where I can gain experience and learn as much as possible.

So I guess my question is what would you do in this situation? Do you see any other options that I have overlooked?

Another issue is that I have only ever found jobs through advertised positions. I think the best way to get a new job would be through networking or identifying companies I would to work for. I’m just not sure how to do this.

Finally, I would love to have a mentor that is in the financial planning area but am unsure of how to go about finding one. I have signed up to online networking sites such as LinkedIn but haven’t made use of them yet.

I have a lot to offer and have exceeded expectations in every job I have had by focusing on results and having a great attitude, just like you mention on your site. I’m just at a crossroads right now in what to do next.

I responded with a couple questions to make sure I understood the issues:

1. If you stayed at your current firm, would it be as a paraplanner or as something else?

2. Are the companies you're interviewing for literally saying, "we'd hire you in a minute if you had a year's worth of experience" (or something like this)?

She responded:

1. I would have the option of staying as a paraplanner or going back to my old department but a different team. I have been thinking about it a lot the past few days and have decided I will go back to my old department as I will learn a lot more in the different team and expand my knowledge. It is useful experience for when I do get a paraplanning position but obviously not as useful if I were to stay as a paraplanner. My reason for this is that it is a lot more flexible in my old area, it is always busy so I never run out of work and I am able to study/research and basically do what I want as long as the work gets done.

I believe that if I were to stay as a paraplanner I would probably end up quitting within a few months regardless of whether I had a job or not. I constantly run out of work (despite being proactive about finding more work to do) and the work is quite different to what a paraplanner in a financial planning firm does. Also, if I did stay there the salary increase would not be enough of a difference for me to want to stay there.

2. I have applied for under ten jobs in the last couple of weeks and had a few interviews which went well. Most of the jobs were through recruitment agencies who basically said I don't have enough experience but they have other positions I would be suited for - ie administration roles. The interviews were all for companies I applied directly to and they told me that while they were impressed with me, they have chosen someone with more experience. One firm offered to put me forward for an administration position they have that could eventually lead into the paraplanner role I interviewed for.

I guess the issue is that at the moment a lot of experienced paraplanners are out of work so it is quite competitive. When applying for jobs in the past, I would get job offers for nearly everything I applied for, although they were for administration roles and it was before the GFC. My problem is that despite not having the experience, I know that I can do a better job than a lot of paraplanners out there. I work very hard, learn very quickly, get results and enjoy having a reputation for being a top performer. My concern is that if I get an administration job with a company and then get promoted to paraplanner, the salary increase won't be as much as it would be if I were to start as a paraplanner.

From this, I told her what I would do if I was her. She also gave me permission to ask FMF readers for their advice, so have at it -- what are your suggestions for this young lady?

Help a Reader: Saving for College

I recently received the following email from a reader:

My wife and I recently found out we are having our first child.  We are very excited!  I am 27 years old (and my wife is near that) and we are doing OK financially.  The only debt we have right now is our mortgage.  I was wondering what people's advice is for what we should do financially.  We want to start saving for college and we want to make sure we are making the right financial decisions for our baby's future.

Advice...thoughts?

I asked for a few more details to be sure we all had a decent picture of where they stood financially and he provided the following:

Well, we were both lucky that our parents paid for our schooling, so we don't have any of that school debt.  Yes, we do have an emergency fund and it is pretty well funded.  I invest in a 401k through my company (they have a matching problem).  The only major financial issue we are facing is the prospect of buying a new home (gotta sell ours first!).

I think our only specific goals are to start putting money away for college.  We own both our vehicles outright, but also want to keep paying into a new car fund for if/when one of our cars breaks down.  And we also want to keep making sure we don't fall behind in our emergency savings...but at the same time...keeping some money aside to use to keep us sane during the infant years.  We know nothing about 529's...We did have investing in the E-Trade S&P 500 index fund before they canceled it (which lost us a fair amount of money.  I am still VERY upset about that.)

Knowing this, what are your suggestions for this family?

Help a Reader: Off-Setting Stock Gains with Losses

Here's a question a reader left here recently:

I purchased WAMU stocks in the mid-1980's and allowed my shares to accumulate. I signed up to re-invest my stocks dividends. My shareholdings got to over 1,000 shares (total of shares I held and in the reinvestment program). At over $40 per share I was sitting on over $40,000 investment. Then WAMU filed bankruptcy under Chapter 11. I have 2008 gains from a different company's stocks. Can I offset these two? What documents do I need to support the losses? I still have statements from the company that managed my re-investment portfolio. I will appreciate any help.

What I think he's saying is this:

1. His shares went up dramatically but he did not realize the gains (he did not sell any shares.)

2. But he did have some gains (reinvestment) that were lost when the company went bankrupt.

3. Not sure why he's asking about 2008 gains. Maybe he's saying he'd like current losses to go back and offset gains that he had a year ago?

Personally, this is why I use a CPA to do my taxes. But I thought maybe someone out there could make sense of this mess.

Help a Reader: Splitting Household Expenses

Here's a question a reader left here recently on my post titled Marriage and Money: How to Split Up the Money and Bills:

I haven't heard anyone speak on second marriages, joint account, husband makes more yearly but brings home less from f/t due to $750 CS mo & ins & loan repayment, yet it's 50/50 living in the house I owned before marriage. I have a teen and he has two (diff mothers), one grown & other is 10. What suggestions do you have regarding best ways to do finances?

It's a little cryptic, but I think you get the flavor of what she's asking. Any suggestions on how they should split up costs/handle expenses?

Help a Reader: Foreclosure

Here's an email I recently received from a reader:

I need to ask for some advice about a mortgage problem my aunt is having. First of all, she is disabled and living on a fixed income. She and her mother (my grandmother) own a house in Los Angeles, CA. My grandmother died 2 years ago. Both names were on the title, and it was assumed that the title would simply transfer to my aunt, without having to file any paperwork. We have recently learned that assumption was incorrect and that she should have filed the paperwork for Prop 58 in order for taxes to not be reassessed. Taxes were reassessed to current market value (actually, it is a bit higher, since it was reassessed for the time period when prices were at it's highest!)

Here's the problem: My aunt has the mortgage through Wells Fargo. They paid the newly assessed property taxes (which came up to more than $12K), and have adjusted her new mortgage payment accordingly. They have denied her application to modify her loan, even though we have already filed the paperwork with the assessor's office and are just waiting for the taxes to be reverted back to what it was before. The assessor's office said that the way things are going with the economy, it might not get paid back until next year. Wells Fargo is already trying to start short sale proceedings. We don't know what to do. She will lose the house at this rate, simply for not realizing she was supposed to file something at the time of her mother's death. Wells Fargo sees that the house is worth far more than the mortgage she owes, and is trying to get the house any way they can. Please let me know if there is anything we can do to keep the house.

The only other responses I have gotten have said to get a lawyer, but we cannot afford that, so I'm not sure there is much else that can be done.

Any advice for her?

Help a Reader: Should You Take Social Security?

Here's a philosophical question a reader left recently on my post titled An Example of How to Become Rich:

I would like to ask a question of Old Limey or anyone else who would like to answer. I mean no disrespect, I am simply curious, but it could be a loaded question. It seems clear that you and your wife planned well for taking care of yourselves, and seem to have enough assets and available income to maintain the kind of lifestyle that you want. Do you believe you are entitled to Social Security benefits? If there were a bill in Congress that would eliminate your benefits because you are able to provide for yourself, would you oppose it? Should Social Security benefits be reduced or eliminated for people who can support themselves in order to extend the amount of time the fund will last in general?

(To make sense of my perspective, if it matters, I am 27 years old. I have been paying in to Social Security since I was 16, and have only become aware in the last few years that the current system is not sustainable, and that I am completely on my own for retirement. I would like to hear the answer of someone who does receive benefits, but doesn't depend on them as the sole source of income, as to whether benefits should be reduced or eliminated for some people. I personally have not reached any sort of conclusion).

Thank you for any response that you give me, and I honestly am not trying to offend or say that you do not deserve benefits because you saved for your own retirement.

Personally, if I pay into a system, I'll be getting paid by that system (and believe me, I've paid a lot into it over the years.)

What's your point-of-view on the subject?

Help a Reader: Making More Money

Here's a question a reader recently left here:

I'm in a tough situation. I've been working for the same company for about a year on a project. This project is set to finish in around 4 weeks and due to someone leaving, I've been offered another role providing support. Now, technically it's only a contract extension but it is a higher pay band (my company works in bands) than my last job and probably more work. It was intimated to me that I would receive a raise but when my contract letter came through today it said I would be on the same money. I'm worried that if I press for more they'll just give the job too someone else. My contract ends with the project in four weeks as well, any advice?

What would you suggest he do?

Help a Reader: Time to Change Jobs?

Here's an email I recently received from a reader:

I graduated in 2006. It's now 2009; I have been at my current job for three years. This was my first job out of college, and I started at $33K. As for the job, I love it. I have incredible benefits -- I work at a ski resort. I get plenty of vacation time. Last year I got a 12% raise, bringing me up to $40,000 per year. My cost of living is cheap and I have pretty much everything I want -- Flex spending, 401K matching, vacation, great co-workers, low cost of living, etc. My job develops and I take on more responsibility every year, my company values me, I have a good time despite the stress of the winter season, when all employees work 6 days per week, all holidays, etc.

As I said, I've been here for 3 years. I'm coming into my 4th ski season. I am wondering if it is the right thing to do to continue with this company. Despite the fact that I gain new skills and make new contacts each year, I am wondering if, as a 25 year old, I should be switching jobs more often to build a wider range of experience for my resume. I am assuming that I will get another 10+% raise this year (not high in general, but extremely high for the ski industry). I've taken a look at the Department of Labor's data on turnover/job retention...but ultimately, do most people change jobs because they hate the one they have, they find better opportunities, or because we live in a culture where it is desirable to change jobs on a consistent basis?

Come March, April and May, I will be looking for new opportunities...I guess I am wondering if that is a wise move, based on the fact that I will have 3+ years at one company...or is this something that I should not be concerned about?

What advice do you have for this reader?

Help a Reader: Found Money

I recently had this questioned emailed to me from a reader:

I have inherited mutual funds from Invesco Industrial Fund. I am not sure how much this is worth and am in the process of trying to claim it.  My question is how do I go about finding out how much this is worth and should I cash it in.  It has been laying stagnant for well over 25 years and I just now found out about it.  Not sure what is the best way to go with this.  Any advice would be helpful.

I responded that I needed more details such how she inherited them and what she meant that they've been laying stagnant for 25 years. She responded:

My father in law did not have a will.  We went on the site of missingmoney.com and put in his name randomly and found unclaimed property in his name.  We filled out an affidavit and they said that it appears to be "a substantial shares of stock."  It is in a mutual fund for a company named Invesco Industrial Fund.  I investigated this and found that they merged many years ago with AIM Invesco and now Diversified Invesco but when they could not get in touch with him as a shareholder, they just turned the stocks over to the state of Virginia.  So the treasury dept of VA has been holding this unclaimed property for years.  He has been dead for over 25 years and therefore no one has touched this because we did not even know about it.  I am waiting to get more info from them as I sent the info they requested to verify that we are who we say we are.  But i was just trying to get a jump on it to see if you could tell me if you think this is gonna be worth anything.  As I get more info I will keep you posted but I just wanted your opinion on what happens to a mutual fund that no one touches for over 25 years?

I said I guessed that it would depend on what the state did with it -- did they liquidate it at the start or let it sit. If it was the latter, it could be worth a very big amount (then again, the shares could be worthless too.) If it was the former, the least she'd have is what he had when it was lost.
 
I then offered to post the question here and she said:

Yes, I would like you to ask your readers what they think.  I'm tryin to get all the opinions and possible options in place while I continue to wait to hear from the state of VA.  I think that they did not liquidate it by virtue of the fact that they said "it appears to be a substantial share of stock".  I think they would have said it's money if that's what it was.  But they said "share of stock" so it sounds like to me they did not liquidate it at the time.  Still not sure, just fishin for possible answers.  Please have your readers give their opinions and I will keep you posted as i find out more info.

Ok, so it's your turn now. Any thoughts for her?

Help a Reader: Asking for a Raise

Here are some questions a reader recently left as a comment on FMF:

I worked as a teacher for several years, but now I'm going back to school full time, so I've been searching for a job that will grant me flexibility to attend daytime classes. I found a job with a private company as a primary tutor/educational consultant. The hours are flexible, but of course they require nights and weekends.

The compensation on the job listing was $30-35k. When I was asked about my salary expectation in the interview, I stated that I thought the advertised salary seemed fair. Since that time I have learned more about the position and realized that I will be bringing work home occasionally. I completed several assessments and sample essays to prove myself and I was told that they were all superb. I feel that I am extremely qualified for the position.

The official offer that I verbally agreed to over the phone was for $32.5, but I feel I should have asked for more. I will be making about $4,000 per year less than when I was a full-time teacher, I will be working about 50 days more per year (I'll no longer be on the school calendar), I will have to pay for my own health benefits (I didn't pay as a teacher), and there won't be a school district paid retirement plan or life insurance policy (I didn't have to pay anything for this).

I feel that I should be making more. I haven't signed the agreement yet. The only thing stopping me from asking for more is the flexibility of the company with my schedule and the fact that I already agreed to a small salary. Is it too late? How much should I ask for? Can I ask for more than the advertised salary?

What are your suggestions for her?

Help a Reader: Universal Life Insurance

Here's an email I recently received from a reader:

Two questions please:

1) What is your opinion on seniors investing in a universal life insurance policy for wealth protection? Transamerica Life Insurance Company was recommended by my bank representative. I haven't found out their fees yet.

2) For a recently retired person who has traditional IRAs and wants to avoid RMD for many reasons (turns out it would put me in a higher tax bracket at an age when that's not desirable, the personal belief that taxes will be much higher in a few years when I'm 70 1/2, and possibly filing single instead of married by that time as spouse is much older, etc.), what are your thoughts on rolling over these funds to Roth IRAs in 2010 and spreading the taxes due over two years, 2010 and 2011?

I told her that these questions were "above my pay grade" (to quote our president), but that you all might have some thoughts for her. Your suggestions are appreciated.

Help a Reader: Buying a New House

Here's a question a reader left as a comment on my post titled The Cost of a New Home:

I am in a boat somewhat similar to yours. My wife and I live in a good house on a great street in an awesome location. The problem is the school system is terrible. We just had our first and possibly only child (daughter). There is no way we will send her to public school in this area. If we were to move into a neighborhood like we have now, in the areas we are looking with good public schools it would cost about 150k more than our house. The cost of 12 years of catholic school will be close to 100k when my daughter is done. We have no debt except a small mortgage so we could probably afford either. The new place we are looking at are closer 2 her family( I am OK with that cause I get along with them as tough as that might be to believe.) One of the cons about moving is both of our commutes would increase by about 20-25 mins.

Any thoughts would be great.

What suggestions do you have for him?

Help a Reader: 401k Rollover

Here's an email I recently received from a reader:

I was laid off from my job a couple of months ago.  I found a new job and everything seems to be ok now but I have a 401(k) from the old job just sitting there.  I know the best thing to do is an IRA rollover but I just don't know much beyond that.  Can I do a Roth or must it be traditional?  I don't like the thought of shelling out a lot for taxes if I do the Roth though...  but the balance is only around $20,000.  What's the best company to go with?  Vanguard?  What funds should be considered for investment?  I usually stick with an even blend of small-cap, mid-cap, large-cap, and international funds (25% of portfolio in each).  I'm only 27 so I have plenty of risk tolerance and no desire for bonds, etc.  Currently the 401(k) is with Schwab.  They would probably create an IRA for me if I wanted I'm sure.

Any advice?

I responded to him but also said I'd post here for you all to offer thoughts. What are your suggestions?

Help a Reader: Knowing a Pastor's Salary

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

Here's a first -- a "Help a Reader" question with a Sunday-topic theme! Cool!

Anyway, here's a question a reader left on my post titled Who Should Know How Much a Pastor Makes?:

I am concerned about our pastor's control of the church finances and was curious if anyone else has run across this issue. The church is pastor-led with no elders or deacons. There are no over site committees of any kind. He has a group of 5 paid staff that make all financial and ministry decisions. They set their own pay and will not tell the congregation what they make, even after we ask. The pastor also has a 10k per year fund he can spend at his total discretion. He also knows how much everyone gives to the church. They have a "budget meeting" once a year but it is really just a report of where the money was spent the previous year. They have a member of the church prepare the spending report but she doesn't give the report. She is not even present at the annual meeting. When questions are asked we are seen and labeled as trouble makers and made to seem as we don't trust the pastor. If there is nothing to hide then why won't he be more transparent? Comments?

I have one thought for him. What do you have to say?

Help a Reader: Dressing for Success

Here's an email I received recently from a reader:

You write all the time about advancing and managing your career and I have an interesting question that I am having a hard time digging up some information on in relation to this issue.  Here is the issue: 

I am a 26 year old woman.  I have managed to stumble into somewhat of a successful career by working hard and developing a great reputation.  I am now interviewing for positions that have traditionally gone to those with roughly 20 years of experience, or more, working with CEOs, etc of various organizations.  I can do these jobs; I am fully qualified.  I worry about reverse age discrimination.  Do you know of anything I should be doing (other than dressing professionally) that can assist me in interviews?  I was thinking potentially there was something I could do so that I don't look 26, maybe at least in my 30s?  (other than dying my hair gray?!?!)  It's hard finding advice on how to look "older"!  Do you have any suggestions on resources I could go to to read up on this?

Or should I just dress professionally and hope for the best?

I sent her some advice, but what thoughts do you have for her?

Help a Reader: House Trouble

Here's a question left recently by a reader:

My husband and I have retired in the last year. We have built a new house and have a large mortgage. Needless to say, our old financial advisor did not advise about saving for the house and we started building when the "recession" hit. We lost $60,000 in our investments and we had planned to put $100,000 down and do most of the work ourselves. We did a lot of the work ourselves, but we had to hire a contractor or we couldn't get a loan to finish the house.

Our current financial advisor has most of our money tied up in annuities.

How can we get our house paid off early? We have a 30 year mortgage. And are annuities the right place for our money?

Details are kinda sketchy and the ones that do exist don't sound good. Got any suggestions for her other than "cut spending" and put that towards the debt?

Help a Reader: What to Charge as a Babysitter

Here's a question left recently by a reader on an older post of mine:

My neighbor wants me to start babysitting her nine month old. She works unusual hours: Monday - Friday he'd be at my house 6am - 1 pm and then 2pm - 8pm. and then 10 hours on Saturday. Is 90$ a week fair? I'm 16 by the way, but I don't just sit the kid in front of the TV; we read books, go to the park, take walks, or paint. I give him all three meals, snacks, give him a bath, and put him to bed.

Do the math. It's 13 hours a day for five days a week -- plus 10 hours on Saturday -- 75 hours in total each week. $90 seems to be waaaaaay low. Do you agree? What do you think is the right amount for her to charge?

Help a Reader: Buying Gold Coins

Here's a question I recently received from a reader:

I'm a young professional doing pretty good. I'm 26 and still single and my only debt is about 1000 grand of student loan. Anyways, I am trying to start my life right and do everything right.
 
My question is I want to buy some gold coins. I don't know if you ever bought some before. If so, can tell me where you bought it from so I can buy it from the same reputable source.

A few comments:

1. I'm sure he doesn't mean that his debt is "1000 grand." I'm assuming it's either $1,000 or $10,000 since he sounds like it isn't much.

2. I told him that I have never bought gold coins.

3. I'm sure many of you can advise on where/how to buy gold coins as well as the potential pros and cons of doing so. Have at it.

Help a Reader: Me Again

Ok, I need some help again. We've decided that we're getting a new (bigger) TV. It's been about 15 years since we purchased our last one, so it's time for an upgrade. We've done our research (both with Consumer reports as well as looking at options in stores) and there seems to be a TON of conflicting information/opinions our there. I know I'll probably get the same here, but I thought it at least worth a shot to hear what you all had to say on the subject. So here are some thoughts/questions to get you going:

• Do the newest (120 Hz) LCDs have the "motion blur" that LCDs are "known for"? We watch sports and play video games on our TV and don't want any sort of blur. We've been told (and read) that these LCDs do (some say) and do not (others say) have motion blur. What's the truth?

• Do plasmas have "burn in" at all or is this something that also used to happen but doesn't any longer? Is plasma going to be around in five years? Seems like LCDs are killing plasma.

• How important is 1080p versus 720p? Anyone really notice a difference in these two?

• Size? We're looking between 40 and 50 inches (a big gap, I know). Any pros or cons to any of these?

• Brands? We've been told (and read) that Sony, Samsung, Toshiba and Panasonic seem to be winners. True?

• Where to buy? Options, options, options...

• What accessories do we need? Surge protector, etc.?

• Should we wait for technology? Is there anything breaking that we'll really need/want and thus should wait for? For example, TVs seem to be moving towards better/easier web connectivity. Is this something we will want? Is it coming soon?

Answers to these and any other thoughts you may have on the issue would be very much appreciated.

Help a Reader: Parking Money

Here's an email I recently received from a reader:

My wife and I just sold our house and are walking away with about $26,000.  We are not yet ready to buy our next house for a variety of reasons, and are currently in an apartment.

I would like some input on the best place to park the money while we decide our next move.  I am extremely comfortable not having access to the money for 3 months and am relatively comfortable not having access to it for 6 months.  Anything beyond that I feel like the money needs to be liquid and accessible for a new home.

What are your thoughts for him?

Help a Reader: Paying Off a Mortgage Early

Here's an email I recently received from a reader:

Lots of financial experts say to pay your mortgage off early if you plan on staying in that house forever. In fact, as of late this seems to be the popular opinion on most financial blogs as well. My question is a little more involved than that. What if either a) you're not sure if you will stay there forever, or b.) you plan on eventually using that property as rental income and buying a second home. Should you still pay off the mortgage early? These are the two scenarios I'm considering.

I'm sure there will be a wide variety of opinions on this one, so go ahead and offer him your thoughts in the comments below.

Help a Reader: Rent Deposit

Here's a question I recently received from a reader:

I am planning to move apartments in the upcoming months. I wanted to get lower rent for more space so I was planning on renting a townhouse from a local landlord rather than a rental company. I've read a few stories on the news about renters being foreclosed upon and being forced to move out along with losing their deposit.
 
Is there anything I can do to protect myself in case this happened? Once a house is foreclosed the lease is void, so I presume I can't force anything to be written in there. And I imagine the landlord will not accept no deposit either. What steps can I take to prevent losing my deposit and/or being compensated should this happen during the term of the lease? Is it reasonable to ask the landlord for their credit report prior to signing the lease? Also, is there a special type of account where the deposit could be placed that I would still have legal right to it?
 
I'm afraid that asking these questions and being firm place me farther down the potential tenant list. But I do not have room in my finances to lose $1,200-$1,400 because my landlord doesn't pay their mortgage! And in my area renting from apartment complexes vs. individual landlords is a difference of 100-200/month. That could make for some nice extra money in my budget.

Any suggestions for her?

Help a Reader: Transfer of Funds

Here's a question recently left by a reader:

My parents are very old and want to turn over their funds to me, their only son. I'm concerned about tax implications of a $120K transfer to my account. Also, in the event of their passing, I'd like to avoid the probate vultures. What's the best way of handling this?

Any advice for him?

Help a Reader: Whole Life Policy

Here's a question recently left here by a reader:

My grandmother took a whole life policy out on her son 50 yrs. ago which would be (MY father). He just recently died in April at the age of 56. The face value is $5,000.00 is this worth anything more than $5,000.00? We don't understand and she is in a nursing home still somewhat coherent. We need advice or help.

Any suggestions for him?

Help a Reader: Credit Score Problem

Here's an email I recently received from a reader:

I recently found on a copy of my credit report that my Citi PremierPass card isn't reporting properly. Even though I have a $2700 revolving credit line, it reports as $1500 (I have a $1400 balance right now, but it will be around $800 next week). So it looks like I am almost maxed out, which I'm not -- after numerous calls to Citi, I have learned that my card doesn't actually have a limit, so it reports whatever it wants to. Which doesn't make much sense -- I can't quite get an answer about why it reports $1500 when my balance is $1400...but whatever.

Anyway, Citi can't "transfer" my account to a new card product. They told me I have to cancel this card, and reapply, which will take down my score even more. If I close this and try to open a new one, my score will go down. If I keep this open, my score won't get any better. I am really concerned about what to do, and am concerned that I won't even be approved for a new card if I close this one down, due to the 100 or so points I've lost JUST because of my card looking like its near maxed out on my report. There is NO WAY they will report my credit line on this PremierPass card, because there isn't one.

All said and done, I've had enough issues with Citi to pursue a different company...but it seems that no matter what move I make, I am going to hurt my credit score. What's the fastest way to repair my score? This is the ONLY issue on my credit report -- and this is my ONLY credit card.

What do I do?

Any thoughts for her?

Help a Reader: CD-Secured Loans

Here's an email I recently received from a reader:

I am planning to purchase a second home for around $360,000.  My income is around $180,000 a year, and I have no debt, including no mortgage debt on my primary home worth about $180,000.  Due to the location and uniqueness of the second home (no comparables and so no possibility of a credible appraisal), I have been unable to secure a cost-effective mortgage, and so will pay around $300,000 in cash and finance the rest through CD-secured loans at my local credit union (this borrowed amount is a relatively small percentage of my financial net worth).  An interesting piece of this transaction is that I should pay the loans (there will be several CDs involved) off in around two years, and the credit union has a 1% off sale on the CD-secured loan interest rate, making the first year’s interest rate effectively 1%.  The second year, with a much lower balance, can be expected to be effectively 2% (I will go on receiving the interest on the CDs, and the loans cost the CD interest rate plus 2%).

My question is the worthiness of using this mechanism as a finance tool.  It will leave me with an adequate emergency supply of cash and my other investments and retirement funds intact.  I am not comfortable devoting more cash to this transaction since it would deplete my reserves below what I want for emergencies (I am 42 years old, married, with three children close to college age). I am primarily interested in the use of this financing tool as a viable, smart option.  As background, my wife and I are very conservative financially and make it a habit of spending much less than we make. 

Any thoughts for him?

Help a Reader: Inheritance

Here's a comment a reader left on my post titled Is Inheritance a Right?:

My husband, one of 5 children, predeceased his parents. We had 2 children, both living. My husband's parents both died in the past month, without wills. There is currently about $28,000 left for an inheritance. (Some of the children had requested and received large money gifts from their parents a few months prior to their death.) I've been informed by one of my husband's siblings that the money will be "split" 4 ways among the 4 living children; and that it will not have to go to probate because it's such a small amount.

I feel that my husband has been dishonored by his elimination from any inheritance. If probated, would this not have gone to his children as his descendants? I would like to make an appeal to my husband's siblings to apologize for their lack of consideration which is deeply hurtful. Convinced as I am that we have been wronged, and my husband dishonored, I'm not sure that I want to press for more than an admittance of wrongdoing as I don't want to fracture the family. One of our children is incapacitated and I'm his mother and legal guardian.

Any thoughts for her?

Help a Reader: Where to Buy an Engagement Ring

Here's an email I recently received from a reader:

I'm looking at buying an engagement ring in the next few months and I wanted to know how practical it would be to purchase a diamond/ring online though eBay.  I've looked at the big brick-and-mortar jewelers and online sites such as bluenile.com but I can't help wondering if the best bang for my buck would be something like eBay.  Do you know anyone that has made a significant purchase like this?  And how did it work out?  I think my biggest concern would be getting ripped off.  But at the same time, it looks like there are some great deals on there that can greatly undercut even an online site like bluenile.com. 

Any thoughts?  I am not the most knowledgeable about diamonds, but I am reading up on the subject.  Assuming I proceed through eBay, are there any recommendations, general thoughts, or advice? (e.g. make sure the diamond is certified; buy from a reputable seller, etc).  If I bought an uncertified diamond, should I spend the money to get it certified?

I guess a big concern is that I don't know if diamonds are ever greatly discounted (like books, movies, dell computers, etc). I mean, the most Apple discounts their new products ever is no more than 15% if you buy through the educational store, but Dell/HP regularly have sales and discounts taking 30-40% off of their computers.  Are diamonds like Apples or Dells?  I'd be suspicious if I could by a new BMW for 75% off, but should I by suspicious if I could by a diamond at 75% off (or more) of M.S.R.P.?

In all, I'm not looking to spend a fortune ($1,000-1,500), but I'd like to get the nice .5-1ct. diamond, decent quality, at a low price.  If that means steering clear from ebay as the safest way, I can do that.  But if I can get a nice ring on there, I'm patient and am willing to do it.

Any thoughts for him?

Help a Reader: Bonds in a 401k

Here's an email I received from a reader:

My question is regarding high yield bonds and core bonds - what is the difference between these bonds? Generally speaking, is one preferable to the other for a passive investor?

In this particular situation, I'm operating within the confines of my 401(k). There are target date funds available, however, I prefer to do my own asset allocation. My only bond choices are Core and High Yield - which, if any makes more sense and why?

Anyone care to offer advice on this one?

Help a Reader: Posting a Bond as Insurance

Here's a question a reader left on my post titled What It Means to Be Self-Insured:

I have "heard" that instead of paying for liability insurance for your vehicle, you can post a bond for whatever the minimum amount of liability required. That way, YOU earn interest on your bond, not the insurance company. Anyone know different?

I haven't heard anything about this. Anyone have a clue what he's talking about?

Help a Reader: Credit Card Rewards

Here's an email I recently received from a reader:

I have accrued about 35,000 American Express Rewards Points.  The exchange rate goes roughly like this:

• $100 gift card = 10,000 points
• $100 cash (or equivalent) = 20,000 points

I get 1 point for every dollar I spend on that card, so they are offering me 1% money back for a gift card, or .05% cash back.

I can get a $350 gift card to a participating merchant, or $175 in cash.  Clearly, the cash is a bad idea (a 50% loss).  However, there are no merchants participating that have products I'd like to purchase.  You can see my initial dilemma.

After much deliberation, I finally decided to get the Breville Juice Extractor for $299 from Williams-Sonoma.  Right before checkout, however, I decided to compare prices, and found that Amazon.com sells it for $182, about 40% cheaper (and I wouldn't pay tax on an Amazon purchase).  So buying the juicer from Williams-Sonoma will be almost as bad an investment (percentage-wise) as just getting a cash card.

American Express, of course, doesn't offer Amazon gift cards.

What would you recommend here? 

By the way, I have now switched to the Bank of America Accelerated Rewards card - which is offering me 1.25% cash back, and all of the benefits that the Amex provided with no Annual Fee.

This is why I hate points cards -- so many of them make it tough to redeem, have over-priced items, and often don't have what you really want. And it sounds like he was paying a fee for this card. Yikes! Why not just get a cash back card (which is what he ultimately did)?

Any good advice for him? Sounds to me like he's stuck and needs to cut his losses. Anyone else have a different opinion?

Help a Reader: The Best Small Business Credit Card

Here's an email I recently received from a reader:

I followed with interest your quest for the best consumer credit card and am currently working on moving mine to Schwab.  But I ran into a problem yesterday on a different plane.  I am a church administrator and our church staff has been using Advanta credit cards.  Advanta has now cancelled all their small business credit card accounts (4 days notice, thanks a lot).  I was wondering if you....and/or your readers might have suggestions for the best small business credit card as far as rewards go?

Any suggestions for him?

Help a Reader: Home Buyer Credit

Here's a question a reader recently left here:

My fiancée and I are looking to purchase a house this year. We want to take advantage of the $8k first time home buyer credit. I make around $50K, he makes around $85K; we both qualify as first time home buyers. Can we both claim the credit? Should we get married before April 1, 2010? How does being married v. buying the home individually affect the tax credit?

Anyone have some informed advice?

Help a Reader (Me): Buying a New Computer

You all are so good at helping readers who send in their questions that I thought I'd give you a situation of my own and let you give me some advice to consider. Here goes:

• At home, we currently have an older (2002) desktop in our finished basement. It was our main computer for years and I still use it every couple of weeks or so to update Quicken. It's a bit slow but suitable for what I need and ok when there's no need to be social (it's tucked downstairs away from most of the family.)

• A couple years ago, we got a desktop computer for my wife and kids that sits at a desk in our "play room" (is meant to be a formal dining room) just off our kitchen.

• I set up wireless internet access in our home a couple months ago and I bring my work laptop home on the weekends and use it. It's nice to sit at the kitchen table, on the couch, or anywhere else and call up the web if needed. In addition, I have some computing-related tasks I'd like to work on but the basement computer is a bit out of the way and the other computer is in use quite a bit.

• As such, I'd like to get a laptop for our home use. The only questions -- what type and where should I buy it?

• The type question is probably related most to what I plan to do with it. Here's a short list: run basic programs like Word, Excel, and Quicken, watch shows/sporting events on Hulu or ESPN360, play some decent video games (kids), potentially store/edit video and or pics, monitor/work on this blog, and maybe a few miscellaneous tasks along the way.

• It will need to be mobile, but really only throughout the house and maybe on a few car trips. I don't plan to carry it on a plane or any other sort of trip. As such, I've been thinking about getting a "desktop equivalent" laptop -- heavier than most laptops but performance is better too.

• Cost is not an issue (within reason.) I have the money set aside for the purchase.

Ok, so that sets the scene, here are a few questions:

• Is a desktop equivalent the right way to go or should I go more middle of the road?

• No matter which laptop I get, what are the minimum requirements regarding processor, memory (GB), hard drive, video memory (MB), etc. that I should consider?

• Any brands in particular I should think about? (Every other computer I've ever purchased has been a Dell and I've had zero problems.)

• Where should I buy the computer?

• Anything else to consider?

Finally, please do not suggest an Apple product. I know how great they are, hoe they work better, etc., but I live in a PC world with my other computers and at work and don't want to bring an Apple into the mix.

Thanks for your suggestions.

Help a Reader: Dealing with Real Estate Agents

Here's an email I recently received from a reader:

I am in the process of looking for a house to purchase. In fact, I found a house I love -- I saw it last week. It was shown by a real estate agent.

My boss is a broker, and told me today that he'd be my agent (I've never done this before, I'm 24 years old and can only learn so much so fast, so I gladly accepted the help). In a later conversation today with the real estate agent that showed me the house, I told her I had a buyer's agent who would be assisting me.

Want to make a real estate agent hate you? Tell him or her you have your own agent -- she was not only mortified, and dumbfounded, but also very MAD. She told me it was illegal under real estate law (I'm in NY), it wouldn't work, I need a written contract with my own agent, and because she already showed me the house, I couldn't have my own agent for the house I am interested in.

I can't find anything online about this "law." I can't even find anywhere that says I need a written contract with a buyer's agent. I am going to ask my boss tomorrow about it, but could this be possible? Or is this agent just angry that she could lose half her commission to an agent working for me? The paperwork I have on the house says that under the circumstances, there could be 3% allotted to a buyer's agent, if there is one.

In the end, I'd really love to end up with this house and not cause problems. I don't understand why it would be illegal to have someone in it for me -- was she just trying to scare me and intimidate me or is it really illegal to have my own agent and not provide proof at the time of the showing of the house? Don't I have every right to have my own agent?

I suspect this has something to do with splitting a commission, but I'm not sure. Anyone out there have any advice for this young lady?

Help a Reader: What to Do with Kids' Gifts

Here's a comment left on my post titled Who Are Kid's Gifts Really For?:

My boyfriend and I have been talking money and completely disagree on the gift of money. My children are 6 and 9. I haven't set them up with savings yet but I am figuring out allowances and with that I will set up a savings account for each of them. Now that my children have an opinion of things they know what they want. My grandpa gives them a one time gift of 35 dollars on their birthday. Here's my dilemma. I believe that is theirs it was their gift and they should be able to do with it as they please (not to mention of course it’s their favorite gift because they can pick out their own stuff) My other half believes that money should be put in a savings account. I agree with children saving money, that's where the allowance comes in. I say why not take their clothes and toys back and put the cash in savings as well? It was a gift too..isn't that the same thing? Kids getting money any other way I completely agree with savings but it's a gift and to them? I just can't see taking a gift away from a child? HELP!!

Any advice for her?

Help a Reader: Medical Billing Problem

Here's an email I recently received from a reader:

At 23 years old, I recently had knee problems and went to an orthopedic practice for diagnosis. When I called for an appointment I was asked what insurance I had, and was given an appointment with and saw a doctor who was covered under my insurance - as would be expected. This doctor diagnosed a knee issue requiring surgery, and referred me to another doctor at the same practice. Thinking nothing of it, I saw that doctor once in the office, followed by his performing my surgery.

The day I get back from the hospital (4/22), I see in the mail a letter delivered that day, but dated 4/16, stating that I am approved for outpatient surgery using an out-of-network doctor. A couple of days later I get a $250 bill for my initial visit with the surgeon, not covered by insurance. Bear in mind that I've already had a followup appointment with him where he just said "Good job, keep icing it!," that I'll probably receive a similar $250 bill for. I have another followup appointment with him scheduled for June.

Fortunately, I saw a $6,000 hospital facility / lab fee post to my insurance, covered at 100%, but after digging for a couple of minutes I'm pretty certain that the surgeon and anesthesiologist are not in-network under my insurance. My out-of-network coverage has a $3,000 deductible that I of course don't want to contribute to, and while I understand that it was likely my technical responsibility to ensure that everyone involved was covered under my insurance, it is disturbing that an in-network physician in an orthopedic practice would refer me to an out-of-network surgeon in that same practice without anyone mentioning anything.

Any suggestions as to how I can best resolve this? (With the doctor(s)? With the insurance company? Both?) As a related aside, I have a very good rapport with the surgeon. Thank you!

Any suggestions for him?

Help a Reader: How to Invest

Here's a comment left here recently:

I have $225K in savings. I am 38, married, 2 kids under 6. I contribute to my 401k for my company match, current balance there is $100k. What should I do with the $225k. I have it in savings because I am afraid to lose it and I'm afraid not to have it available if I get laid off. The layoff possibility is low but it is still on my mind. I don't know what to do. Should I go to Vanguard? If so, how much and which funds? All in the Total Market Index? Should I get a financial adviser? If so, how do I choose one. It seems like now is the time to invest but I'm nervous and unsure what to do. I also want to consider a 529 for my two kids. Thanks for any help you could give.

Overall, I'd say this guy needs a plan and it doesn't sound like he's in a position to develop one himself (he seems to be paralyzed by fear.) So he probably does need to find a friend, family member, or an advisor to review his finances as well as his goals and give him some good advice. Here are my thoughts on how to find a good planner.

Now if this was me, here's what I would do:

1. I'd make sure I had a good emergency fund set aside. If three to six months of living expenses is the "norm", I might have six to nine months set aside in a tough economic time. I might look at some ways to make extra money just to give me even more cushion. I'd also cut my expenses as far back as possible to provide even greater security.

2. If there was any left over (and there probably would be at these levels), I'd put some in for my kids 529s (assuming they're young -- so I could put in a few thousand or so -- I put in $5k per year for each kid to maximize the amount I can write off on my state income taxes) and invest the rest. Yes, I'd go with Vanguard and yes I'd go with an index fund (based on being 38, there's plenty of time for these investments to earn a decent return -- assuming he doesn't need them for as long time.) For details, here's exactly what I'm doing. 

This said, he's not me. He'll have different priorities, different goals, and situations that I don't know about and can't anticipate. hence, I'd advise him to get some help.

How about you? What would you tell him to do?

Help a Reader: Buying a House on Contract

Here's an email I recently received from a reader:

I have been presented with an opportunity to buy a house from my fiance's grandmother.  Her income is tight and we have been offered to purchase the home at a value well below the market price.  I am a self-employed small business owner and my fiance is in her 2nd year teaching.  We both have student loan debt and personal debt.  Bank financing would be difficult for us.

Here are some details:

• Our personal debt includes 950/month student loans, 650/month consolidated loans (credit cards, medical expenses), 550/month car payments, 300/month rent on current house, 400/month food/misc expenses, 150/month utilities.  3500/month income.  We have about $500/month of wiggle room for savings and/or emergencies.  We do not have 20% to put down for a down payment.  No assets.  We are expecting 10k from inheritance in 4-6 months.

• House value is $120k appraised.  We have been offered it for 75k.  Her grandma pays about 325/month on current mortgage plus utilities.  We would like to buy the house on contract by paying her an agreed upon amount per month that she can pay her current mortgage with or save for health expenses that may occur in the upcoming years.  By showing the bank we are paying on a house with contract in hand, we can go to a bank in 2-3 years to borrow the remaining amount and pay grandma a lump sum.

Pros/Cons?  Best ways to go about buying a house on contract?

What advice do you have for him?

Response from Guy with $265k in Student Loans

For those of you reading/commenting on/interested in/asking questions about the reader who has $265k in student loan debt, he has responded to many of the issues brought up.

If you want to follow up on it, check out the post here.

Help a Reader: Repaying HUGE Student Loans

Here's an email I recently received from a reader:

As a college freshman, I went crazy with student loans. Although I received a scholarship to attend my college of choice, I was still 10,000 dollars or so short.  The total annual tuition for my college was approximately 44,000.  In an attempt to close the gap, I took out private student loans except not just for 10,000, but for the maximum that was allowed to me: 30,000.  I did this several times. Why?  As I sit here, I attempt to find an answer to that question, and the only thing I can say is, I tried too hard to keep up with the Jones’ way of living.  My school was full of affluent students who drove Bentleys and Mercedes Benz….and not just one, but multiple cars.  I had a beat up old Jeep and I couldn’t stand that I wasn’t fitting in.  Seeing as I wanted to spend 4 years there, I decided the best thing to do was to keep up with the pack by getting as many student loans as possible, relying on the fact that I would be able to pay them back on my own schedule (big mistake) later on down the road.

In the end, I totaled $265,000 in student loans (about 56,000 went towards the actual tuition/school). The rest went into paying rent in a place that I had no business staying in as a freshman, sophomore, junior or senior!  I spent money making payments towards my Mercedes Benz ML500 and just going out with people I thought were my friends (money changes everything).  Adding insult to injury, I ended up using credit cards to fill in the gaps whenever my student loan money ran out and I had to wait another two or three weeks to get another one.  When I finally snapped myself out of this utopian nonsense, I realized just how much debt I was in.  Armed with only a bachelor’s degree, I was $265,000 in student loan debt, most of which was private.

To make matters worse, the school I attended was for business.  Do you know what I do for a living? Well...what I did until I lost my job due to a drunk driver hitting me....I was a State Trooper.

I love my job.  Believe me I do; however, never in my wildest dreams would I have seen myself making this career choice.  My salary was $41,000 starting.  My overtime helped me rake in approximately $70,000 per year.  Considering the fact that I had to work 60-70 hours a week, it wasn't the most attractive thing in the world, but it brought in extra cash to help me formulate some type of a plan to attack this debt.

I am almost done with eliminating my credit card debt (I have approximately $12,000 to go---it used to be $23,000).  I will begin paying on these loans in a few months.  The minimum payment will most likely be upwards of 1800-2100 dollars per month.  Now that I am unemployed, I have a problem..

Therein lies the problem….

I guess what I’m asking for is advice….seeing as I am now very much aware of my mistakes and am making an earnest effort to turn everything around.  I want to get my Roth IRA fully funded this year. I have the right mindset.  I know that now.  It’s unfortunate I didn’t have this mindset before college.

What should I be focusing on without completely deteriorating my quality of life? I know I have to pay for my mistakes, and I will; however, I’ve exhausted my brain and I need a new take on things.

If you would, please feature this on your site as I want other people to learn from my mistake.  It’s easy to get sucked into the whole keeping up with your neighbor thing.  If anything, I may get the satisfaction of knowing I at least prevented someone else from making the same mistake I did.

Any advice to a 23 year old just beginning fresh would be greatly appreciated.

What advice do you have for him?

Help a Reader: Loans for College

Here's an email I recently received from a reader:

I'm currently in search of student loans for the upcoming fall semester. I was wondering a couple of things that maybe you could help me with. A little background first: I'm 20 years old, and I work while going to school. I will be completing my third year of community college this May, when I will be graduating with my Associates Degree.

I only paid for about half of my community college expenditures, while the other half was financed with scholarships. Now that I'm moving on to a University, I've realized I can't avoid taking out a few loans as my parents faced many challenges over the years, and will not be able to contribute to my schooling. First of all, I did fill out the FAFSA with estimates from my parents for their own tax return. The results from this conclude that my family's estimated contribution should be about $6469. The website for the university I will be attending says that for one year of education at their school, including living at home, commuting, food, and books and supplies, I will be paying $14,500. The way I eat and find ways to save money I think this number can be brought down all the way to $10,000. This means I should expect about 4,000 from my school or the government to subsidize the costs. I applied for various scholarships, but I won't get those results until after my fees are due to my school. This means I will need to apply for a loan for the other $6,000 regardless of the scholarships.

I plan on applying for the Perkins Federal Loan, the Stafford Loan, and also to apply for a student loan through State Farm. My biggest question is this: Will applying for a loan from various placed negatively affect my FICO score? I know that each time an inquiry is made from a creditor it does affect it, but I wasn't sure if that meant EACH time, or for each type of loan during a given time period?

Also, do you have any other ideas to help subsidize the size of the loan I need, other than working and saving (which I am already doing), scholarships (which I have already applied for), and Federal Grants?

What advice do you have for her?

Help a Reader: Getting Out of Debt

Here's an email I recently received from a reader:

My wife and I made some poor financial decisions early on in our marriage, so we are trying to dig out of our debt.  Here is where we sit:

• Have a house (worth about $5K less than mortgage)
• 1 Child
• I have a full time job and part time job
• Wife has full time job
• College Loans (total of $20K)
• 2 car loans (total of $14.5K)
• $22K in Credit Card debt

We finally started turning the ship the right way about 6 months ago, by setting a budget and so forth.  We have enough money coming in to keep everything afloat, but not enough to knock out significant chunks of the credit card debt at a time.  Right now we are working on the cc that just had the interest jacked up to 26% and that one has $1,200 left. 
 
The real question is: biggest cc has a balance of $14K and I was recently informed by Chase that the interest would be raised to Prime Rate + 7.99% from 7.99%.  In the term changes notification it said I could opt out of the change, but my account would be closed.  It's not that I want my account open so I can use it, but I fear it will screw up my credit until I get that 14K paid off.  Does anyone also know if I opt out will I always have the 7.99% interest or can they change that if they see fit?

Any advice for him?

Help a Reader: New Job Offer

Here's a comment/question I received recently on my post titled Ask for More Money When You're Offered a Job:

Curious what the reaction here might be to my current situation:

1. Went in for the interview & it went very well. I had been instructed to give a salary suggestion prior to interview, which I grossly undersold myself on. Left the interview saying this would need to be a larger amount if I was hired.

2. Was offered the job by phone. They wanted a start date, I wanted to know about the salary, they said not to worry.

3. Received my Contract by email with the original amount I stated prior to interview.

4. I wrote back saying again that we needed to increase this number and attached my earnings from my previous company to show that I was off the mark with that suggestion.

5. They wrote back that they can't see any room for compromise, as my previous jobs amount marks to much of a difference. "Good luck with your further job search"

6. Emails, Phonecalls etc.. I've been blocked out. I can't speak to anyone at the company who made this decision.

The facts are: I'm in a foreign country, The bottoms fallen out of the job market and I'm now desperate as I'd been working on getting this job for a month.

What to do..! I'm close to call up and accept their first offer.. but it seems they are so scared of my previous salary.. they don't even want to talk. I've already offered a huge drop in Salary by email.. to no reply.

I responded in that thread, but thought I'd ask you all to comment as well. What advice do you have for him?

Help a Reader: Leveraged ETFs

Here's an investing question a reader recently sent to me:

I have noticed the Proshares Ultra S&P ETF that attempts to double the S&P market returns (whether up or down) and have a basic question.  Why wouldn't someone 30 years out from retirement invest in this in their retirement savings rather than an "unleveraged" ETF?  I'm a plain old index fund buying, buy & hold investing person not particularly looking for risk.  But if one assumes that the S&P will be higher in 30 years than it is today (and I'm thinking that is anyone who is in the market, or why bother), why wouldn't someone in their 20s and 30s invest in these leveraged ETFs in place of an unleveraged one? 

I even noticed there was a 3x S&P fund out there.  From what I've read, there is tracking error since it is only the "goal" of the fund to double market returns by complex hedging, derivatives, etc., not a guarantee.  But even if the returns are a bit off, with an expense ratio of under 1%, wouldn't you still come out ahead? 

I never saw the appeal of leveraged investing in the past because the interest expense on the money borrowed rarely made sense for average return, long-term investing (plus there is always the threat of a margin call), but I'm not sure I understand where the pitfalls are with this alternative leveraging technique (besides the obvious volatility gut check during downturns, a good reason to probably get out of these after the age of 40).

Any thoughts for him?