Credit card debt: Indebted mom wants to buy me a TV. Should I accept?
Credit card debt is burdening mother, so how should responsible daughter respond? Also, contribute to charity or pay off credit card debt? Questions 10 and 4 in this reader mailbag.
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Q6: Multiple student loan payments
I’m a 23 year old grad relatively recently graduated out of college. I accumulated about $25,000 in total loans (all subsidized), and payment time has finally kicked in. The total monthly minimum I’m looking at is about $275, with my intention being to reach $400 per month whenever I can.
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
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The thing that I find annoying is dealing with five separate payments coming out at varying times of the month. Do you think it would be prudent, and worth the credit score hit, to consolidate my loans for the sole sake of making one payment? I’d plan to pay the same $300-400 a month, but would just like to worry about making one transaction.
The only downside I see to is that because I use direct deposit from one of the lending house, they’re giving me a 2% interest rate reduction on the two loans I owe them ($11,000, 5.5% interest rate, $100 monthly minimum payment).
How would you advise I approach this?
There’s no reason not to investigate what kind of rates you would get with consolidation. You can certainly call around and get some rate quotes before you make such a move.
I’m going to guess that with some shopping around, you can find a rate that’s lower than that 5.5% that might also reward you for direct deposit payments while also providing the easier depositing that you want.
One way to start shopping around is to check out the organizations you already have loans with and see what they offer for consolidation.
Q7: Cars with leg room
We are looking for a new car. My teenage son is almost 6′ 6″ and I was wondering if you know of a sedan or SUV (we are going to be looking for one with good gas mileage), that has a lot of leg room in the back seat. He has his own truck and drives back and forth to college but we still need room for him in our vehicle sometimes.
I’ve got a lot of experience in jamming myself into cars that are smaller than my frame will allow. My height is “top-heavy,” which means that I can wear pretty ordinary length pants but my shirts pretty much must be tall shirts. This means that I do okay for leg room in most cars, but my head often bumps the ceiling.
This means that cars like my wife’s Toyota Prius actually works okay for me provided I ride in the passenger or driver seat, but there are many SUVs and vans that are pretty awful to ride in because of my head bumping the ceiling.
Given that body proportions vary so much, my honest suggestion would be to just go test out a lot of vehicles at a large dealership so that you have an idea what works well for him. Once you have some models you’re sure about, use that information to shop around before buying.
Q8: Good items on credit report
I’m 30 years old and just a few months into my first full-time 9-to-5 job (previously I have been doing freelance writing or photography to supplement part-time work while taking care of family responsibilities). I have a bit of a checkered financial history, mostly due to a couple of credit cards being charged off after my house was nearly destroyed in Hurricane Ivan in 2004 and I missed a couple of payments. I’ve worked with the collection agencies that purchased those debts and this month I will be debt-free. Even though I know that if I had ignored the debts, they would nearly all be off my credit report by now, I feel good about having repaid my legitimate debts.
Here’s the problem. My only “in good standing” item on my credit report is a store credit card that I never used, and that has been inactive since the store (Bombay Company) closed a few years ago. I found out today that this item will leave my credit report in June 2013. Because I have avoided opening any new lines of credit, once this is no longer reported I’m worried about how bleak my credit will be.
Now here’s my question. How can I add more “good” items to my credit report? I checked with Orchard Bank and the card I qualified for was a secured card. I’ve never really felt like secured credit cards were a good idea (since I don’t intend to use it) but is it worth opening one just to have another line of credit on my report? Can you suggest any alternatives?
The only reason to get a secured credit card is to raise your credit score. I truly look at them as though you’re loaning money to a bank at 0% interest in order to raise your credit score. Very rarely will you find a secured card that makes sense for a person to use for actual purchases because the interest rates are usually really high on them and they rarely have any sort of good rewards programs.
Now, is that worth it? If your credit score without that secured card is really low, it probably is. A decent credit score helps with your insurance rates and also helps with the interest rates you’ll get on things like car loans and the like.
You may want to see if you’re eligible for an unsecured card of some form. If you do have a positive history with the one card on your report, it might not quite be as bad as you’re thinking. Use the secured card as a “last resort.”
Q9: Personal finance in the U.S.
I have been a follower of your site on and off for a few years, more of a casual reader than anything purely on the basis that many articles did not apply to me, being from the UK and having no debt to clear. Now however, I am reading every post you make as I am moving very shortly to live in the States. A lot of things are very different; by this I mean the basic way financial intuitions run, the way mortgages work, the way banks and investments work… the ‘basics’ on my financial education here in the UK will not apply. This will be very strange for me – here in the UK I’m very well financially educated, working as a personal tax accountant. So I feel I will not enjoy suddenly floundering! I was wondering if you had any general advice for me, and if there was a particular book or blog or any such that you could recommend to me… sort of an ‘American Finance for Dummies’ but for people who do want a little more than just passing knowledge?
In terms of basic principles – pay off your debts, spend less than you earn, etc. – most economies work pretty much the same. In terms of your day-to-day actions, you’re not really going to be doing much differently in the U.S. than in the U.K. A standard Personal Finance for Dummies book written for a U.S. audience will actually answer surprisingly few of the questions you come across. They also tend to focus on the principles.
Honestly, the source I would use the most for this would be Wikipedia. I would start with entries related to the areas that concern you the most, such as income taxes. One good entry to start with would be “Banking in the United States.”
Another good tactic is to simply ask entry-level employees of institutions you intend to use. Bank tellers and the like are often good sources in terms of how things functionally work, which you can then supplement with ideas and theory from other sources.
Q10: Overspending family and holiday politeness
I’m writing for some advice on dealing with my financially irresponsible mother and grandmother. I am 25, living in NYC on my own. All of my school loans (~24K) and credit card debt (~5K) are in my name – I haven’t taken any money from my mom (who raised myself and my 2 brothers alone, with minimal financial help from my father) since I was about 17 years old. I saw what a struggle money caused in my house growing up – it was a main cause of my parents divorce – and I’ve always worked to be as independent and responsible as possible. That, of course, is not without incident so I’m actively paying down a bit of credit card debt that I accrued while in my early 20s and trying finding a job/figuring out the whole ‘financially responsible’ thing. I’ve since managed to make quite a dent in my debt despite my high cost of living. I contribute to a 401K with a 5% employer match and I also maintain a personal savings account.
I’m writing because my mother and grandmother are compulsive over spenders. They are both in a fair amount of credit card debt but they still shop compulsively (nearly every Saturday is spent at the local mall, Kohl’s, Target or flea market, etc.) My grandmother spends so much money that my 85 year old grandfather still works two jobs to make ends meet for the two of them. He also works to lend additional funds to my mother as she is also in debt and has no savings to speak of.
That in and of itself has serious implications for me as I am sure that I will be charged with caring for my mother in retirement as she has nothing. However, I’m wondering if you might be able to advise me on how to politely decline presents and shopping trips with my grandmother and mother. When I visit (usually about twice a year), all they want to do is shop. I’m not a big fan of shopping ingeneral however, when I do purchase things I do so with a “quality over quantity” mindset – I pick out one classic, high quality piece and I save up to buy it. My mother & grandmother just buy anything that is on sale, favoring low quality department stores – usually falling into the trap of “it was on sale, so i bought 3 of them!” My mother even took a part-time job at a local department store for the employee discount.
They don’t seem to have any interest in chatting with me and discussing my life, accomplishments, plans, etc. They want to go to the mall and buy things. This makes me feel incredibly uncomfortable as I know that they are not financially in a position to spend the kind of money that they do. Additionally, it hurts my feelings because I work my butt off to make my life what I want it to be – I’ve worked my way up the corporate ladder quickly and I have a budding romance that is quickly maturing in to something that could very well result in marriage, yet they make no effort to inquire or be a part of my life. I feel that their wanting to shop for me is more for themselves than for me. They push clothes and things on me that are not my style and then guilt trip me when I try to politely decline. They tell me that i have become a snob. I don’t try to deny that or defend myself because I don’t want them to know what I really think about their financial promiscuity – I just let them think that I’ve become a total snob.
With Christmas coming up, I’ve asked all my family members to get my gift cards to Target so I can purchase a television (I haven’t had one for 4 years to save money). My mother is now insisting that she can buy me a TV for Christmas [...] with her employee discount. When I tried to make up excuses why I didn’t want that, she acting like I had just refused her the chance to meet her new grandchild or something ridiculous like that. How do I politely approach this situation without hurting anyone’s feelings but also not accepting gifts that I’m not comfortable accepting?
My reaction would be to just accept the gift and move on with life.
You have to remember that you cannot change the behavior of others. People have to find within themselves cause for change. External forces rarely can do anything at all to cause someone to change, unless it’s to simply trigger something that’s already inside of them.
You’re growing and maturing and finding yourself on a different path than many of your family members. Your values are different at this point. The choice is really up to you: are you willing to set aside some of those values differences to maintain a relationship or not?
In some ways, I’m in the same boat as you. I know that many of my extended family members find our situation confounding. We’re both college educated and earn a good income, but we do things like make homemade Christmas gifts (when other family members just buy all kinds of random things) and buy our vehicles used off of Craigslist. There are values clashes.
At the end of the day, though, I’m okay with that. I know a gift from them is still a gift from the heart, even if it’s not a match for the things that I value. It’s a show of affection and an attempt to maintain a connection.
In your shoes, I would just suggest that you roll with it. Bond with your family where you can, and tread lightly in the areas where you can’t.
Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.
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