Mailbag Monday: Cutting the Cost of Pet Care
Vet costs are rising as rapidly as human health care, and it’s difficult to manage a yearly check up now, along with effective topical flea/tick medications (those NEVER seem to be discounted), heartworm medication, good quality food, and then the little and big extras you like to give to your furry friend. I haven’t found most pet insurance to be good value, either. How can I save?
- Deanna
I know the feeling — as many of you know, I have a cockapoo, Teddy. He’s cute but expensive! Here’s the deal on pet insurance: it tends to be a good value if you a) purchase it when your pet is young and b) tend to be the kind of person who would go to any financial extreme — raid your savings, max out your credit cards — to provide care for your pet.
Otherwise, it is generally not worth it. But there are ways to minimize these day-to-day costs. A few tips: Amazon’s subscribe and save service, which allows you to purchase an item and then receive it on a set schedule, like every month, can shave a few dollars off the cost of pet food and treats, provided you buy it on a regular schedule and choose a kind that qualifies for their free shipping. I’ve found that topical flea, tick and heartworm medications are often much cheaper online than they are through your vet, so it’s worth shopping around. You can get a prescription and price quote from your vet, then do some work on the web to see if you can do better. And local charities — like the Humane Society — often offer discounted rabies shot clinics a few times a year.
For other supplies, like collars, leashes, bowls and dog houses, check Craigslist to see if someone in your area might be selling. Yard sales (particularly this time of year) are also a good source for used pet items on the cheap.
Finally, understand that it’s okay to negotiate with your vet, or tell him that you’re going to call around to see if a medical procedure might be cheaper elsewhere. He or she may be willing to work with you.
P.S. For a few more tips, check out this segment on the Today show from several weeks ago — we talked about lots of ways to cut the cost of common pet expenses.
Mailbag Monday: Choosing the Right Credit Card
My husband and I have booked a cruise for our wedding anniversary. We currently do not have a credit card. We want to have one specifically for this trip: cruise charges (drinks, excursions), bike/kayak rental, etc. We want to build credit and will consider making large purchases on it when we have the cash first and will pay off within the same month. What card or company should we consider?
- Angela
Angela, credit cards have a bad reputation, and there’s a good reason for that. If you carry debt, the interest rates can be a killer. But they’re also an important tool to have in your wallet — used wisely, they can help you improve your credit score, as you noted, and even earn you money or other perks in the form of rewards.
This is a good, timely question, as many people are in the thick of planning their summer vacations. If you’re going to be paying off this card in full each month — as, of course, you should — you want to look for a card that will give you rewards by spending on things that you buy anyway. Card issuers often dole out rewards based on categories of spending — you might get more back when you shop at grocery stores, for instance, or fly a certain airline. Remember that this is a card you’ll use not only on your upcoming cruise, but also on other purchases when you return, so take a careful look at your spending and then look for a card that will reward you based on where you spend money anyway.
My favorite website to sort through the options is LowCards.com. You can search by gas cards, home improvement, retail, travel cards, and then narrow them down by the credit score requirements. If you’re not sure you’ll use something like miles, I’d look for the most generic card you can find – one that gives you cash back for spending across the board. LowCards.com picked the American Express Blue Cash Everyday card as the winner in that category – right now they’re offering $100 cash back if you spend $1,000 in the first three months of membership, and that cruise may get you there. The card also pays 3% back at US supermarkets (for up to $6,000 per year in purchases), 2% back at US gas stations and select department stores, and 1% on all other purchases. And there’s no annual fee, which is important because depending on how much you spend, a fee can really eat into your rewards.
Enjoy your cruise, and happy anniversary!
Mailbag Monday: Finding a Bankruptcy Attorney
I talked to a credit counseling agency and they told me to find an attorney about bankruptcy. What should I look for in an attorney and what questions should I ask? I am self-employed, have my own at home business and have gotten in serious credit card debt. I have been paying my mortgage and all cards, except for one. I called them but they will not work with me. I had one card go to collection and just got a collection agency letter in the mail. I would be willing to sell my house and pay the debt, but prefer not to do that. The lawyer I called said he need $2,000 up front and I do not have that. I do I deal with talking to the collection agency?
– Kathy
Hi Kathy, I’m sorry you’re in this situation. What kind of credit counselor did you go to? Did they tell you that you were ineligible for a debt management plan? Typically a not-for-profit credit counselor will work with you and your creditors. They’ll put you on a plan — called a debt management plan — that will allow you to pay off your credit card debt in less than five years, and negotiate with your creditors to lower your interest rates. Is that a process you went through? Sometimes, if the counselor thinks that the debt is too high to pay off within that time frame or if you don’t have enough income to support the debt, they will suggest bankruptcy. But I want to make sure you went to a reputed counselor and considered all of your options before going this route. Be sure that the counselor you are working with is an accredited non-profit agency that is a member of the National Foundation for Credit Counseling. You can do a search on their website here.
Once you’ve done that, I’ll direct you to the American Bankruptcy Institute. That organization has a consumer information website that is really helpful. Whether or not you can keep your home and your car will depend on the type of bankruptcy you file, the value, and your state’s exemption rules. Chapter 13 bankruptcy allows you to keep your property and puts you on a repayment plan to pay off your debt.
ABI’s website also has a pro bono resource locator that can help you find pro bono legal help near you if you qualify – it’s certainly worth a look. If you don’t qualify, and you can’t afford an attorney, you may be able to pay off the attorney’s fees through your repayment plan if you file Chapter 13. Be sure to ask about that upfront. You’ll also want to ask the attorney how long the process will take, how much time he or she will devote to your case and how much access you will have to ask questions, and whether he or she will be handling your case exclusively or if it will be passed off to someone else in the office. He should also be able to clearly explain the bankruptcy process in a way you understand – if it sounds like another language, search out other attorneys until you find the right fit.
Mailbag Monday: Life Insurance at 74
When does buying life insurance at the age of 74 make sense? We are thinking in terms of protecting our estate, but aren’t sure if we need to do that. We do have a trust.
– Evelyn
Hi Evelyn, that’s a great question. The vast majority of people do not need life insurance unless they have an income, which means many retirees should pass on this product. Getting rid of life insurance, or letting a term policy expire, is a great way to free up some cash in retirement.
It should be noted, though, that there are a few exceptions: If your spouse is dependent on a pension or annuity that will cease or decrease payments upon your death, you may want life insurance to pick up the slack. The same goes for Social Security payments that will be reduced — life insurance can step in at that point. The other scenario in which life insurance may be necessary is if you want to use it as part of an estate planning strategy, as you indicated. If you plan to pass on a large amount of money, you can use a life insurance policy to pay for estate taxes. You can also set a life insurance policy to pay into a trust as a way of passing on an inheritance.
Here’s the issue, though: Purchasing life insurance at age 74 will be extremely expensive, even if you are in good health and you’re looking at a term policy. The high premiums may not be worth it – you may be better off investing that money elsewhere. If you’re planning to go this route, I would work with a good fee-based financial advisor who focuses on estate planning to make sure you’re taking the correct approach. You can find one at NAPFA.org.
Mailbag Monday: A Mountain of Debt
My husband is an entrepreneur and we were living for years within a budget that turns out not to be real (our savings and investments were used as salary). I have discovered all our savings (including 401k) are gone. We have $0 to our name. I also discovered that we are in debt up to $494,000, which includes a home equity loan on my in-laws home, a car loan, money borrowed from friends and his parents, and credit cards. Our health insurance has just been cancelled. We are unable to pay our rent of $5,200 and our car loan is in default. I don’t know the first thing about taking a step forward with this mountain of debt on top of me. I negotiated with all the credit card companies to reduce interest rates and drop late fees and I make double payments on the cards.
– Suzanne
Suzanne, this sounds like a scary situation — but it also sounds like you’re getting a handle on things. It was smart to call your creditors and negotiate a better rate. The next thing I think you are going to need to do is downsize. You’re lucky in that you rent, so you have the flexibility to move to a less expensive property. I highly encourage you to do that immediately – you simply cannot afford this home. Cutting that chunk of your budget will free up more money that you can use to save and chisel away at those cards and other loans.
Then I want you to consider where else you might be able to make cuts. Can you drop down to one car? A less expensive car? Cut the cable or any other extra services? Go over your budget with your husband and see what can be cut back. I guarantee you will find some savings. And it sounds like both your and your husband’s income is somewhat sporadic, so I want you to get on a system in which you deposit your income into a savings account, then pay yourself a set paycheck each month. If you earn more one month, you still get the same amount – because it accommodates for the months during which you’ll earn less. This is a wake-up call that you needed to get more involved in your finances – it’s never too late.
If that doesn’t work, and you feel like you’re facing bankruptcy, I wanted to address how that might work with all of these loans from friends and family members. When you file bankruptcy, every loan must be listed, even loans that are undocumented among friends. If they are unsecured, and they get discharged, you won’t have to pay. That doesn’t mean you can’t – or shouldn’t – pay these people back, but they won’t be able to do anything to collect the debt. For the home equity loan, if no one pays it, the lender can foreclose. If your in-laws continue to pay it and you do not, they will likely be able to keep their home, even if you are on the loan and you file for bankruptcy. Your obligation to pay your in-laws for that loan may be eliminated, but again, you could continue to pay.
Mailbag Monday: Unloading a Timeshare
About 10 years ago, we bought a resort-type timeshare. Our circumstances were quite different then, but we have only used it twice in the 10 years we’ve had it. It is paid off but we have the yearly assessment fees. We want to sell it, but I am leery of any of the sites I have seen on the web. Do you have any recommendations for companies that might purchase this from us? We do not want to pay any up front fees, if this can be avoided.
– Gina
If I had a FAQs section, this question would definitely be in it — that’s how frequently it lands in my mailbox. Timeshares are a bit notorious in this way: They’re easy to get into, hard to get out of, and many people — particularly after the recession — are in the same boat as you. It’s just one line item that would be easy to wipe out of your budget and free up some cash, but unfortunately, it isn’t that simple.
Let’s get one other piece of bad news out of the way first: You are probably going to lose money here. Timeshares tend to depreciate just like cars, especially in a bad economy when more and more people are trying to unload them and less and less people are in the market for a vacation. But your first point of contact should be the resort management company. Call them up and find out if they have a buy back program — many do. You’ll get less than you paid for it, but it will be out of your hands and those assessment fees will be out of your budget. If they won’t buy it back, ask them if they can recommend a resale company or broker you can use to sell the timeshare to someone else. Just be sure you don’t pay anyone an upfront fee for this service — you’re correct that you should pay only when and if the timeshare sells. As you suspected, there are a lot of scams in this area right now.
Mailbag Monday: A Difference of Opinion
My daughter is 28 and pays $975 in rent. Her take home pay is $1388. She also has a $312 car payment, and her student loans are on deferment. She puts about $100 a month in savings every month but only has about $800. Instead of looking for a cheaper apartment, she has decided it would be better to buy a house. Her dad and I are trying to talk her out of it because she doesn’t have a down payment and won’t have the extra money in case of emergencies. What are your thoughts?
- Christine
I don’t want to get in the middle of a family dispute, but I’m going to have to side with you, Christine — based on the information you’ve provided in your email, it’s probably not the best idea to buy a house at this stage in her life. Even if she could find a home with a mortgage that is less than her current rent, you have to take into consideration other costs — the down payment, as you mentioned, but also maintenance, which can average 1% of the home’s value each year. And I like to see home buyers have at least a bit of an emergency cushion — emergencies pop up more frequently when you own a home, because if the roof springs a leak or a tree falls across your yard, you have to foot the bill.
A rental also comes with more flexibility — if she were to be laid off, for instance, or even if she wanted to take a lower-paying job, she could pick and move to a cheaper rental, but she won’t have that option with a home she owns. I would encourage her to find a rental that is less expensive — she is paying almost 75% of her income toward housing right now, which is too high. Then she can get those loans out of deferment. She should look into income-based repayment, which ties your monthly payment to your income. And she can start saving more to have a cushion for emergencies and, eventually, a down payment on a house.
Mailbag Monday: Dropping the Cosigner on Student Loans
I had to co-sign for my son to secure student loans for going to college. Now he is two years out of college and has a full time job and meeting his payments completely on his own. My question is: Will I always have to be listed as a co-signer on these loans?
- James
Hi James, thanks for writing. The answer is not necessarily, and that’s because it largely depends on the lender. Many, like Sallie Mae, offer a cosigner release after the borrower has met certain obligations – under Sallie Mae’s program, the borrower must have completed school, made 12 to 24 consecutive on-time payments, and met underwriting requirements. Wells Fargo allows a cosigner release if the borrower meets credit requirements and has made all of the first 24 payments on time. Contact your lender for specifics about your loan – with two years of payments under his belt, you may qualify to be removed. If you don’t yet, you can at least find out the qualifications and then have your son work to meet them. Once he does, you should get off that loan.
Mailbag Monday: Refinancing in Retirement
I am having trouble refinancing my mortgage. I am a 78-year-old widow and retired. The mortgage company says that they will not refinance me because I don’t have an income. This is the same mortgage company that has my current mortgage. How can I get around this and refinance?
– Sylvia
Sylvia, thanks for writing. This is a challenge, unfortunately, because even if you have retirement savings, and you’re drawing a steady income from those accounts each month, lenders don’t really see that as something they can count on because your investments could fluctuate so substantially. What that means is you have to cast a wide net and hope for the best – go to local banks, credit unions, lenders who keep the loans in their own portfolio rather than selling them, and mortgage brokers and see what you find.
If you come up short, you can effectively “refinance” your loan yourself by throwing additional money at it each month. That additional payment, even just $50 a month, will lower the cost of interest you pay overall, serving a similar purpose as cutting your interest rate. Of course, this strategy only works if you are refinancing to lower your interest rate and not to open up more cash flow each month – but even still, it’s worth a mention of you have wiggle room in your budget.
And I’m going to use this as a PSA to the rest of my readers: If you’re nearing retirement, and thinking you might want to refinance, don’t put it off if the time is right. You may really struggle to get that refi once you’ve pulled out of the workforce. Getting it taken care of before retirement — especially in this low interest rate environment — will save you a lot of headache (not to mention money).
Mailbag Monday: Saving for Retirement Overseas
My son works in India on a two year contract. If he continues with this company, he will not be eligible to contribute to U.S. Social Security. He has some kind of plan with the company like an IRA, and wants to open up a Roth IRA here. In
your opinion, what’s best: a bank Roth; a mutual fund Roth; or a brokerage firm Roth?
– Patricia
Patricia, this is a good question. First of all, in order for someone to contribute to an IRA (Traditional or Roth) they have to have qualifying income. If your son has all of his income excluded from federal taxes, he likely won’t be able to contribute. If not, he should be able to open an IRA and contribute with the same restrictions as if he lived in the US. What I would do is have him contact a few brokerage firms, like Fidelity, Vanguard or Charles Schwab. Ask about whether he is eligible to contribute. He can open a Roth IRA at any of these financial institutions – as well as local banks – and he’ll probably have a wide range of access to many investment options, including mutual funds, CDs, stocks and bonds. He should compare by looking at the specific options that are available – and how they are rated – and the fees charged for the account. This is where he is likely to see the most variance.