Answer: Dear K.: I am not well informed on tax law. You may find what you want at: http://www.irs.gov/irm/part7/irm_07-020-008.html Blessings, Luise

Answer: Dear G.: I am not well informed on tax law. You may find what you want at: http://www.irs.gov/irm/part7/irm_07-020-008.html

Blessings, Luise

Answer: Dear S.: Those people make money doing that and some are not reputable. I would first see if I could negotiate my own debt resolution. Write each company and tell them that you have lost your employment and are trying to avoid bankruptcy. Ask how much each one would settle for to close the account. Blessings, Luise

Answer: Dear L.: That’s a tricky situation. There’s no way around it that I know of. No matter how you try to protect the bequest, it can be cashed out and given to your daughter-in-law by your son, if he so chooses.

An acquaintance of mine just went through something similar after she found out she had terminal cancer. Her closest and oldest friend married a guy who brought her nothing but grief. My friend went to an attorney trying to find out how to set up a trust that her friend’s husband couldn’t access or an account someone would monitor for her. I couldn’t be done. Her husband is clever and a great manipulator…piece of cake. In the end she left the money as planned knowing what would probably happen to it but not wanting to punish her friend further for her poor choice in a partner.

It sounds like that’s what you’re going to have to do…choose between hurting your son or taking a chance that his wife will get control of part of or all of your bequest. Neither choice has much appeal. I would just go with my heart. Blessings. Luise

Answer: Dear D.: Your grandmother left you the house and she left your brother money that was not longer there because she had to use it. End of story.

It’s not about you needing to “give” your brother anything. Your grandmother was doing the giving and that was based wholly on what the residual of her estate was after she used her resources to pay for end of life expenses. There was nothing in her will requiring you to share your inheritance with your brother, should her funds become depleted or non-existent. You were the one in her life who stood by her and she acknowledged that

If you want to borrow $20,000.to give to your brother…have at it. You can get it from your equity in the house. However, please remember that your grandmother didn’t even have enough residual to settle her estate and you are out-of-pocket there. Did your brother…or mother for that matter, come forth to help you with that burden? No, I didn’t think so.

The bottom line here is whether peace between the three of you is worth $20,000. And think about this; if your mother and brother turn on you again, what will it cost you next time?

I hold you in deep regard for taking over and giving your grandmother the love and support she deserved. Proximity, warmth and respect are all priceless. End of life issues often aren’t pretty or easy for those who care enough to stay in the loop. How wonderful that your grandmother had you by her side on her journey. Blessings, Luise

Answer: Dear J.: You sound like you have a level head and are naturally conservative. Those are great assets when something happens, no matter how wonderful, that upsets your financial balance. The fact that you realize how foolish people can be under such circumstances is a good indicator that you will do well.

As you are aware, we no longer “know” what we thought we knew about investments. Our financial world has been turned upside down and many of the approaches that were seen as “safe”, no longer are.

It would be wise to do a search in your area for well established, highly recommended Estate Planners. I use the plural because you should see at least three for a realistic comparison. Check and recheck their credentials and then make three appointments about a month apart to give you adequate time to work with them and review their recommendations. Let each one know that you are shopping and if that isn’t acceptable, move on. Give them your four, well thought-out goals and then turn them loose…one at a time, and see what they come up with.

Don’t be in a hurry. That’s a very important thing to keep in mind; there’s no rush. What you are doing will affect the rest of your life, your children’s lives and probably your grandchildren’s, too.

Don’t be taken in by any get rich quick programs or by anyone who tells you that you need to move quickly to “get in” on something.

After you have digested the short and long range plans submitted to you, pick your counselor. Do not try to go it alone…you can afford a mentor. Also remember that if there was something in one of the other plans that appealed to you, you can ask the person you chose to work with about it. You can custom-tailor anything you find mutually acceptable.

Keep a cool head, maintain your personal and family life as much as possible in the same known and comfortable patterns that you previously established…and have fun! Blessings, Luise

People who are handy and mechanically inclined often do their own maintenance on both new and used cars, although for complicated issues, expensive diagnostic computers are now needed.

People like me who can’t afford payments, get a car paid off as fast as possible and then baby it for years without any more payments. Some extended warranties help but they are costly and eventually run out. One big repair bill can add up to a year’s payments.  However, that doesn’t usually happen every year.

I get a good car that’s a couple of years old and save a lot that way and then I drive it for a decade. The kind of miles you put on your car and how hard you are on it are also determining factors and some people can even write their costs off as a business expense.

If you can budget around what you are doing, i.e. annual leasing, it’s one way to drive pretty much trouble-free and that can be worth a lot. Weigh your options and see where you find the best fit. One size doesn’t fit all. Blessings, Luise

Answer: Dear D. I can see where your wife is probably coming from since there have been a lot of warnings regarding liquidating assets after a loss. The standard observation is “if you don’t sell you haven’t lost anything.” Waiting hopefully for some degree of financial recovery is seen as a wise approach.

The truth is that you have already realized the loss and it may be a long time before your portfolio is worth what it was, say, a year ago.

What you are suggesting is that you may have a better chance of recovery in a different fund. That is not selling, that’s transferring assets. You are right in stating that the net remains the same no matter what fund it’s in. Moving it does not devalue it. You do have to consider any costs that will be incurred, of course, but if it’s within the same company they are often marginal. Blessings, Luise

Answer: Dear K.: You can’t change the behavior of others. Your son is going to continue to lay a guilt trip on you when you tell him “no” until he gets that the game is over. And there’s no way to tell how long that will take. Wanting him to stop asking is a lost cause.

You know you are not to blame for his financial issues. And there is no reason you need to be his “lending institution.”

Let him know that you feel you helped creat an unhealthy situation by lending money to him that you had to borrow for that purpose. Tell him you won’t be doing it again. Also you may want to let him know that spending money he doesn’t have and blaming you for his shortcomings are attitudes that don’t reflect maturity on his part and it’s time he took responsibility for his life.

Your future relationship needs to be based on the fact that you are two adults who have the potential to become really good friends. “Mother and child” is over. Blessings, Luise

Answer: Dear Q.: You are perfectly safe in doing a consolidation. People who have great credit ratings often move their debt around to take advantage of lower rates on special offers connected with balance transfers. However, always read the fine print. Sometimes there is a time limit for the decreased rate of interest.

For those who don’t watch carefully, a lower payment following a consolidation may become an incentive to create more debt. Be very careful you don’t fall into that trap. And by the way, good for you for making larger monthly payments than required. Very wise because it offsets the interest rate.

The best way to use credit is to pass on credit cards because of their high rate of interest and painful penalties for late payments. Keep one for the simple reason that they are handy but/and pay off the balance in full every month.

If at all possible, obtain a line of credit for a reasonable amount from your bank to use when necessary. Then, keep it paid down. See how low you can get the interest because paying out interest can become a bad habit. If you can limit that to a home mortgage and a car payment you can pocket the savings.

Deficit spending is a way of life for many people today. It is costly. The smart thing to do is to pay off your incidental debt. Once you don’t have those monthly payments to make, you can start doing some serious saving…borrowing from and repaying yourselves when necessary. It takes some patience to move from instant gratification to a more responsible attitude toward money and spending but the rewards are huge. And if and when a crisis comes, it could save your bacon. Blessings, Luise

Answer: Dear U.: I think I would make an appointment with at least two bankruptcy attorneys and then decide which one makes the most sense. They usually don’t charge for the first interview. The last I knew, there were some debts that don’t come under the bankruptcy blanket and I think student loans may be in that category. I’m not sure about mortgages, either.

You need to know the legal ramifications of such a move and whether to include the house or not, if that’s possible. It certainly doesn’t make any sense to keep a house that has become an albatross around your necks. As you mentioned, bankruptcy may limit your options when it comes to buying again in the near future.

There are many sites on the web that offer bankruptcy information. See what you can find there as well. The more you know and the better informed you become, the wiser your decisions will be. It might even be a good idea to check out the web and study what you find there before you see an attorney. Blessings, Luise

Answer: Dear J.: Some people are afraid to do what you are considering because they leave themselves without any liquid assets. I, for one, don’t see any sense at all is paying out high interest while earning low interest. What I do is have an open, secured line of credit at my bank for the purpose of liquidity and when I use it, I repay it in full as soon as possible.

I wouldn’t lower my payment, however. I would pay my second down to $4,000. and then I’d keep right on making the same payment every month to retire it entirely.

As soon as it was paid in full, I would take the same amount of money, monthly, to rebuild my liquid assets via CDs. I would also pay something extra every month on the principle on my first mortgage. That’s another way to offset higher interest.

Many people see forfeiting their home equity through getting a second mortgage as a way to borrow from themselves. That’s true to a degree but it often becomes a habit and the house never gets paid off. Come retirement, living rent-free or being able to sell and have the money to support the necessary changes in lifestyle can make the “golden years” a lot more comfortable. Blessings, Luise

Answer: Dear B. There are several different ways that I know of to look at debt reduction.

An initial approach might be to pay off the smallest debts first. Quite often, multiple payments can really add up and the best thing to do it to get them paid off so you have greater resources to tackle the big ones with.

Another way to look at it is the percentage of interest you are paying. The higher your rate…the slower the payoff because you are paying too much in interest and too little on the principle. Paying as much additional as you can on the principle every month is like lowering the interest rate.

There are firms out there that specialize in debt consolidation. They often are able to negotiate with creditors to reduce payments. However, beware, because that will extend the length of the payment schedule and end up costing you more in the long run. The psychology of consolidation usually doesn’t work for the people who have gotten hooked on deficit financing. They don’t really plan to perpetuate their problem, but once they get a breather…they often just use the extra money to incur more debt instead of learning to save. Rationalization is the great enemy in such cases and counseling may be needed to get a clear look at what is going on and why.

Using the support of another person until poor financial habits have been replaced with healthy ones is yet another way to get out of the hole. Sometimes someone near and dear will pay off debts and accept reasonable and, occasionally, interest-free repayment. The problem with such an arrangement is that many times the family member or close friend gets left holding the bag because habits aren’t that easy to break and they don’t have the leverage that outside lenders do. Also, money can be handed over to a sympathetic third party on a regular basis for better management. This resolution, too, has possible problems built into it, namely eventual dependency and/or resentment.

Take a close look at your situation to see if any of these solutions would work for you. The fact that you are looking closely at which debt to pay off first is a strong indication that you are moving in the right direction. Blessings, Luise

Answer: Dear R. I think you might want to talk with an attorney about the situation. I don’t have any legal training.

It would seem to me that he had every right to repay his debt, whether it was to you or to someone outside the family. And if you used the rest to buy things for him in your name, because of his drug habit, that makes sense to me, too. Unfortunately, I’m not the one who gets to decide.

If you belong to a church, ask your pastor if he knows an attorney that might be able to help. They often specialize and you don’t have any extra money to pay the wrong one for incorrect advice. A letter legal letter explaining your son’s rights and yours might go a long way toward clearing this up. He is without funds because he honored his obligation and used the rest wisely, it seems to me. Blessings, Luise

Answer: Dear K.: After you have sold your home and caught up on all of your bills, I would take those questions to various mortgage companies to see if any of them can find a way to work with you.

If not, negotiate with an apartment manager to pre-pay the first six months rent to see if you can get past their fear of renting to you.

In the meantime, put the equity you get out of the sale of your house into something that is not available to you, like a CD, and make a commitment to yourself that you will never use any of it and will only add t it.

If you keep your credit clean for a certain number of years…I think it may be seven, you can have this negative history erased from it. At that time you will be able to buy again. Blessings, Luise

Question: Dear Luise: I have a bad credit score. I am falling behind in my bills, etc. I have a second mortgage on my home. My home is appraised at 200,000 of which 77,000 is my own cash I put down. I cannot really afford my home. My question is if I sell it, can put about 80,000 cash down on something else more reasonable? I have been told I will not be able to get a mortgage because of my credit score. The large down payment means nothing. I will be lucky if to get into an apartment complex. Is this true? My credit score is under 550. K.

Answer: Dear K.: After you have sold your home and caught up on all of your bills, I would take those questions to various mortgage companies to see if any of them can find a way to work with you.

If not, negotiate with an apartment manager to pre-pay the first six months rent to see if you can get past their fear of renting to you.

In the meantime, put the equity you get out of the sale of your house into something that is not available to you, like a CD, and make a commitment to yourself that you will never use any of it and will only add t it.

If you keep your credit clean for a certain number of years…I think it may be seven, you can have this negative history erased from it. At that time you will be able to buy again. Blessings, Luise

Answer: Dear Maurice: I can give you some personal advice about this but a good financial counselor is what you are probably going to need to end up with. I have no idea what your assets and liabilities are and for that reason, have little to offer to you regarding financial resolution.

Self worth is another thing. Sometimes it is tied up with success and failure, sometimes with money or the lack thereof and sometimes it seems to have a life of it’s own and is free from such measuring sticks.

One person doesn’t fail at a marriage. Please factor that into your thinking. Two people wanted to try and two people did. After the fact, it is pretty hard to figure out where it started to unravel and what might have helped. The point is that it’s over. You agreed to disagree and you are now alone in what sounds like a very tough place.

It would suggest that you also get some personal counseling aside from professional financial direction. Most of us just go round and round in our thinking when we try to sort through what brings us such great pain. This is new to you and devastating. It is not new to a counselor and they have a lot of experience helping others over the rough patches. Give yourself the very best break that you can.

Being heard can be extremely healing. There is a road back to balance and comfort. You wrote to me out of self-love. Concern for how you are feeling. Contact someone one-on-one and take it to the next level. Blessings, Luise

Answer: Dear Maxie: This is often a very difficult thing to track down and get rid of. At least it was for me. Spending money and eating “treats”, can be emotionally gratifying, distracting and habit forming as well. You’re right on the money there. (Oops!)

I had to get rid of my credit cards to eliminate the deficit spending and then pay them off slowly. Truth be told, I had to so it several times.

Many of us were brought up lacking the necessities of life for a variety of reasons or being provided with the bare requirement with no frills. I was raised in the depression. Spending and “treats” can then be very reassuring and feel “temporarily” like abundance. Soon, another “fix” is needed because it wears off. Constantly indulging ourselves brings us the “warm-fuzzies”.

I got into a program on the web called The Solution by Laurel Melin. It was very helpful since it identified all such behavior as turning toward external solutions instead of creating inner strengths. It sure worked for me.

I have created a fat-free/debt-free life. It’s a long road back but well worth it to my way of thinking. Good luck. Blessings, Luise

Answer: Dear Tonya: She is telling you what she wants. You just aren’t hearing her. She wants more money. Unfortunately, instead of making the decision, she is putting it off on you each time you bring it up.

You don’t want to change anything because the arrangement suits you well, so it just goes on and on. It’s time to put a stop to it. Let her know that the amount you are paying, which sounds like it is about $200. a month is your maximum, unless you can find a way to up it to $300. Is that possible? Then, arrange to see her four times a month instead of eight. That way you will be “giving her a raise”…since at $300. a month, you will be paying full price and she will be able to see four more people a month at full price, as well.

These things can be cumbersome and can eventually cause hard feelings and even relationship breakdowns. Don’t let that happen. Evidently she sees you are pretty special. Let her know that you find her to be pretty special, too. Be proactive and clean this situation up, ASAP. Blessings, Luise

Answer: Dear Sam: What a tightrope many of us walk between being too loose with our money and too tight with it. And everyone has a different definition of what both loose and tight means…to make matters worse.

It sounds like this bonanza has thrown you off balance. It also sounds to me, and I may be wrong about this, like you don’t expect to meet your end of the year goal if you don’t dump the extra money onto your Visa balance. Is there a possibility that you are trying to create some new habits at this time where money is concerned? For instance, saving money while you charge up the same amount isn’t really saving anything at all, right? Saving money from the way you describe your situation, means first becoming debt-free and then not charging up anything more. With that in mind, I would pass on the cruise and get on with it. Also you will need to handle your Visa differently so as not to get right back in the soup. Why not keep a running, monthly Visa balance with a limit, so you can always pay it in full every month and still save? I think you are ready to make some changes and that blowing the $3,000., no matter how much fun that might be, would be counterproductive to where you seem to be headed, which is solvent, saving and sane. Blessings, Luise