My husband’s family spends lavishly every Christmas and it always makes me feel pressured to reciprocate. For example, last Christmas, they bought my four-year-old daughter a $300 DVD player. And they gave me a $150 gift certificate to my favorite salon. While their generosity is greatly appreciated, my husband and I can’t afford to break the bank Christmas shopping. Plus, I’m worried they’re sending my daughter the wrong message about the meaning of Christmas. How do I make it a nice Christmas for everyone without looking like a cheapskate? Shannon, Indiana
Could it be you’re putting pressure on yourself to be the Family Christmas Magician? You have my permission to turn in your resignation. You can’t control what other people do. What your daughter learns about the real meaning of Christmas she’ll learn from you and your husband, and not just from what you say. She learns from your attitudes and actions, too. Teach her that the gifts we give express what’s in our hearts. We shouldn’t give to get approval or to get something equal in return.
How about letting her help you make gifts this year? Here’s an idea: Create a family calendar that highlights all of the important family dates and events for the coming year. Once completed, make a color photocopy for each member of the family. Should she (and you!) receive gifts from others, accept them as the expressions of the givers’ hearts. And don’t miss any opportunity to teach her how to be gracious and genuinely grateful. And hey, enjoy that spa day!
My husband and I just found out we’re expecting our third child. We would like to add on to our home. My husband found out that he can take out a loan from his 401(k) at a super-low interest rate, then have the amount deducted from his paycheck every week to pay back the loan to his account. It sounds too good to be true—and that’s making me nervous. I don’t want to jeopardize our future for an extra two rooms. He thinks I’m being too worrisome. Is he right? Doti, email
Most 401(k) plans allow this, but the conditions can be severe. First there’s the matter of double taxation. The money in his account has never been taxed. Those are “before-tax” dollars. If he takes a loan, he will be repaying that money with “after-tax dollars.” For every $1.00 he borrows he’ll have to earn $1.28 or more to net $1.00 in his paycheck to repay the loan. Interest is on top of that. When he withdraws those same dollars in retirement he’ll pay taxes on them again.
Then there’s the matter of life’s uncertainty. If he leaves his employer for any reason before the loan is repaid, the entire balance will immediately become due. If you can’t do that, the loan balance will be converted from a loan to a cash withdrawal. He’ll get socked with a 10 percent penalty plus the IRS and state tax collector will be knocking on your door to collect taxes on that “cash withdrawal.” And if that’s not enough, you must consider the potential loss of investment growth. Overall, borrowing from his 401(k) may be so troublesome this should be your last option, not your first.
Question: Have you experienced something similar to Shannon’s or Doti’s situations? What advice would you give them? Comment here.
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