I recently asked a group of women of all ages to tell me the money questions they most wanted to ask. Because they could remain anonymous, the responses poured in. What I learned is that we’re all embarrassed to ask many of the same questions about debt, credit, budgets, divorce, and parent issues. These are the answers that most of you really wanted to know.
Social Security Benefits
Q. I’m a stay-at-home mom and haven’t had a paycheck since I was a teenager. Will I be eligible for Social Security benefits?
A. If you are married, you will be eligible. Your Social Security retirement benefits are tied to your spouse’s benefits. You can file when he does, provided you’re at least 62 at that time. Your monthly check will be equal to 50% of his, if he waits until “full retirement age” to begin collecting benefits (65, 66, or 67 depending on the year he was born).
If he opts to begin drawing early at 62, then your benefit will be reduced to 37.5%of his monthly check. (If you’re single, divorced, or widowed, the amounts vary.) We’re not talking a lot of money here under the very best of circumstances, so plan on it as a supplement, not enough to live on.
Go to the Social Security Administration website, ssa.gov, and check out the FAQs. This site is remarkably user-friendly.
On My Own
Q. I’m recently divorced. My husband handled the finances; now I’m on my own. Where do I start?
A. You need a budget. This just means spending your money on paper first, before you deposit your check.
Make two lists: Income and Expenses. Under Income, list the sources (paycheck, child support, alimony, savings, settlements, etc.) and the amounts. Under Expenses, list all of your bills and obligations, starting with your rent or mortgage payment, food, car payment, utilities, clothes, etc.
Add up each list, then subtract your expenses from your income. If your expenses are more than your income, start crossing out things that are optional. Carefully weigh the expenses you believe are essential. Cable TV isn’t essential. Food is vital, of course, but try shopping at discount markets, rather than going out to restaurants.
You need a car, but not a gas guzzler with big payments. Once your expenses and income are in line with each other, use your budget as your monthly financial road map. Consult it often and you’ll find yourself in control of your money, instead of the other way around.
Type “budget worksheet” into a search engine, and you’ll find many free forms and spreadsheets to develop a spending plan.
Q. How do I balance my checkbook?
A. Flip your physical bank statement over or go online to your bank or credit union website. There you will find a form for balancing the amount you think you have in your account against what the bank says you have.
Write down the ending balance the bak says you have. Then subtract every check you’ve written, and any ATM or debit card transactions, automatic payments or fees you’ve been charged since the statement date, as well as any previous checks that haven’t cleared the bank yet. Also, add deposits you’ve made since the statement date.
The number you get should match—or balance—what you show in your check register, which hopefully you’ve been keeping up to date.
If the numbers are different, the most likely reason is a math error in your check register. Maybe you missed a check or deposit or failed to deduct a fee. If you have a monthly service charge, make sure you’re subtracting it in your register. There is a slight chance the bank made a mistake. If you can’t find the error, stop by the bank or call customer service.
If you have not done so already, set up online access for your account. Then, sign in daily to make sure the checks, debit card, and ATM transactions match what you’ve done, and that all of your checks are clearing.
Q. If my parents die with a lot of debt, will I be responsible for paying it?
A. Generally, you will not be responsible for their debts, unless you cosigned for a loan with them or you are a joint account holder on their credit card accounts (check the laws in your state to make sure).
Your parents’ debts will be paid out of their estate (everything they own, including real estate). Once their funeral expenses are taken care of, unpaid creditors are next in line to be paid. If there is insufficient money or assets to pay all creditors, then the estate must be divided up as equally as possible, with secured creditors (the mortgage holder, for instance) receiving priority. If your parents die with little to no assets, their creditors eat the loss.
Talk to your parents about their estate planning. Search “how to talk to your parents about estate planning” into a search engine. There’s good, free advice available.
Q. How do I tell my husband about my secret credit card debt?
A. First, write down every detail, including the total debt—truthfully. Next, create a written plan for repaying the debt. Will you take a second job? Sell assets? Cash in savings bonds? As soon as possible, tell him. Cut up your credit cards and tell him exactly how much you owe. Offer your most sincere heartfelt apology, without making excuses or casting blame. Share with him how committed you are to repaying the debt and how you plan to do it. He’s going to be hurt and angry. After all, this debt may affect his financial standing as well as yours. Over time you will re-earn his trust if you stick to your plan.
If you need help getting on a payment plan, consider credit counseling. But be careful. Only use counselors endorsed by the National Foundation for Credit Counseling. Go to NFCC.org, or call 800-388-2227.
Payday Loan Hell
Q. How can I break my payday loan cycle?
A. Payday loan stores and other check cashing and finance companies are making these small short-term, high-rate loans.
These companies can charge 15% interest a week so if you can’t pay off the loan immediately, the next week you owe 30%. You can see where this is going, right? Here’s another way to look at it: The interest rate on the average payday loan is 391% APR (annually).
Maybe you only needed $100 to cover a short-term need and a payday loan seemed so easy. You decided to get another one to cover that loan because the next week things were still tight. Before you knew it, you owed more in fees than you ever borrowed, because these sharks get away with charging outrageous rates of interest on top of fees. This is only going to get worse, so you have to get out fast.
Find out exactly how much you owe. Now set up a reasonable repayment plan, then figure out how to generate the money. Ask for help from a friend, family member, or credit union. Go through your cupboards, drawers, closets, and garage. Sell everything you can in a garage sale, on eBay, Facebook Marketplace, or through classified ads to raise that money. Or pick up a weekend job. Whatever it takes, you need to pay this debt as quickly as possible. It will not go away on its own.
Go immediately to NFCC.org to talk to a National Federation for Credit Counselors certified counselor. Or pick up the phone and call 800.388.2227. This is an organization you can trust for compassion, confidentiality, and immediate help, To learn more about why you should never take out these loans again, read Escaping from a Payday Loan Organization: Tips for Getting Out of the Payday Trap at credit.com
Q. What is a “charge-off” and how will it affect my credit score?
A. A charge-off is one of the worst things to have in your credit history. It brings your credit score way down, which is a problem if you’re trying to get the best rate on a mortgage or car insurance.
It can happen when a borrower becomes severely delinquent—for instance, going six months without a payment. The creditor then has to decide if that debt can ever be collected. If the answer is no, the company writes it off as uncollectable—a “charge-off.”
A charge-off stays on your record for seven years and does not erase your debt. Legally, you still owe it, and the creditor can turn it over to a collection company or continue attempting to collect it. Paying an old charge-off will not remove it from your credit report. While “paid charge-off” is slightly better, it is still a serious blow to your credit history.
If your account has not yet been charged off, do all you can to get back into the good graces of the creditor by calling right away and figuring out a payment schedule.
Read How to repair your credit and improve your FICO® Score at MyFICO.org. Your Credit Score: How to Fix, Improve and Protect the 3-Digit Number That Shapes Your Financial Future, by Liz Pulliam Weston is an excellent resource, as well.
Q. Will I get my husband’s pension, 401(k), and IRA if he dies?
A. Yes, provided your husband has named you as the sole beneficiary of those plans. Most plans have a stipulation that if the beneficiary is anyone other than the spouse, the husband or wife must consent in writing. Should he precede you in death, the rules that applied to him for getting his pension, 401(k), and IRA will now apply to you, his beneficiary.
For example, if your husband dies before the minimum withdrawal date (age 59 1/2), you will have to wait until that date to withdraw funds without a penalty, regardless of your age. Every plan has an administrator who will be able to answer all of your questions.
Discuss these issues with your husband and go over what you can each expect financially if the other dies. Know exactly how to find the documentation on each of these assets. Speak with plan administrators to get the answers to your specific questions. Knowing will bring you peace of mind.