Category Archives: Marriage & Money

Should you pay your wife an allowance?

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I get all sorts of email. I get emails about debt. I get emails about how to ask for a raise. I once even had a Nigerian prince offer to share his family fortune with me. Despite the fact that I opened an account and emailed him the account number, I never heard back from him. But I digress. My point? It takes quite a bit of craziness for an email to get my attention.

My eyes are wide open

Dear Pete

Hey. I love your podcast. It cracks me up. You said you take emails, so I thought I’d give it a shot. I’ve got a problem. My wife spends too much money. It might cost us our marriage…unless you can help. Hahaha. No pressure. I’m the only one that works. She stays at home with our two kids. I make really good money (nearly $120,000 in 2011). But we never can get ahead. Between us, we have over $85,000 in student loans, $30,000 in credit card debt, $40,000 debt on my M-Class Benz, and my wife has a major spending problem. It’s got to stop. She makes no money, but wants to spend all of my salary on clothes, and random stuff for the kids. She’s at Target like twice per week. Between the medication for our son, and the piano lessons for our daughter, she spends like $50 per week right there. If I was doing the buying at our house, we wouldn’t be in the position we are in now. We fight so much on the weekends, that I end up leaving the house and playing golf just so we dont fight for 5 hours. What do you suggest I do? 

My buddy thinks that I should put her on an allowance system. I’m thinking about doing it. Have you ever heard of somethings like this? It sounds crazy, but I really think it could work. For instance, if she cooks five meals in the week, then I’d give her $100 to spend. If she vacuums and dusts, then I would give her another $50. I’m thinking she just needs to earn her keep more so that she’ll value money. What’s a fair price for chores? I figure it’s much cheaper than a divorce. Hahaha. Things are just nuts around here. My college buddies are going on a guy’s weekend, and I can’t even go because the cards are maxed out because of her stupid Target trips. Sorry, I’m just venting. Thanks, man. I’m interested to see what you have to say.

Jeff

Jeff, thanks for your email. I’m afraid that I’m fresh out of candy-coating today. Therefore you are simply faced with the unadulterated truth.

I’m really worried about you. You’re pissed that your wife spends too much on your kid’s medication? I would sell all four of my limbs for my kid’s medication. I wouldn’t golf the rest of my life to pay for my kid’s medication. And your daughter’s piano lessons are a problem too? You’re not supposed to feel that way. I generally don’t make a practice of telling people how they should feel, but you shouldn’t resent your children’s medication and/or music lessons.

Anyone that would think/write the things that you thought/wrote clearly doesn’t have a strong grip on reality. I don’t know where you come from, but where I come from my buddies call me out for being an a-hole. They don’t tell me ways to be more of an a-hole. If you have the sort of friends that recommend that you put your wife on an allowance, then get new friends. Your wife isn’t the problem. Your attitude is the problem.

Here’s what I suggest you do. Take a week’s vacation. Given your salary of $120,000 per year, I figure you have the sort of job that allows you to take a paid vacation. Send your wife out of town to stay with a friend for the week, and then do her job for seven whole days. What you will find is that you are lucky that you currently aren’t divorced. My guess is that you will find that your wife doesn’t spend nearly as much as you think she does. She simply spends the money that it takes to run a household…without the (non-financial) support of her husband.

Jeff, I’m really concerned for you and your family. To be frank (as though I haven’t been), this is the worst situation I have ever seen. You need counseling. I highly recommend that you seek professional help. Dude, seriously? You care more about guy’s weekend than your kid’s medication. You have got to man up. You are going to ruin your kids’ lives. All they will ever know is dysfunction if you don’t get help. This is serious. I don’t have any financial advice for you at all. I’m just really sad. You don’t have any true friends that are pushing you to be a better person, and unless this email strikes a chord, then I’m afraid things will have to completely blow up before there is a resolution. Please change.

****Update #1****

This post has caused quite the uproar. I’d like to clarify a few points. First, I didn’t address the financials in the question, because I don’t think the answers would actually help him. In my professional opinion, although he has significant financial problems, his primary issue has nothing to do with money. I chose to treat the problem, not the symptoms.  In addition, the advice is so obvious, that I didn’t think it was worth writing. Alas, here it is: Jeff shouldn’t be driving a $40k Mercedes. He should be driving something paid for or something with a very cheap payment. The payment on his Benz is most likely astronomical. If he were to do this, the savings should then be used to pay down his credit card debt. He and his wife should sit down and work out a budget together using Pete the Planner’s Ideal Household Budget. Any other financial advice would be purely speculative. I don’t know his credit card and student loan interest rates. I don’t know if he has an emergency fund, though I doubt he does. And I don’t know how much they spend per month on their mortgage. My educated guess is that it’s a significant part of their income.

I’m not above criticism. When I write advice or give advice that is poor, then please ask for clarification or correction. I will gladly admit when I am wrong. However, in my opinion Jeff was looking for help. He thought his problem dealt with money. I disagreed, and wanted him to see that his family was at risk. Keep calm and carry on.

 

You are the product of who raised you

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Mrs Planner and I had our monthly budget meeting last night. We have come a looooooong way in the last six years in regards to how these meetings go. A monthly budget meeting with your significant other may not seem like a great idea, but it is such a vital part of our marriage. It’s our time to take our individual ideas, and convert them into our collective ideas. What did we have to overcome? Our own individual views of money. The craziest thing is that I have adopted her mentality more than she has adopted mine. She has made me more frugal and less materialistic. I am very thankful for this. I honestly believe that by addressing our financial differences, we have strengthened our marriage. Here’s why.

One of the primary reasons that marriage and money can get challenging is the fact that you and your significant other were raised by different parents…hopefully…not that there is anything wrong with marrying your sister…who am I kidding…nevermind…how did I get off track already in the first paragraph? Anyway, different parenting styles create different types of people. The sooner that you take the time to acknowledge this and apply it to your relationship, the better. You think the way you think because you are most likely the behavioral product of the people that raised you.

If you have ever sat down in my office for an appointment, then you know that I ask about your parents’ financial situation, especially when you were a child. I usually ask this near the end of the appointment once I’ve made my initial assessment about your financial habits. What am I listening for? Lots of things, including pride, denial, sacrifice, a lack of realism, bankruptcies, divorces, and several other life altering events. Am I playing psychologist? A bit. Does this “digging deeper” help me do my job better? In the mortal words of Sarah P. from Alaska, “You betcha!”

It’s quite common for a person to recognize the less than ideal financial status of a parent, and then try to coach his/herself in the opposite direction. This flight from familial failure is admirable, but it’s one of the biggest mountains that a person can climb. This is because a person’s financial behavior is just an offshoot of their overall behavior. You can try to isolate and unlearn the financial lessons that you learned (or didn’t learn) from your parents, but you can never unlearn 18 years (or so) of parental socialization. Was your dad always trying to game the system? Did your mom take five free samples at the grocery store when the sign said “take one”? It’s crazy, but this matters.

Your financial character becomes especially important when you share a financial household with someone else. And what is even more challenging is that your partner can more easily see your shortcomings. Shortcomings that you never realized that you had. This can either make for a wonderful relationship or a terrible relationship. But understanding that your way, the only way that you know, may not be the best way. But the comforting thing is that your partner’s way is the only way that they know. This means that you can eventually come up with “our way” when you take the time to work on your relationship.

My recommendation is pretty darn simple today. Take a few minutes to think about your childhood. Identify two positive characteristics that you have adopted from your parents. And now identify two negative characteristics that you have adopted from your parents. How do these affect your life today? What can you do to turn the tide? And to make sure that you can get the most out of this activity, forward this post to your significant other too. They should take the time identify the four characteristics that they have acquired too.  Good luck. And one last thing, when you have this conversation, be a listener, not a talker.

Here are our the rules of our budget meeting that Mrs Planner and I use. Use them. They work.

Why divorce/breakup is so difficult on a financial life

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Some of my posts are (meant to be) inspirational, some are (meant) to make you laugh, while others are (meant) to show you an aspect of the financial world that you have never considered. Today we will dive into the latter. I want you to know what divorce looks like from a financial perspective. Why would I do this? Because I have to see it everyday, and I want you to see it through my eyes. Think of it like the person that says “This tastes like crap!! Taste this.” So here is the cost of a split.

How much does it cost to run your household? And you thought running one household was expensive. As it stands pre-divorce, both of your incomes (no matter what they are) go into one pot to pay all the bills. So what happens when that income is forced to fund two households? All hell breaks loose. Let’s take a look at what that looks like:

Pre-divorce hypothetical net monthly household income: $5000
  • Mortgage $1250
  • Transportation $750
  • Utilities $500
  • Debt payment $600
  • Food $750
  • Everything else $1150

Post-separation hypothetical net monthly household income : $5000

  • Mortgage $1250
  • Rent $800
  • Transportation $800 (potential insurance price changes)
  • Utilities for home $500
  • Utilities for apartment $200
  • Debt payment $600
  • Food $900 (this almost always increases across the two “new” households)
  • Health insurance (one person usually loses coverage) $300-$1000
  • Everything else $1150

Net difference $1,600-$2300

 

You don’t have to be a math genius to see that two households costs nearly 25% more than one household. I’m not suggesting that this should/will prevent your divorce, I’m just suggesting that you know what will happen to you financially when the two households split. But wait, there’s more.

Who gets the house? Rarely do two people in a household make the same amount of money. This causes major problems when you consider the next two common normalities. Women, on average, make less than men (don’t blame me. It’s just statistically true). And here is the stunner: women tend to try to “get the house” in a divorce. This means that the lesser income earner is funding the largest expense. This is a disaster. Yes, there are stability considerations especially when children are involved, but I find that divorcees fights way to hard to keep the houses that they can’t possibly afford. A fresh financial start is possible if you don’t “fight for” the house.

Health insurance is still important.  Just because you aren’t married anymore doesn’t meant that you don’t need health insurance. And since one person typically provides the coverage through his/her employer, the other person gets the health insurance shaft in a divorce. This is a problem. It’s a HUGE problem if the person without coverage has health issues.

Kids get extra expensive in relation to two households. The reality is that you will still want to buy your children gifts, clothes, toys, etc. That’s what parents do. However, you have less money to do this. Both parents generally still make these expenditures. That costs more in totality

My point in all of this is that you need to know what your financial life is going to look like if you are considering a divorce. Believe it or not, good or bad, this has prevented many people from getting divorced. If you do get divorced, then you need a plan. I put one together for you. It’s my divorce recovery guide. It’s free. Let me know if you have any questions.

 

 

 

 

 

 

Learning to make decisions as a couple

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You want to save for a family vacation next summer. Your significant other (sig-ot) wants to pay off the credit card bill from the previous vacation. Who is right? Who is less right? And how do you come to a decision together without someone sleeping in the guest bedroom? (Not that I’ve ever slept in the guest bedroom. The light is so pretty coming through the curtains in the morning in that room. I always enjoy it.)

Most people think that they are right. Otherwise you wouldn’t think what you are thinking. You generally don’t set out thinking about something knowing you are wrong. And even when you do, you justify your wrong thoughts so that they appear outwardly right. Example? If you have ever said “I work hard, so I deserve it”, then you most likely are trying to cover up a bad idea with weak justification. If there wasn’t a question on whether or not you could afford something, then you wouldn’t have to break out the “deserve it” justification. This is hard enough to deal with as an individual. Now, add your sig-ot into the equation, and you have two people, two brains, two sets of thoughts, two ideas of affordability, and two sets of justifications that affect affordability.

The only way to address this cluster- waiting to happen is to have joint financial goals. Without goals, you are wandering around aimlessly in a financial world that is poised to kick your arse. Please understand that the operative word in the phrase “joint financial goals” is joint. Individual financial goals are great and all, but they aren’t really going to help your relationship that much. You need JOINT financial goals. DO NOT IGNORE THIS ADVICE. If you have ever said “we aren’t on the same page financially”, then joint financial goals will at least put you in the same book. Beyond that, holding each other accountable to your joint goals will complete the trick.

So, the advice: sit down with your sig-ot and create financial goals that you both agree on. Believe it or not, this is also where you need to practice the art of compromise. It’s likely that one person is more financially focused. If this is the case, then allow the not-as-focused person to speak their mind. I believe it was Sir Elton John who once said “don’t dampen the flame of a flickering candle in the wind.” Okay, I made that up. But my point is that the person “struggling” needs to do most of the sharing, not the person that “knows what they are talking about.” Constant hammering away by the person in-the-know is counterproductive. You’d be surprised how much progress you can make when the “not great with money” person gets to talk.

Pete the Planner starts a fight

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One of the biggest financial mistakes that I see on a regular basis is the undervaluing of a stay-at-home parent. This is most evident when we look at the life insurance purchased to protect the family. Ignoring the importance of insuring the “primary care provider” is a heinous error. Especially considering how inexpensive it can be to properly insure a stay-at-home parent.

Do NOT neglect to insure the non-breadwinner of a family. Often times it can cost less than $30/month to buy the right life insurance protection. Don’t know how to do this? Hit me up, and I’ll tell you.

An Open Letter to Husbands

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Hey Fellas,

Please send your lady-friends out of the room for this one (although it’s quite likely your wife is forcing you to read this). I know that guys don’t traditionally talk to each other about their marriages. And for that matter, we certainly don’t talk about the financial stresses of our marriages, many of which (the stresses) are self-induced. So I thought I’d bring it up in this forum, and share my thoughts with you.

I think we (men-types) need to take some time to explore the current status of the financial relationships we share with our spouses. Some of us do a great job, some of us do a terrible job, and some of us could do a lot better by allowing ourselves to be a bit more vulnerable.

To me, it all starts with socialization. As a child, what did you learn about being a man? The fact of the matter is that many of the gender assigned roles that existed when we were kids have now been turned on their head. Women are no longer “tied to” domestic duties, nor should they have been. The man is no longer always the primary breadwinner, nor do they always have the aptitude to be. Stay at home dads are increasingly more common than they were 25 years ago. This is all great. We love our fathers and grandfathers, but they didn’t do that great of a job (generally speaking) of having gender open-mindedness. Believe me, I’m not hating on them. I’m just being honest.

All of that being said, there is still one old school socialization that remains, and it can be very harmful to your marriage. What is this divisive idiom? Men call the financial shots and shouldn’t be held accountable to their actions. This is just stupid. But unfortunately, after doing my job for 12 years, and after meeting with thousands of married couples, I can tell you with great certainty that this attitude not only exists, but is PREVALENT. And if you are experiencing marital strife that has financial ties, then my guess is that you may be guilty of this last remaining caveman tendency.

I don’t think we put enough effort into trying to be better husbands. Arguably, our marriages are the most important things in our lives. Yet we really don’t “work at them” the way we should. The reason for this is simple: we don’t know what it means to “work on” our marriages. Well, I can help you with that from a financial perspective. Here are three things to consider as you try to improve the most important relationship you have.

  1. Pride- Pride is really strange. You need enough pride to motivate you to do the right things at times. But often times pride is the cause of our marital/financial problems. I find that men don’t communicate as well as they should in regards to money because of pride. Did you do something stupid financially (we all do, men and women)? That’s okay, but don’t make the problem ten times worse by hiding the mistake, and trying to rectify the situation on your own. Believe it or not, sometimes I really hate talking about money with my wife. I mean really hate it. The cause for this occasional disdain? Pride. I don’t want Mrs. Planner to see how stressed-out I am over some trivial matter. I’m afraid that she might think that I’m weak-sauce. Here’s the thing though: if I force myself to have the conversation that I don’t want to have, then I feel better 95% of the time. Pride can also coax you into taking vacations you can’t afford, or buying gifts that you shouldn’t buy. You aren’t proving your manhood by buying your wife a gift that puts you in a bad situation. What’s a good use of pride used the proper way? Getting a second job when you have dug yourself a hole.
  2. Leadership- I feel like I’m on the verge of pissing some people off with this particular point. Are you the leader of your household? Is it out of respect, or out of merciful appeasement? Is your wife allowing you to set the financial tone of the household because you have an eye to the future? Or have you bullied your way into the financial leadership role? If your wife runs the day-to-day finances of your home because “it stresses you out”, yet you ultimately still call the shots, then this is a warning sign that you need to do a better job. In this instance, your wife is trying to save your financial lives, and you are nowhere to be found. Is that leadership? Don’t mistake this for splitting duties. My wife pays most of the bills, not because it stresses me out, but because that’s what we have decided to do. If your reluctance has led you away from this process, then you need to examine why.
  3. Fighting what is healthy- If you are what is causing the financial problems in your house, then you can be the person that leads the change. If you hate talking about money with your wife, then talk about money. You may be fighting for the wrong outcome. Your ignorance, to what is financially sensible, is actually making your life harder. In 12 years, I have never ever had a husband regret pulling his head out of his ass. Ever. Are you in debt, yet you keep hammering away with your old financial habits? If so, why? You are only hurting yourself. If you bucked up and did the right thing now, then your financial life would get better in the future. If you don’t, then it gets worse. Don’t fight what makes sense.

As you may or may not know by reading this, I love marriage. I think it’s the greatest thing in the world. And no, I’m not trying to impress my wife by saying this publicly. Besides, she doesn’t read my blog. I think a great marriage is one of the truly wonderful pleasures in life. Even great marriages suck at times, but it’s your commitment to this marriage that gets you through the tough times. And if for some reason this blog post strikes you as “soapboxish”, then I’m sorry. I do not have a perfect marriage. But I want to. And I’m willing to put in the work to get that done.

Please allow me to hammer one final point home. If this is a problem for you, don’t fight the solution. Fight for your life. Fight for your marriage. But don’t fight the solution. If you are living a personal hell right now, then get out of hell. Don’t give up. Work. What’s waiting for you on the other side of financial hell is wonderful, and you can’t get there by digging deeper. You have to step up.

 

***DISCLAIMER*** I am not the manliness guy in the world- I’ve never personally changed the oil in my car. I carry a man-purse. I have makeup in that man-purse (for TV). I cried when watching The Devil Wears Prada. I’ve never been in a fist fight. If forced to be in one, I would slap, tickle, and run. What I’m trying to say is that you, the person reading this, are much more of a man than I am.

 

The financial ramifications of fertility treatment and adoption

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I pride myself on discussing topics that other people dare not touch. Today’s topic is one of those really uncomfortable topics. I’m about to share some thoughts and ideas with you that you have never heard come from a “financial guy’s” mouth. In fact, many people would say that a couple’s decision to pay for fertility treatment or an adoption is none of my damn business. But they apparently don’t realize that my business is telling people exactly what they need to hear about money. Choosing to seek fertility treatment or adoption has a serious financial component, and that’s where we will start.

Here is my big sweeping disclaimer statement that I sincerely mean: you can’t put a price on the value of human life. Not only that, but being a parent has been the absolute best experience of my life, and I would give up all the money and possessions that I own, if I had to, in order to experience for just one day. But this is where the problems begin. Sometimes people don’t have enough money or possessions to give up in order to put themselves in a position to be a parent.

Infertility is a heart-wrenching experience. It is physically and psychologically taxing. The further down the road of infertility you get, the more you want what you seemingly can’t have. It’s one of life’s cruelest scenarios. You are opening your heart and your home to a child. You are promising the child a loving environment, but the science of it all simply isn’t working. It’s at this time that you reevaluate many things, including financial stability. You may come to the conclusion that you are willing to trade a great deal of financial security for a better opportunity to become a parent. I can’t, shouldn’t, and won’t blame you for this conclusion. However, if you have no money or possessions to trade, then this is where the conversation takes an ugly turn.

It is neither practical nor sensible to burden yourself with tens of thousands of dollars of debt, especially if you are already in a precarious financial situation. If you have not assets or possessions, then I’m making the assumptions that you may actually have negative assets and or possessions. Which is saying that you may be already burdened with debt. If this debt is already significant and troublesome, then raising a child is hard enough. If you have to worsen your financial situation even more by borrowing for fertility treatment or adoption, then you are surely damning yourself financially. And I’m not talking “the budget will be a little bit tight for a while” tough. I’m talking “wreck your financial life forever, no seriously, forever” kinda tough. This is where you are going to have to trust me.

It is unrealistic to be able to expect to afford the costs associated with raising a child when you are nearly destitute. Please don’t read the previous sentence with anything other than sincere gravity. You CANNOT raise a well adjusted child in a house that has mountains of debt. The type of debt that stresses you out and makes you a less-than effective parent. The type of debt that has you working 2-3 jobs and NEVER seeing the child that you so badly wanted. Some call this sacrifice. I call this being absolutely unrealistic. I have sifted through the pieces of several households in this exact same scenario. Again, please don’t mistake this for anything other than a perspective that many people refuse to consider.

Another heartbreaking consideration is that of absolute uncertainty. Even if you spend $25,000 on fertility treatment, and even if you spend $35,000 on an attempt at adoption, that doesn’t meant that you will succeed. At that point, you have worsened your financial life for decades to come, and you have no bundle of joy to show for it. Adoptions do fall apart. Recently, one of my best friends was on the bad end of a $35,000 adoption gone wrong. They paid various “otherwise reliable entities” $35,000 and left the hospital with no child (as the birth mother refused to give up her child).

I’m not telling you to forego fertility treatment and/or adoption if it makes financial sense for you. I’m not even telling you to forego fertility treatment and/or adoption if you have no money, but no debt. What I am asking of you is to be realistic. You CANNOT raise a child in a financially unstable home. Here’s the good news, I’m telling you this as your friend. I’m not telling this to you as God. I’m not telling this to you as the ultimate decision-maker in your life. And I’m not telling you this because I think I know everything. I’m telling you this out of my life-long obligation to discuss things that should be discussed. Therefore, do what you must.

Anyone who has ever adopted or who has successfully completed fertility treatment will tell you that it was the best money that they had ever spent. They are right. The real question is whether you can still say that if you are spending money that you never had in the first place.

I welcome ALL comments. But please understand that I’m making MY comments based on what I have seen, and the assumption of a very bad financial situation for the prospective parents. I implore you to share this post with the people that you love that are in this decision making process that COULD lead to this type of trouble.

5 financial tips for staying married and (relatively) happy

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For the last 12 years I have been the sounding board for several marriages. I didn’t set out to do this, but it has just kinda happened that way. Just last week I had three separate couples sit in my office and say something to the effect of “you didn’t know you were going to be our marriage therapist.” Yes, I did. I knew 10 minutes into our meeting. Hey, but that’s okay. How do you expect to have a great marriage unless you truly work at it? For many couples this simply means admitting that you need to work at it. My marriage is the most important thing in my life on earth, you better bet your ass that I work at it.

So it’s with this that I offer you my top 5 financial tips for staying married and (relatively) happy.

****Disclaimer: I’m not a marriage therapist, but I have spoken with thousands of married couples at their most vulnerable and trying moments. My advice in this post is based on those experiences.

1. Don’t punish your partner by spending money – When your spouse pisses you off, for whatever reason, don’t spend money to get even, prove a point, or make yourself feel better. This is unbelievably common. And it’s unbelievably counterproductive. Revenge-spending will widen the gap, not bridge it.

2. Don’t ever have a spontaneous money conversation – It is nearly impossible for a spontaneous money conversation to end well. Have something to say? Set a time 2 days out to talk about it. That way the other person can get their mind right. It reminds me of a story about a badger.

3. Don’t borrow money from your parents – If you are married, and your parents are still bailing you out, then you need to remove that option. No, don’t kill them. Just stop “allowing” them to help you. Because it really isn’t helping you. It’s hurting you. I know that I’m going to get several emails/comments telling me I’m wrong. As soon as you have spoken to thousands of couples about this, and you have seen the damage that comes with borrowing money from a parent, then come see me for a debate. I’m not saying it never works, but I am saying that it is rarely successful in the end for both parties involved.

4. Work hard to develop joint financial goals – Inevitably, one person in the relationship is going to be more financially ambitious. That’s okay. But leaving the other person out of the family goal-setting is a huge mistake. This can/will/does lead to resentment. Often times the person’s goals are similar to yours. It just takes some creative blending to make them a joint goal. God forbid you have to have a complex discussion. :)

5. Don’t have a secret account – Just don’t do it. Take every good reason that you can think of to have a secret account, multiply it by ten, and that’s how many bad reasons there are to have a secret account. I have had at least three client meetings abruptly end when a secret account was discovered. Watching it unfold, I even felt dirty, and I didn’t have anything to do with it.

Just know that marriage takes work. If you are unhappy with how you communicate with your spouse in regards to money, then you HAVE TO work at it. Doing nothing will yield you the same crappy results. If nothing else, send them the link to this post, and say “Honey, I want to work on this together. We owe it to each other.” And then start the rebuilding process by taking a look at your budget compared to my Ideal Household Budget.

I’d love to hear your best money and marriage tip. Leave a comment and tell me what works great for you.

 

A letter from a young widow

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letter-writing

Dear Pete

I came across your website while doing a search on Google for help.  My question is, Is it ok to stop contributing to your 401k for 2 years to pay off credit card debt?  Before you answer, let me tell you my situation.

My husband died in 2004.  Me and my beautiful 8 year old were left behind.  At that time, I did pay off all my credit card debt and then I went through a phase and ran myself in the ground with credit card debt.  In 2004 I did start contributing to my 401k.  As the years went by I started confiding in a friend at work, who’s knowledgable when it comes to these things, and he convinced me to work myself up to the 6%.  Our company matches .25 up to 6%.  So I worked myself to that point, recently I increased my contribution to 10%.  I currently have about $30,000 in my 401k.  Being a single parent, I wasn’t able to save so much money, so I figured this was a sure way to have money for my son to go to college.  I myself just graduated with an Associate’s and know how expensive it is.

This is the big problem.  After my husband passed, I started receiving checks from SS as a benefit to my son.  I’ve used that money to pay bills/mortgage for years and now the age of 18 is quickly approaching.  These benefits will end 2/2014 and I will then only have my salary to survive on.  Well my shopping sprees that have put me in so much debt (unfortunately, my way of dealing) has left me with about $25,000 of credit card debt.  I know at this point I have enough money in my 401k to take a loan when it comes time for my son to start college.

I’ve already started paying down what I can on credit cards and have done my best not to use them.  If I do have to use it, I hop online right away and pay it.  Is it ok to stop contributing for the next 2 years and pay off the credit card debt?  I need a solution or I will not be able to survive financially when it comes time for the SS benefits to end.  I’d also like to be in a position where I can start saving some of that money for my son.  If managed to save some of it, but not as much as I’d like to.  Please help!

B

B,

Thanks for reaching out. There are a number of things that you need to consider.

1. I understand how hard it is to be a single working parent. You have a TON of financial responsibilities. On top of providing for your son, you have had to take time and grieve the passing of your husband. This clearly was not a “blip on the radar screen”. This was a major event in your life. “Retail therapy” is often dismissed as funny or harmless, but it is neither. As you know, you DO need some outlet for your grief and feelings, but I urge you not to choose an outlet that affects you so negatively from a financial perspective.
2. It does not appear that you have changed your habits. That’s either tough to hear, or it’s really tough to hear. You clearly have felt some of the pain that comes with poor financial decision-making. I hope that it has been enough to change your behavior. Making a cash-flow change (stopping 401k contributions) without changing your spending and financial decision-making habits would be a mistake.
3. Borrowing from your 401k for college is not a good idea. You can finance a college education (get loans), but you can’t finance retirement.
4. You need to make sure that you have a strict spending budget. I would not stop your 401k contributions for 2 years unless you hold yourself accountable to your spending. Otherwise you risk having less retirements savings, more debt, and still no money saved for your son.

I hope this helps. Please let me know if you have any other follow up questions. I’d be glad to help.

Pete the Planner