Dear Dave,
One of my credit card bills was turned over to a collection agency, because I was late making payments several times. The agency has offered me two or three different payment options I can afford. If I agree to one of these, does the original creditor get paid, as well?
Bethany Dear Bethany,
You’re facing one of two possibilities. The collection agency is either directly representing the credit card company, or it owns the debt outright. Neither way of handling it is unusual when someone has defaulted on a loan.
Here’s the deal. You’ve already got a mark against you on your credit report for the bill being turned over to collections. So, at this point settling on a credit card you’ve defaulted on is really no big deal. Unless you have the cash on hand right now to make good on the debt outright,I’dacceptwhichever deal makes the most sense for you financially at the moment.
But if you want my very best piece of advice for you, and anyone else finding themselves in this kind of situation, Bethany, it goes something like this. Stop using credit cards!
— Dave Dear Dave, I have a money market account that I use as both my checking and savings account. I have a debit card and check writing privileges with the account, and I get a better interest rate on my money. Is what I’m doing a good idea, or is it better for some reason to have separate savings and checking accounts?
Bonnie Dear Bonnie,
It’s always good to have a physical and emotional boundary between your savings and the everyday funds in your checking account. This is especially important when you’re talking about savings or an emergency fund.
There’s nothing inherently wrong with getting a better interest rate, but when everything is all lumped together it can become easy for the line between savings and checking to become blurred. And if you’re not careful, you might find yourself dipping into your savings or emergency fund for things that aren’t emergencies without realizing what you’re doing.
—Dave Dear Dave,
My wife and I are debtfree, and we live on a budget. My mother-in-law, on the other hand, uses credit cards for practically every purchase. Several times she has gone too far and run up balances she couldn’t pay off. We bail her out when she does this, but often the extra purchases are frivolous things she doesn’t need. We love her, of course, and we feel obligated to help because my wife is her only child. But her behavior with credit cards is beginning to put a strain on our finances. What should we do?
Charles Dear Charles,
This is a tough situation, one that’s made even tougher by the fact that involves a close, loved family member. A very blunt, but caring, discussion is in order. But it needs to be initiated by your wife—not you. This is important, because if you try to step in and take the lead on things, you’ll immediately become the mean son-in-law in her eyes.
You and your wife need to be completely on the same page about this situation, but she’s the one who needs to approach mom and talk things out. She needs to sit down with her mom, and very gently let her know you two have talked, and you’ve decided together that you won’t be picking up the pieces where her overspending is concerned anymore. Your wife also needs to tell her the two of you are willing to help her work on handling money a little better, and walk her through making and living on a monthly budget. Your wife could even explain that’s what you guys do, and it’s one of the reasons you’re in such good financial shape.
Here’swhatitcomesdown to.Youwouldn’tbuyhermore drugs if you found out she was an addict, right? Along the same lines, you’re not helping this lady by bailing her out every time she creates a money mess. You’re enabling her when you do this, and that’s the same as telling her it’s okay.
Work with her, Charles. Teach her, both of you, and love on her. Let her know you’re there to help. If things get really bad, you can pay her light bill, or even buy her some groceries if the pantry gets a little bare. Hopefully, it won’t come to anything that serious.
But one thing needs to be clear. You folks are not bailing her out anymore when she misbehaves with money.
— Dave Dear Dave,
My husband and I both work outside the home, and he has come up with an idea for our fun money. He wants us to set up an account where we both put 5% of our earnings for discretionary spending. The issue in my mind is that he would have a lot more to spend, because he makes much more money than I do. He says he feels he should be able to spend more since he makes more. I’m not a greedy person, and I don’t spend money on a lot of frivolous things, but I do think things would be even. I feel we should each put in thesamedollaramount—one that’s fair to both of us—if we’re going to do this. What do you think?
Val Dear Val,
This isn’t a good plan. I’m sure your husband means well, and that he’s really a good guy overall, but it sounds to me like he probably hasn’t thought this whole thing through. As they stand now, the details of his idea play out as pretty immature and selfish. And something tells me you wouldn’t marry a man like that.
Think about it this way. There are plenty of families out there where only one person works outside the homeandgeneratesanactual income. Would it be fair to say thatwhoeverbringshomethe paycheck is the only one who can have fun spending once in a while? Of course, not! In mostcases,spouseswhodon’t work outside the home take on tons of responsibility and accomplish several things every single day—especially if the couple has kids. If you put a monetary amount on all that, it’d wind up being a pretty nice income dollarswise.
Rememberbackwhenyou two got married? If it were anything close to a traditional ceremony, I’ll bet the preacherpronouncedyoutwo “asone.”Asineverythingand every way. That means you have one income, a combined income, and it’s our income. If you own a home, it’s our home. It’s not more his home just because he makes more money than you. Our kids, our marriage our everything. Get the picture?
Marriage is not a me proposition. It should always be a we thing. Your husband needs to be reminded of that.
—Dave