Are you afraid of wiping out your savings?

by Lauren

There are very few financial decisions that I disagree with my husband about, but we don’t agree on whether we need long-term care insurance. I read this article and reminded him about my concerns about certain illnesses that can wipe out even large amounts of savings. I’ve seen this with some of my friends with parents or grandparents that lived for many years after a stroke, or even my grandmother that survived 9 years after she exhausted her savings at the age of 90.

Do you have concerns about this situation?

Long-term care insurance

by Sheep Farmer

My insurance agent recently asked me if I had long-term care insurance. When I told her that I did not, she told me that I should seriously consider purchasing it I am not quite 50, so LTC insurance is not something that I had given any thought to. I went home and started researching LTC. I looked up prices, statistics as to what percentage of the population needs long-term care, the length of time spend in long-term care, etc. I considered the longevity of my own family and that of DH. After much thought and research, I decided that we would be better off putting the same amount that the monthly premiums for LTC would be into an index fund. If we need LTC, we will be to self fund it, and if we don’t need it, then DD will stand to inherit quite a bit of money. What are your opinions on LTC? Have your or members of your family purchased it?

Buying a car

by lagirl

Finally after 13 years of driving my Corolla I am going to buy a new car. Some of you may remember I wanted the Lexus IS 250 but have recently become enamored with the new Civic. Clearly the Civic will be much cheaper. I test drove it and it feels very similar to my Corolla.

Any tips of negotiating through email? They told me that they don’t offer 0% financing but i know a lot of companies do.

Also, I’m interested in changing my insurance company as well-anyone have one they really like?

Interfamily financial friction

by Anonymous

This CollegeConfidential post must have hit a nerve because it generated so many comments.

Is this “greedy”? Really?

FIL passed away recently. FIL (and the sons) were terrible about money in the sense that they were always throwing wads of money at each other. “Here let me pay for that. No really I INSIST.” “No really WE INSIST.” Yada, yada.

Typical situation: When everyone was returning to base for the funeral week, SIL spent $200 to stock up the MIL/FIL house with food for the incoming hoard (it was empty for the season when they winter over in the south). H gave SIL $100 because MONEY. Not sure why it was our responsibility to pay for stocking the house (there are 5 siblings) since we live in the same place and were not the ones eating all that food, but that’s how it is. We’re wealthy – it’s not like it matters.

So people were spending hither and yon, and H and I had a discussion about whether everyone was going to keep track and start billing each other. We agreed that since MIL is not poor in any sense of the word, and all this tracking and billing would be a PITA (and why?), we would generally have MIL pay for her own expenditures as we went along.

Since she has a hard time getting around, one of the things I am trying to do now is pick up things at the market once a week or when I happen to be going I ask if she needs something. I get a separate bill and have them bagged separately and she reimburses me when I take them in. Tonight, I picked up a few things she asked for and made dinner at her house as well. H showed up and tried to waive off the $10 for her groceries. I took the money because that was the plan. Now he is having fits and says I’m just greedy. I basically told him to pound salt.

The initial comments indicate some readers believe other issues besides money are at play here.  But isn’t that usually the case?  Money can represent so many things — love, prestige, self-worth, independence, etc.

Misunderstandings can easily occur.  I was recently surprised when a relative insisted on compensating me for my Uber expenses after I did her a favor.  At first I was a bit surprised, as if she considered it a financial transaction instead of a favor.  Then I realized that she just viewed these types of things differently and did not want to burden me financially.  And I made a mental note that she would probably expect to be compensated if I asked her for a similar favor.

How does your family operate?  Do they “nickel and dime” expenses among each other?  Or do they tend to be more casual?  How are restaurant bills split?  Have you had major (or minor) disagreements?  Financial dealings between parents and their children can be particularly touchy.  Part of what makes these types of dealings potentially more complicated are discrepancies between family members’ wealth.  But even when everyone is in a similar financial position, misunderstandings can occur.

Have you ever borrowed or lent money to family?  How did that turn out?l

Bargain travel

by Grace aka costofcollege

Despite her initial doubts, this NYT travel writer gave a positive review of a trip she took using a bargain package deal.

Looking for a Bargain Vacation? Don’t Rule Out Hawaii

For years I’d seen online ads for surprisingly affordable prefab vacations — airfare and hotel, with maybe a car and a tour thrown in — through unexpected vendors like Groupon and Costco. I remember thinking, “Do people actually buy vacations through Costco?” To me, packaged bulk trips were the five-pound tub of mozzarella balls of travel. Sure, it’s a bargain, but how bland? What quality could you possibly get for that impossibly low price? I was, in short, the worst kind of travel snob.

I regularly check deals that come my way, mainly Groupon Getaway and Travelzoo.  But I’ve never tried any.  Sometimes they seem too good to be true and sometimes they seem to scrimp more than I’d like.  (Are the hotels lacking?  Can I get an aisle seat on the plane?)  Sometimes they don’t seem like such a great value when I start to compare low airfares and housing options that I could assemble on my own.  But I keep telling myself that one day I need to throw caution to the wind and buy a five-night inclusive trip to the Caribbean for under $600.  How bad could it be?

Here are three travel deals I recently came across, all departing from New York:

  • 11-day Thailand & China Tour w/Air for $1499 that includes hotels, transfers, daily breakfasts, and several tours including one of the Great Wall of China
  • London & Rome 6-Night Trip for $799 that includes air, hotels, transfers, daily breakfasts
  • Punta Cana 5-nights all-inclusive beach side resort including air for $589

Do these sound enticing to you?  Have you ever bought one of these deals or have you considered it?  Do you know people who’ve had good or bad experiences?  Do you avoid these mainly because they’re too conventional and you prefer more personalized travel?  In other words, are you a “travel snob”?  Any advice for someone who’s considering buying one of these deals?

Also, do you have any travel plans coming up or any dreamy destinations that you’d like to visit soon?

Financial education for kids

by Finn

Having a kid who’s close to graduating from HS, this article caught my attention:

5 Financial Concepts To Teach Your Teen Before High School Graduation

What do you think? Do you agree with the five concepts? Are there any others you think should be added? How do you plan to teach these concepts to your kids?

On a related note, do your kids’ schools offer classes in personal finance? My kids’ school offers one, but DS tells me he won’t take it because he’s already maxed out on the number of classes he’s allowed to take, and doesn’t want to give up any of them.

Next year they plan to offer some short courses, with personal finance being one possible subject. With the PSAT being moved from Saturday to a school day, the school decided to cancel classes on PSAT day, and instead offer things like personal finance seminars for the freshmen and seniors. Another possible time for some short classes is the weeks after AP testing.

How much have you saved?

by Finn

While this story is about college financial aid, what I found most interesting was the finances of the families involved:

An inside look at financial aid offers from private Franklin & Marshall College

For example, Student A comes from a family with an AGI of $400k, with $635k in home equity and $360k in assets not in retirement accounts. While recognizing the possibility that they could have millions stashed in retirement accounts, doesn’t that seem like a net value of less than $1M outside of retirement accounts is low for that level of income? Granted, I also don’t know what sort of special circumstances they might’ve faced, e.g., expensive medical treatments, long periods with much less income, but if we assume they didn’t face any of that, wouldn’t you think they’d have accumulated more?

Side note: This example does suggest that maximizing retirement account contributions is one way to maximize financial aid.

Looking through the other examples, while some families have assets that seem commensurate with their incomes, especially the families with low incomes, it seems to me that others should’ve been able to accumulate more assets, including home equity.

What do you think? I know I’m well above national norms in terms of how much I save, but do you think these levels of assets and home equity seem low relative to their incomes, taking into account where they live?

Credit cards

by Finn

A recent exchange of posts with Lemon brought this article to mind:

5 Signs It’s Time to Shop for a New Credit Card

How often do you shop for new cards? What criteria do you use in selecting which cards you get, and which cards you use?

We try to pay our balances every month, so we don’t really look at interest rates. What we look at primarily are rewards and annual fees. We value cash rewards over airline miles, due to its versatility, and the fact that we can use even small amounts of cash. We also look for cards with no foreign transaction fees, but since we don’t spend a whole lot of time outside the US, and already have a couple cards without those fees, that’s not a primary consideration.

We value the Discover Card cashback over others, because we can redeem cashback there by purchasing discounted gift cards from places we shop (e.g., Gap, Lowe’s). We once redeemed some cashback by buying several $100 gift cards for a hotel chain for $50 each, just before going on a trip in which we used those gift cards.

If you’ve found a card that offers a particularly good benefit, please share!

Vacation splurges

by Denver Dad

We are going to Iceland next month and we booked a tour for an obscene cost. It’s a helicopter ride to the Thrihnukagigur volcano and then you take an open elevator down to the volcano floor. It’s the only place on earth where you can go into the magma chamber. We went back and forth on it, and finally decided it’s a once-in-a-lifetime opportunity, and we figured if we’re going to do it, we might as well go all in and do the helicopter ride instead of hiking up.

What are the biggest splurges you’ve made on vacation? What was worth it and what wasn’t?

Choosing a Vacation Destination Based on its Economy

by Honolulu Mother

Vox put together this Vacation Index showing which countries are the best – and worst – bargains for vacationers at the moment. According to the article, it’s not intended to compare bang for the buck in absolute terms, but rather to show which countries are cheaper or more expensive than they usually are. Do you think the index is an accurate representation of that? Would you consider choosing a vacation destination based on it?

Our next vacation is to the very worst bargain listed, and yet the exchange rate is still better than it was the last time I was there. I think the index is looking at a relatively short-term timescale.

Graduation costs

by Grace aka costofcollege

This time of year many families are celebrating graduations, whether preschool, elementary school, middle school, high school, or college.  The costs can mount up, as discussed in this CollegeConfidential thread.

Cap and gowns, diplomas, yearbooks, photos, rings, invitations, dinners, parties, travel, and gifts are some of the typical expenditures.  If your child is receiving honors of various types, costs for awards dinners can mount up.  One parent with twins complained she would be spending several hundred dollars for those.  Other end-of-year expenditures like recitals and proms can also strain family budgets.

How lavish is your spending for graduation celebrations?  What is common among your friends and relatives?  What about spending for other types of milestones, like First Communions or bat/bar mitzahs?

That time of year, again

by Finn

We are well into that least favorite time of year for many of us: tax time.

While some may already be done, others are yet to start.

Do you have any tips to share? Potential gotchas?

Tax time is also a good opportunity to review financial decisions, and make adjustments. What have you learned from this tax season? What worked, and didn’t work, financially over the past year?

Retirement savings

by Grasshopper

Do you think 401(k) plans and IRAs will work as retirement savings for most Americans?
Are most of your friends and relatives saving enough for retirement in 401(k) plans and IRAs?
What have been your best 401k investments?
Do you think Teresa Ghilarducci and Hamilton James’s plan as described in the linked article would work?

A Smarter Plan to Make Retirement Savings Last – The New York Times

The current system — a mix of 401(k)s and individual retirement accounts (I.R.A.s) — is broken. These plans are individually directed, voluntary and leaky. Just over half of workers don’t have access to a workplace retirement plan. According to the National Institute on Retirement Security, Americans between the ages of 40 and 55 have retirement savings of $14,500, when they will need between 20 and 30 times that amount. Many people take money out before they retire. And the wealthy tend to pay lower fees and get higher subsidies for their savings.

Which live events are worth the money?

by L

EXPERIENCES. Which experiences are “worth it” to you? Totebaggers may disagree on whether the following are worth spending money on:

  • Concerts (non-classical).  For this Totebagger, concerts are uniformly not worth it:  too expensive, too LOUD, and too late at night.  I have only been to a handful during my life, and found the Depeche Mode one the best.  (I saw U2 in 2001, and Bono was unfortunately flat during many of the songs!)
  • Concerts (classical).  Definitely worth it, but at choral concerts I find myself wishing I was performing instead of watching/listening.
  • Opera – Nope, unless one of my friends is performing.
  • Ballet – yes for the Nutcracker or similar fairy tale; for the modern ballets, I would go more if I had a non-DH friend to go with.
  • Broadway musicals.  Worth it!  I plan to see “Hamilton” later this year.
  • Plays.  YAWN, except for comedies (“Noises Off” and similar).
  • Live sports.  Pass, other than the Red Sox once a year.
  • Kid shows (Disney on Ice and similar).  We have so far managed to avoid going to these!

What about other Totebaggers? I know some of you are bigger sports fans than I! What is the most you have ever spent on a live event ticket? My max is $150.

Grocery bills

by MBT

I am fascinated by those of you who have mentioned in the past how you spend so little on groceries each month for your families. I spend multiples of what the SNAP monthly allotment is, but several people on here said that the SNAP number was consistent with their spending. So because one of my goals for this year is to reduce some of my mindless spending, my overall grocery and takeout food budget is under careful scrutiny right now.

I often don’t meal plan, and just buy things I think I’ll use, which results in waste. So I am trying to start meal-planning on weekends and only shopping off of my list. But I want to know what some of your secrets are for a consistently low grocery bill. Here were a few of my questions:
– Do you buy store brands and/or generics?
– Does your total bill include wine, beer, etc?
– Does your bill include meat? (I order most of my beef from an online steak company, so my weekly grocery spending does not include this)
– Does your number include household cleaning products like paper towels, detergents, etc?
– Does you number include personal care products like shampoo, razors, etc?
– Do you intentionally choose recipes that require lower cost foods, or do you cook whatever your family likes?

What other things do you do to watch your spending, so you don’t end up with the $150 quesadillas?

Retirement planning

by Finn

We’ve had discussions here before about what we plan to do (or in some cases, actually do) in retirement (most of us would sleep more), and Rocky recently conducted a survey on how much money we need to be comfortable in retirement, and how much we expect to have.

But we haven’t had much discussion here of how we plan to get there financially.

What vehicles do you use to accumulate assets to support your retirement? 401k? IRA? Roth, or regular? Mutual funds? ETFs? Rental real estate? Medical Savings Accounts? Deferred annuities?

As we approach year end, and then tax season, this may be higher on our minds than during the rest of the year.

College Budgeting Fail

by ssk

I just read this online and thought it might be a starting point for a blend of two of our favorite topics: paying for college and teaching fiscal responsibility.

22-year-old college student blows her $90,000 college fund and blames her parents

While this article (and the accompanying videos) is tongue-in-cheek, it makes you wonder about how you have done (or will do) teaching your children about finances. Has anyone encountered a young person like “Kim”?

Credit cards for kids

by Finn

I can see the light in the tunnel that is the approaching train of DS graduating from HS and heading for college. Some time before that, I should get him a credit card so he has a chance to learn how to use it before he leaves for college.

When do you plan to get your kids their first credit cards? What kind of card will it be? Will it be just his or her name, or will it be connected to your account? Do, or will, you let your kids use your card before they get their own?

DS has used my card a couple of times, on a trip. We sent him across the street from the hotel to get some breakfast for us, and there was no problem with him using my card.

How Much To Spend On A Wedding Gift

by Grace aka costofcollege

June is a big month for weddings.  A recent CollegeConfidential discussion asked about the appropriate amount to spend on a wedding gift.  Opinions vary, to say the least.

This comment …

This is sooooo variable, by region of the country, socioeconomic status, how close you are to the people involved. There are weddings where I’d give $100 and feel fine, and those where I’d give $1,000 (my nieces/nephew)….

… prompted this response:

I can’t imagine spending that much for anyone but my own kids.

Several factors come into play.

In addition to region of country, another factor quite simply is your income. One family’s $300 check is done without a blink of an eye, another, $300 is the grocery bill for the month!

How much do you spend on wedding gifts?

Financial Safeguards For The Unemployed Spouse

by Sara

I’m a new empty nester and 2 mothers in my situation have been dumped by their husbands – and neither has worked in 15 years. Turns out their husbands blew through all their joint savings accounts so now both women are going back to work in low-level jobs. I think there still needs to be more awareness of long-term consequences of giving up your career as a mother – and actions you can take to stop free spending spouses if they seem out of control ( freeze bank accounts is one).

How Are You Paying For College?

by Grace aka costofcollege

As the deadline for high school seniors to choose a college approaches, the challenge of how to pay is has been a recent topic of discussion for many families.  Totebaggers are savers and unlikely to qualify for much need-based financial aid, so this timeline may not be relevant to many readers here.  But it does show some generalized steps along the path to saving and paying for college while giving us a starting point for discussion.

20150412.COCPlanningTimelineB

Before High School

Start saving for college ASAP:  This is the relatively uncomplicated part.  Although we can’t predict the costs of college over a child’s lifetime, it almost always makes sense to begin saving early on.  Even if MOOCs or other innovations make higher education more affordable in the future, there’s usually not much of a risk in saving too much since there are options for dealing with “left-over money in your 529 plan”.  Still, it makes sense to look at all the pros and cons of 529 plans.

Before Junior Year of High School

  • NMS potential:  If your child tends to score in the 95%ile of standardized tests, he may have a shot at earning a National Merit Scholarship.  A little test prep can make the difference in qualifying for significant merit financial aid.
  • Base Income Year (BIY): If there is a chance your family may qualify for need-based financial aid, you should explore ways to minimize income during the BIY, which is the 12-month period that begins January 1 during your child’s junior year.  Since the BIY is used as a snapshot for determining financial need, you may want to avoid selling stocks or property that will create large capital gains, refrain from converting to a Roth IRA, and defer bonus or other income if possible.

Junior Year of High School

  • Create list of schools:  Get serious and make a realistic list that includes academic and financial safeties.
  • Can we afford it? 1-2-3:  Determine affordability by using the 1-2-3 Method or something similar.

Senior Year of High School

Senior year is the busiest time for families as they handle the many details of the college application process, including final determination of how they will be paying.  Some important acronyms:

The two main forms used in determining financial aid eligibility are the FAFSA and PROFILE.
FAFSA is the Free Application for Federal Financial Aid. It is a form submitted to the government that collects the financial information needed to decide eligibility for federal FA. It’s also used by many colleges to determine institutional aid.
PROFILE is the financial aid application service offered by the College Board, used by about 400 colleges to learn if students qualify for non-federal student aid. There is a fee to submit a PROFILE, whereby the FAFSA is free.

The SAR (Student Aid Report) is a summary of your FAFSA responses and provides “some basic information about your eligibility for federal student aid”.

What’s your approach in planning on how to pay for college?  Do you feel well prepared, or a bit nervous about how you’ll handle the costs?  If your kids are older, tell us what you learned.  Share your wisdom and ask your questions.

(A version of this post previously appeared in Cost of College.)

The Cost of Extracurricular Activities

by Louise

Kids’ Extracurricular Activities May Cost More Than You Think

Totebaggers – I was talking to a lady who was spending approx. $350/month on dance lessons for her two daughters. This didn’t include recital, costumes or other fees. Her daughters had been in dance since they were little but now as high schoolers their interest had waned and they were on the fence about continuing lessons. Their mother decided to cut the lessons out. “I’m tired and spending too much money”. There was some drama but the parent wanted a firm exit rather than continue to pay and have the kids not go.

Totebaggers, what do you think of all the activities your kids have been involved in ?
Worth it or not ? Are we collectively spending too much time and money ?
We have new parents who may benefit from the advice.

Tax Time

by Finn

We’re now in the middle of everyone’s least favorite time of year: tax time.

We’ve already touched on a number of tax topics this year, but perhaps it’s time for a day of asking our questions, sharing our knowledge, and airing our complaints.

Totebaggers, what have you learned over the years that you can share with your fellow totebaggers that will help ease this time of year? What questions do you have that others here might be able to answer? If someone died and made you king, what changes would you make to our income tax system?