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Dear Pay Dirt,
My husband and I have been extremely close to another couple for 15 years. They’ve always had more money than us, a spacious house, and lots of savings. We pay for my disabled mother’s care and we can’t afford a house, so we travel a lot. There’s never been competition, our lives are different (they don’t like to travel, and we don’t want kids).
My husband got a promotion/raise. It isn’t life-changing, but we’ve upgraded my mom’s care, saved/traveled a little more; our same life, but less stretched. Our friends had a baby six months ago, something they’d been saving up for, but as expected they’ve had to cut costs. Suddenly, they are weird about our travel. It started with some “must be nice” comments, then “jokes” about how we must be broke, vague judgmental comments about people who choose to spend versus save. The wife has made one-percenter jokes at me. The comments aren’t incessant, but frequent enough to be troubling. It’s awkward and frustrating, since they’re still financially better off than us—and I feel weird even saying that.
We’ve deflected the comments. We aren’t showy. Our trips aren’t glamorous. At this point, we only tell them when we are traveling because we babysit their child, and will be unavailable. I’ve started saying we’re visiting my mom, but I hate lying, and I don’t want to go on a total social media blackout. (Also, I’m a professional travel photographer, so it hurts my work to hide.) My husband thinks they’re feeling the heat of having a baby, and even if they don’t like travel, they’re experiencing unfocused jealousy. I’m worried that they no longer perceive that they’re “on top” and it’s uncomfortable for them. Maybe they don’t like losing free babysitting? We’ve never had to have a serious conversation, certainly not about money. Everything else is as it was before the raise/baby, and they’re basically family—but I don’t know how to address this without causing a rift.
—JT
Dear JT,
Your husband makes a good point—your friends are probably feeling the financial squeeze of parenthood, and it’s making them a little envious. That doesn’t excuse their behavior, but it helps to know where they’re coming from. If these friends really are like family, you should be able to talk to them about this. Before you do, think about what you want to say. You might try something like, “We all have our financial priorities, and I understand yours are different, but comments like this make me a little uncomfortable. I’m just not sure how to respond to them.”
Then, the next time your friend comments about you being a “one percenter,” bring it up: “Can we talk about these kinds of comments?” Knowing what you want to say beforehand will minimize the chance you’ll be reactive in the moment. Of course, your friends themselves might be defensive—they might pull the old “What, you can’t take a joke?” card—but that’s on them. All you can do is be honest, direct, and calm about the effect their comments have on you.
If you’re not ready for a full-blown conversation about it, try joking it off at first and see if they get the hint. “Wait, I’m a one percenter now? Last time you said I was broke. What changed?” Or, turn the tables. Next time they say something like “It must be nice,” ask if they’re feeling financially stressed, and if they want to talk about it. These moves are a little passive-aggressive, sure, but so are their comments.
Ultimately, how you spend your money is none of their business. You don’t have to justify your spending, your husband’s promotion, or your lifestyle choices and financial obligations to anyone. It sounds like this is more about them than it is about you, but if they do try to lecture you again, tell them it’s up to you to decide how you spend your money, period. Being honest about this may test the strength of your friendship, but hopefully, everyone will pass.
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Dear Pay Dirt,
My husband and I bought our house in 2018 before the market in our area took a dramatic upswing due to COVID. When rates dropped in 2020, we refinanced into a 15-year mortgage, which, at the time, seemed like a good financial decision as with the new 2.7% rate our payment was only $150 more than it was on the 30-year mortgage we used to buy the house. Well, over the years our taxes and insurance have gone up so our mortgage payment is now about $600 more than it was when we bought. Alone, this wasn’t so bad but my husband was unemployed for six months and we both ended up running up our credit cards. Then our backyard was about to fall into the canal it sits on, which meant we had to take out a home equity line of credit (HELOC) to pay for a new bulkhead. We used the HELOC to pay off most of our credit cards, finance the bulkhead, and pay off some medical debt. THEN my car died and we had to immediately get a new one. The HELOC and the car, with 2024 rates are both financed at about 9% and the two loans total $90,000.
Here’s the thing…. when we took out the HELOC our house appraised for almost double what it was worth when we bought it. We’re on track to pay the mortgage off completely by 2035 BUT I don’t think we should. I think it’s a really bad move. I think it’s a better financial decision to refinance again, take some cash out at 5%, and use the cash out to pay off both the HELOC and the car loan. At 5%, our mortgage payment would be about $300 lower than it is now AND we’d lose the $1,000 a month in payments that we make toward the other two loans. My husband is unwilling to even consider the idea of refinancing the house.
In fact, whenever I bring it up it’s suddenly HIS house, not ours. I hate his approach but understand his reasoning. He thinks that paying off the house is a gift to me financially since he doesn’t have life insurance or any money to leave me. He also is 12 years older than me and he likes the idea that he will live to see the house paid off (he’ll be 62 in 2032). Pay Dirt, my husband has no retirement and no life insurance, and we have very little savings. If something were to happen to him, I would not be able to afford the bills we have on my own. I have a pension (that doesn’t vest for another five years) and some money set aside for retirement but I can’t afford to contribute now that we have these two new loans. Forget trying to aggressively save so HE can one day retire. Also, I think he’s being very short-sighted (or maybe looking too far ahead?). What if he doesn’t make it 10 more years? What if he loses his job and the next one doesn’t pay enough? What if he got hurt and couldn’t work at all? We’d lose everything! I don’t make enough money to cover these loans by myself and neither does he! At the rates we have, it will take seven to eight years to pay off the two new loans. How can I convince him that consolidating our debt and lowering our bills by $1,300 a MONTH is a bigger gift to both of us than the paid-off mortgage could ever be?
—Who Gets Emotionally Attached to an Interest Rate?
Dear Emotionally Attached,
This sounds like a financially vulnerable situation, so I understand why your husband is reluctant to pull from your home’s equity. In a way, it seems like that’s the only “emergency fund” you have. But I do understand your point. It’s expensive to be in debt. The rate on your loans is fairly high, and it’s eating into your finances. The plan you describe, however, is a cash-out refinance, and it has some drawbacks.
For example, there’s the risk of foreclosure if you can’t afford to keep up with payments in the future and the risk of an underwater loan if your home’s value plummets and you need to sell. Plus, you’d miss out on that great low rate. Since the new mortgage interest rate would increase—5% sounds optimistic—and the loan itself would be bigger, the mortgage could also cost significantly more in the long run, depending on how much cash you take out and how much more taxes and insurance go up. Then again, the HELOC is also costing you, and it also runs the risk of foreclosure.
Finally, and maybe of most concern, if you refinance and find yourself in a situation where you need to take on debt again in the future, you could be in the same position you are now, but with a bigger mortgage. Yes, you’re already in a risky position with that $90,000 loan, but it’s a risky move to keep borrowing from your home’s equity. So I see why your husband wants to stay the course and pay off the debt.
My point is that there’s risk involved with either decision. So one thing both of you should consider is: How likely are each of these risks? He’s worried about losing what sounds like your only asset —something that could come in handy if you find yourself financially struggling in the future. For you, the bigger risk is being trapped by this high-interest debt, which could grow out of control, and leave you with nothing saved for retirement. Both are valid concerns. Are there some compromises he—or you—would consider?
For example, if your husband is worried about leaving you with nothing, would he feel better with a term life insurance policy? You could take the cash out of your house, pay off your loans, then use a fraction of the freed-up funds to pay for a 15, 20, or even 30-year term life policy. If he dies before the house is paid off, you’re taken care of financially. This comes with its own cost (it might run you a couple of hundred bucks a month), but if he truly wants to give you the “gift” of an asset in the event of his death the cost might be worth it.
Or instead of borrowing from your house, could you take out a personal loan with a lower interest rate and use it to pay off your HELOC and car loan? Yes, you’d still have a loan, but if the interest is lower, your monthly payment would still be smaller and you’d keep your low mortgage interest locked in. You have to be careful of loan consolidation and refinance scams out there, but credit unions may be a good place to start your search.
If you do decide to pay off the loan, you should commit to using the extra funds to save for an emergency and your retirement. If something else happens—his car breaks down, another big repair project comes up—what is the plan? Whatever you decide, come up with a savings plan before so that you’ll be better prepared for setbacks in the future. This way, hopefully, you won’t find yourself back at square one: paying off an increasingly expensive mortgage with another high-interest loan on your hands.
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Dear Pay Dirt,
My partner and I are guardians of three young family members, who will not automatically inherit from us due to the nature of the guardian relationship. We have no other children. A trusted family member is our chosen successor guardian if something happened to us but it will go through the courts and there’s no guarantee the children will not be returned to their parents instead, though that’s unlikely.
The parents, sadly, are drug manufacturers who are involved in gangs, in and out of prison and often homeless, and we cannot trust them with any money on the kids’ behalf. Any sort of inheritance would be an incentive for them to fight for custody. They have received supports both financial and otherwise in the past and have not demonstrated any desire to change. We do not trust them to raise the kids to make safe choices with an inheritance large enough to pay for nearly any college, or buy homes in our area. This is already a multi-generational cycle of drug addiction, so “accessing your inheritance at adulthood” seems really risky. Do you have any advice for how we could estate plan to provide for these children? We know college and home ownership aren’t for everyone so we don’t want to be too limiting, but we also clawed our way out of poverty ourselves and do not want our hard work to end up funding drugs or violence if we can help it.
—Trying to Break the Cycle
Dear Break the Cycle,
It’s admirable that you want to give these children a solid financial start, and you’re smart to think about any potential pitfalls. You should consult with a lawyer, but there are some strategies you can look into. For example, you might consider setting up a trust, which would allow you to appoint a trustee to manage your will according to your own specific wishes. You would avoid the lengthy process of probate, but you’ll have to be confident in the person you appoint as trustee to carry out your wishes as you’ve outlined them.
In your will, you can include specific instructions on how the funds are to be used—for education or housing, for example. There are provisions you can make to the will where the beneficiaries will only get the money after certain milestones—like when they reach a certain age—or after completing a certain task—like getting a college degree.
An estate planning lawyer can help you work out these details. They’ll know the ins and outs of setting up these provisions. Plus, they’ll likely have years of experience dealing with similar situations, so they can walk you through any other potential problems they notice. Ask around for references, or look up lawyers in your area. Here’s a solid guide to help you in your first steps. Yes, lawyers can be pricey, but if you’re worried about your money being mishandled, it sounds like the cost is worth it.
—Kristin
Classic Prudie
I’m not sure how to resolve a conflict where neither of us are “wrong.” The other day, my boyfriend saw a mark on my ribs just under my bust that he thought looked like a hickey. He knew he hadn’t given it to me, and when he asked me what it was I didn’t know—it didn’t hurt and I hadn’t noticed it. This made him furious because in his words, he would have believed that it wasn’t a hickey if there was a reasonable explanation, but what was he supposed to think if I just shrugged him off? I got upset at being accused of cheating and said I don’t have an explanation for every bump and bruise on my body, but he should trust me enough to not assume I was cheating…
