Common Misconceptions About Money Management
Every month, I open the DMs on my Twitter and Instagram accounts to help readers who need advice about their finances. Below are some questions I received in August, along with my answers. I have edited them for clarity and removed the handles.
Q: My husband is a spender and I am a saver. Could this be hindering our financial goals?
A: Think of your financial life as a road trip with a GPS. You need a plan to reach your destination (financial goals) and your budget acts as your guide. Without a plan, you may wander aimlessly and struggle to meet your goals. If you and your husband have different spending habits, it can make the journey even harder. To address this, schedule a financial date where you can discuss your concerns and set goals together. Start with small goals and make these meetings a regular occurrence.
Q: Are debt consolidation loans ever a good option?
A: Debt consolidation loans can be helpful, as long as the terms don’t increase your overall debt. One concern is that people often use these loans to pay off credit card debt, only to accumulate new debt on their cards again. It’s a cycle that can be difficult to break. Be cautious when considering debt consolidation and make sure it actually helps you in the long run.
Q: What is a reasonable amount of credit card availability for someone with an $80,000 income?
A: The amount of credit card availability you need depends on your ability to pay it off regularly. Even with a high income, it’s important not to accumulate unnecessary debt. Many consumers struggle with revolving credit card debt, so it’s best to only have as much credit as you can handle responsibly.
Q: How can I ensure I have enough saved in my 401(k) for retirement?
A: It’s difficult to know for sure if you have enough saved for retirement, as it depends on factors like your lifespan. However, you can get a rough estimate by creating a budget for your retirement years. Consider Social Security income, savings, and retirement investments. Websites like AARP offer retirement calculators to help you determine if you’re on track.
Q: I had to use all my retirement funds and now have no savings. How do I start rebuilding?
A: Caregiving responsibilities can often lead to a lack of retirement savings. It’s important to start saving again as soon as possible. If your company offers a retirement account, contribute to it. You may also need to adjust your retirement plans and consider working longer to compensate for the lost savings.
Q: Should I be concerned about the negative outlook for my bank?
A: If your funds are insured by the FDIC and you are within the insured amount, there is no need to worry. Deposit insurance covers your money in case of bank failure.
Q: My mother has significant credit card debt. What is the best course of action?
A: I recommend scheduling an appointment with a nonprofit credit counseling agency. They can help you formulate a plan for your mother, which may involve filing for bankruptcy protection. While bankruptcy is not an easy decision, it can provide much-needed relief for seniors struggling with debt. The National Foundation for Credit Counseling can provide more information and assistance.
If you have a personal finance question for me, please call 1-855-ASK-POST (1-855-275-7678).
Additional Resources:
- Read about my mortgage payoff story
- Managing credit card debt
- B.O.M. – The best of Michelle Singletary on personal finance
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