life

Christmas Bonus Comes With Options for Spending It

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | January 8th, 2019

Dear Helaine: I recently received a $10,000 Christmas bonus. I own a home in a city I no longer live in that I rent out to reliable tenants, earning a modest profit. Besides my mortgage, my only other debts are $4,500 remaining on a student loan and $13,000 I still owe my parents for helping me out when I was laid off several years ago. (I'm paying them $350 a month.)

My work is solid, so I am wondering if it makes sense to buy another home in my current city. Between the bonus and accumulated savings, I could put down 5 percent, just like I did with the home I already own. I'm paying $1,200 in rent, and I estimate that if I bought a two-bedroom condo, my expenses would come to $1,800 a month all in, and I could rent out the second bedroom on Airbnb to offset costs.

The only snag is that I might need to purchase a car soon. I currently use a friend's vehicle since he travels 90 percent of the time for work and leaves the car with me. But there is a possibility he will relocate and take the car with him. If that happens, I could lease a vehicle, buy a cheap motorcycle or use the bonus money on a car. So how would you spend the bonus? -- Bonus Bucks

Dear Bonus Bucks: I think you are risking biting off way more than you can chew financially. It's quite possible you are going to need to purchase a car within the next year. I'd suggest putting the bonus money aside in a savings account, so you have it if you need it. If it turns out you can continue to maintain your car-sharing arrangement, you might want to consider accelerating the rate you are paying your extremely generous parents back for their financial help when you needed it.

As for homeownership, I'm going to make a different suggestion. It sounds like you are treading water on the property you are now renting out. I'd suggest putting it on the market, and using the proceeds and other accumulated savings to buy the two-bedroom condo you desire in the city you live in now. This will allow you to put down more than 5 percent -- something I would strongly recommend. The higher your mortgage payment and other monthly charges, such as private mortgage insurance, the less financial latitude you'll have if you encounter financial headwinds. You don't really want to need to turn to Mom and Dad yet again if you lose another job, do you?

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

Selling Stock in Family Business Feels Disloyal

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | January 1st, 2019

Dear Helaine: When I was a teenager, my grandmother gave me about $20,000 in privately traded stock in a company founded by my great-grandfather. The value has grown considerably. What was initially a $125 annual dividend paid $14,000 last year.

My wife and I are diligent savers. Our house is paid off, and we currently have a mix of retirement savings and short-term assets valued at a little under $1 million. My shares from the family company make up the majority of that number.

Every year the family company sets aside a certain sum of money to buy back shares at a discount from the book value. Other family members have sold back some of their stock over the years, but I never have. Given that the stock has been valued higher every year, this has been a good investment decision. But with some key relatives in company management looking to retire, I feel like I should probably start selling shares and moving the money elsewhere.

But I am fighting a feeling of disloyalty at the thought of selling the shares. I never worked for the company, and neither did my parents. Also there's the thought that since I never did anything to earn this stock, it should be something that gets passed along to my kids instead of keeping it for myself.

I'm also concerned about capital gains. It's easier to collect a nice dividend check every year than to think about forking over a bunch of money in taxes. Thoughts? -- Fortunate but Perplexed

Dear Fortunate: It must feel like that stock is a close relation. It's not just your own piece of a long-term family-owned business; it's like a fairy godmother, raining down financial benefits on you while you do nothing for it in return. Little wonder you would like to hold the stock close!

But wise money management isn't about sentiment and continuing to count on good fortune. It's about cold, hard facts and logic. So ask yourself this question: If this stock was that of any other company, would you ever have allowed it to become such a disproportionate part of your portfolio? The answer is almost certainly not. It's too risky. If something goes wrong, it will inflict severe -- and perhaps irreparable -- damage on your finances and on any future inheritance you might leave your children.

You need to diversify your holdings. Holding on to the stock because you fear a large capital gains bill could be the definition of being penny wise and pound foolish. I'd recommend taking advantage of the family buyback plan so you can bring your financial life into alignment. But you don't need to recalibrate in one fell swoop. You can parcel out the sales over a period of years, gradually weaning yourself off the family business.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

Husband Changes the Terms of Couple's Retirement Plan

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | December 25th, 2018

Dear Helaine: My husband is 63, and I am 60. We've been married two years.

When we met, he told me he had a solid retirement income. We initially agreed I would retire at about the same time as him, and we would travel. Instead, he retired last year at 62, when he received a $30,000 package for early retirement. I suggested he work another year, and we could retire together, but he said he didn't want to work any longer. My husband then said I needed to work till 62 because he worked till 62.

He micromanages our finances for at least an hour a day. He continually moves money from one account to another to make sure there is only what we need in our checking account. He says if we leave money in the checking account, we will spend it. He's cut back on his cellphone, cable and entertainment.

He made $100,000 a year before he retired. That's three times as much as I earn. He's now telling me to work till I'm 63 because that's when one of his pensions kicks in. Part of my salary goes into my own account, and I only use our joint account for gasoline and groceries.

I know his financial situation allows me to retire earlier than 65, and that's what we planned. I now feel resentment going to work every day while he is not working and controlling the money. -- Love and Money

Dear Love and Money: A lot of people, after they leave the workforce, get extremely concerned about their money. Little wonder. They are now dependent on savings, investments, pensions and Social Security. If they encounter a financial crisis, there is no earning their way out of it. That's scary for many, including, it seems, your husband. After all, he's not just attempting to deny you spending; he's cutting back on things he enjoys as well.

But that doesn't mean his controlling behavior is acceptable. It's not. At best, he pulled a bait and switch on you, and he has serious issues with allowing a partner to have equal say in the marital finances. At worst, he's an abusive spouse, using his greater net worth to lord it over you. Not only would you be inhuman if you didn't feel resentment in this situation, I would be concerned about your psychological well-being if you weren't frightened and furious.

My advice: I would demand the two of you go to a financial counselor jointly, and get a sense from an objective expert what you can and can't spend, how much you can dedicate to travel annually, and when you can afford to retire. If your spouse refuses to go, or continues to attempt to control your spending and otherwise act in an offensive, dictatorial way, I would suggest seeking legal advice. I hate to say it, but it's possible this relationship can't be saved.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

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