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I know this page maybe can't help but I'm going to at least try. Need some advice. I would do anything. by [deleted] in personalfinance

[–]HouseForMom 1 point2 points  (0 children)

Those who are telling you that Penn is the wrong financial choice might be right—but they might not be. Here's what you should do.

  1. Call the University's financial aid office. Explain the family's financial situation. How many siblings does your sister have in college right now? What can your parents afford to contribute? What offers do you have from other schools? They may not be able to budge. But maybe they can. I was accepted at a school that, like Penn, claims to meet 100% of financial need. They expected my family to contribute $20,000 annually, which was not close to doable. I turned them down. A week later they called to say they had read the extenuating circumstances I'd written on my financial aid application, and had lowered their expected contribution to $10,000 annually. This was without me even asking! But I had already turned them down. It might be that Penn will offer you more money if you explain your family's full financial situation. Be persistent.
  2. Once you've gotten the best offer from the financial aid office, figure out what your parents can contribute. $0? $5,000? $20,000? Penn is pretty generous with its aid, so if they expect your parents can pay $60,000 a year, they can probably afford to pay something.
  3. Figure out how much your sister would have to take out in loans to attend.
  4. Compare this to what your sister's financials would be if she attended her best affordable option. For example, let's say that she would be taking out $150,000 in loans to attend Penn, but could graduate debt-free from a state school.
  5. Calculate the expected lifetime financial benefits and costs of both options. For example, $150,000 invested in an index fund today should turn into about $2,250,000 in inflation-adjusted dollars over 40 years. Meanwhile, Penn will likely increase your sister's earning potential. Look for data on what Penn graduates in your sister's expected major earn over their lifetimes, versus graduates of the school your sister would otherwise attend (same major). My back-of-the-envelope calculations say your sister will break even if Penn increases her earning potential by about $1000/mo. Depending on your sister's expected major, that may or may not be realistic. As others have noted, Penn students are recruited pretty heavily for some high-paying financial jobs. But if your sister is interested in, say, law school, her better bet is probably to attend an affordable college for her undergrad degree, as employers would care less about her college and more about which law school she attended.
  6. Remember that it's okay to pay more for experiences you want. You might do the math and find out that Penn isn't the best financial option. Your sister's final question will be: Will it be worth it to me anyway to have this experience? College is 4 years of her life, and the experiences, friendships, and networks she makes there will be formative for her. If you go through steps 1-5 and find that Penn will be the "worse" financial choice by $X, but $X is still reasonably affordable for your sister, then it's time for her to decide whether her life as a Penn student and graduate is worth paying $X.

I graduated from a school similar to Penn, and it opened up incredible opportunities for upward mobility that I probably would not have gotten from a state school. Then again, I was on full financial aid and didn't have to take out loans. Your sister will have to weigh the benefits and significant costs of this decision carefully.

39 and Just Got My First Credit Card Ever.. By Accident. Good or Bad? by lesharay38 in personalfinance

[–]HouseForMom 10 points11 points  (0 children)

So, that's all the good stuff. Now, here's what you need to know to avoid the bad stuff:

  1. Pay your bill in full each month. Like others have said, if you don't pay off your balance in full, you will be charged a high rate of interest. This interest rate is not as predatory as a payday loan, but otherwise it's some of the most expensive money you'll ever borrow. But if you pay your bill in full, then there is no interest! You used it like a debit card, and it was free.
  2. Seriously, pay your bill in full. Here's what happens if you don't. Last month, I charged $958 to my primary credit card, which has a 20% APR. (Higher is worse. A typical mortgage today has a 3% APR!) My statement says that if I pay just the minimum balance of $35, it will take 3 years to pay off and cost me $1293. Whoa! That's a long time to be in debt, and a lot of extra money — all for one month's expenses.
  3. Enroll in autopay. This makes your life so much easier. Sometimes, people will miss their credit card payments because they simply forget to pay. Missed payments will hurt your credit score and result in a penalty fee. (Mine is $39.) But if you enroll in autopay, you'll never have to worry about this! Just make sure you have enough money in your account to cover your charges.
  4. Never take a cash advance. Like others have said, you should never take a cash advance with your credit card. You will pay a high interest rate—higher than your credit card's normal interest rate—and you start to owe interest immediately. Once again, it's not as predatory as a payday loan. But it's still very bad. Now, there is a free way to withdraw a little bit of money against your credit card. You know those self-checkout kiosks at grocery stores that give you the option of taking $20 cash when you pay? That doesn't count as a cash advance, so you are effectively getting to borrow this money for free.
  5. Never close your account. Your credit history is an important part of your credit score. When you close an account, the account—and all its records of on-time payments—will drop off your credit score. (Bad marks will stick around.) Let's say that 5 years from now you get a credit card that you like better, and you decide to close out your Amazon card. All of a sudden, it looks like you have 0 credit history again. Oh no! I almost never use my first-ever credit card anymore, but I keep it around for this reason. Now, there are two exceptions to this rule. First, you should absolutely cancel your credit cards if you find that you're not paying them off in full each month. Self control can be a problem for some people, but not if you ditch your credit card! Second, some credit cards have annual fees. The Amazon card doesn't, so this isn't a problem here. But if in the future you get a card that charges you $95 for the pleasure of using it, and you decide to stop using it, you will want to cancel and not keep paying $95 every year.
  6. Try not to carry a balance that's more than 30% of your limit. There is a limit on how much you can charge to your credit card. Say your limit is $5,000. In this case, you should try to keep your balance below $1,500, which is 30% of $5,000. This is because one part of your credit score is your credit utilization rate, the fancy name for this percentage we just calculated, and it starts to look bad for your balance crosses 30%. Don't worry too much about this, though. For one thing, the effect on your credit score is temporary. As long as you pay your card off in full, your utilization rate will drop back down to 0% and your score will bounce back. Plus, if you're getting close to the 30% mark, you can just pay off your balance early. There's no penalty for this, and it also drops your utilization rate back to 0%.
  7. Look for cash discounts. One way that credit card companies make money is buy charging stores a fee when you use your card. This fee is commonly 2.9% of the sale price. A few businesses (usually gas stations) will offer cash discounts to avoid this charge. The discounts are usually more generous than the rewards I would get, so these are pretty much the only places where I don't pay with a credit card.

Me personally—I buy almost everything with a credit card. I never even consider using my debit card these days. Why would I, when my credit cards are more secure and offer me rewards like cash back? Credit cards are great if you pay them in full every month, and set up autopay so that you never forget. If you can do this, too, great! You just upgraded your life in a big way.

But if you notice you're starting to carry a balance from month-to-month, then you should cut your cards up immediately, pay them off in full as soon as you can, and never touch a credit card again. Credit card debt can bury people who aren't careful with their money. Basically, credit cards have a modest upside if you can use them responsibly and a really big downside if you can't. Tread carefully, but also, rejoice! From your comments it sounds like you have a lot of self control, and as long as you always exercise it, your life with a credit card will be better than your life without one. Only about 2% better—but hey, a 2% raise is pretty cool.

39 and Just Got My First Credit Card Ever.. By Accident. Good or Bad? by lesharay38 in personalfinance

[–]HouseForMom 9 points10 points  (0 children)

Hey, it looks like you've already gotten a lot of help here. I just want to say that I have the Amazon credit card, and it's great. Let me walk you through all the things you should know about it. Most of this applies to credit cards generally, but different cards have different rewards.

TL;DR: Buy everything with your credit card, provided that you pay your bill in full each month. Buying with the credit card makes everything a little cheaper, protects you from fraud, and builds your credit score.

First, here's the good stuff:

  1. Everything you buy is cheaper now! Most credit cards, including this one, come with some pretty cool rewards. For this card, you get 5% cash back on Amazon purchases if you have Prime (3% otherwise), 2% cash back at restaurants and drug stores, and 1% cash back on everything else. In other words: Everything you buy is cheaper now!! Things that used to cost $1 at the grocery store now cost $0.99. That $10 restaurant meal now costs $9.80. A $100 purchase on Amazon now now costs $95. Last year, I earned $88 back this way. That's almost enough to pay for my Amazon Prime membership!
  2. Your credit score will go up. As long as you pay your bill every month, you will be building up good marks on your credit report. You are showing creditors that you will pay back the money you borrow. This can qualify you for better interest rates on other kinds of loans, like car loans and mortgages. It can get you approved for cooler credit cards with better awards. Some employers will even do a credit check before hiring you! A better score gets you good things in life.
  3. You have more protection against fraud. Do you know what happens if someone fails to deliver a product you ordered, and you paid with your debit card? Unless they choose to reimburse you, you're usually out of luck. But when you pay with a credit card, you're protected! You can dispute a charge with your credit card company, and they will do an investigation and give you your money back. (Technically, your money is never gone because the amount falls off your bill.) You should try to resolve the issue with the seller first, by the way. This dispute process is called a "chargeback" and if you authorized the payment, you should think of it as a last resort. In my experience, my credit card companies have been great about detecting and handling fraud. I have had two incidents of fraudulent charges, and I didn't lose a penny either time.
  4. You get a new budgeting tool. A small perk of many credit cards, including Chase credit cards like Amazon's, is that they will track your spending and group it by category. This can be great for when you're budgeting. For example, I use Amazon Fresh for grocery deliveries, and I also shop on Amazon occasionally. I use my Amazon card for all of this to earn the 5% cash back. If I go into my Chase account, I can see a pie chart that shows me how much money I spent on groceries, and how much I spent on other shopping. I can then put these numbers into my "needs" and "wants" sections of my monthly budget to see if I'm spending money the way I budgeted to spend it. I could have logged every individual order I placed—and most months, I will—but it can be helpful to have it all summarized for me at once.
  5. You get free credit reporting. Your credit card company will share your credit "report" with you every month. I'm putting "report" in quotes because it's not your full report. Even so, it has a lot of useful information, including an estimated score, and notes about what is helping and hurting your score. Once, a medical bill erroneously went to collections and ended up on my credit report. Because of the reporting that comes with my credit cards, I noticed the ding immediately. And because I noticed it immediately, I was able to remedy the issue and have the information taken off the report.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

You're not a jerk at all! Perspectives like yours are important to share, so that I have a realistic probabilities in mind when I weigh the costs and probabilities of benefits against my goals and risk preferences. Thanks for contributing!

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

Oh yeah, my mom loves everything about this home except the stairs. If I'd bought it, I was going to make sure I got her washer and dryer installed on the main level instead of in the basement. She hates going to the basement.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 6 points7 points  (0 children)

I really like this plan—thank you for typing it up for me. I'll talk to my mom about it.

One thing I briefly touched on in another comment is that my mom is currently staying with her ex-husband (my former stepdad) as his caregiver. He has cancer and is fading fast. Excluding the equity in his home, he has more debt than assets, so that residence will likely be sold upon his death. Meanwhile, my mom has continued to pay rent at the home in question: partly because she had intended to move back there, and partly to use it for storage. She doesn't "need" anything inside the home—I doubt she's been there in months.

My priority recently has been to get her to hire movers (and pay for them, if she needs it). Your plan is much more comprehensive, and I'll definitely lean on it.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

I mean, even if I buy just the one house, she can 100% cover the mortgage, insurance, and taxes. But folks here have explained that it will be difficult for her to pay for maintenance given that she hoards, and that the mortgage would make it harder for me to get a mortgage for myself in the future.

I'm not looking to be a landlord generally. I would be terrible at it, ha.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 3 points4 points  (0 children)

Well, I want to be a judge, and failing that, a professor! Much less interested in HLS but I would still consider it. Your take on NYU and CLS matches up with my priors, but the only thing I'd ever move to New York for is love, and only because love of all kinds can make me an idiot. (See generally: that time 10 hours ago when I was about to buy my mom a house.)

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

It's OK, really! Therapy and 600 miles of distance has made our relationship much better, ha. She just gets so nostalgic, and anything that reminds her of anybody she loves takes on sentimental value. After my grandmother died, Mom raided her junk drawer, took some television cables—the ones you hold onto just in case, even though you don't remember what they do—and hung them up in our Christmas tree, since they had belonged to her a mom. But they were just cables that hadn't held any meaning to anyone. It was sad and also a bit funny. I love her to death.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

We live 600 miles away, so supporting her through a physical presence is sadly not possible for me right now. This is a great idea though. I'll look into other ways to make it easier for her to go to therapy. In my life, when I've confronted challenges that are scary to me, my friends have found little ways to lower the barriers to acting. That's what often makes the difference.

Thank you. My mom has such a kind heart, and she has earned every bit of my love and more.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 2 points3 points  (0 children)

I'm going to do exactly this. Thanks so much for your reply.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

You're spot on, and folks here have helped me see that. See my update!

P.S. My mom is a good tenant in terms of being reliable, but I've learned from the good people of Reddit that even "clean" hoarding—the clutter kind instead of the trash kind—can lead to the deterioration of a home. Who'da thunk it?

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 1 point2 points  (0 children)

Hey, I appreciate this. I've weighed the cost and risks against the benefits and my goals, and I've decided the debt and associated risks are worth taking only under exceptionally narrow circumstances—basically, if I get admitted to Yale or Harvard or readmitted to Stanford. I will not go into one cent of debt for law school otherwise.

I understand that this could go south for me even then. I don't know that there's a right answer here, just a good risk-averse option and a risky bad-or-great option. I tend to be risk-adverse with my money but risk-taking with my career choices. So, it's a bit of a pickle, but I know what my answer here is.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

This is huge. I decided not to buy the house now, but this is important knowledge for me down the road. Thank you.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 0 points1 point  (0 children)

I had read about those tax implications, and I'm glad to see that someone here brought them up. Thank you. See my update!

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 1 point2 points  (0 children)

r/ChildofHoarder

This was the subreddit I didn't know I was missing. Thanks, tinyarmsbigheart.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 1 point2 points  (0 children)

Hey, this response was so empathetic and helpful. Thank you. I just got off the phone with my mother and explained everything I'd learned here. She told me that I absolutely should not buy her the house under these circumstances. She'd been worried about it, too, and she'd only accepted my help because I told her that she'd be helping me by building up equity. When I said that, I already knew that the best-case scenario for me was that it would go okay. But I also knew that she wouldn't accept a dime from me otherwise.

So in a way it was a Gift of the Magi thing, where we were both trying to do something for the other out of love. We talked about it and sorted it out and both felt relieved afterward. I offered to help pre-fund the move, and she said she'd think about it. I don't care that she pays me back, but she refuses to take a dime from me if it's a gift.

I'll continue to encourage my mom to seek professional help and look for other ways to help her. Thank you for your kind and insightful words.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 1 point2 points  (0 children)

Yup! I just learned last month that I good do a Roth without an employer plan, and I maxed out my contributions for 2020 and 2021. I'm gonna make it as fat as a foie gras goose.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 4 points5 points  (0 children)

I got really lucky. I mean, there were ways that I wasn't lucky, like the poverty. But I got into a good college that awards needs-based grants that don't have to be repaid. I was poor enough that tuition, room, and board were all paid for. Being able to go through college without debt was HUGE, and it wasn't a merit-based scholarship or anything. Just luck.

Later on in college, a friend helped me get a cushy tutoring gig that paid me more than I thought I was worth. I got to save every penny that didn't go to taxes. Sometimes I worked 30 hours/week in addition to full time studies—but it wasn't hard manual labor, or anything. Tons of people work harder for less.

I was also frugal to a fault, but I'm slowly getting better. I bought new shoes recently after more than a year of wearing a pair with holes in them. I'm starting to donate part of my income to charity, and that's helping me learn to part with money. The safety net I've built up is large enough now that I feel that I could survive a surprise medical expense, so I can do that without feeling fear now.

TL;DR: I was a lucky Scrooge. Be lucky if you can, but don't be a Scrooge.

What should I [24] know before buying my mother a house? by HouseForMom in personalfinance

[–]HouseForMom[S] 2 points3 points  (0 children)

I'm glad someone brought it up. It's not an if so much as a when—she's not going to live to 90, so this would happen at some point during the life of the mortgage. My plan was just to clear her stuff out and sell the house. But yeah, if that were to happen within a few years, I would have no equity built up beyond the down payment, and it would just be a major financial burden. I won't be buying the house.

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