Should elderly parents negotiate settlement on credit card debt?
December 22, 2015 6:01 PM Subscribe
Need advice regarding whether elderly parents (in dire financial straits) should negotiate a settlement on their credit card debt.
This was me a few years ago. My parents are are about to close on selling their house, in which they (thankfully) have a good amount of equity. They also have a lot of debt, so this is pretty much their final chance to wipe the slate clean. Here are the basic numbers:
SO, to arrive (finally) at my question: given their particular circumstances, is it advisable for them to negotiate a settlement on at least part of their credit card debt?
My understanding (I’ve never done this myself) is that the promise of an immediate cash payment can sometimes be leveraged with credit card companies in order to settle for a fraction of the total amount owed. My feeling is that even if they just do this with 3 or 4 of the credit cards where they’re carrying the most debt so that they could save, say, $20-30,000, that would be cash in the bank that would give them an emergency cushion.
However, it’s also my understanding that this is usually a strategy pursued by people who are already behind on payments and are seeking to avoid bankruptcy. Since my parents are actually current with their payments and aren’t considering bankruptcy, would CC companies even be willing to negotiate with them?
If they do pursue this, I’m aware that there are tax implications to settling with credit card companies (i.e., the IRS considers the forgiven amount to be income, which means they’d wind up paying taxes on it), and also that their credit rating would take a hit (though I don’t know if it’s as bad a hit as they’d take with bankruptcy; also, frankly, I think they could do with a little less easy credit, but that's an aside).
Given all of this, does settling on some of their debt seem to be a worthwhile strategy to pursue? And if so, is it worth it for them to pursue it themselves, or is this the sort of thing where you want to hire someone (a lawyer?) to negotiate on your behalf? (If it is advisable to hire someone, any specific recommendations for the Santa Fe/Albuquerque area would be much appreciated. And thanks for reading this far.)
This was me a few years ago. My parents are are about to close on selling their house, in which they (thankfully) have a good amount of equity. They also have a lot of debt, so this is pretty much their final chance to wipe the slate clean. Here are the basic numbers:
• House is selling for about $345,000.Their intention is to pay off all their debt once they get the cash in hand. And of course I fully approve of them getting out of debt, but I’m concerned that once they pay everything off, they will have just enough cash to buy a house (250,000 – 90,000 = 160,000), and then pretty much nothing left over for savings. Because they are not good at living within a budget, I’m certain that without savings, combined with continued easy access to credit, they will start digging themselves into a brand new hole all over again, and we’ll be in a similar spot five or ten years down the road.
• After paying off their mortgage, realtor’s fees, etc., they will come away with just under $250,000.
• They have somewhere in the neighborhood of $80-90,000 in debt, most of which (around 70-80k) is on 9 or 10 credit cards; the remainder is a car loan. (They seem to have managed to juggle all of this debt pretty skillfully, in that they are current on all of their payments, have good credit, and aren’t paying high interest rates and fees.)
• They are relocating to the Phoenix area early next year where they will need to buy a small house or condo with cash. Realistically, based on what they want (and what I know they will tolerate in terms of amenities, location, etc.) they will need to spend around $160,000. (Please assume this is nonnegotiable. The question is not whether they should move to a different city or whether there is cheaper housing in Phoenix.)
• Their only income is $1600/month in Social Security. They have no savings and no retirement accounts. They are not good at living within a budget (in large part because one of my parents still pursues a business that used to be a fairly steady source of good income, but which over the past several years has become primarily an expensive hobby that only rarely breaks even).
SO, to arrive (finally) at my question: given their particular circumstances, is it advisable for them to negotiate a settlement on at least part of their credit card debt?
My understanding (I’ve never done this myself) is that the promise of an immediate cash payment can sometimes be leveraged with credit card companies in order to settle for a fraction of the total amount owed. My feeling is that even if they just do this with 3 or 4 of the credit cards where they’re carrying the most debt so that they could save, say, $20-30,000, that would be cash in the bank that would give them an emergency cushion.
However, it’s also my understanding that this is usually a strategy pursued by people who are already behind on payments and are seeking to avoid bankruptcy. Since my parents are actually current with their payments and aren’t considering bankruptcy, would CC companies even be willing to negotiate with them?
If they do pursue this, I’m aware that there are tax implications to settling with credit card companies (i.e., the IRS considers the forgiven amount to be income, which means they’d wind up paying taxes on it), and also that their credit rating would take a hit (though I don’t know if it’s as bad a hit as they’d take with bankruptcy; also, frankly, I think they could do with a little less easy credit, but that's an aside).
Given all of this, does settling on some of their debt seem to be a worthwhile strategy to pursue? And if so, is it worth it for them to pursue it themselves, or is this the sort of thing where you want to hire someone (a lawyer?) to negotiate on your behalf? (If it is advisable to hire someone, any specific recommendations for the Santa Fe/Albuquerque area would be much appreciated. And thanks for reading this far.)
Best answer: First of all, cut up the cards. That's going to be the hardest part.
It's tough settling debt that is current. Generally the credit card companies will not go lower than 50% of the original sum. DO NOT use a "debt settlement company" or "debt consolidator" from the internet (exception below). I've seen too many frauds over the years to trust any of them. If settlements can be negotiated, you can do it for them if they aren't able to do them on their own. (Get a statutory power of attorney if you don't have one already). Some attorneys do this, but again, be very careful in selecting one. Most of us attorneys in the debtor/creditor area don't like doing it as it is time-consuming and frustrating.
Bankruptcy is not really an option for them in Arizona. The homestead exemption is $150,000 for a married couple, and non-retirement cash is limited to $300.
The one program you may want to consider is Greenpath Debt Solutions. They negotiate to stop interest from accumulating and their clients make one monthly payment. They normally can't reduce the balances, but are quite good at setting up a budget. I've recommended them as a bankruptcy alternative for years, and they are reputable.
I'm familiar with this situation - sadly, once the debt is all paid, people start running up the cards again. Sometimes the pressure of the monthly payment keeps the spending in check.
posted by Sweet Dee Kat at 6:31 PM on December 22, 2015 [8 favorites]
It's tough settling debt that is current. Generally the credit card companies will not go lower than 50% of the original sum. DO NOT use a "debt settlement company" or "debt consolidator" from the internet (exception below). I've seen too many frauds over the years to trust any of them. If settlements can be negotiated, you can do it for them if they aren't able to do them on their own. (Get a statutory power of attorney if you don't have one already). Some attorneys do this, but again, be very careful in selecting one. Most of us attorneys in the debtor/creditor area don't like doing it as it is time-consuming and frustrating.
Bankruptcy is not really an option for them in Arizona. The homestead exemption is $150,000 for a married couple, and non-retirement cash is limited to $300.
The one program you may want to consider is Greenpath Debt Solutions. They negotiate to stop interest from accumulating and their clients make one monthly payment. They normally can't reduce the balances, but are quite good at setting up a budget. I've recommended them as a bankruptcy alternative for years, and they are reputable.
I'm familiar with this situation - sadly, once the debt is all paid, people start running up the cards again. Sometimes the pressure of the monthly payment keeps the spending in check.
posted by Sweet Dee Kat at 6:31 PM on December 22, 2015 [8 favorites]
Response by poster: Sorry to be tactless, but what is their life expectancy?
They're in their early 70s, in relatively good health, and their parents all lived well into their 80s. So I'd say at least another 10 years, possibly more.
First of all, cut up the cards.
They live in another state from me, but if I could get my hands on the cards, I certainly would. Thanks for the suggestion re: Greenpath.
posted by the return of the thin white sock at 6:42 PM on December 22, 2015
They're in their early 70s, in relatively good health, and their parents all lived well into their 80s. So I'd say at least another 10 years, possibly more.
First of all, cut up the cards.
They live in another state from me, but if I could get my hands on the cards, I certainly would. Thanks for the suggestion re: Greenpath.
posted by the return of the thin white sock at 6:42 PM on December 22, 2015
If you haven't already done so, consider what they will pay in capital gains tax once their house is sold.
You need to find out what happens to debt if the debtor dies -- both if they leave any estate, and if they don't. You're thinking that it's virtuous to pay all the debts, and maybe it is. But if they pass away, under certain circumstances the heirs don't end up having to pay the debts of the deceased. I don't feel certain enough of the facts to tell you more about this, but you can find out.
Also investigate bankruptcy. If your parents won't be hurt by a big hit on their credit rating, it might be wise for them to file for a type of bankruptcy.
They need to understand that they must stop spending beyond their modest means. I suggest you tell your mom and dad right now that you have little or no money to give them once they are broke -- even if it's not true. If you don't want to lie about it, start putting away the amount of money that will set you up safely for retirement; that will probably make your "I can't afford it" into a true statement.
It sounds like they have a spending problem. In my opinion, the best way to curb the spending is for them to go all-cash. It's a lot less convenient, but if they have no way to "charge it" they can't overspend.
My own 88-year old parents aren't realistic about money; if I had to make decisions for them, I would take control of their remaining cash and mete it out to them as if it were an allowance. (Not saying you should do this; you probably can't.) When people don't make the right choices for themselves, it can be a bad idea for their family to assume that they will change their habits. Keep in mind that if something doesn't change, they may want to live with you at some point. For me, this would sound some very loud alarm bells. Find out what their assumptions are about very real future in which they won't be able to support themselves, and say them all out loud. Say clearly what you will and won't do for them. Keep repeating it if it keeps coming up.
posted by wryly at 6:51 PM on December 22, 2015 [3 favorites]
You need to find out what happens to debt if the debtor dies -- both if they leave any estate, and if they don't. You're thinking that it's virtuous to pay all the debts, and maybe it is. But if they pass away, under certain circumstances the heirs don't end up having to pay the debts of the deceased. I don't feel certain enough of the facts to tell you more about this, but you can find out.
Also investigate bankruptcy. If your parents won't be hurt by a big hit on their credit rating, it might be wise for them to file for a type of bankruptcy.
They need to understand that they must stop spending beyond their modest means. I suggest you tell your mom and dad right now that you have little or no money to give them once they are broke -- even if it's not true. If you don't want to lie about it, start putting away the amount of money that will set you up safely for retirement; that will probably make your "I can't afford it" into a true statement.
It sounds like they have a spending problem. In my opinion, the best way to curb the spending is for them to go all-cash. It's a lot less convenient, but if they have no way to "charge it" they can't overspend.
My own 88-year old parents aren't realistic about money; if I had to make decisions for them, I would take control of their remaining cash and mete it out to them as if it were an allowance. (Not saying you should do this; you probably can't.) When people don't make the right choices for themselves, it can be a bad idea for their family to assume that they will change their habits. Keep in mind that if something doesn't change, they may want to live with you at some point. For me, this would sound some very loud alarm bells. Find out what their assumptions are about very real future in which they won't be able to support themselves, and say them all out loud. Say clearly what you will and won't do for them. Keep repeating it if it keeps coming up.
posted by wryly at 6:51 PM on December 22, 2015 [3 favorites]
Maybe I'm misunderstanding something here, but if they're buying a house with cash, why would they bother paying off their debt first? I mean, if they're not trying to pursue a mortgage, who cares what order it's all in? Are they deliberately trying to spend down their assets to qualify for Medicaid? If so, they might talk to a financial planner about placing some of that cash into an annuity instead of paying down the debt, if they're really not experiencing adverse effects from floating it all.
posted by juniperesque at 6:54 PM on December 22, 2015 [6 favorites]
posted by juniperesque at 6:54 PM on December 22, 2015 [6 favorites]
Couldn't they pay off a few of the cards (and close the accounts!) so they have to make less monthly payments and keep the rest as savings? At least try to negotiate one card and see how it goes. Investigate which CC companies are most willing to negotiate.
posted by blackzinfandel at 7:19 PM on December 22, 2015
posted by blackzinfandel at 7:19 PM on December 22, 2015
If it were my parents, I would recommend they stay current but not pay them off or settle. Liquidity is key here. I would wait until they are settled in AZ to decide to offer.
posted by AugustWest at 8:20 PM on December 22, 2015 [4 favorites]
posted by AugustWest at 8:20 PM on December 22, 2015 [4 favorites]
You fear they will pay off their unsecured debt and, without a savings cushion, gradually crawl right back in the hole. Even if you are correct, their assets at death, including that mortgage-free new house, will settle their debt. Assuming your name is not on any of the credit card accounts (and you should check to be sure that it isn't -- parents sometimes do unexpected things for inscrutable reasons), unsecured debt is never "passed on" to the children. You may inherit nothing else, but you will not inherit unpaid credit card bills.
In your place, I would certainly encourage them to try to negotiate debt reduction, but I wouldn't be optimistic. If it's going to work, your chances are probably best before they are flush from the house sale. Then, you might suggest consolidating the debt payoff (or even part of it) in a 10-year mortgage on the new house in order to reserve a cash cushion or, as suggested above, invest in an annuity. Mortgage interest would be much lower and also tax-deductible (at their income level, that might not really benefit them, but the argument has emotional power nevertheless).
If you and your sibling have reached the decision that you cannot be their cushion, say so in clear terms. If you can bring yourself to do it, discuss with your parents how they would want you and your sibling to proceed if the day should come when "ill-advised decisions" start to look like "evidence of dementia and legal incompetence". Until then, I'm sure you know -- your parents are adults who deserve to run their own lives, even if, in your loving judgment, they are doing it all completely wrong.
posted by peakcomm at 8:43 PM on December 22, 2015 [1 favorite]
In your place, I would certainly encourage them to try to negotiate debt reduction, but I wouldn't be optimistic. If it's going to work, your chances are probably best before they are flush from the house sale. Then, you might suggest consolidating the debt payoff (or even part of it) in a 10-year mortgage on the new house in order to reserve a cash cushion or, as suggested above, invest in an annuity. Mortgage interest would be much lower and also tax-deductible (at their income level, that might not really benefit them, but the argument has emotional power nevertheless).
If you and your sibling have reached the decision that you cannot be their cushion, say so in clear terms. If you can bring yourself to do it, discuss with your parents how they would want you and your sibling to proceed if the day should come when "ill-advised decisions" start to look like "evidence of dementia and legal incompetence". Until then, I'm sure you know -- your parents are adults who deserve to run their own lives, even if, in your loving judgment, they are doing it all completely wrong.
posted by peakcomm at 8:43 PM on December 22, 2015 [1 favorite]
Best answer: A consultation with a financial planner and an elder law attorney could give you more information about options for you and your parents:
The Legal Resources for the Elderly Program (LREP) is a free, statewide helpline for New Mexico residents age 55 and older. The Program does not have any income restrictions. LREP can be contacted at (505)797-6005 or 1-800-876-6657.posted by Little Dawn at 9:51 PM on December 22, 2015 [3 favorites]
I agree that you need an eldercare financial planner, but I think the overall strategy should be to preserve capital and negotiate the smallest monthly payment possible on the grounds that the debt will outlive them.
posted by DarlingBri at 11:05 PM on December 22, 2015 [4 favorites]
posted by DarlingBri at 11:05 PM on December 22, 2015 [4 favorites]
I had a comment here, and it was removed, primarily because I addressed a different issue. So I'll address your question first:
There is no incentive at this time for any credit card company to settle the debt. If your parents are current it's more profitable for the credit card companies to continue on collecting interest and a monthly payment. If your parents have money in the bank, the credit card companies will simply sue them and they'll have to pay not only the debt, but all the court fees as well.
Settlement only works when the credit card companies believe that some is better than none.
The financial plan you've laid out is pretty terrible. You're right to be concerned that there is no reserve for contingencies. Unless your parents change their relationship with money, they will always be in debt and living hand to mouth.
There are things one needs to know about owning a home in Arizona, and frankly, the fact that elderly people want to purchase a home shows a fundamental lack of understanding of finances.
Here's the information I gave in my previous answer, take it for what it's worth.
What benefit does owning a home offer your parents? They tie up a considerable amount of capital, and put themselves in financial risk because they'll be living on the edge once they've purchased. What happens if they need to replace a roof or an HVAC system?
The market in Phoenix is volatile. Just look at what happened in 2008. Property values dropped by half. There are concerns about water and drought in the southwest. The climate has changed considerably in the 30 years since I lived there and it's only getting dryer. This will affect property values as well.
Electricity in Phoenix is expensive Typical monthly bills run in excess of $400 a month. If your parents buy in a planned community or condo, there will be monthly maintenance fees, probably in the neighborhood of $200-$300 per month. Then there are other expenses, homeowners insurance, property taxes, and Medicare will probably eat up around $600 a month. Then there are repairs, groceries, gas, etc. That monthly $1600 won't go far. Certainly there won't be any money left over for saving or really big emergencies.
The most important thing is that unless your parents materially change their relationship with money, they will be back in debt in very short time. There's really no way, especially with this current financial plan that they won't be.
Money doesn't solve money problems. Changing behavior does. The mere fact that they think this is a good idea shows that they don't understand how and why they're in a financial crisis, or how to make the changes.
My own opinion is that there is NO benefit to owning a home. There isn't financial security for elderly people. What if someone needs to move to assisted living? What if someone becomes incapacitated? Then there's caretaking of the partner AND the house. Additionally, in houses built in the 2000's, there's an issue with Chinese Drywall. Who needs it?
It would be better to find a small apartment, easier to care for, cheaper to maintain. No insurance, no maintenance fees, no property tax.
Normally, I'd let the fact that my comment was deleted go. But I'm really concerned that this opportunity to start over and to be at financial peace will turn into the biggest financial nightmare.
I have friends whose parents are exactly like yours. They are in their sixties, they had two businesses fail, and they declared bankruptcy. The father got a job with the state, the mother is working a part-time job with the schools. They were living in a rental and making expenses okay. Then they decided that they HAD to own a home, so they bought a house with no money down. The first month the place flooded and the insurance didn't cover all the expenses, so they've been living in a construction zone. Just last week, the father was diagnosed with memory issues and on-set of dementia. They have been advised for him to file for disability. Mom is in denial about how dire her financial situation is. This is no way to live out your golden years, or to visit financial disaster on grown children raising their own families. That house? They own more than it's worth right now. Can't get out of it if they tried.
Seventy is not a good time to put 100% of your money into a home. I might be swayed if they could buy a home for $80,000. But even then, I still think that renting is better.
Get to a financial planner to help your parents learn how best to handle this second chance. Don't let it be the biggest regret of their lives.
posted by Ruthless Bunny at 4:55 AM on December 23, 2015 [12 favorites]
There is no incentive at this time for any credit card company to settle the debt. If your parents are current it's more profitable for the credit card companies to continue on collecting interest and a monthly payment. If your parents have money in the bank, the credit card companies will simply sue them and they'll have to pay not only the debt, but all the court fees as well.
Settlement only works when the credit card companies believe that some is better than none.
The financial plan you've laid out is pretty terrible. You're right to be concerned that there is no reserve for contingencies. Unless your parents change their relationship with money, they will always be in debt and living hand to mouth.
There are things one needs to know about owning a home in Arizona, and frankly, the fact that elderly people want to purchase a home shows a fundamental lack of understanding of finances.
Here's the information I gave in my previous answer, take it for what it's worth.
What benefit does owning a home offer your parents? They tie up a considerable amount of capital, and put themselves in financial risk because they'll be living on the edge once they've purchased. What happens if they need to replace a roof or an HVAC system?
The market in Phoenix is volatile. Just look at what happened in 2008. Property values dropped by half. There are concerns about water and drought in the southwest. The climate has changed considerably in the 30 years since I lived there and it's only getting dryer. This will affect property values as well.
Electricity in Phoenix is expensive Typical monthly bills run in excess of $400 a month. If your parents buy in a planned community or condo, there will be monthly maintenance fees, probably in the neighborhood of $200-$300 per month. Then there are other expenses, homeowners insurance, property taxes, and Medicare will probably eat up around $600 a month. Then there are repairs, groceries, gas, etc. That monthly $1600 won't go far. Certainly there won't be any money left over for saving or really big emergencies.
The most important thing is that unless your parents materially change their relationship with money, they will be back in debt in very short time. There's really no way, especially with this current financial plan that they won't be.
Money doesn't solve money problems. Changing behavior does. The mere fact that they think this is a good idea shows that they don't understand how and why they're in a financial crisis, or how to make the changes.
My own opinion is that there is NO benefit to owning a home. There isn't financial security for elderly people. What if someone needs to move to assisted living? What if someone becomes incapacitated? Then there's caretaking of the partner AND the house. Additionally, in houses built in the 2000's, there's an issue with Chinese Drywall. Who needs it?
It would be better to find a small apartment, easier to care for, cheaper to maintain. No insurance, no maintenance fees, no property tax.
Normally, I'd let the fact that my comment was deleted go. But I'm really concerned that this opportunity to start over and to be at financial peace will turn into the biggest financial nightmare.
I have friends whose parents are exactly like yours. They are in their sixties, they had two businesses fail, and they declared bankruptcy. The father got a job with the state, the mother is working a part-time job with the schools. They were living in a rental and making expenses okay. Then they decided that they HAD to own a home, so they bought a house with no money down. The first month the place flooded and the insurance didn't cover all the expenses, so they've been living in a construction zone. Just last week, the father was diagnosed with memory issues and on-set of dementia. They have been advised for him to file for disability. Mom is in denial about how dire her financial situation is. This is no way to live out your golden years, or to visit financial disaster on grown children raising their own families. That house? They own more than it's worth right now. Can't get out of it if they tried.
Seventy is not a good time to put 100% of your money into a home. I might be swayed if they could buy a home for $80,000. But even then, I still think that renting is better.
Get to a financial planner to help your parents learn how best to handle this second chance. Don't let it be the biggest regret of their lives.
posted by Ruthless Bunny at 4:55 AM on December 23, 2015 [12 favorites]
>Maybe I'm misunderstanding something here, but if they're buying a house with cash, why would they bother paying off their debt first?
Someone with $80-90,000 in consumer debt is paying up to $2,000 per month in interest charges. That itself is sufficient reason to pay off all, or the largest part of it, early.
posted by yclipse at 4:57 AM on December 23, 2015
Someone with $80-90,000 in consumer debt is paying up to $2,000 per month in interest charges. That itself is sufficient reason to pay off all, or the largest part of it, early.
posted by yclipse at 4:57 AM on December 23, 2015
As far as I'm concerned, dying with a bunch of debt is winning. I'd do the minimum to service the debts (even looking at refinancing at lower interest rates), and maybe talk to a financial advisor about putting my house out of reach of my estate should I die.
posted by Leon at 5:12 AM on December 23, 2015 [6 favorites]
posted by Leon at 5:12 AM on December 23, 2015 [6 favorites]
I am not a lawyer or tax accountant, and I don't know where your parents are currently living, so please take this advice with a grain of salt. That said, if these were my parents here is what I would suggest.
1. Do not sell their current home immediately. Make sure it is registered as a homestead in their state, so it is protected from bankruptcy.
2. File for bankruptcy. Don't feel guilty about this. Credit card companies prey on people who cannot manage their finances. Your parents can and should walk away from this debt. Depending on the laws of their current state of residence, all of the value of their house could be protected. Filing for bankruptcy also has the advantage of lowering your parents' credit rating, so it will be harder for them to get back into debt.
3. Once sufficient time has passed after the bankruptcy, they can go ahead and sell their current home and move to Phoenix or wherever else they want.
You and your parents may feel like they're being nice or honorable by paying half of their life savings to these large predatory corporations. That is misguided. Corporations don't have feelings, and they won't feel hurt if your parents file for bankruptcy. These corporations aren't honorable, and feeling like you need to pay them out of a sense of honor is an unreciprocated burden. They have likely taken advantage of your parents for years. Bankruptcy is structured into the laws of our country, and is an implied exit within all the contracts your parents have signed. They should take advantage of that exit.
posted by alms at 5:54 AM on December 23, 2015 [5 favorites]
1. Do not sell their current home immediately. Make sure it is registered as a homestead in their state, so it is protected from bankruptcy.
2. File for bankruptcy. Don't feel guilty about this. Credit card companies prey on people who cannot manage their finances. Your parents can and should walk away from this debt. Depending on the laws of their current state of residence, all of the value of their house could be protected. Filing for bankruptcy also has the advantage of lowering your parents' credit rating, so it will be harder for them to get back into debt.
3. Once sufficient time has passed after the bankruptcy, they can go ahead and sell their current home and move to Phoenix or wherever else they want.
You and your parents may feel like they're being nice or honorable by paying half of their life savings to these large predatory corporations. That is misguided. Corporations don't have feelings, and they won't feel hurt if your parents file for bankruptcy. These corporations aren't honorable, and feeling like you need to pay them out of a sense of honor is an unreciprocated burden. They have likely taken advantage of your parents for years. Bankruptcy is structured into the laws of our country, and is an implied exit within all the contracts your parents have signed. They should take advantage of that exit.
posted by alms at 5:54 AM on December 23, 2015 [5 favorites]
Response by poster: Re: bankruptcy: believe me, I've thought for awhile that it's their best option, but I am alone in this opinion in my family. I have broached the subject with them a few times over the years, and they have categorically refused to consider it every time. In any case, they got an offer on the house last week and they're moving forward with selling.
Re: renting: they considered renting initially, and I thought it was a good idea at first, too, but my sibling pointed out that since they have such low income that, assuming they'll both live into their 80s, they'll almost certainly spend through their cash on rent before they die, at which point they'll have nothing to show for it -- in other words, they'll reach their 80s and be out of money and have no home.
Re: concerns about Phoenix in particular: they already live in the Southwest and want to stay there, and the Phoenix area is the best option for them for Reasons. They don't want to move to state where my sibling and I live because it isn't any cheaper (and our water situation isn't any better).
Re: "money doesn't change money problems; behavior does" -- I agree, 100%. Unfortunately, they've behaved this way their entire lives, and only one of the two of them seems even slightly inclined to consider that what needs to change here is their behavior. Unless and until they both get entirely on board with changing their behavior, the present set of circumstances is the reality of what we're dealing with.
Re: financial advisers -- if anyone has any specific recommendations for the Santa Fe/Albuquerque area, please share them.
posted by the return of the thin white sock at 12:29 PM on December 23, 2015
Re: renting: they considered renting initially, and I thought it was a good idea at first, too, but my sibling pointed out that since they have such low income that, assuming they'll both live into their 80s, they'll almost certainly spend through their cash on rent before they die, at which point they'll have nothing to show for it -- in other words, they'll reach their 80s and be out of money and have no home.
Re: concerns about Phoenix in particular: they already live in the Southwest and want to stay there, and the Phoenix area is the best option for them for Reasons. They don't want to move to state where my sibling and I live because it isn't any cheaper (and our water situation isn't any better).
Re: "money doesn't change money problems; behavior does" -- I agree, 100%. Unfortunately, they've behaved this way their entire lives, and only one of the two of them seems even slightly inclined to consider that what needs to change here is their behavior. Unless and until they both get entirely on board with changing their behavior, the present set of circumstances is the reality of what we're dealing with.
Re: financial advisers -- if anyone has any specific recommendations for the Santa Fe/Albuquerque area, please share them.
posted by the return of the thin white sock at 12:29 PM on December 23, 2015
Re: renting: they considered renting initially, and I thought it was a good idea at first, too, but my sibling pointed out that since they have such low income that, assuming they'll both live into their 80s, they'll almost certainly spend through their cash on rent before they die, at which point they'll have nothing to show for it -- in other words, they'll reach their 80s and be out of money and have no home.
This is wrong. Let's assume that owning a home will cost around $450 in maintenance fees (condo or community,) taxes and insurance. In fact, that's conservative. In this case the difference in monthly outgo is $550 monthly.
If the $160,000 was in a conservative savings account, yielding 1% per month, that's $133 a month income, without touching the principle.
So if there's $1,600 in Social Security and $133 in interest payments, the budget would be tight, but they could make it if they could find a cheap apartment.
At the very least they can't put EVERY LAST CENT into buying the home. What if taxes go up? What if insurance goes up? What if they need mold abatement? What if the car needs to be replaced? There's no cushion whatsoever. Please impress upon them the folly of spending so much on a home. Could they find something for half the price? They can't afford $160,000.
Here are some places in Peoria that would be affordable for them.
It sounds like you really need to sit down with a financial counselor so that everyone can understand what's actually affordable. There's a lot of magical thinking going on here.
posted by Ruthless Bunny at 12:58 PM on December 23, 2015
This is wrong. Let's assume that owning a home will cost around $450 in maintenance fees (condo or community,) taxes and insurance. In fact, that's conservative. In this case the difference in monthly outgo is $550 monthly.
If the $160,000 was in a conservative savings account, yielding 1% per month, that's $133 a month income, without touching the principle.
So if there's $1,600 in Social Security and $133 in interest payments, the budget would be tight, but they could make it if they could find a cheap apartment.
At the very least they can't put EVERY LAST CENT into buying the home. What if taxes go up? What if insurance goes up? What if they need mold abatement? What if the car needs to be replaced? There's no cushion whatsoever. Please impress upon them the folly of spending so much on a home. Could they find something for half the price? They can't afford $160,000.
Here are some places in Peoria that would be affordable for them.
It sounds like you really need to sit down with a financial counselor so that everyone can understand what's actually affordable. There's a lot of magical thinking going on here.
posted by Ruthless Bunny at 12:58 PM on December 23, 2015
Response by poster: It sounds like you really need to sit down with a financial counselor so that everyone can understand what's actually affordable. There's a lot of magical thinking going on here.
I would love to. Do you have any recommendations for someone in the Santa Fe or Albuquerque area?
posted by the return of the thin white sock at 1:04 PM on December 23, 2015
I would love to. Do you have any recommendations for someone in the Santa Fe or Albuquerque area?
posted by the return of the thin white sock at 1:04 PM on December 23, 2015
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posted by bq at 6:25 PM on December 22, 2015 [6 favorites]