Pay Dirt is Slate’s money advice column. Have a question? Send it to Lillian, Athena, and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
Much to our surprise, my new spouse and I received about $15,000 for our wedding (Yay! Wow!)! We also have about $10,000 in credit card debt and over $50,000 in student loan debt combined (though we both applied for federal student debt relief, which will hopefully pass). Right now, we’re feeling very lucky and very overwhelmed—neither of us comes from a very financially literate family, and aren’t sure what to do with the money. Could you help us figure out some of the best options?
Right now we’re discussing either completely paying off the credit card debt and saving what’s left over OR continuing to do our minimum monthly payments on the credit card debt and immediately putting all of the gift money into some kind of savings account (what kind, we’re not sure). Either way, we also think it’d be best to just keep continuing our regular monthly student loan payments and not use that gift money for that at all. These sums might seem small to some readers but we’re absolutely blown away by the generosity of our loved ones. We’re both in very rewarding but low-paying fields, so this amount of money is a lot more than what either of us has seen at one time, despite slowly building up our savings outside of this gift.
—To Pay or to Save
Dear Pay or Save,
I’m all about a side hustle, and now I know apparently, wedding gifts can make it happen.
As of now, student loan payments are suspended until the Supreme Court rules on the future of the student loan forgiveness plan (payments will start 60 days after their decision). If the issue isn’t resolved by June 30, 2023, payments will then resume 60 days after that. With that being said, you have some options to make your windfall work for you.
You shared in the initial letter that you and your husband both have careers that aren’t necessarily making you a ton of money. With your tight financial situation, it’s a good idea to assess how much cash you have access to should an emergency arise—cash can go a lot further than an emergency fund you have to finance. I always recommend starting with $1,000, then working your way up to the amount of money you would need to cover necessary expenses for three months.
If you’re covered on that end, I recommend treating yourself to something fun as a couple and then something that would make your quality of life better. Whatever cash is remaining, I would then use to pay off your credit card debt. The interest that is most likely accruing on your credit cards cancels out the gains you’d make in a savings account. If you still have remaining debt left over, create a plan that will help you pay it off, then put the money you freed up that you were using for payments toward other areas of your budget that could use some TLC. I wish you the best of luck on your new journey.
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Dear Pay Dirt,
My husband and I are in our 50s and this is the second marriage for both of us. At the start of the new year, we decided to review our finances/wills/etc ,to make sure everything is in order.
We discussed what our children (he has two kids in their 20s and I have a daughter who is a senior in high school) will receive if we die. His children will each get about $1.5 million. I would get my husband’s 401(k) (worth close to $1 million). So his total assets are about $4 million. I have about $1.3 million in assets including the value of my home, and I have a $1.5 million term life insurance policy that ends when I turn 80. My daughter will get $1 million of that plus my other assets and my husband will get $500,000 from my life insurance.
My husband has asked me to also leave him my 401(k) which is currently worth about $350,000. He says he doesn’t “need” the money, but it would make him feel better if assets were more evenly distributed between himself and my daughter.
I have financial anxiety from growing up with a family that had nothing. My parents died in their 70s in debt and owing on a mortgage. I didn’t receive any financial support from them growing up and I divorced my first husband primarily due to financial abuse. I don’t want my daughter to struggle the way I did, and I realize logically that I am leaving her with plenty, but in my head, it will never be enough. The life insurance isn’t guaranteed if I (hopefully) live past 80. My husband inherited a substantial amount from his dad and will likely inherit another windfall from his uncle in the next decade. I don’t want my husband to be upset with me, but I am struggling with turning over my 401(k) to him, although he is giving his to me. I don’t know what the right answer is, but I would prefer to leave things as they are.
—Can There Ever Be “Even”?
Dear Even,
It sounds like your husband is a little insecure, and I’m not sure why. He admitted he doesn’t need the money, so what does it matter if he’s only getting $500,000 if he has $4 million in assets? Especially since he’s set to inherit even more money.
As a parent, you want to ensure that your daughter is OK after you’re gone, and you’re doing that how you see fit. So no, don’t direct the 401(k) to him. If he asks why explain to him what you’ve told me here: that you have a lot of financial trauma leftover from your childhood and the first marriage that you’re working through. Due to this, you feel more comfortable having your estate drawn up the way it is, ensuring that your daughter is taken care of. If he continues, remind him that it’s nothing against him, this is just how it is for now and you’d be open to talking about it next time you revisit your estate.
If he insists, the next step is to ask yourself how important it is for you to have his 401(k) because if this is the hill you guys are fighting on, it may make sense to tell him you no longer wish to have it. You know, for the sake of fairness.
Dear Pay Dirt,
My husband has two college-educated daughters. I have a teenage son and we adopted opposite-sex twins. We have a four-bedroom house. Our twins are turning 11 this year and it is high time they have their own spaces. But when my stepdaughters moved home, they moved all their stuff into the fourth bedroom.
They live with their mother whose home is much smaller. Both my stepdaughters work but as far as I can tell haven’t been bothering to look or even save for an apartment. When anyone brings up the subject, they claim they are “working” on it. In the mean time, they pay no rent, and their mother, father, and I are covering their car notes.
I keep pushing for the girls to either sell the stuff they don’t want or move the rest into a storage locker. They don’t want to—it is too expensive and not fair to them. They had enough money to fly down to Mexico four times last year to see friends. I have always tried to let my husband deal with his girls since I came in so late in their lives, but I have to put my foot down here. Our children need their own bedrooms. It is that simple. My stepdaughters need to get their acts together. They are both driving basically brand new cars while mine is the same age as my youngest children—they can share a storage unit. How far do I need to push this?
—No Room
Dear No Room,
At first, I was going to give them the benefit of the doubt because rent is too damn high but then read they are partying it up in Mexico with their friends. Since their answers are vague, I assume they’re taking advantage of the fact that both of their parents enable them. You can always tell someone you dislike their actions, but until you combine it with a consequence that you follow through on, it’s just fluff. I’m also slightly disappointed that your husband seems to be more preoccupied with making sure his daughters’ stuff is accommodated than making sure your twin’s needs are met.
Since action speaks louder than words, get some free boxes and place them in the spare room. Next, look up nearby storage units located in your area and create a list of three to five places. Then tell your husband that you’re willing to help his daughters move their belongings so your twins can get their own spaces.
After you let him know, reach out to your stepdaughters and explain that while you know they are currently looking for their place at the moment, you need the room back, and you’re happy to help them go through their belongings, with everything needing to be out within a month. If they claim they can’t afford it, let them know that the average storage unit is only about $180 a month and that together they should be able to cover the costs, especially since you are paying their car payments. Unfair? So is, their siblings not being able to have their own spaces because their sisters are using the spare room as a storage unit. Then give them a list of the units you found nearby.
For the next month, start packing up their stuff and find somewhere outside the room to stack it. By taking action, you are sticking up for yourself and showing everyone how serious you are about it needing to leave. If your husband refuses to have your back or makes excuses for his daughters then I think the next step is couples counseling.
Dear Pay Dirt,
I’m a single woman in my late 20s living in a very large city that has a lot of income disparity and I work as a high school teacher at a school where most students live in poverty. My friends are mostly similar to me in age and make a range of incomes, with some of the coupled friends making in the mid-six figures (I only know this information because they have shared it). A number of those couples make jokes about having “too much money to know what to do with” and how they “keep getting promoted, but can’t think of what to do with the extra income.” In such moments, is there any way to appropriately ask them about donating to my “Adopt a Classroom” page or the various GoFundMe’s my students will sometimes put up for things like unexpected medical expenses, looming college expenses, or family tragedies? My paycheck only goes so far and already I dedicate a chunk of money to school supplies, as well as supporting my students. I know money is personal and my friends are entitled to spend theirs however they like. I just wonder if there is a way to bring up the idea of them sharing some of their wealth or if that would be incredibly rude.
—Less Resourced Teacher With More Resourced Friends
Dear Less Resourced,
If someone purposely tells you they have too much money than they know what to do with, it’s only right as a good friend that you help them. Who doesn’t want the satisfaction of donating to a good cause?
People pay attention when they can form a personal connection with a fundraiser. This is what inspires them (and you to) donate. How many times have you seen an American Society for the Prevention of Cruelty to Animals commercial and then reached for your credit card while bawling?
Figure out your own personal connection to your fundraiser so you can share the why behind it. Also, be ready to share how they can donate and any tax credits they can receive because of said donation. For example, if I was the person raising your scenario above, I’d say, “Let me know if you’d ever be interested in donating to the GoFundMe I created for my students. I don’t know if I ever told you I was homeless in high school after my mom died. One of my teachers really helped me through that time and that’s why I decided to help pay it back to some other kids who could be in my situation. The State of Arizona offers a tax credit if you donate so let me know if you’re ever interested. I can send you the link to both.”
Not only did I create a personal connection to my cause and explain about the tax credit, I even offered to do the legwork for them so all they need to do is swipe a card. The squeaky wheel gets the oil, so get to squeaking.
—Athena
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