Dear Liz: I am 30 and have two sisters, ages 31 and 27. My wife and I both have good jobs that allow us to live comfortably and save for retirement. My sisters, on the other hand, have severe money problems. My older sister works a low-paying retail job. She is unable to save and is currently at risk of having her wages and tax refunds garnished because of unpaid student loans. My mom provides her with support when she asks for it. The other sister still lives at home. While she makes decent money by working two jobs, she spends all of her money on "wants," and my mom pays all of her living expenses. The only bill my younger sister pays is her car payment. She also currently has close to $100,000 in student loans that she just had to start paying on.
I have tried to provide both my sisters with budgeting advice, and I have recommended books that I have used as the blueprint for our budget. Neither of them takes the advice. I have talked to my mom about both sisters' situations. While my mom agrees that both are in bad shape, she is unwilling to show either of them the tough love that they need to improve their situations. Do you have any advice on recommendations that I could make to help any of them out?
Answer: The best advice is to stop offering advice.
Your mom and sisters have made it quite clear they're not interested in what you have to say. Continuing to offer your opinions on their situations would be tiresome and pointless.
Yes, it's hard to watch people struggle when you think you know what could help them. But keep in mind that: a) you might be wrong about what they need right now, and b) nobody asked you, anyway.
If you're passionate about teaching people to manage their finances, you might look into becoming a certified financial planner or other planning professional. The CFP Board of Standards has information at http://www.cfp.net. If people are paying you for your advice, they're somewhat more likely to listen to it.
Otherwise, you'll have a captive audience for your financial teaching if you and your wife should have children. And as a parent, you'll get to experience firsthand how it feels to be the target of unsolicited advice.
Choosing custodial parent for financial aid purposes
Dear Liz: My ex-wife and I are about to start the financial aid process for our eldest child, who goes to college in the fall. My ex happens to have a higher income than me, and has asked me if I'd be willing to have different aid scenarios calculated based on our different incomes and assets. From all the research I've done, though, it seems she is the one who needs to file the Free Application for Federal Student Aid, since she's the custodial parent. It's not possible to choose who the custodial parent is for the purposes of financial aid, right?
Answer: It may be possible, but you have to make the choice well before you file the FAFSA form.
For federal financial aid purposes, the custodial parent whose information is used to calculate financial need is the parent with whom the child lived the most during the 12 months before the FAFSA is filed. With joint custody, the custodial parent is typically the one who provided the most cash support.
Some divorced parents opt to revise their children's living arrangements so that the lower earner becomes the custodial parent. That may require a trip to court to revise a custody agreement. Also, the financial situation of any stepparents would have to be part of the equation, since the income and assets of the custodial parent's spouse (the stepparent) are factored into the federal formula.
Brokerages often buy additional insurance coverage
Dear Liz: You recently explained the insurance limits for brokerage accounts covered by the Securities Investor Protection Corp. I recently retired from the brokerage industry and wanted to add that many firms have additional insurance coverage beyond the SIPC limits.
Answer: Good point. Brokerages often purchase additional coverage from private insurers on top of what's provided by the SIPC. To find out how much coverage may be available, ask your brokerage or conduct a search with the brokerage name and "how are my accounts protected" as a search phrase.