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Dear Pay Dirt,
My partner (57 M) and I (64 F) have been together for 12 years. We each have two adult children. The two youngest were still at home for the first few years of our relationship. We all melded well and are close with a shared granddaughter from his youngest son. We didn’t formally live together for the first six years of our relationship.
In 2020, my partner was given the opportunity to put a home on family land. We agreed we’d do this together with the understanding that neither myself nor my children would have any inheritance rights. I designed the entire interior of our home and almost the entire contents are mine from previous homes and what I purchased for our current home. We do not commingle funds but have had a workable arrangement all these years about who pays what of the household expenses. Right now, he pays the mortgage (including taxes and insurance) and I pay everything else. Previously, I had paid the rent and food and he paid everything else. He does pay my car insurance and cell phone and I’m on his eye and dental plan through his job. We each have personal credit cards and other personal expenses. That’s just a small overview.
Throughout our years together, I have experienced several bouts of relatively serious illnesses. For the most part, they have resolved but a couple are chronic conditions that will eventually get worse and will kill me. I have had a great job managing a retail gift store in a tourist area throughout our years together. The lease on the store is up this year and a year ago, I informed my employers that I was not interested in going forward with the position when it ended. My partner was fully aware of this and that my retirement income would be minimal with Social Security of about $1,500/month and interest from a small inheritance from my mother.
Two months ago, he informed me that he was in credit card debt of over $30,000 and had been having a hard time making the mortgage payment (he’d already refinanced once to pay off credit card debt making the mortgage payment go from an affordable $900/month to $1,400.) He signed up with a debt resolution company and currently has biweekly payments and no credit at age 57. I, on the other hand, planned for a significant drop in income and will be almost debt-free when I retire. I’ve had some serious health problems throughout the years we’ve been together but most have been resolved except those that are chronic and will ultimately cause my death. I feel financially betrayed. I very much want to retire and enjoy a life free of work stresses and finally have time to exercise, bake bread, and make friendships. I bought an affordable camper with a small amount of my inheritance so we could also do some traveling with the understanding that my partner would help with the cost of the actual travel. At this point, I am considering selling the camper and moving to a subsidized housing situation. I am so angry with him. Yet we have built so much together and for the first time in my life, I felt secure. I would hate to do this to our families but I feel so betrayed. What should I do?
—Financially Betrayed and Scared
Dear Financially Betrayed and Scared,
There’s a lot to unpack here. Your partner’s actions are a financial and emotional betrayal of the highest order. That’s why it hurts so much. You trusted your partner with your financial security, yes, but also your heart. To find out that he lied about something so central to the core of your being—your current and future security—is extremely tough.
You planned for your retirement as best you could with the information you were given. After 12 years, six of which you’ve built a house and lived together, it’s difficult to understand why your partner couldn’t own up to his financial issues sooner. My guess is he’s embarrassed. For too long he’s been funding your joint lifestyle on his credit card, and got to a place where that was no longer feasible. (It’s not an uncommon spot to be in—one survey found that 15 percent of American survey respondents who have credit card debt are carrying a balance of $30,000 to $50,000.)
The question now is what’s next? You don’t own the house, but it contains a lot of your own property. If you leave, will you take it, along with your camper and retirement funds? Is there any paperwork governing your relationship to these items if, for example, your partner precedes you in death? Do his children recognize your right to these items or would you face a fight over them?
At the end of the day, you’ll have to decide whether you can get past your anger and forgive your partner for his financial indiscretions. If you can, then you both need to decide how you’ll move forward financially. If the house isn’t affordable on your joint income, you have a few options: Perhaps his children can help, since they will inherit the property. Or, perhaps your children can step up, but if they do, make sure this is documented and the ownership structure of the property is changed to reflect your children’s financial involvement. Finally, there are companies like Unlock and Hometap that will give you cash in exchange for a share of your home’s equity. If your expenses have stabilized, this might be a way for your partner to get out from under the debt, so you two can move forward.
If you can’t get past the pain of it all, then gather the family together, talk about what’s happened, and explain why you’re leaving. You deserve the peaceful retirement you’ve been dreaming of.
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Dear Pay Dirt,
I recently told my mother that I want to major in political science, something I’ve known for many years, and her reaction was, “Psh! What money can you make from that?” When I replied by saying that I wanted to work in government, lawmaking, or something to create change, she said something along the lines of, “The government is bullshit and it’s all a bureaucracy.”
These comments were really hurtful and we had a massive blowout fight about it. She told me I am making her feel bad, while I think that as a parent, she has a responsibility to support me in all of my endeavors. What she says has a really drastic impact on my life and opinions, and even though I’ve KNOWN I wanted to major in political science for a really long time, now I feel so unsure about it because of what she’s said.
Whenever she asked about what I wanted my major to be in the past, I would always tell her I didn’t know because I was scared of how she would react and how that would affect me. I’ve based all my extracurriculars around this, and while we were arguing, she mentioned that once, I was talking about my internship with a politician and offhandedly mentioned how boring it was, which is her basis for saying this is not the career for me. Maybe she’s right, and I’m not cut out for a political career. I feel so lost because I thought I knew what I wanted, but three conversations with my mother have completely upended that. Maybe my beliefs were never as solid as I thought. What do I do? Should I continue my extracurriculars (which I like and am good at) or start fresh and find new ones? Do I need to rethink my life plan?
—Premature Quarter Life Crisis
Dear Premature Quarter Life Crisis,
As I was reading your letter, I found myself thinking about the many careers I’ve had in the past few decades. I’ve done everything from freelance writing to running my own financial wellness technology company. And, that’s really the way of the world, isn’t it? One thing leads you down a path, until you take a turn and start down another.
When I started out freelance writing, my mother would agonize constantly over how I was going to make ends meet. A top-selling real estate agent and all-star worrier, she was concerned about how anyone could make a living as a writer. As I found my path, the way I heard her comments (which sometimes felt more critical than supportive) changed. They didn’t sting as much anymore. I became more confident that by doing what I loved, I’d be able to pay my bills—or at least, figure out how to live within whatever means I had. She began to trust that I’d be able to stand on my own two feet.
With that in mind, here’s my take: If you love all things politics, if you see yourself running for office or running someone else’s campaign, then you should start down that path. Learn as much as you can. Once you get into it, you may find you don’t love politics after all. Or, you may find yourself entranced with the analytics, surveying, or lobbying side of the business. Or, you may want to run for office. These new revelations, and the people you meet along the way, will help you discover new opportunities that may be even more challenging and satisfying.
But you won’t know until you try. Start now. Trust your instincts. Keep an open mind and work as hard as you can to develop your inner gut and moral compass. And don’t let anyone ever dissuade you from following your dreams.
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Dear Pay Dirt,
My family is unexpectedly moving across town. It’s unexpected because we weren’t house shopping but this perfect property came on the market and we bought it. We were able to make the down payment without selling our current house, but carrying both mortgages is a stretch. My plan is to rent it out. It’s in a desirable neighborhood close to the downtown area and local hospitals. I’m hesitant to sell because I have 12 years left on the mortgage and the interest rate is at 2.65%, but because when I refinanced for that low rate I went for a 15-year loan, the payment on it (after property tax and insurance) is only about $500 less than I could rent it for, so a possible profit of $6,000 if it’s lived in the whole year with a good tenant. Or I have considered renting it out at the cost of my monthly payment to a trusted family person, so $0 profit, but less concern. Over the course of a year, I pay about $3,500 in interest on it, but that number keeps going down.
In the meantime, the new house loan is at 6.25% and I will pay about $37,000 in interest the first year, and $36,000 the second. I could sell the older house and make about $300,000 on the sale after all the costs. If I paid myself back for the down payment and put the rest toward the new house, it would drop my monthly payment and interest for the year goes down to about $28,000 to start. With two kids getting ready to launch (likely to college) in three years and seven years, I don’t think I will have the extra income for a while to put toward paying down the principal of the new house.
I’m not sure which is the better long-term money choice. Keep the old house as a rental because it’s in a popular neighborhood and will continue to appreciate in value (plus there’s sentimentality and I like having a backup plan for myself and thekids)? Or sell the house and save money on interest in the new house and headspace on being a landlord?
—A Tale of Two Houses
Dear A Tale of Two Houses,
This is a happy problem to have, but you’ve left out an important consideration: taxes.
Let’s start with the old house. You’ve lived in this home for more than two out of the last five years. If you sell now, you can keep up to $250,000 in profits tax-free if you’re single and up to $500,000 if you’re married. I’m guessing you’d clear $300,000 tax-free, but you’d also get access to all the equity you’ve built up over that time. All of that cash can go into other investments, which even at 4 percent interest in a high-yield savings account would generate far more money than if you rent out the property. And, with a lot less work on your part.
Yes, you’d give up an amazing, historic interest rate (and the incumbent bragging rights). And, you’d give up future appreciation. But as you contemplate paying college tuition, having access to this sort of cash would be helpful, though it may compromise your ability to tap into certain grants and low-cost loans.
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On the other hand, if you turn the house into a rental, you’ll be able to write off your expenses against the income and take depreciation. This might help lower your tax bill going forward, so you’ll want to check with your tax preparer or accountant. If you do your own taxes, you can run a variety of scenarios on most tax preparation software programs. If you decide to sell down the line, current tax law requires you to recapture that depreciation at a rate of 25 percent. But if you decide to leave the property to your kids, they’ll inherit it at the stepped-up basis. So, if the house is worth $500,000 today and $1 million when you die, their cost basis for the property will be $1 million. If they turn around and sell it, they likely won’t owe any tax.
Which way should you go? Both can be great decisions depending on what you plan to do with the cash. So, start there. Evaluate your current, short-term, and long-term financial needs and then decide whether you’re going to love being a landlord or if you prefer to watch the stock market instead.
—Ilyce
Classic Prudie
I am a doctor and my fiancé is finishing his first year of residency. He worked for several years before going to medical school, saved up some money to live off of, and bought a house. He also got enough scholarship money to pay for most of college and medical school, so he has no student loans. Neither do I. He had chosen a specialty that pays well (better than mine) and which has a relatively short residency program for how much he will be paid for when he is done. I was fine with this. Then, last week, he told me that he had been trying to transfer to a different specialty with a longer, grueling residency and a specialty that will ultimately be substantially more lucrative.
