Wilson David Investment Advisors
I fix things. My specialties are financial planning, financial literacy education, taxes, and investment advice, but over my 30-year career, I've been able to help people fix problems with money, construction projects, meetings, sentence construction, culinary disasters, and academic difficulties.
I wish I were like Samantha of the TV show Bewitched and could just twitch my nose to repair everyone's problems. Unfortunately, no magic erupts when I twitch my nose. I help clients using my knowledge, experience, and hard work...although I like to think that our working together has its own magic. My work as a lecturer, teacher, copy-editor, writer, presenter, negotiator, researcher, and office manager in a diverse cross section of business, educational, and government organizations has helped me gain the depth of knowledge needed to advise my clients in all aspects of sound financial planning and investment. I have been described as a fast, cheerful, flexible worker who rapidly resolves unexpected problems and project difficulties. I manage work quality and time based on guidelines provided and use my talents to provide customers with top-notch service.
As a champion for financial literacy, I speak at high schools, libraries, career fairs, churches, businesses and community groups - anywhere I can get a platform! - to raise awareness about financial knowledge and safety. I recently published "Financial Advice for Blue Collar America" which offers guidance on basic concepts of money including insurance and taxes, financial traps to avoid, how to pay for college and tech school, and info about the bright future ahead for blue collar careers.
BA, College of William and Mary
MA, College of William and Mary
MBA, University of South Carolina
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I am so very sorry about your mother’s illness and the turn it has taken. That is so upsetting for everyone in your family, and my heart goes out to all of you. During this stressful time, it’s hard to think about practical concerns, but I suspect that your mother, in wanting to clear up loose ends, may be the one who is driving the worry.
From your question, I am assuming that your mom has just two heirs – two daughters whom she wants to treat fairly. She’s given money to one daughter (Daughter A) that she didn’t give to the other (Daughter B) and wants to be sure that things get evened up without difficulty or strife.
The simplest way to solve the problem if your mother has the liquid funds to do it and is able to manage the action is for her to write Daughter B a check for the amount she gave Daughter A for the down payment. If no cash is free, perhaps your mother has a piece of jewelry or other item that is valued at the amount of the down payment that could be given to Daughter B. Alternatively, Daughter A, who received the down payment, could give half of that amount in cash to her sister, Daughter B. That would make it all even, and then when the sad day comes that you lose your mother, her will specifies the even, fair distribution to each daughter. (Note – if the amount of the down payment was greater than $14,000, a Gift Tax Return (Form 709) may need to be filed with the IRS, but unless your mom has already give millions away, no actual tax on that gift would be paid.)
However, neither your mom nor Daughter A may have that kind of cash available. In that case, amending the will if she is able would also work, but there may not be the time and energy needed to get to the lawyer’s office and modify the will. There would also be a cost to doing this. Another possible solution could be for your mom to write up a codicil or additional note to be included with the will explaining the situation and letting the executor know to give Daughter B more than Daughter A in the final distribution, but if this addition isn’t formally incorporated into the will by paying the attorney some amount of money to do so, it may not hold up.
If you mother passes away before any action is taken to remedy this situation, then nothing formal or legal can be done to change the situation after death. It would be up to Daughter A to say “This is not fair to my sister and not what Mom would have wanted,” and then give her sister half of the amount of the down payment after the final distribution of the will is made.
I’m so very sorry for your loss, and I hope that your mom’s end is as peaceful and affirmative as it can be. Best wishes to you and your family.
Hi – thank you for writing. This situation is a tough one to be in, and my heart goes out to you. It is scary and uncomfortable to owe more money than you have at the moment or that you can make in the near future. It won’t give you much consolation for me to tell you that you are not alone in being in this situation – you and many other Americans share a heavy debt burden.
Luke’s action items are great. I wanted to add a few more possible ideas. I don’t have to tell you that somehow you need to either spend less money or make more money so that you can apply the extra toward reducing your debt. That advice is so hard to implement because the basics of life are so expensive, and the extras of life are so appealing, seductive, and also expensive. It is SO HARD to reduce spending, and it’s often just as hard to increase earnings.
Practical Tips for Raising Cash – You may have already tried one or more of these, but just in case you haven’t, I’ve listed some ideas here.
- Work paid over-time if it’s available at your job.
- As Luke said, look around at your belongings to see what things you don’t really like or use that might be worth some cash. Sell things you don't need on eBay or at IWanta, being careful not to get scammed by unscrupulous “buyers.” Family and friends may also want to buy things from you.
- Consider asking for a raise at work if you haven’t gotten one in a while. They won’t fire you for asking, and the most they can say is no.
- Get a part-time, second, or seasonal job - finding one can be hard, though! You might have better luck during the Christmas season when stores do a lot of extra hiring. Look into this tactic in September or October so you don't miss out. Be creative about what you can do. My husband and I are 57 and 54 and throughout our careers we have always had at least two jobs – a main job and one or more on the side. Even if your career is not the type that lends itself to consulting, maybe you could earn some extra money by baby-, dog-, or house-sitting or food service or lawn work. Having a second job brings in more money each month and reduces what you spend on entertainment because more of your hours are taken up by working. Here are some more thoughts about the value of a second job.
- Cut unnecessary bills. Cutting out cable TV or pedicures technically doesn't generate cash, but it leaves you with more cash at the end of the month. It's hard to give up your favorite shows or an activity that makes you feel good, but if you console yourself with the idea that the sacrifice is temporary, that will help.
- Consider asking a wealthier loved one for help. You might ask for help paying a medical bill or a particularly expensive utility bill rather than ask for cash – sometimes a one-time concrete gift is easier to ask for and to give. Many people who are comfortable financially enjoy helping out loved ones who are in a pinch, but they tend not to offer help for fear of hurting feelings or opening the door to being asked repeatedly for help. It can be hard to ask, but it might be worth trying depending on your circumstances. It might be best to ask for a gift rather than a loan so you don't have repayment hanging over your head, and be sure to include an “out” for the person you're asking if they don't want to or aren't able to help. In your case, a loan with a very low interest rate could really help because you mentioned that you currently pay high interest on the debt you are carrying.You could send an email or letter to pave the way before asking verbally. Be honest about how hard it is for you to ask and how fine it is if the person doesn't end up helping. If your request is granted, be sure to say thank you verbally and in writing.
- Apply for assistance if you are qualified to receive it. There’s no shame in using food stamps, WIC, free or reduced lunch for the kids at school, or other forms of governmental help. Also consider faith-based help from your church, other churches, food banks, or other religious charities.
I hope that you can get to the point where you are able to pay off the loans! In doing so, you’ll raise your credit score and get to a place where you feel more financially comfortable. Best wishes to you and please write back to us with more questions.
Hi! Thanks for writing! In addition to books, you might like to check out safe, non-biased, non-selling websites. As college professor, I place a lot of emphasis on making sure that the sources a student uses to write papers are credible and factual. You want to do the same thing as a financial consumer. In reading about financial planning and investing, you get the best info from non-profit or government sources. I've listed some of my favorite "safe" websites below. Best wishes to you!
Investing in the Stock Market
Financial Calculators and Tools
Investing in Bonds
Hi! Advisor Eli Weissman is exactly right. I wanted to add that you'll want to get that done within 60 days since the IRS sets a time limit on having the money out of a qualified retirement plan. Thanks for writing!
Hi - thank you for writing, and I'm sorry that you've hit a rough patch financially. I hope things will be better soon. Larry Frank's answer is spot on, but I wanted to suggest one other thing....maybe instead of taking that withdrawal, which you will need to pay income taxes for in the year you take it out and will ultimately reduce the amount you have, could you just add the $1,000 on to the existing loan? You'll still need to pay the entire amount back, but you won't need to pay taxes on the money that you are borrowing at this time. (Keep in mind that 401(k) money is tax-deferred, so when you do withdraw the money permanently you do pay tax on it.)
Additionally, you will probably incur a 10% penalty for withdrawing early. There are exceptions to the penalty but they are pretty much only for the following
- You're receiving distributions in the form of an annuity
- You're deemed totally and permanently disabled
- Your unreimbursed medical expenses exceed 10% of your AGI if you're under 65 at the end of the tax year (7.5% if you're 65+)
- The distribution is due to an IRS levy or your death
- You took the distribution as a military reservist called to active duty for more than 180 days
None of the above fits your situation as far as I can see unfortunately.
With a 401(k) loan you don't pay taxes at that time or get a penalty unless you don't pay it back within the specified time, usually 5 years.
I hope this info helps, and best wishes to you.