Ask Jill: Bills, Wills and Oil Spills
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
Here's a smattering of topics that have been coming in lately. If you have financial questions, go here and I'll help you out!
I recently got married and my wife has $25,000 in student loans, with interest rates ranging from 4-5%. I've never had any debt and its freaking me out. Here's my question: should we pay down these loans before we start saving for a house? Thanks-John
First of all, try not to freak out too much about the loans. It's not credit card debt, it was for her college and ostensibly, your wife got a good education, which allowed her to land whatever job she has. Additionally, the interest rate is reasonable, so hopefully you can pay it down quickly.
Next, you should review how much extra money you have each month and then split it between the house down payment fund and acceleration of the debt repayment. Chances are, you can do a little bit of both, which alleviate your worry about the debt burden and help you get on track for your house purchase.
The next question comes from Sandra:
I have been married for two years and throughout that time, I have tried to get my husband to do our wills. He has always said that he doesn't want to pay a lawyer to draft wills, because "we hardly have any money, so what's the point?" Well now I'm pregnant and he still is dragging his feet-HELP!
Sandra, this is more common that you know. Here's how I got a client to change his mind about wills.
Bill: We don't need a will. We own the house jointly, so that's not a problem and we have retirement accounts and life insurance policies that have beneficiaries listed...
Jill: You're right-real estate that's owned jointly with rights of survivorship will pass to the surviving spouse. And yes, retirement accounts and life insurance policies can flow directly to the beneficiaries by contract. But Bill, I know you and Connie pretty well and I bet that you have an opinion as to who might be the best person/people to raise your three kids, in the event that something were to happen to the two of you. Do you really want the state to make that decision for you?
Bill: (after lengthy pause): Hmmm...give me the name of that lawyer!
Get the drift here? By not executing a will, your husband is essentially relying on the state to make what would be the most important decision in his life. By the way, when you do meet with a lawyer, remember to create a power of attorney and health care proxy for each of you.
The last question is about the Gulf oil spill:
Jill: I have $5,000 that I have saved up for a car purchase next year, but was thinking that I might buy BP stock, now that's down almost 50%! When the stock goes up, I'll be able to cash in and take a smaller car loan. - Greg
Let me start by making this abundantly clear: NO WAY! You should never invest money that you know that you will need within a two year window, whether that money is a home down payment; money for college, or a car. The reason is that it's just too big a risk. How would you feel if BP went DOWN and you couldn't buy the car at all? Please don't do this!!!
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.