‘I'm 68 and my 401(k) has dwindled to $82,000': My husband committed financial infidelity and has $50,000 in credit-card debt. What now?
Without going into details of my spouse's financial infidelity, I would like your opinion. Here is the bottom line. I'm 68 and my 401(k) has dwindled to $82,000. I have $3,000 in gold and Social Security income for me and my spouse totals $46,180 a year.
Our home is paid off and the estimated value is somewhere between $600,000 and $1 million. We live in a vacation area. Many out-of-state folks have moved in and the price of even a tiny home is outrageous right now. Yearly land taxes at $5,000.
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'I'm 68 and my 401(k) has dwindled to $82,000': My husband committed financial infidelity and has $50,000 in credit-card debt. What now?
'He failed in his fiduciary duty': My brother liquidated our mother's 401(k) for her nursing home. He claimed the rest.
Our adult children owe us a total of $90,000 and are attempting monthly payments of various amounts. My spouse has $50,000 in credit-card debt. I abhor any debt. What is the smartest way to pay off this debt?
Feeling Desperate
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Financial infidelity — keeping secrets like excessive spending a secret — can be as damaging as more traditional infidelity.
Your children could pay off your credit-card debt, almost twice over, if they were able to stick to a payment plan. But lending money to people — children, friends, neighbors, relatives — who have gotten themselves into the red won't necessarily solve their problem. It will merely create a problem for more parties: the lender, who wonders why the money was never repaid in a years-long game of cat-and-mouse, and the borrower, who has added creditor to their list.
The smartest way to pay off your debt is to write all your expenses in one column and your income in another and create your own personal Department of Good Housekeeping. Slash and burn and pay off that $50,000 at all costs. Your husband should also prioritize his credit-card debt before you do anything — including eating out, going to the movies or the theatre, buying new sneakers (even if they're on sale), or taking a vacation.
You don't mention the cause of your husband's financial infidelity, but unless you deal with this first and foremost, the chances of it happening again are high and/or probable. If he has a gambling problem or a substance misuse issue, for instance, it won't go away even if you do pay off the debt. Paying off the debt could even provide him with a new impetus to repeat the errors of the past. If this $50,000 debt was news to you, this is a separate problem.
That said, your priority is to pay off your debt on a regular basis, automating those payments, with a medium- to long-term goal of getting back on track. The National Foundation for Credit Counseling is a nonprofit organization that can help you and your husband put together a budget and a realistic plan to pay off your debt. The American Consumer Credit Counseling is another nonprofit organization that helps people in your situation.
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You could also attempt to renegotiate the debt with the credit-card companies. 'Call your credit-card company and ask to speak with the debt-settlement, loss-mitigation or hardship department,' Bankrate.com advises. 'A general customer-service representative won't have the authority to approve your request. Once you're connected with someone who has the ability to negotiate with you, explain your situation and make your offer. Be polite but firm.'
'Outline your terms,' Bankrate says. 'If you're considering filing bankruptcy or hiring a professional to help you with your debt, let the card issuer know and mention that you'd rather work things out directly. At this point, be prepared for the card issuer to potentially freeze your credit limit or close your account.' Beware of for-profit debt-settlement companies, which frequently end up costing you more money for a less-than-satisfactory outcome.
There are two main methods of paying off debt: the snowball method (paying off the card with the lowest amount on it first) and the avalanche method (paying off the debt with the highest interest rate first). The first is a way to help motivate people to get out of the red, but paying down the highest rate first makes the most sense to me. Your decision is whether these payments come out of your husband's income or joint funds.
Looking ahead, you are sitting on a lot of equity, so you have another choice to make: Do you take this moment to review your finances, downsize, pay off your husband's credit-card debt and provide yourself with a cash cushion in more modest surroundings? Can you trust your husband with a cash cushion in a joint account? My biggest concern for you is that, after you pay off this debt, your husband will repeat the mistakes of the past.
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