Columnist Sally Herigstad reflects on her past two years of reader questions
By Sally Herigstad
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
I'm a practical person. I used to think virtually all money
problems could be solved by finding the right savings, making more money or
creating a better budget. Cut those interest charges, resolve disputes on your
credit card, find ways to make more money, and you'll be fine.
Those things are important. But I've discovered after
reading your letters in the past two years for this column that most money
problems for women are really relationship problems.
Two years ago, one of my first reader questions was whether she should pay off bills or
start an investment program. I weighed the pros and cons of either approach,
recommended that she apply most of her efforts to paying off high-interest debt
while starting a limited investment program. Then I sat back and waited for
more readers who needed my practical, dollars-and-cents advice.
Instead, I got an inside look at what really goes wrong in
women's financial lives. Divorce is a common financial catastrophe. It's difficult
enough emotionally, but it can devastate a woman's finances. Widowhood can take
away not just the spouse's income, but sometimes the spouse who handled the
family finances. Women don't have to do anything wrong to find themselves in
these horrible situations.
On the other hand, I have seen a pattern to some of the most
common financial mistakes women make that can be avoided. Here are the top six
most common financial mistakes women make:
1. Being
overly helpful. Some of you are just too nice. I'd love to have you as my
neighbors -- I'm sure you'd water my houseplants when I'm gone and bring me
Christmas cookies. But you cannot -- and should not -- try to fix everyone
else's financial mistakes. You can't afford it -- nobody can! That holds true
whether you want to buy your cash-strapped granddaughter and her husband a house and pay off all
her bills, or let your 49-year-old son borrow your credit cards. It's even true when all you want to do
is co-sign on a loan to help your daughter out. Chances are, you'll be the one stuck
paying the bill.
In some cases, however, I urge
readers to be more helpful. When Lynn
wondered how her 83-year-old mother could make payments on a $14,400Discover
bill, I suggested she and her siblings pitch in.
It's one thing to be careful when helping able-bodied adult children or
acquaintances too much financially, but this is her elderly mother. Mom's not going to get an
evening job delivering pizzas to pay this off. Her daughter needs to help.
2. Pooling
financial resources with someone you're not ready to marry. If you have
reasons why you're not ready to tie the knot, you have reasons not to have a
joint checking account. And while a
joint checking account can only do so much damage -- don't even think about
handing a boyfriend your credit card. If you do, you're likely to write me
later, wondering what to do with all those bills. Or, I'll be telling you to
contact the police when your then-ex starts opening more credit cards in your
name. Think your sweetheart would never do that? That's what this reader's fiance thought, too. (This letter proves that you sometimes have to
pay for not only your own relationship mistakes, but those of the people close
to you.)
3. Making
emotional money decisions. Anger, fear and low feelings of self-worth can
make people do things that hurt them financially. Alexandra, a reader who says that
"money is not a problem," is so mad at a credit card company representative
who was rude to her years ago that she refuses to pay her bill. Neither her anger nor her balance will
go away until she pays her balance and moves on. Another reader, Michelle, is
so afraid of her own spending that she won't get a credit card, even though she
loses many advantages by not having any credit accounts at all.
4. Not
severing financial ties after a divorce or breakup. Divorce is not always
avoidable. Keeping a joint credit card with your ex for years after you go your
separate ways is. Holly found this out the hard way. She
forgot about one credit card that she held jointly with her ex, and four years later, he
dug it out and started using it. Not only did this nice guy ring up $10,000 in
purchases, but he proceeded to file for bankruptcy -- leaving her with the
bill. And even if your divorce decree says your ex is responsible for joint
debt, don't trust that he'll take care of it. After all, as long as your name is
on an account, you will continue to be held liable for any unpaid debt. My
advice? Excise yourself from all jointly held accounts as soon as possible.
5. Expecting
someone else to take care of us. Few women would go to the extremes of one
reader, who used her dad's credit card as an authorized user for months after
he died and then hoped she wouldn't be on the hook for the bill. (I hated to tell
her that the card became invalid the day her dad died, and that she could be
charged with fraud.) But all too many women are surprised when they suddenly have to support
themselves. Even stay-at-home moms should keep their skills up so they can make
a living if they need to. It's a lot harder to figure out a career when
suddenly something doesn't go according to plan, even if it's just your husband
being laid off.
6. Seeing
bankruptcy or debt negotiation as a fix-it-all solution. I've received more
letters than I can reply to in my column asking how readers can get rid of
their debts through bankruptcy or debt negotiation. I attribute this to the
constant barrage of advertisements on radio and TV making either method look
like the easy way out. The best way to get rid of debt is to pay it off. Even
in Mitzi's heartbreaking case, in which she and her family had a string of cancer
cases and her father and sister died, she should try to avoid bankruptcy --
although no one could fault her if she and her husband decided it was the best
solution. When bankruptcy or debt negotiation
doesn't change the underlying problem of expenses far above a person's income, it
doesn't really fix anything. Ruth ran up $100,000 in debt trying to raise 10 grandchildren on a limited income. While
she may very well be forced into bankruptcy, she will be disappointed if she
thinks bankruptcy will solve everything. Ruth needs to find more resources -- in her case, possibly state aid -- to survive
financially.
Money mistakes are not the only thing I've learned from your
letters, however. I've read stories about resilience and caring and a desire
to make good on debts. I am in awe of some of the difficulties my readers
continue to face. Very few are shopaholics who just want to get out of
paying all their debts. Most are very responsible, even in hard times. I
admire those who are taking care of others despite difficulties. (Ruth, with her 10
grandchildren, wins the prize on that one!) And a surprising number of you write
letters because you are concerned about someone else, be it your mom, your
adult child or your friend. There is much to admire in your letters, and by
writing to CreditCards.com, you have taken positive steps to finding solutions
to financial problems.
Take care of yourself, your loved ones, and your credit! The
more we all educate ourselves about finances, the more we'll be able to do just
that.
Sally Herigstad writes about women and credit every week for CreditCards.com. Herigstad is a writer and finance consultant for MSN Money, a personal finance software product. She is also a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Her Web site is http://helpicantpaymybills.net. Sally Herigstad lives in Kent, Wash., with her husband Gary. They have two grown children, Valia and Grant.
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
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