Friday May 22nd Check-In: Family, Friends, & Money

Alex and Taylor are about to sit down to talk about their newly shared financial lifestyle. The following tips would be useful for them to talk about EXCEPT...

• Have clear lines of communication about finances.

• Keep pre-existing debt separate (such as student loans, outstanding credit card debt or car loans, etc)

• Collaborate to make a written budget for joint obligations and household expenses.

• Keep all money pools entirely separate.

Some of your friends who are living together have different approaches to their joint finances. Which of the following situations do you believe is the BEST strategy?

• Kellan and Patci decided they will pool all of their money for the month together in one account and each spend from it as they see fit.

• Lex and James moved in together last week and still have not discussed how they will pay for things.

• Katherine and Marcus decided ahead of time that they are splitting every joint expense (utilities, rent, groceries, etc) 50/50 so they have an equal stake.

• Jim and Hazel individually allocated money to their joint emergency fund and decided to go on a vacation using funds from it.

Which of the following statements about co-signing for loans or credit is FALSE?

• If the primary borrower doesn't make payments, you are responsible for making them instead.

• If the primary borrower stops making payments, you can cancel the loan in order to release your obligation.

• The credit score of both the primary borrower and the cosigner are impacted by the loan.

• Co-signing on a loan for your family member could impact your ability to get future loans for yourself.

In which of these scenarios does cosigning for credit make the most sense?

• Diamond cosigns a $50,000 loan so her neighbor can build a game room in his basement that both their kids can play in.

• Elizabeth cosigns a $3000 loan for her brother, even though he's been unemployed for 3 years and has been arrested twice in the last year.

• Sam, who's been struggling to make ends meet lately, cosigns a $1000 loan for his nephew to pay for books for college.

• Rico cosigns a credit card with a $1000 limit for his college-age daughter, so she can start building her credit history.

You agree to cosign a bank loan for $2,000 for your sister, so that her son can get braces. Which of the following statements below is TRUE?

• Your debt-to-credit ratio will go up, because you now have $2,000 more debt than you did before.

• Her credit score alone will be impacted if she doesn't make payments on time.

• This is the same as giving her a gift of $2000, so the loan doesn't need to be repaid.

• Now you are both legally responsible for making half the payment each month.

Amelia lent her best friend, Meredith, $500 to help with bills while Meredith was out of work in October and November. They shook hands on the deal and agreed Meredith would repay Amelia by December. It's now February, and Meredith never repaid any of the money. The following options are possible for Amelia EXCEPT...

• Remind Meredith about the loan, and demand she repay her by April.

• Put Meredith on a payment plan, whereby she pays Amelia $50 from each paycheck until the debt is repaid.

• Avoid loaning Meredith money in the future until she pays back the $500.

• Report Meredith to the credit bureaus, so that this failed repayment affects her credit score.

Marcy and Victor are about to get married. Marcy unfortunately has $7,000 in credit card debt as well as $25,000 in student loans and $1,500 in a personal loan. Victor has outstanding credit and no debt other than $4,000 in student loans. Which option makes the most sense for Victor and Marcy?

• Victor and Marcy can decide to combine their debt, which is a good idea, because his good credit will automatically get her better interest rates.

• Victor and Marcy can decide to combine their debt, but that's probably not a good idea, because her bad credit history will decrease his score.

• They will keep their debt separate, but Victor's name will have to be on any other future loan that Marcy takes out.

• They will keep their debt separate, but Victor is now legally obligated to make contributions toward her monthly bills, so that the debt is repaid faster.

Which of the following statements about protecting yourself from family or friend identity theft is TRUE?

• Giving your friend your Social Security number and credit card account numbers could be helpful for when you forget them yourself.

• Using passwords with your birthday or address are strong ways to keep your accounts safe.

• Keeping your bank statements, tax returns, and checkbooks in a locked filing cabinet is a good method to safeguard your information.

• Leaving your computer on and unlocked when you have company over is useful just in case you need to access it quickly.

Your cousin Austin asks to loan money from you to pay for this month's bills. If you agree to lend Austin money, what should you do?

• Get the agreement in writing with both Austin's and your signature.

• Wait one year and then remind him of the amount he owes you.

• Bring up the topic of giving back the money he borrowed during an argument.

• Avoid talking about the loan with Austin, but talk about it with your other cousins.

Catia does not want to give her friend a personal loan. The following statements are valid reasons to say "no" to her friend EXCEPT...

• Catia needs to use the money in a way that more closely benefit herself (investing it, taking a vacation, emergency fund).

• Catia cannot be fully sure that her friend will repay her on time or ever.

• If her friend does not repay her, both Catia's and her friend's credit score will go down.

• The loan could cause emotional or personal problems in their friendship.