Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal finance and financial etiquette dilemmas. Seeking advice on a money issue? Email email@example.com.
I am in my mid-30s and recently married. I have a relatively stable career that I mostly enjoy, making $80,000 annually with little chance for significant raises, since the company I work for isn’t quite profitable. I’m saving about 7 percent of my salary in a 401(k) with no employer matching. I also have some credit card debt. My husband has a similar salary and nearly identical credit card debt, and we are both trying to pay it off as quickly as possible. (We are eating meals at home, doing less expensive dates nights, and so on.) We live in a horribly expensive city, so this is far from easy. Here’s the major issue: I have an elderly cat whom I love very, very much. She’s quite happy, but her medical care for a number of chronic illnesses runs about $600 to $700 a month for specialized food, prescription medicines, quarterly vet visits, and other needs. This is quite a burden. And if it wasn’t for this expense, which has been going on for four years now, I could—at least mathematically—not only be out of debt but have a cool $10,000 in savings. As things are, I am up against my financial limit every month, and my budget allows nothing besides credit card payments and monthly fixed expenses such as groceries, transit, and utility bills. Pet insurance isn’t an option, as it’s a pre-existing condition, and in all my research I’ve found no less expensive alternatives to all the food and medications she needs. On the one hand, it feels insane to let this crucial point in my financial history slip away from me to keep a beloved pet healthy, but on the other hand the alternative is to put her to sleep simply for financial motives. Is there a way around this that I’m not seeing? Or is the answer to live close to the bone until nature takes its course?
Americans love their animals so much so that a sizable majority of pet owners say they think of their pets as family members. (Guilty!) Some even put dogs and cats in their wills. Meanwhile, the same medical advances that are adding years to our lives are also increasing the lifespans of our furry companions. No surprise, the amount of money we spend on animal medical care is soaring in tandem with the similar rise in costs for humans. And since there is no Medicare for pets, those choices can impact our wallets in some uncomfortable ways, as you’ve discovered.
But pets are not children. We may refer to ourselves as pet mommies, but we aren’t obliged to pay for their medical care. While being an animal-lover feels necessary to you and me, it is all but the definition of discretionary spending. So, yes, you could choose to euthanize your cat and put the future savings toward your debt. And there are many people who would call that the right decision. (Keep your cat alive now or risk eating cat food in retirement, they would probably say.) I don’t agree with that thought myself, but if you’re not an animal-lover, it makes sense.
But it’s your money and your life and your cat, and clearly you don’t view her in utilitarian, nonsentimental terms. If you did, you wouldn’t have spent this much time and money on her care. And it’s not always about the money. You’re deeply attached to her. Your commitment is commendable, not something to be derided as financially foolish.
But if you need to justify your decision in financial terms, here’s another way to think about it: You’re hardly irresponsible with your funds. You’re saving a decent sum of money and working on paying down debt. As for your company: It sounds like it won’t be a lifetime job. You can easily permit yourself the spending on your cat. Some people enjoy the high life; others would use their money to keep a well-loved, chronically ill, but still happy feline alive. It’s a perfectly reasonable trade-off.
Instead of euthanizing your cat, take the opportunity presented by this moment to acknowledge you are dealing with an elderly pet. She is—no matter how good and conscientious a pet mommy you are—going to leave you, likely sooner than you think. Make some sort of plan—with your vet or simply with yourself. Not for now, but for the future. Like with humans, it’s quite possible she won’t take a sudden turn for the worse, but instead, her health will gradually deteriorate. There will likely there will likely be the opportunity for costly interventions that could keep your beloved animal alive for a few extra months, but in pain and suffering. That could be the moment when you finally decide to let go.
The nonprofit organization where I volunteer offers free English as a second language classes to its mostly Latino students. Wells Fargo is a significant donor, and the bank will also be offering financial literacy classes in Spanish for our students. Given the recent exposure of Wells Fargo’s scandalous creating of 2 million fake bank and credit card accounts for unwitting customers, this relationship really concerns me. What should I tell the women who run the nonprofit about the risks to our students of bank-branded financial literacy classes?
Wells Fargo is not simply offering up a financial literacy program out of the goodness of its corporate heart. As I reported in my 2013 book, Pound Foolish, banks, credit card companies, and insurers see financial literacy programs, at least in part, as a way of getting in front of potential customers. So you’re right to be concerned, and I would say that even if the bank involved wasn’t Wells Fargo. It’s not exactly a great practice to unwittingly offer up the non–English speaking clients at a nonprofit—people who are no doubt seeking help—as customers for prospecting bankers.
And then, yes, there is the Wells Fargo of it all. While the fake account scandal is getting loads of media attention, it’s hardly the first instance of shady behavior by Wells. This past summer, the bank needed to hastily end a recently announced initiative to offer Amazon Prime customers a half-point discount on bank-issued student loans after critics claimed the deal was an attempt to push students into high-cost bank loans over the more generous federal program. And in 2012, Wells Fargo agreed to pay a $175 million settlement to close the door without admitting fault on federal allegations that bank-affiliated brokers pushed black and Latino buyers into more expensive mortgages than they offered white customers.
I can’t imagine the people running the program where you are volunteering wouldn’t want to know all this. But don’t just outline the problem to them without offering an alternative. Luckily, any number of objective, nonprofit organizations offer financial materials in Spanish. I would suggest the nonprofit take a look at the curricula offered by the federal Financial Literacy and Education Commission or the nonprofit National Foundation for Credit Counseling and let Wells Fargo or other financial institutions find customers in some other way.
My husband and I expect our first child in January. We both have some employer life insurance, but not nearly enough. We are both in our mid-30s, in decent health, and have stable employment. What’s the best type of life insurance to get? And how much should our policies be in respect to our incomes? My work policy covers six times my annual salary, but my husband’s isn’t nearly as good.
Congratulations on the baby! And congratulations on being so forward-thinking with your finances. Few of us want to think about it, but life insurance is almost certainly necessary. How many of us, after all, would have enough money saved up to cover the loss of a partner while raising a child? I would suggest you each look into a 25-year level-term policy, one that will replace about 10 times your salary. Yes, your employer-provided insurance is quite generous—according to the federal government’s National Compensation Survey, only 4 percent of employees offered a multiple of their salary in life insurance as a benefit get an amount exceeding twice their salary—but you don’t want anything so vital tied to your employment. You’ll likely change jobs at some point, and your next employer may not be as giving. I would suggest using a comparison site such as NerdWallet to price out different policies. You’ll need to be careful when dealing with insurance agents, however. Term life insurance, which is essentially life insurance that you rent for a period of time, doesn’t offer them much in the way of commission. So they’ll sometimes recommend whole or universal life insurance policies, which allow for stock market investment on the side. These are significantly more expensive than term policies since someone needs to pay the hefty fees they collect in return for selling the product.
One final thing: Your baby most certainly does not need life insurance, no matter what Gerber claims. That’s one investment you don’t need to make.