charitable donations

Apache is functioning normally

Apache is functioning normally

It seems almost every airline, hotel chain and credit card issuer has launched its own premium credit card, enticing customers with luxury travel perks paired with hefty annual fees. Many of these cards offer solid value, especially if you’re loyal to the underlying brand.

There are two long-standing titans of the premium card market. Of course, we’re talking about The Platinum Card® from American Express and the Chase Sapphire Reserve. The former built the market for premium rewards cards decades ago, while the latter is responsible for growing its mass appeal.

Since the Sapphire Reserve debuted in 2016, competition between these two cards has been fierce. Today, we will look at how they stack up against each other and whether you should consider adding one (or both) to your wallet.

Related: The best travel credit cards

Welcome offer

When considering a new card, especially one with a $500-plus annual fee, most people first look at the welcome offer to see how much of that annual fee they can start recouping immediately.

With its $695 annual fee (see rates and fees), the Amex Platinum is currently offering new applicants 80,000 Membership Rewards points after they spend $6,000 on purchases in the first six months of cardmembership. However, it’s worth checking to see if you’re targeted for a higher offer of up to 125,000 points through the CardMatch tool (offer subject to change at any time).

TPG values Membership Rewards points at 2 cents each, making the initial welcome offer of 80,000 points worth $1,600 alone. Since Amex only allows you to earn a welcome offer on each of its cards once per lifetime, it might be tempting to hold off on applying for the Amex Platinum in hopes that you may be targeted through CardMatch for a higher bonus at some point in the future.

THE POINTS GUY

Meanwhile, the Chase Sapphire Reserve offers a sign-up bonus of 60,000 bonus points after you spend $4,000 in the first three months from account opening.

TPG also values Ultimate Rewards points at 2 cents each, making this bonus worth $1,200. That’s significantly lower than the Amex Platinum offer, though the spending requirement to earn the bonus is also lower.

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Winner: The Amex Platinum takes the lead in this first category, especially if you are targeted for an elevated offer through CardMatch.

Related: The best time to apply for these popular cards based on offer history

Earning

Long after your bonus has been earned and spent, you’ll want a card to help you quickly rack up valuable transferable points.

Both of these cards get that done but in very different ways. Your best option depends on which other Chase or Amex cards you currently have in your wallet and how the bonus categories on those other cards overlap with the Chase Sapphire Reserve and Amex Platinum.

LYFT

Here are the bonus categories for these two cards:

Bonus multiplier

Amex Platinum

Chase Sapphire Reserve
10 points per dollar N/A. Lyft rides (through March 2025.)

Hotels and car rentals booked through the Ultimate Rewards portal.

Chase Dining purchases made through the Ultimate Rewards portal.

Peloton equipment and accessory purchases of $250 or more, with a maximum of 50,000 points (through March 2025).
5 points per dollar Airfare booked directly with airlines and airfare booked with American Express Travel, on up to $500,000 on these purchases per calendar year.

Prepaid hotels booked with Amex Travel.

 Airfare booked through the Ultimate Rewards portal.
3 points per dollar N/A. Travel and dining.
1 point per dollar All other purchases. All other purchases.

Chase offers a broader range of bonus categories, including everyday purchases like travel and dining.

While the Amex Platinum does pull ahead on airfare booked directly with airlines (with a terrific 10% return), the Chase Sapphire Reserve pulls ahead for dozens of other travel expenses, including most hotels, ride-hailing services, parking fees, tolls and tours. It also has an equally broad 3 points per dollar spent on dining that the Platinum can’t match.

Winner: Chase Sapphire Reserve is the best for earning thanks to its favorable everyday bonus categories that help you earn more points in the long term.

Related: Best reward cards for each bonus category

Redemption options

With Chase Ultimate Rewards and Amex Membership Rewards tied at 2 cents apiece in TPG’s valuations, it’s worth looking at the different transfer partners to decide which ones best suit your needs.

Let’s start with the Chase Sapphire Reserve. In addition to 11 airline and three hotel transfer partners, Sapphire Reserve customers get a 50% bonus when redeeming points for travel directly through the Chase Ultimate Rewards portal. This gives you an absolute minimum redemption value of 1.5 cents per point, meaning you can book a seat on any flight that’s for sale, even if there isn’t award space available.

That said, you’ll often get a better value by transferring your points to the loyalty programs of airlines and hotels instead. All Chase partner transfers are at a 1:1 ratio, and most of them are instant. Ultimate Rewards has a real edge for hotel bookings because of its partnership with World of Hyatt, where you can book an award night for as low as 3,500 points per night.

On the airline side of things, popular redemption options include United MileagePlus, Southwest Rapid Rewards, British Airways Avios, Virgin Atlantic Flying Club and Air France-KLM Flying Blue — though the last three also partner with Amex Membership Rewards. The same holds true for Air Canada Aeroplan — though if you also hold the Aeroplan Credit Card, you can enjoy a 10% bonus on certain transfers from Chase Ultimate Rewards to your Aeroplan account.

Finally, you also have the Pay Yourself Back option with the Sapphire Reserve, allowing you to use points to cover certain purchases at higher values:

  • 1.5 cents per point for select charitable donations (through Dec. 31, 2023.)
  • 1.25 cents per point for purchases at gas stations and grocery stores (through Sept. 30, 2023.)
  • 1.25 cents per point to cover your annual fee (through Sept. 30, 2023.)

Again, though, the best redemption option will typically come from maximizing Chase’s transfer partners.

ROCKAA/GETTY IMAGES

Meanwhile, Amex Membership Rewards has a whopping 20 transfer partners, but not all are worth your attention. Some have transfer ratios below 1:1, have longer transfer times (which means you risk watching your award space disappear) or simply don’t have reasonably priced redemption options.

Some of the best are ANA Mileage Club, Air Canada Aeroplan and Avianca LifeMiles, each of which offers attractively priced options for booking Star Alliance tickets. Cathay Pacific Asia Miles, British Airways Executive Club and Delta SkyMiles are also popular transfer options.

However, if you opt to use your points directly through American Express Travel, you won’t get nearly the value you do through Chase. Flight bookings are a flat 1 cent per point, while hotel reservations clock in at just 0.7 cents apiece. As a result, you’re typically much better off with the transfer options.

Winner: Chase Sapphire Reserve comes out on top for redemption options since it offers a 1:1 transfer ratio for all of its airline and hotel partners, the Pay Yourself Back feature and more flexibility with its 50% bonus for travel booked in Ultimate Rewards.

Perks and benefits

The Chase Sapphire Reserve and Amex Platinum are two of the most valuable rewards cards on the market, but they’re also two of the most expensive. You’ll pay a $550 annual fee with the Sapphire Reserve and a $695 annual fee with the Amex Platinum.

So, what do you get in exchange for that upfront cost? For starters, both cards feature airport lounge access and additional travel and food delivery credits, among other benefits. Let’s take a look below at the most popular and valuable perks available (note that enrollment is required for select benefits):

*Eligibility and benefit level varies by card. Not all vehicle types or rentals are covered, and geographic restrictions apply. Terms, conditions and limitations apply. Visit americanexpress.com/benefitsguide for details. Policies are underwritten by AMEX Assurance Company. Coverage is offered through American Express Travel Related Services Company, Inc.

**Eligibility and benefit level varies by card. Terms, conditions and limitations apply. Visit americanexpress.com/benefitsguide for details. Policies are underwritten by New Hampshire Insurance Company, an AIG Company.

This is by far the trickiest part of the comparison, with many different pieces to unpack. It’s also the one where your own personal preferences may sway you to one card or another.

For starters, the Sapphire Reserve still has an edge over Amex regarding the $300 annual travel credit. Not only is it a higher amount than the up-to-$200 airline fee credit that comes with the Amex Platinum, but it’s also much less restrictive. It will automatically apply to a broad range of travel purchases. In contrast, the $200 Amex airline credit only applies to select fees such as seat assignments or checked bags — and you’re limited to a single airline you designate each year.

Regarding ride-hailing services, some people see the up-to-$200 in annual (U.S.) Uber Cash (broken into $15 a month, with a $20 bonus in December) that comes with the Amex Platinum card as a cash-like credit. However, not everyone uses a ride-hailing service or places an Uber Eats order in the U.S. once a month, which means the 10 points per dollar spent on Lyft rides with the Sapphire Reserve might be a more valuable option.

On the flip side, if you live in a smaller city or never order food, you might find the DoorDash partnership with Chase useless.

The same can be said of certain perks on the Amex Platinum — including statement credits with Saks Fifth Avenue, Clear and select digital entertainment providers. If you already use these services or merchants, it’s like money back in your pocket. If not, you may find they aren’t a real value-add relative to the annual fee.

ZACH GRIFF/THE POINTS GUY

Meanwhile, the Amex Platinum is widely considered the most comprehensive card for airport lounge access. Although the Priority Pass Select membership that comes with this card no longer allows you to access participating restaurants (you can with a Chase-issued Priority Pass membership), the access to Amex’s wide collection of Centurion Lounges and Delta Sky Clubs on same-day Delta flights should be enough to make up for that.

Meanwhile, the Sapphire Reserve only offers Priority Pass access, they are expanding their network of Chase lounges, with the first U.S. location open in Boston.

Another area where Amex excels is by offering Gold elite status with both Marriott and Hilton to Platinum cardholders. Chase offers no equivalent benefit.

Chase has historically been the leader in travel insurance, with generous terms. Amex has partially closed the gap, adding a suite of travel protection benefits to the Amex Platinum card (see here for more).

Winner: Amex Platinum is the clear winner when it comes to perks and benefits, which include its $1,400-plus in annual statement credits, expanded airport lounge access, travel protections, and elite status with Marriott and Hilton. However, if you’re looking for a more flexible travel credit, comprehensive protections and fewer lifestyle perks, the Sapphire Reserve could be a better option.

Related: How long it takes to receive statement credits

Bottom line

The Chase Sapphire Reserve and The Platinum Card from American Express are two of the most popular premium rewards cards on the market. However, they offer slightly different value propositions.

Between hotel elite status and Centurion Lounge access, the Amex Platinum is better suited for those looking to enjoy a more luxurious travel lifestyle. If you frequently purchase airfare qualifying for 5 points per dollar, this card deserves a spot in your wallet.

The Sapphire Reserve, by comparison, is a premium card that’s simple enough for beginners and pros alike. The $300 annual travel credit is automatically applied to a wide range of purchases. Plus, you earn 3 points per dollar on travel (excluding the $300 travel credit) and dining and these categories are broad enough that you won’t be scratching your head trying to decide if you’re swiping the right card.

However, some may even find that it makes sense to carry both cards. If you can take advantage of all the annual statement credits and luxury perks, these cards can actually complement each other well.

Official application link: Amex Platinum
Official application link: Chase Sapphire Reserve

For rates and fees of the Amex Platinum, click here.

Additional reporting by Emily Thompson, Ryan Wilcox, Stella Shon, Juan Ruiz and Chris Dong.

Source: thepointsguy.com

Apache is functioning normally

Apache is functioning normally

A House panel has passed a bill that would temporarily expand the standard tax deduction used by the majority of taxpayers by $2,000 per person for the next two years.

The Tax Cuts for Working Families Act (H.R.3936) recently approved by the tax-writing House Ways and Means Committee would temporarily boost the standard deduction by $2,000 for single filers and $4,000 for married filers for 2024 and 2025. The deduction would start to phase out for single taxpayers with $200,000 in income, or $400,000 for joint filers. A financial advisor can help you optimize your tax strategy and make sense of tax code changes.

“The vast, vast majority of my constituents use the standard deduction on their taxes every year,” said Rep. Carol Miller, R-West Virginia, adding that the measure will increase economic activity in local economies. “The bonus $4,000 deduction is a $100 billion tax cut for the working families and will go a long way to make sure that my constituents can make ends meet.”

Potential Impact of Standard Deduction Increase

Nearly two-thirds of households would get a tax cut in 2024 under the proposal, according to research from the nonpartisan Penn Wharton Budget Model. However, since the standard deduction lowers the amount of income subject to tax, the deduction isn’t refundable and wouldn’t provide cash to lower-income taxpayers. In fact, only a small percentage of the bottom 20% of households have enough income to get a tax cut under the proposal, the researchers from Penn concluded.

But those at the very top of the income ladder also wouldn’t see significant tax savings if the bill becomes law. Not only does the higher deduction phase out for incomes of $200,000 or more (or $400,000 for married couples), but a larger proportion of high-income households use itemized deductions.

“The poorest fifth of Americans would receive just 2% of the benefits of this provision, and on average, that means a tax break of just $30 next year,” said Rep. Richard Neal of Massachusetts, the committee’s ranking Democrat.

The change would also cost approximately $96 billion over 10 years, the Penn researchers found.

The standard deduction for 2023 will be $13,850 for singles and $27,700 for couples. The deduction nearly doubled as part of the 2017 Tax Cuts and Jobs Act, which expires in 2026. An increasing number of taxpayers have opted to claim the standard deduction, rather than itemize deductions for mortgage interest, charitable donations, medical costs and a host of other deductible expenses. According to the IRS, 90% of taxpayers opted for the standard deduction for their 2021 taxes.

Will it Help Ease Inflation or Make it Worse?

Sponsors of the temporary increase said the measure was intended to provide relief from inflation, which soared to 9.1% last June before dropping to 4% in May. The target inflation rate for the Federal Reserve is 2%, which mirrors the historical average.

That reasoning was criticized in an analysis by the conservative-leaning American Enterprise Institute, which pointed out that increasing the disposable income of so many Americans tends to make inflation worse, and would contradict efforts by the Federal Reserve to slow consumer spending by raising interest rates.

Bottom Line

An increase in the standard deduction on federal income tax would benefit most U.S. households but only a small amount of lower-income taxpayers would see any cut to their tax bills. Since the increase of the standard deduction in 2017, fewer taxpayers have been itemizing deductions on their returns.

Tax Optimization Tips

  • When it comes to saving and investing for retirement, taxes are a significant and complicated consideration. Saving in a traditional IRA or 401(k) gives you an immediate tax break since contributions are made on a pre-tax basis. A Roth account, on the other hand, is funded with after-tax dollars so your money grows tax-free. Here’s some additional guidance for late-career savers deciding whether to switch to Roth contributions.
  • A financial advisor with tax expertise can help you optimize your tax strategy. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Hispanolistic, ©iStock.com/sasirin pamai, ©iStock.com/Moon Safari

Source: smartasset.com

Apache is functioning normally

Apache is functioning normally

Most reader questions I share at Get Rich Slowly are meant to solve a problem — somebody has a financial dilemma they’re hoping you folks can help them fix. But Rita sent a different kind of question. She doesn’t want to solve a problem — she wants to stir debate. Rita writes:

I ask myself “How much is enough?” several times daily. My husband and I make good money — over $100,000 in combined income — own a home in an expensive city, have two large dogs, and are able to buy most of what we want. I don’t have a problem with normal spending, but I often feel bad when I purchase something really nice (such as a nice purse, a collectible book, etc).

  • On one hand, I can afford these things.
  • But on the other hand, I still feel that it’s somehow wrong that I continue to buy this stuff while many people in the world cannot afford clean water and food.

Just yesterday, I read an article on an entertainment site about Steven Spielberg’s $200 million personal yacht. I think that this a a crazy, immoral waste of money. He could make a HUGE difference by using that $200 million for charity.

I guess my point is: Am I really any better? No, I’m not buying a yacht anytime soon, but I do buy luxury items. And someday I’d like the satisfaction of being able to buy my husband a Range Rover. (He loves those damn cars.) My husband doesn’t feel guilt for having these things, but (if I’m being completely honest with myself) I do. Oddly enough, I majored in finance in college and am currently studying for the CFA exam, so the topic of “efficiency and equity” is really on my mind.

Four years ago, prompted by this thoughtful essay in the New York Times, I asked: What should a billionaire give, and what should you?

In this essay, philosopher Peter Singer discussed the magnitude of charitable donations from the two richest men in the world: Warren Buffett contributed $37 billion to charitable foundations, and Bill and Melinda Gates gave $30 billion. Singer wrote:

Philanthropy on this scale raises many ethical questions: Why are the people who are giving doing so? Does it do any good? Should we praise them for giving so much or criticize them for not giving still more? Is it troubling that such momentous decisions are made by a few extremely wealthy individuals? And how do our judgments about them reflect on our own way of living?

Singer’s article discusses the ethics of giving, and tries to establish some guidelines. (It’s a fascinating read but it’s long, so budget half an hour or so.)

After years of dithering, I’m finally moving forward with philanthropy in my own life. I’ve been researching (and finding!) causes to support. I’ve been exploring the possibility of volunteer tourism. And one of my goals for Awesome People is to donate all profits to charity. (I’ll share more about my forays into philanthropy in coming months.)

But Rita’s question is about more than just giving. It’s also about consumption. When we buy things, there are ramifications across a vast economic web. This is why some people are willing to pay a premium to buy local or to buy organic. It’s also why some people insist on buying American and others boycott specific items. (Some people refuse to buy diamonds; my high-school social studies teacher refused to buy bananas.)

On a basic level, every time we choose to buy a comfort or a luxury, we’re also making the choice not to use the money to help somebody else — whether in our own community or in the world at large. To what degree is this acceptable? To what degree is this reprehensible?


xkcd tackles the morality of spending…

This goes beyond just the personal level, of course.

  • Today as I drove into downtown Portland, I passed the $37,000,000 Mercy Corps building. I winced when I saw it. Mercy Corps does great work, but how much more great work could it have done with the money it spent for its new headquarters?
  • Or what about the humble country church my family attended when I was in high school? About a decade ago, the congregation spent tens of thousands of dollars to pave the parking lot and to build a new kitchen, gymnasium, and office. Is this what Jesus would have done? Or would he have used the money to help the poor?

I used to think there were clear answers to questions like these. Now I’m not so sure. What is right and what is wrong?

[embedded content]

What are the moral implications of spending, especially on Wants? (I doubt anyone would argue that we shouldn’t spend on our own Needs.) If I spend $1500 for a pair of season tickets to the Portland Timbers, is this immoral? What if I also contribute $15 to a charity to make amends? $150? $1500? And at what point am I just “buying” a mental pardon?

Some of you will argue loud and long that there aren’t any moral implications to spending. Others will argue just as loudly (and just as long) that every economic act carries a moral and ethical component, that our financial decisions have meaning. I can see both sides.

What do you think? What are the moral implications of spending? When is it okay to buy a $200 million yacht? Is such a decision ever justifiable? Always justifiable? If Steven Spielberg also donates $200 million to charity, does that ameliorate this obscene expense? And what about on a more mundane scale? Are there any absolutes? How do you decide?

Note: Although this question is likely to stir more passionate debate than usual, let’s abide by the standard rules. You’re free to disagree with each other (and with me), but please do so respectfully. Keep things civil. As long as everyone’s polite, I think this could be a fine discussion.

Source: getrichslowly.org

Apache is functioning normally

Donating to charity isn’t just a way to have a positive impact on society – it’s also a savvy approach to reducing your tax liability. Schwab suggests people who donate to charity on an annual basis may want to consider a tax-smart strategy known as “bunching,” which involves making at least two years’ worth of charitable contributions in one year. Doing so can allow you to itemize your deductions for that year and increase the size of your tax deduction over the two-period. Consider working with a financial advisor if you need help with tax planning or charitable giving.

Standard Deduction vs. Itemizing

Each year, tax filers must choose between taking the standard deduction or itemizing their deductions. If your individual tax deductions exceed the standard deduction in a given year, itemizing is likely the preferable approach. The opposite also rings true. If the total value of your itemized deductions is less than the standard deduction, you’ll want to claim the latter.

2023 Standard Deduction

  • Single filers and married couples filing separately: $13,850
  • Married couples filing jointly: $27,700
  • Heads of household: $20,800

2022 Standard Deduction

  • Single filers and married couples filing separately: $12,950
  • Married couples filing jointly: $25,900
  • Heads of household: $19,400

Choosing between taking the standard deduction or itemizing is key when determining how to best maximize the tax benefit of your charitable contributions.

When to Bunch Charitable Donations

If you regularly donate to charity but your total itemized deductions fall short of the standard deduction, you may want to consider bunching your contributions. Doing so means you’ll make multiple years’ worth of contributions in the current tax year, pushing your itemized deductions above the standard deduction threshold. You’ll then take the standard deduction in the following year(s) since you won’t be making any additional donations.

To illustrate the potential benefits of bunching, Schwab ran the numbers on a hypothetical couple with no children. Schwab assumed the couple made $10,000 in charitable donations in both 2022 and 2023. Their other deductions for both years total $13,000. By taking the standard deduction ($25,900 in 2022 and $27,700 in 2023) in both years, the couple’s two-year deduction adds up to $53,600 – more than would have been had they itemized in both years.

However, if the couple made two years’ worth of donations in 2022, their itemized deductions would have added up to $33,000. They could have then taken the standard deduction in 2023 and their two-year deduction would have added up to $60,700.

By bunching their charitable contributions, the couple would have lowered their combined taxable income in the two years by $7,100.

Bottom Line

Tax filers who regularly donate to charities should consider how to maximize the tax benefit of their goodwill. Schwab recommends making multiple years’ worth of donations in a single year, so your total itemized deductions exceed the standard deduction. This strategy, which is known as bunching, then calls for you to take advantage of the standard deduction in subsequent years when you won’t be making any donations. Doing so can increase the size of your total deductions over that two-year period and lower your taxable income.

Tips for Reducing Your Tax Bill

  • A financial advisor can help you assess your tax situation and potentially limit how much you end up owing Uncle Sam. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Capital gains can increase the amount of money you ended up owing the government each year. However, harvesting tax losses can help offset those gains. And if your tax losses exceed your capital gains, the IRS permits you to deduct up to $3,000 worth of excess losses from your total income for that year.
  • If you’re approaching retirement and thinking about moving to a new state, consider the tax environment for retirees in that state. SmartAsset’s retirement tax friendliness tool provides an in-depth look at the places with the best and worst tax environments for retirees.

Photo credit: ©iStock.com/donald_gruener, ©iStock.com/aschecky, ©iStock.com/shapecharge

Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.

Source: smartasset.com

Apache is functioning normally

Last January I loaned money to a friend who was in financial crisis: Her vehicle was about to be repossessed. The transaction troubled me for a number of reasons, which I detailed at my personal website in a post called “I’m not a payday lender. But I play one on TV.”

During my trip to the East Coast I spent part of a weekend with “Monica” and her family. (Names have been changed to protect the profligate.)

When we made a Wawa* run, Monica didn’t want me to pay for my own Tastykake.** She threw it in with her own order, which totaled a little more than $34 and which included a coffee cake, a box of doughnut holes, and a $2-plus bottle of iced tea.

I started to feel uneasy. In the next 24 hours, the following additional red flags flew:

  • Monica bought about $100 worth of maternity clothes for her married daughter, who right now is still as thin as a candidate’s promise.
  • They have satellite television and DSL. Her kids have cell phones with text packages.
  • She mentioned she was planning to buy a snow blower, which after their military discount would run “only” about $1,000. (This despite the fact that she lives in a state where it doesn’t always snow in the winter and the fact that she has three healthy teenagers.)
  • Monica also mentioned that her van was about to hit more than 200,000 miles. Her daily commute is about 50 miles each way.

You know what wasn’t mentioned? Paying back my $800.

An Unsustainable Way of Life

This isn’t just a cranky post about being a human ATM. I knew when I gave them the money that I stood to lose it. Actually, I don’t think I will. It took 18 months for the first loan to come back, one $50 check at a time, but ultimately it was paid in full.

After making the second loan I mailed a personal finance book to Monica and her husband, “Gordon.” I also suggested tracking expenses in order to plug money leaks, and urged them to contact a debt management program through the National Foundation for Credit Counseling.

My note concluded, “I know it’s not easy to take a critical look at your life and to realize that no matter what happened in the past, you are responsible for the present. Change is never easy. But no one will help you except you.”

Monica wrote back, promising they’d work to cut expenses. She said she’d already advocated dumping the TV and cell phones.

Nine months later the television is still on, the teens are still texting, and Monica and Gordon are still living an unsustainable, paycheck-to-paycheck lifestyle. Here are a few more details, to show you just how deep their denial runs:

  • Company-wide layoffs are looming at Monica’s workplace.
  • Gordon has lower-back issues and is in his early 60s, so there’s no telling how much longer he’ll be able to keep his job.
  • Neither one has any retirement savings.
  • They don’t have an emergency fund. In fact, they have no savings at all.

That’s right: no cash is being set aside in case that layoff materializes or for when the vehicle finally dies. But there’s money for satellite television, texting and doughnut holes. Maybe a snow blower, too.

Treats Before Necessities?

I’d hoped that the first crisis — nearly losing their home — would force them to wise up. It didn’t. Want to know the reason they needed the second loan? They couldn’t make the van payment because it had taken all available funds to pay…

…wait for it…

Bounced-check fees and Catholic-school tuition for their youngest.

They had money to buy technology and other treats, sprinkling NSF checks along the way, but not for an essential recurring expense. Without a vehicle, Monica couldn’t get to work. But they didn’t think about that.

I worry deeply about their future. It’s a pretty safe bet that more things will go wrong. When does something not go wrong when you own a home and are raising three teenagers?

And when it does, they’ll be right back in oh-shit-now-what mode.

No More Bailouts

In that “payday lender” post, I wrote that I could no longer loan money. But I also admitted that I wasn’t really sure what I’d do if she called again, frantic for cash.

Now I’m sure.

Let me be clear: I’m not suggesting you abandon people who through no fault of their own have wound up holding the gooey end of the lollipop. For example, every other week I send $50 to my 88-year-old aunt. She uses the money for medical co-pays.

That biweekly payment is a line item in my budget. What isn’t in my budget any longer is bailouts. I’m a freelance writer who funds her own retirement and insurance and makes regular charitable donations. And at nearly 54 years of age, I have finally given myself permission to enjoy some of the fruits of my labors (frugally, of course).

It’s important to care about your fellow man. But not if you’re enabling rather than helping.

I’m Not the Loan Arranger

If my friends ask for help again, bailing them out won’t really help them. It would just allow them to postpone, yet again, the very hard and very necessary work of changing the way they spend.

I’m done. Maybe you should be, too. The next time you write a bail-out check, swearing it will be the absolute last loan? Make it stick. Frame it any way you like, but tell your sister/son/frat buddy that you can no longer afford to do this.

Maybe it’s that your own financial stability is at risk. Maybe it’s that you’ve given and given and nothing has changed. Maybe you want to use your money on something for yourself once in a while.

Whatever the reason, state gently but firmly that your career as loan officer is over.

You could find some other way to help, such as:

  • Offering to loan your personal-finance books
  • Helping to create a workable budget
  • Pointing out sites where people can learn smarter spending habits, such as Get Rich Slowly (duh) or MSN Money’s Smart Spending blog
  • If need is imminent — not much food in the house, kids need glasses — direct them to my previous GRS piece, “Unemployed? Underemployed? Here’s how to get help.”

If a relative or friend is a financial train wreck, you owe it to yourself to get off at the next station. It will be one of the hardest things you ever do — and probably one of the most necessary. For your sake, and for the other person’s, close the bank and keep it closed.

Readers: Have you had to cut off a family member or friend who needed rescuing but wouldn’t do much to help himself? Was it tough? Did you offer any non-monetary help, and did the person ever wise up?

Source: getrichslowly.org