Life and Money With Helaine

Dear Helaine: My mother-in-law struggled with addiction most of her adult life. She is sober now, but looks for instant gratification through non-chemical means.

She retired early with a modest disability pension and receives Social Security. She owns a home that is paid for in full, and she now uses it as a rental.

After her retirement, she came into significant money when her husband died, from his life insurance policy. She then went on a years-long spending spree, including a new home she was unable to maintain and ultimately sold at a huge loss, world travel and an obsession with mail-order shopping. Now the money is all spent, she's in over her head, and refusing to change her lifestyle.

She feels we owe it to her to give her the money to continue to live as she enjoys. She demands that we buy a handicapped-friendly duplex where we would live in one unit, while she lives in the other rent-free and help her with her monthly expenses. We are far from wealthy, and we have a child in college. In short, there is no way we can give her what she thinks she is owed.

She won't stop spending, and I'm afraid that when she ends up homeless, we'll be forced to take her in. It's a terrible situation, to be able to see the train wreck coming and not be able to control the situation or make it stop. How would you recommend we proceed to protect ourselves while ensuring she doesn't end up living under a bridge? My husband is an only child, and there is no one else to help carry this burden. -- Desperate Daughter-in-Law

Dear Desperate: Your mother-in-law sounds like she could benefit from attending Debtors Anonymous, or working with a good financial coach (or both), but there's a catch: She needs to want to do that. And she clearly does not.

I think you and your husband are going to need to make your peace with the fact that this situation is all but out of your control. Hopefully she'll soon realize she can't keep up and either find a rental that costs less than the income she receives from renting out her home, or decide to move back there entirely.

But if she doesn't confront her spending addiction -- and make no mistake, that's what this is -- don't help her out. If you do, you will, with the best of intentions, not only be enabling her financially and emotionally abusive behavior, but also simply delaying the day of reckoning since you don't have unlimited resources either.

As you've no doubt learned by now, it isn't possible to save someone from themselves. If you feel guilty, know this: It's unlikely your mother-in-law will end up truly destitute and homeless. She's receiving a pension and a Social Security check, so in a worst-case scenario, she'll always have some income coming in.

One other thought: It sounds like your husband could benefit from attending the occasional Al-Anon meeting, where he'll met other people who also deal with a parent like his mother. They can give both advice and emotional support.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

Dear Helaine: My husband and I are in our early 30s. We're not financially hurting -- our only debt is a mortgage and car loan. I handle the savings and investment for our household. We're both contributing to our 401(k)s (I'm at 12 percent, and he's at 8 percent prior to match) and also putting 12.5 percent of our after-tax earnings into savings, stocks and our daughter's 529 account.

I've just received a significant raise, and we're looking at an additional $1,000 a month. Normal advice is to put it into retirement or our daughter's college account, but we're looking at some big changes down the road, which include a second child (birth, medical bills, additional child care payment and college fund) and selling our current home and buying another one in the next three years, so we can have more room for our family and live closer to our jobs. I'm feeling leery about the stock market, given everything that is going on in the world, so where should we park this additional money till we need it? -- Flush, but in Flux

Dear Flush, but in Flux: Congratulations on the raise! Your instincts are right on the money, but not for the reasons you think.

One should always continue investing in the stock market. You'll do better year in and year out if you invest the money and leave it in place, rather than yanking it in and out based on your "feeling" about the state of the world. I'm assuming you are taking this advice with your retirement accounts.

However, funds outside your retirement accounts that you believe you will need within a five-year period should not be invested in the stock market. The reason is basic: Stock markets go up and stock markets go down. If you need to pull money out in a relatively short time frame, you are risking doing so during a stock slump. In a worst-case scenario, you could end up losing a not-insignificant sum. Not good!

I don't believe you are a worrywart about your possible need for those funds. If you go ahead and have that second child, I can promise you your expenses will increase, even if you don't ultimately move. It's not just medical and child care bills, either. Children do eat food and need clothes. If you take an airplane to go on a vacation, you'll spend more on airfare. You can expect to buy double the birthday party gifts too.

I can go on, but you are no doubt getting the idea. Put the money aside now, and you'll be better equipped to deal with the additional bills when the time comes. There aren't any options that will earn you what I'm sure you would like to earn on the money, but your best bet would be to put it in a high-interest money market fund or a bank CD.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

Dear Helaine: I'm in my late 20s and got a bit of a later start in my career than I would have liked. I finished college about a year and a half ago, and got my first salaried job at the age of 26.

I thought when I got a job that didn't involve standing behind a cash register I'd have a lot more money to play with, but it really doesn't seem that way. After rent, bills, putting away money in my retirement and savings accounts every month, it seems like I have almost nothing left over. I've invested a bit in the stock market, but I don't really have time to research stocks, so most of my choices have been bad ones.

I'm starting to feel a bit of panic when I think about all the things I am supposed to be able to afford as an adult, like a house and raising children. My savings account stands at $5,000. A modest home in my area costs no less than $400,000, so even a down payment is a long way off.

I'll be 30 before I know it, and I feel like I should have more to show for myself. How do people handle these kinds of major expenses? I know the easy answer is to invest, but as I said, I'm not good at that. -- Late Starter

Dear Late Starter: When it comes to housing, you are hardly alone. The median age of a first-time homebuyer is 31 years old, partly as a result of higher costs. But don't despair! It's likely you'll be able to save more money as your salary increases, as long as you don't give in to upping your expenditures along with your enhanced paycheck. And while putting 20 percent down on a home is ideal, it's certainly not mandatory. In fact, the majority of people who buy a home with a mortgage put down less than that sum. It's possible you'll be among them. It's also possible your salary will increase, and you will be able to save up the requisite sum.

When it comes to stocks, you don't need to be good at stock-picking to invest in the stock market. In fact, that's completely the wrong way to think about it. I'm assuming that if you are investing via your workplace retirement account, you are likely putting your money in a target date fund or an assortment of index funds. That's how you should invest on your own, too. Enough with the stock-picking! Studies show less than 1 percent of us can beat the stock market averages year in and year out, and that number includes professionals who invest for a living. Don't try to beat them.

Finally, don't be so hard on yourself. Saving $5,000 in little more than a year after graduating college is quite an accomplishment. I'm officially impressed, and I bet more than a few readers of this column are too. Keep up the good work!

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)