Money Questions

Money seems to be a theme these days and I was just pondering some stories of windfalls and shortfalls in the last week that I thought I'd share.

Not too long ago a friend of mine divorced her husband who was lacking in money management or career skills. Having three children, they civilly split their (her) assets and she and I joked that essentially she would be paying herself child support for the next several years out of her newly enlarged and re-financed mortgage and her halved 401k plan. Or so we thought. Because although her husband walked away from the divorce proceedings with a healthy 6 figure check, it was GONE in less than 5 months and his checks to her for child support were bouncing. We kept laughing (cuz what else can you do) as she realized how much it cost her to buy her freedom.

Someone I know is renting a property to her niece. This niece originally was renting the property with her mother (don't try and follow the relationships, it has no bearing here) but tragically her mother passed away suddenly. In addition to the horrible and unexpected loss of a family member, this also presented two money issues - the first was that a stream of income was lost which put the affordability of the rent into question, the second was an eventual death benefit payment which could have afforded a 6-month pre-payment of rent. Needless to say, this story is coming to an unhappy ending where the death benefit has been frittered away (rumors put it in bad investments, inappropriate gifts to boyfriends, and god knows what else) and nearly three months have gone by without rent payment. This leaves all family members in a bad position - one needing the rent to cover the mortgage and other costs, one being in debt to her landlord/relative, and both in a position of needing to change arrangements with a potential loss of income and worse - family strife. So I guess it just goes to show you mixing business with family is just not a good idea.

Another friend of mine had her privately owned company bought out a few years ago by an equity company. The windfall to the owners was so large that they determined they would share some of the money with their senior management - she received a 6 figure check! She paid off the mortgage on her modest small home, paid off the mortage on her little lakeside cabin, invested some of the money, put some in savings, and bought herself some pretty jewelry and a nice vacation. She subsequently sold the lakeside cabin - having determined it wasn't really her bag - sold her little house - having found the love of her life and moved into his place - and other than throwing herself a whiz bang (and yet modest) wedding, is sitting pretty, feeling safe in her financial situation despite economic woes and possible layoffs.

And the most common tale of all these days - the dreaded job loss. One of my dearest friends has had a spouse put out of work by the economy. Since like most of us, they had little cushion on their month to month, two months after his job loss, they are now raiding their retirement funds to make ends meet. Hopefully this is a short term situation, but at the age of 42, you don't want to be starting back at zero in your retirement planning.

Today I received my 401k statement and noted that I have lost 3 years of "gains" in fund value. While the balance is still a healthy nest egg, it is demoralizing to see that I am running dangerously close to only have my original investment in place and with another serious loss in market I could actually have less than I put in! I called one of the fund advisors to talk about options - should I move my funds into another account? Specifically, should I move them from a variety of funds into one of the retirement data management funds that manages risk based upon your projected year of retirement? Essentially, the answer I got was - it's a crap shoot. Those funds have lost money with the down market too, and while they say they manage your risk, they aren't tightly managed based on market values, just spread across investments that have a certain risk-return ratio. I don't know....perhaps the ostrich head in the sand strategy is the way to go right now.

Hubby's latest scheme (in addition to doing all the right fiscal things, like increasing investment in 401k funds, paying down debt, and no revolving credit) is to chip in with his co-workers and buy an annual LOTTO membership, hoping against hope to be that one in a bazillion who hit the numbers and the entire department resigns at once. After all, you gotta be in it to win it.

What are you doing right now to manage your money? What would you do with a modest windfall? Are you managing a shortfall? Is there any magic bullet? Or are we all just f*cked?