SMART MONEY: Young couple could afford more investment risk
August 25, 2013 1:50 AM

DEAR BRUCE: My wife is in college. We receive approximately $11,000 annually from a Stafford loan capped at 8 1/2 percent. We have about $7,000 left over that we have been investing in several mutual funds.

We own our home free and clear, but we have a $24,000 balance on our home equity loan at 5 percent. My wife and I are in our early 20s and our income is $36,000. Are we doing the right thing? — Reader, via email

DEAR READER: Let me disabuse you immediately of the circumstance. You don’t own the home free and clear. You have a $24,000 mortgage, which is what a home equity loan is. It sounds like you are doing very well, but don’t kid yourself. You don’t own your home.

With your income of $36,000, it sounds like you are living well within your means.

Whether you should be investing in mutual funds or directly in the stock market is another question.

It is my opinion that, particularly with today’s relatively poor performance of mutual funds, that you might shift your investments into reasonably large companies that are paying 2 percent to 4 percent dividends. If you wish to take more risk, which you certainly can afford to do in your early 20s, you might lean toward companies that are paying dividends and are rapidly increasing in value.

DEAR BRUCE: My husband recently passed away. I now face our financial obligations alone. He has an outstanding balance of $15,000 on a credit card in his name alone. Is this my responsibility? — Reader, via email

DEAR READER: The likelihood is that you will be obliged to pay the $15,000. Even though the credit card was in his name alone, the $15,000 was credit that was granted to him during your marriage.

There are some circumstances where this would not be your responsibility, but unless you have more information that you didn’t share, I think you are going to find that you will have to pay this.

That being said, you should consult a CPA or an attorney who specializes in matters of this kind to be certain that what I am telling you is correct.


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