Hey everyone, first time posting here, so bear with me.
I’ve started handling my grandma’s finances since she’s getting older. She’s never been great with money, and now it’s even tougher. She has a good amount of debt, and I’m trying to figure out if it makes sense to stop paying those debts and instead start investing for her. She’s in Texas, if that helps.
Here’s what we’re working with:
Debt:
Around $6,000 in credit card debt
Around $11,000 in high-interest personal loans (think sketchy payday loan types with insane interest rates)
Monthly Expenses:
$625 for car loan and insurance
$300 for phone, storage, and other things
Monthly Income:
$1,500 from Social Security (which I know has some protections against creditors)
$1,100 from a federal retirement annuity (not sure if that’s protected too)
My main question—what happens if she just stops paying her credit cards and payday loans? If she moves her money into a brokerage account and invests it, can creditors come after that? I know banks look at the last two months of transactions, but if her money is invested and earning dividends, can they still touch it?
The best move financially seems to be ignoring the debt and investing, but I’m trying to make sure there aren’t any hidden risks. I’ve talked to a couple of lawyers, but they didn’t have clear answers.
I read somewhere that Social Security can’t be touched by private debt collectors, but the government can still take it for things like taxes or student loans.
Nori said:
I read somewhere that Social Security can’t be touched by private debt collectors, but the government can still take it for things like taxes or student loans.
Yeah, I’ve seen that too, but I’m wondering if those protections still apply if the money is moved into a brokerage account. That’s where I’m stuck.
One option is to consolidate the debt into a lower-interest loan, but with today’s rates, that might not be easy. Another trick is to transfer the balance to a 0% APR credit card with a long promo period—like 12 months or more. That way, she’d have time to pay off the debt without drowning in interest.
If she can do this, she could save a ton. I did something similar—moved $21K onto a 0% APR card for 18 months, and my payments dropped a lot.
Also, if her total expenses (without debt payments) are $925, and she manages to get her debt payment down to $200, she could start saving about $1,475 a month. If she puts that in a high-yield account, she could build up a good emergency fund while paying things off.
Props to you for helping her. A lot of older folks struggle with managing money these days, especially with everything moving online.
@Lin
Payday loans are a trap. They’re designed to keep people stuck in debt. I’m not sure if they allow consolidation, but you could ask for a payoff quote. If it’s just the principal left, maybe she could use savings to wipe it out. Otherwise, she might need legal advice to see if there’s a way out.