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#1 of 39 Old 02-01-2010, 02:42 PM - Thread Starter
 
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I need some advice about helping my mom. She is 62, works at a job making maybe $10-12/hour, and is not likely to ever get a job making more than that now at this point in her working life. She has no retirement, no savings, no 401K, etc, and she has debt. Not too bad, but not good either. She is getting out of a relationship and wants to buy a small house. Houses here are not cheap. Even out of the city, the cheapest house one could possibly buy is around $75-80,000. She does not qualify for a mortgage because she has too much debt.

I want to help her, but I don't want to just throw money into a bad situation. She is not good at managing finances and budgeting, and has been in this situation many times. I am not great at it either, but am learning and am in a much better place because I'm in a stable marriage, job, etc.

Two options that I thought of are:
1) Loan her money to get her debt ratio down so she qualifies for the house, then she pays me back. Her mortgage would only be about $395 for the house she is currently looking at if I gave her 3% down. She has paid student loans etc for me in the past, and obviously, raised me as a child.

2) Buy a house myself and rent it out to her. Then that way the house is still in my name, and can be an asset for my own kids later down the road. Though she would probably still be living in it by the time they need to go to college, because she is only 62 and they will be in college in 10-12 years.

3) Encourage her to forget home ownership and look for government subsidized housing in the form of an apartment. This is what DH thinks. But to be honest, I don't think government subsidized housing would be any less than $395/month for an apartment. So, it seems to me it makes more sense to buy and start gaining equity in something. She also says she can't do an apartment because she had too much furniture. I'm like . Get rid of it.


What is your vote? Advice?
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#2 of 39 Old 02-01-2010, 03:43 PM
 
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I'd probably go with option one personally, but realize that the money you give her may never come back to you. If you can live with that and make it a gift rather than a loan, and are in a position to do so, I would go with that one. Also, would it be possible to co-sign on a loan with her without paying down the debt? Just another option to explore.
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#3 of 39 Old 02-01-2010, 03:48 PM
 
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If you can afford to, buy a small condo near a good college. Your mom can help pay the mortgage through her rent and by the time your kids need the condo for college, she'll have moved on to assisted living.
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#4 of 39 Old 02-01-2010, 03:51 PM
 
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Option #1.

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#5 of 39 Old 02-01-2010, 03:53 PM
 
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I think the choice depends on what your own financial situation is as well as the choices that she has made to land herself in her current situation.

Will it be a huge sacrifice for you to help her? Do you think she'll even be able to follow through with payments? Is she in financial trouble because she's been out gambling and drinking, or because of some sort of medical problem or just plain bad luck? If you feel fairly certain that this will not hurt your family financially and that she is responsible in her choices, then I would help her out. If not, I'd let her sell her furniture and move into an apartment. I always feel that my first responsibility is to the family that I created, not the family I came from, so I would consider that when making my decision. I would want to help her if it wasn't too hard on my family, and if I thought I wasn't enabling her in some way.
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#6 of 39 Old 02-01-2010, 05:59 PM
 
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does your mom want a houses or a condo? Can she afford a condo? Some of the gov subsizided senior apartments have a lot of seniors that enjoy socializing, so it can be a fun place to live, just make sure they provide air conditioning if she goes that route.
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#7 of 39 Old 02-01-2010, 06:04 PM
 
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I'm for option #2 - if you can swing it.

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#8 of 39 Old 02-01-2010, 07:03 PM
 
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Option Three. You don't want to get financially entangled - your relationship with your mother sounds like a good one, keep it that way! Also, you want her to get in a situation NOW that is sustainable as she slows down - not a situation where she's going to need yardwork, etc. done for her, or a daily visit because she is socially isolated, or whatever. Above all, tying up money in an asset that you might not be able to sell when you wanted to sell it is a luxury for folks who have a lot of cash on hand, not a sound choice for a family thinking about how to help pay for college in 10 years.
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#9 of 39 Old 02-01-2010, 08:02 PM
 
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Considering her age, I would look to see what is available as far as subsidized housing based on age. Depending on where she is located there might be some decent options available. My dad is in bad financial situation (widower, my Ma passed unexpectedly and a slew of medical bills) and I have been trying to see what will be available when he turns 62. Well there are places where you only pay 30% of your income which would be reasonable.

My concern with homeownership is that its expensive and what happens in 5-10 years. I think if she were younger I could see going the house route but I would be thinking about the day she is not working and only living on Soc Sec.

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#10 of 39 Old 02-01-2010, 08:07 PM
 
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Honestly, it's not likely she will be able to do all the maintenance. On such a low income, you'll be bailing her out all the time.

She needs to rent.

Liz

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#11 of 39 Old 02-01-2010, 08:49 PM - Thread Starter
 
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Hmm, thanks everyone, lots to think about. Yes, I do think about the fact that she is not necessarily in a position to start paying on a 30-year note for a house, I mean, she'd be paying for it until she is 92! I guess I was just thinking that if she starts paying into a mortgage, she is at least gaining equity that she can then sell the house later at a point if she were to need to move to assisted living. As opposed to throwing money at rent, that she never gets ahead doing. I mean, at some point in the next ten years, she will be on social security, and she will still need to pay rent and/or the mortgage.

Option 3 makes me kind of sad though. I feel like she is still so young, and thinks of herself as someone who could still own a home. She has owned several homes in the past, two with a husband and one without, but she has no equity carried over from those. She currently rents. Actually I wish I could buy the house across the street from me for her so she could help me with child care, cleaning, cooking, etc. She has some health issues, fibromyalgia type stuff, but she manages.

To answer the question of how she got here, she is a very good person, no alcoholism or trouble of any kind, she's just not great with money, in fact she's really bad at it. She has been through many relationships since my dad, and has never really had a job that paid very much, most of her jobs have been secretarial/bookkeeping work. Not bad jobs, just has never made a ton of money.

I do also have concerns about, as a PP mentioned, once she gets to the point of needing assistance, if I would have to drive out there daily to do things for her. This house is a good 20-25 minutes from mine. I am already dealing with that with my grandmother now, and have been for almost four years, and it is HARD.
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#12 of 39 Old 02-01-2010, 08:50 PM - Thread Starter
 
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Originally Posted by SunshineJ View Post
I'd probably go with option one personally, but realize that the money you give her may never come back to you. If you can live with that and make it a gift rather than a loan, and are in a position to do so, I would go with that one. Also, would it be possible to co-sign on a loan with her without paying down the debt? Just another option to explore.
I know I could not make it a gift. This money that I would be using to help her needs to pay in part for my children's college education.
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#13 of 39 Old 02-01-2010, 09:16 PM
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Originally Posted by dachshundqueen View Post
Honestly, it's not likely she will be able to do all the maintenance. On such a low income, you'll be bailing her out all the time.

She needs to rent.

Liz


Option #3, especially since that's what your dh wants. His vote matters, too (for keeping harmony in your marriage!!)

"Our task is not to see the future, but to enable it."
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#14 of 39 Old 02-01-2010, 09:22 PM - Thread Starter
 
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Well, he's not really asserting that, he's just saying, in his opinion, there's nothing wrong with renting, and she can get an apt for the same amount. But to me, it seems like it's throwing money away to rent, if I have the option of helping her buy.
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#15 of 39 Old 02-01-2010, 09:33 PM
 
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I am not trying to be nasty or harsh, but a 62 year old person has no business getting a new mortgage, with or without help.

She is better off renting. If she pays $500/mo for a subsidized senior apartment, she is going to have to pay a phone bill and that's it. No taxes, no insurance, no heart attacks in case the furnace breaks, etc. Our mortgage payment is $316/mo (on a 15 year note at 5% interest) and it costs a heckuva lot more than that for us to live in our house. We spend $1200+ on property taxes, $430 on homeowner's insurance, and $300/mo year round on utilities. We spend $750/mo to live in our house. (More, really, since we pay more than the minimum mortgage payment, but I digress.)

There are 4 (maybe more) senior high rises in my county, and they all accept residents at age 62. I would help your mom by doing the legwork to get her into a subsidized apartment.

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#16 of 39 Old 02-01-2010, 09:50 PM
 
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I know I could not make it a gift. This money that I would be using to help her needs to pay in part for my children's college education.
This would cause me to be hesitant to lend someone money that i need for my children's college education. I would go with either option 2 or 3, but I am not sure which one.

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#17 of 39 Old 02-01-2010, 09:54 PM
 
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I would definitely go with option 2 if you can do it. It will give your Mom her own space and you will get equity and a good investment for the future!
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#18 of 39 Old 02-01-2010, 09:56 PM
 
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Why would you want to jeopardize your children's future education such that your mother can live in a house rather than rent? There is nothing wrong with renting. Really!

Your mother got to this place in life of her own doing, it is not your place to bail her out, especially with your husband squarely saying that she needs to rent. If you had the money it would be a different matter, and if your husband was in agreement. You don't have the money. You really don't. Borrowing against your children's education funds for mom's comfort isn't the best use of that money.

Find her a great place for old people. There are a lot of thriving old people communities that aren't nursing homes. I assure you.

Liz

ETA: I want you to know that I am coming from a similar place as you. My mother is pretty severely disabled but I would never ever jeopardize my family for her interests. There was talk about her living with us at one point, which DH nixed, as she has major problems.

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#19 of 39 Old 02-02-2010, 12:02 AM
 
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I would go with #2 if you could swing it comfortably.
She's not "throwing" away money, you are helping her and benefiting. However, it could get awkward if something came up and she could no longer pay rent to you. Whereas if she was renting from someone else, there is a little more accountability.

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#20 of 39 Old 02-02-2010, 01:06 AM
 
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#3 as a first choice, and #2 only if you can afford to make the mortgage payments yourself (w/o your mom paying rent). Honestly, renting makes by far the most sense to me. It the not to distant future she may need to move again (e.g. if her income goes down, she needs assisted living) and such. The fact that she raised you and helped with college really doesn't figure into this. It was nice that she was able to do those things, but you can't bring financial ruin on yourself or her now because of that past decision on her part to help you.
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#21 of 39 Old 02-02-2010, 10:22 AM
 
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Leta has a good point -- it costs a lot more than the mortgage payment to own a house.

Given her age/health issues, your own financial direction (kids in college, etc.), and your dh's wishes, I am leaning toward helping her into a nice rental that you/she don't have to maintain/insure, etc.

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#22 of 39 Old 02-02-2010, 10:58 AM
 
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I am not trying to be nasty or harsh, but a 62 year old person has no business getting a new mortgage, with or without help.
I think this is so ridiculous. Some people that age aren't in a good position to get a new mortgage, but I certainly don't think that you can apply it across the board, nor should you. My own mother is 62 and will be buying a different house within the next couple of months. She and my stepdad finally moved in together and need more room. She easily qualified for a loan while still carrying the note on her current house, is working at a good paying job AND getting retirement that will more than cover her expenses once she stops working. When she can no longer take care of the maintenance she'll have enough to hire people to mow the lawn, etc. While it may not be the best idea for someone who is not financially secure and that age, there's no reason someone should expect to spend the next 25 years as an able bodied person in a rental if they choose not to.
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#23 of 39 Old 02-02-2010, 11:03 AM
 
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Hmm, thanks everyone, lots to think about. Yes, I do think about the fact that she is not necessarily in a position to start paying on a 30-year note for a house, I mean, she'd be paying for it until she is 92! I guess I was just thinking that if she starts paying into a mortgage, she is at least gaining equity that she can then sell the house later at a point if she were to need to move to assisted living. As opposed to throwing money at rent, that she never gets ahead doing. I mean, at some point in the next ten years, she will be on social security, and she will still need to pay rent and/or the mortgage.

Option 3 makes me kind of sad though. I feel like she is still so young, and thinks of herself as someone who could still own a home. She has owned several homes in the past, two with a husband and one without, but she has no equity carried over from those. She currently rents. Actually I wish I could buy the house across the street from me for her so she could help me with child care, cleaning, cooking, etc. She has some health issues, fibromyalgia type stuff, but she manages.

To answer the question of how she got here, she is a very good person, no alcoholism or trouble of any kind, she's just not great with money, in fact she's really bad at it. She has been through many relationships since my dad, and has never really had a job that paid very much, most of her jobs have been secretarial/bookkeeping work. Not bad jobs, just has never made a ton of money.

I do also have concerns about, as a PP mentioned, once she gets to the point of needing assistance, if I would have to drive out there daily to do things for her. This house is a good 20-25 minutes from mine. I am already dealing with that with my grandmother now, and have been for almost four years, and it is HARD.
Based off what you just said, I think the rental makes sense. 62 is not old but lets me honest its not real young and anything can happen in the next few years. I think she would be in a better position renting than she would be if she were in a house. I have seen the housing for folks 62 and up in several states and some of it is really nice. Heck, I have sold my Dad on the idea since he learned he could stay in his current neighborhood. The thing is if your Mom was only paying 30% of her income on housing and a phone bill, she could stash away a lot more cash for enjoying life than she could as a home owner.

Maybe I am biased but home ownership when you are older with little in terms of resources is a bad idea. My Grannt who died a few years ago was stubborn and refused to sell her house and the last 10 years of her life on that house was a mess in part because of money. The house was paid off but with a fixed income she just could not handles taxes, sewer, water, upkeep,etc. Especially once she hit her 70's and stopped working and only had Soc Sec benefits she could not do it. So thinking of how things were for ny Granny and from what you are saying, your Mom really has nothing as far as resources, I think you have to think long and hard about it.

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#24 of 39 Old 02-02-2010, 12:46 PM
 
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I have some experience in this area in our families. DH and I already talked about it and know what we will do when the time comes.

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Originally Posted by Leta View Post
She is better off renting. If she pays $500/mo for a subsidized senior apartment, she is going to have to pay a phone bill and that's it. No taxes, no insurance, no heart attacks in case the furnace breaks, etc. Our mortgage payment is $316/mo (on a 15 year note at 5% interest) and it costs a heckuva lot more than that for us to live in our house. We spend $1200+ on property taxes, $430 on homeowner's insurance, and $300/mo year round on utilities. We spend $750/mo to live in our house. (More, really, since we pay more than the minimum mortgage payment, but I digress.)

There are 4 (maybe more) senior high rises in my county, and they all accept residents at age 62. I would help your mom by doing the legwork to get her into a subsidized apartment.
Leta's point about the other costs of ownership after the mortgage payments is very valid.

Quote:
Originally Posted by annekevdbroek View Post
#3 as a first choice, and #2 only if you can afford to make the mortgage payments yourself (w/o your mom paying rent). Honestly, renting makes by far the most sense to me. It the not to distant future she may need to move again (e.g. if her income goes down, she needs assisted living) and such. The fact that she raised you and helped with college really doesn't figure into this. It was nice that she was able to do those things, but you can't bring financial ruin on yourself or her now because of that past decision on her part to help you.
Agree. If you do #2, go into the decision based never seeing rental payments. She could lose her job, get a lower paying one, have the best of intentions to pay you but the reality is a lifetime of poor financial choices will likely continue. Can you, would you and your DH let her live there free if worst comes to worst?

OP - you mention a string of many relationships. If you do option #2, I would absolutely not allow and new "relationships" to live in the house without paying their fair share of rent.

#3 would be my first choice.

"Throwing away money on rent" is not throwing money away. It costs money to live, whether you own or rent.

People say renting is throwing money because they are hoping their homes will significantly appreciate over the years.

Sadly, that is proving not to be true in current times. Also, long mortgage terms mean very little money is going towards principle and people are not gaining equity.

Saving the difference between renting and owning costs can be as financially prudent as owning. (This assumes a reasonable cost of living area where renting versus owning is in line.)

Leta's example of how much more it costs to own over renting is worth evaluating in the OPs area.

Futher, so many people are in the position now with mortgages they can't afford. The reality is, all they are doing is renting their house from the bank because they borrowed too much money, took out the loan for too long of a term, didn't put any money down, paid too much and never had any equity or got hit by dropping home prices, etc. They have no equity, no ownership position and the added burden of maintenance, real estate taxes and insurance costs.

From my post, I bet you can figure out which option DH have already decided upon for any relative that will need help....

Mom to DS, born fall 05 after ,,, wife/best friend to DH We have
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#25 of 39 Old 02-02-2010, 01:03 PM
 
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Yah, her buying a house sounds like a really bad idea.

If she can't qualify for a mortgage on her own, and also have an emergency fund saved up, then she isn't ready to be a homeowner.

What would she do if the furnace broke or the A/C went out?

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#26 of 39 Old 02-02-2010, 01:11 PM
 
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Yah, her buying a house sounds like a really bad idea.

If she can't qualify for a mortgage on her own, and also have an emergency fund saved up, then she isn't ready to be a homeowner.

What would she do if the furnace broke or the A/C went out?

Yep.

Family obligation includes helping someone to keep a roof over their head. It does not extend to enabling someone's poor financial choices when they want a specific, expensive type of roof over their head.

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#27 of 39 Old 02-02-2010, 09:45 PM
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If you think she is doing better and making better choices, I think #2.

Personally, I will help pay for my DD's college, but also would help my mother with HER comfort. I think paying forward is good, but backwards is important too.

Seems like there is a lot of dissent with my opinion, though.

Good luck deciding mama!
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#28 of 39 Old 02-02-2010, 10:52 PM - Thread Starter
 
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Okay, she does have a fair amount of debt right now, which is why she doesn't qualify on her own for a home. She has about 11,000 on a credit card. She has two car loans. One is for the main car she drives, which she still owes $7,900 on (I actually think this seems like a lot of money for that car, and wonder if she could even sell it for that much). The other car is a minivan that she and her partner used to use to transport things, but is not really in use now. She still owes $3,000 on that, and thinks she can probably only sell it for about $2,000.

If she can get rid of both car payments, she would qualify for a mortgage. Because the car payments are higher, and the credit card's minimum payment is, of course, lower. Although yes of course she knows that she is paying an exorbitant amount of interest by only paying the minimum.

She also has expenses like a cell phone, and she is paying on a life insurance policy for me that she has had since I was a kid! I said, what are you still paying on that for? She said she kept it because I don't have any life insurance yet, which I do have a small policy through my husband's work now, and I know I should get some term on my own. I think she has been paying something like 20 or 30 bucks a month for me on that for years and years. That seems crazy.

I think if I am going to help her at all, she needs to seriously revamp her budget. Here are some ideas I can think of:

--sell the more expensive car for whatever you can get for it and drive the minivan?
--cancel any non-essentials like cell phone or cable? (I honestly don't think she will go for this)
--quit smoking???

I don't know, what else?
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#29 of 39 Old 02-02-2010, 11:00 PM - Thread Starter
 
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I actually have some money that I could help her with, but I was considering buying a car with it. (And hopefully investing some for college, but it's not what I was saving solely for their college funds, just to clarify). My car is 16 years old and pretty close to being done, but it's still running. So part of me thinks, well, why not invest it in way that can both help her, and she also helps us, because she helps put the equity into it that is growing that can eventually be an asset in our own retirement, or even for my kids in college. If I bought it as an investment property, I would have to put at least 20% down, so I don't feel like I'd be in a situation where I would owe more than the house is worth off the bat, as someone above mentioned is the case with many current mortgages.
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#30 of 39 Old 02-02-2010, 11:31 PM
 
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Why don't you give her a gift of a couple-few meetings with a financial advisor, someone who can help her figure out the best way for her to manage her assets, debts and income, as well as budgeting?
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