Dear Karen: This is a little embarrassing. I know you advise that we take care of ourselves first –  the old “put on your own oxygen mask before you help others” argument. That’s why we had our son pay for his own college expenses. He had an on-campus job at first, and a small scholarship from the state. But we did co-sign on a private loan when he couldn’t get enough government loan help.

That was five years ago, when he was an aspiring business major. Then he was disgruntled by the Great Recession, and changed his major. He ended up with a degree in drama, which is tantamount to majoring in unemployment. He did graduate; that much is good. Now he’s been out of college for a couple of years. We’ve been keeping up with the interest on the private loan to keep the creditors at bay, but we can’t keep it up. My husband is retired on disability and I plan to – I need to – retire in a year or two. Our son still thinks he’s going to make it in entertainment and says he’ll pay us back when he does.

What do we do? – Tired of being a soft spot.

Dear Tired: The best thing you’ve done is provide a good example of why not to get into purchases you can’t afford, whether it be houses or cars or educations. All budgets need to provide for contingencies that emerge, such as disabilities and unemployment. The guideline (just in case you have other kids waiting in the wings) is for students to borrow no more than they expect to earn their first year of employment.

In terms of their high variable interest rates, private student loans are a lot like paying for college with credit cards. However, student loans (public or private) cannot be discharged in bankruptcy. The only light I see in your predicament is that private lenders don’t have the same power to collect as the federal government. There is a statute of limitations, which varies according to state. The lender can file a lawsuit, but if your only income is Disability and Social Security, and you have no property legally available to the lender, the creditor may not be able to collect a judgment against you.

I’m hoping you haven’t yet explained the situation fully to your son. Perhaps he will “see the light” before creditors drag you through this quagmire. Your son will be on the line to pay when the creditors see they can’t collect from you. He is in a much better position to pay than you.

Dear Karen: My wife and I make a little over $100,000 between us, so we’re not poor. However, it never seems to go far enough to take care of saving as much as I think we should. We get into these tiffs around the little stuff – “You’re spending too much on the dog,” “You should take your lunch to work,” that sort of thing. We do put money away every month for emergencies, but sometimes we’ve robbed that account. We usually pay into my company’s retirement plan but not always. I think we need a plan.  – Hand to mouth.

Dear Hand:  You’ve nailed the problem: you need a plan. The plan can start by simply by organizing and ordering your saving.

1. Your first requirement is for an emergency fund. It should contain 3-9 months’ worth of your expenses, depending on the economy, your risk aversion, and your job stability. This needs to be in cash-type accounts such as checking and savings: train yourself not to use it as a piggy bank.
2. Next is tax-advantaged savings. Contributing to your employer’s 401(k) is essential, especially if your employer matches. Automatic payroll deduction will prevent you from choosing the dog or restaurant instead. Max it out each year, and your future self will thank you.
3. The 401(k) may not be enough. If you can, scrape enough together for an IRA or Roth IRA.
4. After emergencies and retirement contributions are taken care of, you can start allocating to other goals such as paying off debt, saving for grandchildren’s education, and other goals. Sometime soon, meet with a fee-only financial planner to review all your needs and your progress towards your goals. She can create a comprehensive financial plan to help you understand how and how much to save and invest. But for now, commence these actions to strengthen your financial fortitude.

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