Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
My fiancé and I (both early 30s) have lived together for several years. He is smart, funny, and a generally gregarious guy. He is in an industry where he has been making over six figures for at least six years. I, on the other hand, finally finished a doctoral program and worked a few side jobs to barely make 34K each year. Rent is high in NYC and I’ve gone into a fair bit of debt living with him and keeping up with his lifestyle. I moved to his state so he could be closer to work even though I had to commute over three hours a day for years.
Now that I have a job that pays much more (but still a third of what he makes). Here is the issue: He insists we split rent evenly. I do most of the chores and the apartment management and think our rent should be divided proportionally based on our income. I need time to financially recover and start contributing to my 401(k)! I grew up fairly poor whereas he was solidly upper middle class, and we have different outlooks on money management. So, how should we split the rent?
—Rent Bleeding Me Dry
Dear Dry,
I think you’re on the right track. Rent should be based upon income percentages. So if he makes $60,000 and you make $40,000, his proportion would be 60 percent of the rent based on your 40 percent.
Relationships are definitely a system of checks and balances. You both have made sacrifices, and I’m sure he knows that, but may think that now that you make more money, you can chip in more for living expenses. Does he know that you went into debt trying to afford his lifestyle, or have you kept it a secret? Did you put that lifestyle on credit cards? I’m assuming he knows about that commute you did for years, but does he know how much it bugged you—all so he could live in NYC? It sounds like you could have lived closer to your doctoral program, but you still wanted to live with him—and I get that.
But now you may need to make a hard choice. If he does not agree to pay more so you can get caught up, you may need to find a new place to live so that you can have more control over your living expenses. I wouldn’t discuss that with him if I weren’t serious, so think hard about it. That route is definitely not ideal, but if your partner sees how much this means to you, and how serious you are, he may have a change of heart. If he doesn’t—well, I might reconsider whether this person is really the one you want with you as you face the rest of life. In the course of a couple’s financial lifetime, things will go up and down. How will he be, in the “down” times?
Dear Pay Dirt,
I started a new job a few months ago at a small nonprofit in my town. Everything was going great until I received my first paycheck, and I asked my boss why there were no taxes taken out of it. She replied that I’m classified as an independent contractor. I’ve done some research since then, and I’m not! I don’t fit any of the criteria of the ABC test on the IRS website. I really don’t want to have to pay my taxes in advance, but also—this is apparently illegal.
I informed my boss of all this, and she said she would have it remedied by the end of the year. Today, we had a staff meeting, where she and our finance person said that it “wasn’t feasible to switch everyone over to payroll” and that this way of employing people is a “fairly common practice,” and that I would remain classified as a contractor. As far as I’m aware, at least three of us are being misclassified like this. My boss has also never had people working under her before this year, so maybe she’s just misinformed? But I’m also 20 and don’t feel like it’s my place to tell her how to do her job. I don’t know what to do. Should I report it to the IRS? Any advice would be helpful.
—That’s Not Me
Dear Not Me,
I don’t think it’s so much a matter of “telling” your boss how to do her job, versus making sure she doesn’t get reported to the IRS for tax fraud. Classifying someone as an independent contractor when they are an employee can result in a $1,000 fee and prison time, as well as being held responsible for all of the taxes you should have been paying the IRS on their behalf through payroll deductions.
I can see why you would be reluctant to pursue this, as a relatively young and new employee. Would you feel comfortable convening a meeting with the three other misclassified employees, reconfirming your impressions of the situation with them, and then deciding whether you want to collectively represent your case to her together? There might be strength in solidarity, here. Even if you don’t sway her, at the very least you wouldn’t feel like a lone whistleblower if you decide to take the action I’m going to describe in the paragraph below.
If you decide to move forward with protesting this, you can submit an SS-8 form to the IRS, which may take up to six months to process. The IRS can then review your status and make a decision from there. Just to anticipate the worst-case scenario, where the review doesn’t come out in your favor, definitely start putting your own money aside for taxes just in case. But to me, it sounds like your employer should be liable for failure to pay.
Dear Pay Dirt,
My now ex-wife and I divorced amicably back in April. Most of the stipulations in our separation agreement were based on our equal salaries, so although our kids spend most of the year with her overseas, there was no requirement for either child support or alimony. Prior to the divorce, I worked with our broker to divide our assets, which included a sizable stock portfolio. I asked about tax liability and was told that dividing assets should not incur capital gains. Having been responsible for the money during our married years, I prepared the paperwork and my ex looked it over before we both signed it.
Fast forward several months. My ex calls me, furious, reporting that the division of assets resulted in the stock positions being placed in her managed portfolio (with the same broker). The portfolio manager appears to have sold the entirety of the positions and reinvested the proceeds into mutual funds, with realization of a substantial quantity of capital gains. Her tax hit with this is substantial. She naturally wants me to help her cover this unexpected cost and blames me for this happening at all.
I don’t mind contributing to help our kids, but I’ve got questions. Do I have an ethical obligation to cover half the cost of the tax hit? Does the portfolio managers’ failure to ask my ex for permission prior to the stock sale represent a failure of fiduciary duty? And what options do we have to reduce this tax hit or undo some of the damage here?
—A Mistake, but Whose?
Dear Mistake,
A portfolio manager can make investment decisions on your behalf without your consent if your brokerage account is a discretionary one. If your account is nondiscretionary, then your trader must ask you for permission before trading. Your wife will need to investigate to see what type of account she has, and to determine whether the broker has acted outside of fiduciary duties.
You do not have an ethical obligation to cover half of the costs of the tax hit. Yes, you settled the estate—but she signed off on that settlement. Once you’re divorced, you’re divorced. She is now responsible for her own financial matters, and for making sure her affairs are in order. I don’t know if you want to face her wrath by telling her this—that’s for you to decide. Godspeed, friend.
Dear Pay Dirt,
I’m about to receive a windfall of a trust fund and I’m completely freaking out about it. How does one ethically/morally/logistically handle thousands of unearned dollars? I grew up relatively upper middle class, but with a generous, wealthy grandfather who enjoyed spoiling me and my siblings, who were his only grandchildren. With his investments (and my scholarships), I was lucky to graduate from college debt free. I now work as a preschool teacher, a profession I love and am able to afford as a career because of my partner’s high-earning job and my own lack of debt. I already feel comfortable in my life and grateful for the many financial privileges I had/have growing up.
However, I recently learned (by accident—this was apparently a family secret) that in two years, I am receiving an additional trust fund from this grandfather that’s around $50,000, and at the beginning of next year, I am receiving full ownership of all the 529 money I didn’t use for my education—currently valued at $180,000. I have no idea where to begin responsibly handling that much money—I only make $35,000 a year!
Right now I have about $25,000 total in my bank accounts, an amount I’m already proud of/lucky to have. I only have a regular savings account with my bank and have never done any kind of investing/retirement saving/etc. I would love to put a lot of the money toward retirement savings, but I also want to use a large chunk of it charitably, as this much money could do a lot of good for causes who need it way more than me. I feel overwhelmed when trying to research options and want to set myself up for sustainable success—both with savings and donations. Do you have any recommendations for first steps? What kind of accounts should I be looking at?
—How Can I Make This Fair?
Dear Fair,
What a wonderful position to be in! I think it’s great that you want to share the wealth, literally, while wanting to set yourself up for future success.
The first step is to look into opening a brokerage account at a firm. There are many out there to choose from, but I personally love Fidelity. You can review investment options to see the different ways you can invest money. The younger you are, the more aggressive you can be in your portfolio, so that means index funds are your new friends. You can create a DIY account over at Fidelity, which walks you through each investing option so you can make an informed choice on putting your money to work for you.
After you have your brokerage account going, look into setting up a giving account through Fidelity Charitable Giving. You can transfer investments from your brokerage account to a giving account, to give to the charity of your choice. This also allows you to decide if you would like to liquidate the assets into cash, or simply gift the asset to the foundation to allow them to manage it from there. Good luck!
—Athena
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I am 23 and have a full-time job with weekends off. I live in the same large city where I attended college, about 100 miles from my parents. A trip via train or bus to go visit them takes about 2½ or three hours each way. My mother tries to guilt-trip me into visiting more often than I’d like to. I love my family, but the trip is long enough that I typically have to stay overnight to make the journey worth it. How can I talk to her about changing her expectations around visiting?
