My Salary Barely Covers Childcare. I Found the Perfect Solution, But Someone Is Standing in My Way.

Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!) Dear Pay Dirt, My husband lost his job a year-and-a-half ago (he was in a lucrative but volatile industry) while I was staying home with our son, then 15 months. Unfortunately, the next month I learned I was unexpectedly pregnant. I went back to work on a contract basis for a short time before my pregnancy became high risk. It took nine months before my husband could even find something that qualifies as “underemployment,” at less than half his former salary, which he started a week before the baby was born. The issue now is that I can’t return to work (in a very inflexible in-person job) without taking a loss when the cost of two children in full-time care is accounted for. But I might have found a solution, but it’s complicated. Recently an existing childcare franchise very close to our home was listed for sale due to the owners moving to another state. We have reviewed their financial records, and it seems it would allow us to earn $50,000–$100,000 per year without incurring childcare costs (I could take the children to work with me and would have much more flexibility). The catch is we could only start earning immediately if we bought the business with cash (it will cost $125,000–$150,000). But we don’t have the money ourselves. My father-in-law has been making up most of the difference in my husband’s income with quarterly gifts to my husband. Essentially, we need $200,000 per year to live comfortably for even basic expenses with two children. My husband used to make $250,000, and he now makes $100,000, so my father-in-law has been providing another $100,000 per year. We have burned through our savings (even though we tried to make a lot of cuts) simply with the cost of medical care for me and the many expenses that come with a new baby. I realize we are lucky to have this support, but I would love to go back to being independent and financially self-sufficient, and I could if we buy this business. The point of frustration for me is that my father-in-law told us that he will continue supporting us at a rate of $100,000 per year for the next three years until my oldest is in kindergarten (unless my husband finds a better job). But when we asked him for $150,000 to buy the business in order to become financially independent sooner, my father-in-law balked. I know no one owes us $150,000 and that it’s a lot of money, but I am confused and hurt that he’d rather give us a potential $300,000 that doesn’t change our circumstances than $150,000 in a lump sum that could change our circumstances almost immediately. Is there another way I could be thinking about this? —Mommy’s Got Money Troubles Dear Mommy’s Got Money Troubles, I totally get the excitement over finding a possible solution to the work-or-childcare conundrum, but I worry that you might be massively underestimating how hard it is to run a childcare facility. It can be a tough business model with low margins and, of course, a lot of regulation. That doesn’t mean it’s not doable, but it might be more of a gamble than you think. If you’re already struggling financially, taking on a business that only works if someone hands you $150,000 in cash—even if that business is turning a profit—might add a lot more pressure to family financial situation that already sounds stressful. As hard as it’s been, it still seems to make more sense for you to look for another job, or even explore a different kind of business venture—one that doesn’t require upfront capital, lots of regulation, and a big learning curve. Again, I understand why this business feels like a lifeline. It promises income and childcare at the same time, which sounds perfect. I’m not saying it’s a bad idea, I just fear it’s not going to immediately solve the problem you’re hoping it will. Or, even if it does, it might bring a whole new set of problems in your life. I can’t tell you about the ins and outs of what it’s like to run a childcare facility, but you asked for another way to think about your father-in-law’s rejection, and to me, it seems clear that he probably has an inkling about all of this and wants to help you all avoid more stress in your lives. Get advice—submit a question! Please keep questions short (<150 words), and don‘t submit the same question to multiple columns. We are unable to edit or remove questions after publication. Use pseudonyms to maintain anonymity. Your submission may be used in other Slate advice columns and may be edited for publication. Dear Pay Dirt, Can you help me understand a reverse mortgage? The pros and cons? My mother is a 67-year-old widow; her only income is about $2,000 per month from Social Security. She has little savings. She owns her house, which is valued at about $400,000, but she still owes about $90,000 and pays about $800 a month on her mortgage. She has a very low interest rate, so refinancing doesn’t seem like a good idea. After my stepfather passed away four years ago, my grandmother (currently 91) moved in so my mom could help take care of her and my grandma would help with expenses. Together they have a monthly income of about $5,200, which mostly works for them. My grandma is getting to the point where she needs more care and they are considering an assisted living place, which sounds like my grandma could afford with her income, Medicaid, and maybe some sort of insurance. But my mom would have a harder time financially with only her Social Security. The reverse mortgage sounds like a good idea and would help ease her financial stress (which is significant). But what are the cons? —Just Want Her Life to Be a Little Easier Dear Just Want Her Life to Be a Little Easier, A reverse mortgage is basically a loan you take out using the equity of your home as security. That loan still accrues interest and fees, but you don’t have to make monthly payments. Instead, the loan gets paid back when you sell the home, permanently move out, or your heirs sell it (although they can also choose to refinance it). In the meantime, you still own the home, but the lender can foreclose if the property taxes or insurance aren’t paid. The most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM), which is available to homeowners who are at least 62 years old. It can be a great vehicle for someone like your mom, who needs money but whose net worth is tied up in her house. She gets to eliminate her mortgage payment (she’ll pay the current balance off as part of the closing), keep the house in her name, and she’ll never owe more than the home’s value when the loan is repaid, even if the home decreases in value for some reason. There are lots of cons, though. For starters, these kinds of loans are expensive. Interest rates and closing costs are typically higher than standard mortgages, and your mom would be replacing her low-interest mortgage with a more expensive loan with a balance that grows over time. It can also be risky, since she’s using her home’s equity to secure the loan—she’ll have less equity to borrow from if she needs it down the road. Plus, it makes it a little more complicated to pass on the home as an asset. But a reverse mortgage can give you a lot of flexibility in the meantime, which can be useful if your mom is under a lot of stress. Of course, watch out for scams, which are so common that meeting with a HUD‑approved reverse mortgage counselor is a requirement to protect seniors from being rushed or misled through the process. There might be alternatives they ask you to consider, like downsizing. Maybe your mom sells the home and buys a cheaper one, so she doesn’t have to live with a mortgage payment at all. If she wants to keep the equity in the family, maybe she sells the home to another family member who lets her live there. These options might not be possible—just something to consider. The bottom line is, a reverse mortgage is not always a bad idea. But, of course, there’s a price to pay, which is essentially giving up future equity. If it’s something you’re seriously considering, I’d start with this primer from the National Consumer Law Center’s digital library. The National Council on Aging is a great resource, too. —Kristin More Money Advice From Slate I’m getting really frustrated with some of my friend’s financial stances on housing. All of them complain about the housing market, which I think is a legitimate concern for many people, but not my friends. Most of my friends make six figures or close to it. We live in a medium size city where the cost of living is less than the national average so six figures is a really good salary. Several years ago, I had a crisis and realized I didn’t want to be in my high-paying career, so I made some major changes to my budget, which mostly consisted of living with elderly women who needed a little help around the house. This has helped me save up quite a bit of money. My friends, however, have been less than supportive of my life changes and some of them mock me for being “basically homeless.”