Should you take a lump sum or a salary increase? Sometimes the best way to make a decision is to take the “pillow test.”
Dear Cheapskate: I just had my annual review at work. My boss told me I’m doing a good job then gave me the option of taking my raise as a lump sum or a salary increase. But I’m not sure if it’s better to get the money all at once or spread out over the entire year. What is the right decision?—Geoffrey, Ala.
Dear Geoffrey: If you take the salary increase, how many months will it take to match the amount you would get in the lump sum? Are you fairly certain you will have this job at least that long? Of course, there are no guarantees, so you need to evaluate your tolerance for risk. The safe decision would be to take the lump sum, pay taxes on it now, and look forward to another merit increase in the future. However, if you are more of a risk-taker and believe you will be on this job for many more years, accepting the monthly option could net you more money over the long run. Sometimes the best way to make a decision is to take the “pillow test.” Consider which decision would allow you to sleep better. Hope that helps!
Dear Cheapskate: My husband and I have finally decided to buy a new car, but now we’re not sure what to do with our old one. Trading it in with the dealer seems like the easiest option, but my dad says we could get more for it if we sold it ourselves. How can we make the most, considering it’s such a hassle?—Sally, Ohio
Dear Sally and Hubs: The difference between the amount a dealer will give you on a trade-in (the wholesale value) and the retail value (selling it privately) can be as much as 20 percent. Let’s say in your case the difference is $2,000. Even if it takes 20 hours of your time to get the car ready for sale, list it, show it, and finally close the deal, that’s $100 an hour tax-free for the hassle—something to consider. Visit the Kelley Blue Book website (KBB.com) to calculate both the retail and trade-in values for your specific area. Be sure to read “How to Sell a Car Online” while you’re there. This will give you the information and confidence you need to make the best decision.
Dear Cheapskate: I’ve always been very generous with my family, thinking nothing of picking up the tab for dinner with everyone or treating my favorite niece to a shopping spree if she does well in school. My husband gets along well with my family, but he does think some of them take advantage of my generosity. We’re expecting our first child in a few months, and he thinks my priorities should be elsewhere right now, but I make plenty of money. In fact, my salary is more than his! Who’s right?—Madison, N.J.
Dear Madison: Money is probably the most difficult issue in marriage. But you can make it a lot easier when you think the way you would in a business partnership. Successful business partners don’t keep score; they bring their particular strengths and abilities to the business and pool the income and the profits. They make joint decisions on spending.
The fastest way I know for a partnership to fail is for one partner to go off in a huff and make independent decisions without regard for the other. I suggest you see your marriage and family as the most important “business” in your life. Together, you and your husband need to negotiate and compromise when it comes to giving and “gifting.” And the sooner you see everything in your marriage as “ours” rather than “yours” and “mine,” the sooner you will find emotional intimacy and financial harmony.
Dear Cheapskate: I’m a single mom on a tight budget. Unfortunately, my 15-year-old car just died, and repairing it wouldn’t be worth the cost. I’ve already decided to buy a car, but I’m a little nervous about negotiating with the salesperson. I know absolutely nothing about cars, and I’m worried I’m going to get taken for a ride. (No pun intended!) What should I look out for before signing on the dotted line?—Dorothy, Ariz.
Dear Dorothy: Before you do anything like falling in love with a car you cannot afford, I suggest you get “prequalified.” Go to your bank or credit union for an auto loan commitment. Based on your credit history, current income, and expenses, a lender will commit to a specific dollar amount and tell you the conditions, such as the interest rate, monthly payment, and number of months.
Next, you need to do some serious homework. Should you buy a used or new car? Domestic or foreign? Internal combustion engine or electric? Compact or full-size? If you spend a few hours at two information-packed websites (Edmunds.com and KBB.com), you will know so much about buying a car you'll swear you’ve just graduated from “Auto U”! Never forget that knowledge is power. Hint: If you decide to buy a good used car (that’s what I would do if I were in your situation), make sure you have a qualified mechanic give it a clean bill of health before you make that final decision.
Dear Readers: We would love to hear from you. What topics would you like to read about? Please send your feedback and tips to [email protected] 
