Welcome to this month's Color of Money Book Club. Post columnist Michelle Singletary is joined by Wanda Urbanska and Frank Levering, co-authors of "Nothing's Too Small to Make a Difference."
Need financial help? Need advice about your credit report? How can you live a frugal lifestyle?
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Michelle Singletary: Hello everyone. Welcome. I was on break for awhile but let's get started because there are a lot of questions.
Hi, Michelle - This is a basic personal finance question from someone in late 20s with a pretty good job. I have no debt except a car loan that I took out two years ago for an inexpensive used car. The balance is now a little over $3K. I'd like to pay it off early (maybe three one-time payments of $1K in addition to the regular payments) but I am wondering if it would be better for my credit score to just pay it off on time. One of the reasons I took out the loan initially was because I don't have any credit history other than credit cards. I know I wouldn't actually save much by paying off early, I just like the idea of having the loan paid off. I have no other debt and am in pretty good shape in terms of savings, retirement savings, etc. What would you recommend? Thank you!
Michelle Singletary: Wow. You are in such good shape that you can pay off your car loan early and you wonder if you should. Child, pay off that loan. It won't hurt your credit score one little bit. What matters most is if you paid your monthly payments on time, every month. So go forth and be car debt free!
I enjoyed your simple life piece. I consume less by renting dvds instead of buying them.
My high speed internet access make it possible to stream video, another alternative to buying dvds.
Buying less powerful car helps the gasoline budget and improves the environment
Upgrading a computer to play games is better than buying a console plus additional games($50 a piece) A computer is more useful than a console(word processing, web surfing, email,etc)
Subcribing to a download service, make your own comp cds instead of buying a bunch of cds(like a only couple songs you really like on one disc)
These ideas is not being cheap but consuming wisely in our capitalistic society.
Wanda Urbanska and Frank Levering: These sound like excellent suggestions.
We'd also suggest renting DVDs and videos rather than purchasing them outright.
Michelle Singletary: So, I fail again. I have enough kid videos to start my own video store :) Wanda and Frank help me!
My name was recently added onto a corporate purchasing AMEX at my company. I also have bad credit. Since this bill isn't being paid by me, but by our accounting department, it will be paid on time. Will this in anyway help in improving my credit score?
Michelle Singletary: Sorry, kid. If the card isn't in your name or you're not a co-signer the fact that your company pays the bill on time won't help you at all. But you know you can start today to build good credit by paying your bills on time, which is the biggest factor in determining a good credit score.
Capitol Heights, Md.:
Hi Michelle. This has been on going. My husband tells me that it would be to our best interest, for me to get a credit report done before I can be put on the title of the house. Will it help or hurt us if he puts me on the title without a credit report being done? or is he trying to keep me off it?
Michelle Singletary: Girlfriend, your husband is completely snowing you. You don't need a "credit report done." And what the heck does that mean anyway. You can order a copy of all three of your credit reports, which will show how you handle your bills but that has nothing to do with his ability to add you onto the title of the home. I would suggest you and your husband check with a real estate attorney about how to go about adding you to the title. But my gut tells me -- as it does you I bet -- that he is just putting up road blocks to putting you on the title. And you SHOULD be on the title if you are married to the guy.
Silver Spring, Md.:
I have a question about credit--I have good credit, and I recently got my scores from all three companies. One of them does not have record of many of my accounts, therefore giving me a score about 30-points lower than the other two. How do I get my accounts reported to a credit company?
Thanks, and its such a relief to read your columns in this world of "spend, spend, spend!"
Michelle Singletary: Well, many consumers are unaware that companies are required to send your payment information to the credit bureaus. It's completely voluntary. If you want those accounts recorded to that particular credit bureau, you have to contact the creditors and ask they they send your information. But they don't have to. But it's worth asking. Also, just so you know if you go for a home loan most mortgage companies take the middle score (not an average)because they know many companies don't report consumer credit information to all three bureaus.
I haven't had a chance to read the book yet. What are your 5 main tips on simple living?
Also, what five things do you see people most commonly make mistakes on?
Wanda Urbanska and Frank Levering: We know you'll get some great tips from our book.
Five main tips of simple living are:
1. to become a thoughtful consumer -- carefully considering each purchase before you buy. You might want to wait a week or a month if you want to buy on impulse and see if you still want it, need it, have space for it and can afford it.
2. Become a better environmental steward by trying to do the "little things" that can help. Work hard to eliminate disposables in your life. Replace a travel mug for throwaway cups, and the like. Use cloth napkins instead of throwaways.
3. Track your time for one week and see where you can conserve your time instead of frittering it away. In the book, we talk about "big picture" and "little picture" tips you can try, such as creating a "cushion of time" so that you're not always running late to events.
4. Practice frugality by reusing items as long as possible, and using the last of things. Swap whenever possible. And save money for your major life goals.
5. Learn from your children to live in the moment, and to save life's simple pleasures.
Capitol Hill, Washington, D.C.:
My landlord put my security deposit into a bank acount in escrow by him with my SS#. He overdrew the account and now the bank says I'm responsible even though I'm not allowed to touch the account since it's held in escrow for me. Is there anything I can do about this?
Michelle Singletary: Really, contact an attorney. If you don't have much money I would try to contact the National Law Center.
I really have a comment, more than a question. I read Michell's column online, and most of the book club selections (Work full time and go to college, so pleasure reading time is minimal). I love Michelle's advice, here are some things I do that are not painful financially. I do not have cable TV, I have free TV and rabbit ears, I can't see spending $600 or more to watch television. I do not use air conditioning, I have ceiling fans and fans in all my rooms, my electric bill for my husband and myself runs $45-55 a month year round, and we live in Central Florida (hot, hot, hot!) I have a long distance calling card from Sam's Club 3 cents per minute, no long distance service on my phone. Reading is cheaper if you go to the library (Michelle I read your book, FREE from the library) Very good book I might add. I only use coupons on items I will normally use, but don't buy the item till it's on sale (they always eventually go on sale, and have your friends and family load you up on coupons if they dont need them) None of this is painful (the airconditioning sometimes) but I SAVE this money, invest, and have lots!!! of money for emergencies, also 401K, stock, ... Keep up the good advice Michelle!!
Michelle Singletary: Girl, my husband and kids call me the hot queen cuz I'm always turning off the air (most of the time because I'm cold but also to save money). Glad you liked my book and I'm not offended at all that you got it from the library. But my book is coming out in paperback in Dec. under a new title "Spend Well, Live Rich." And it will be much cheaper than the hard cover.
Michelle Singletary: So, for those of us who have so much stuff, how do we go about reducing what we don't need without contributing more to some landfill, especially if the stuff is old or worn.
Wanda Urbanska and Frank Levering: Great Question, Michelle. We don't want to add to the landfills, when we have perfectly usable stuff, so you're challenged with finding another "home" for it. We suggest finding Goodwill centers, homeless shelters and the like. Also, there's a great organization called Freecycle that helps you find a new home for your things. This disposal problem should help raise awareness next time you're tempted to buy on impulse.
Should I or Shouldn't I?:
Pay off my car loan, that is. The interest rate is about 6%. I owe less than $4,000 and have that in my checking account. I would still continue to put the amount I pay in monthly car payments into a savings account. It's direct deposit, so I never even see it. Thanks for your advice!;
Michelle Singletary: I would pay it off only if you would still have 3 to 6 months living expenses saved up. If not, pay as much as you can without depleting your savings of your emergency money. And you are absolutely right, continue to make a car payment to yourself even after you pay off the car. That's a trick I've used for years.
I've heard that Wanda and Frank have a new TV series. When is that going to start?
A comment on saving energy: having a manual transmission car is the best way to save gas and repair costs, plus it thief-proofs your car from being stolen by joy-riders who can't drive a stick!;
Wanda Urbanska and Frank Levering: Thanks for asking. We're delighted that SIMPLE LIVING with Wanda Urbanska will start airing in the Washington DC metro area on Saturday, Oct. 2, @ 8 a.m. and will be running Saturdays thereafter. You'll see Michelle (and her former house) on the first show. It's appearing all over the nation. Readers need to contact their PBS stations for airtimes and dates. They can also check out our website at www.simplelivingtv.net. We'd love to hear from viewers with suggestions for the next run of the series.
Michelle and her children are featured on a show on Simplicity and Children in Show #5.
We are delighted that Smead Manufacturing of Hastings, MN has signed on as our corporate sponsor. They make file folders and other office organization supplies and like many progressive businesses work hard to place post consumer waste in their product lines.
New home owner:
Or more precisely, I now co-own something with a mortgage company. Since getting a mortgage, I have been overwhelmed with credit card offers, mortgage insurance, refinancing, etc. I'm also getting catalogs every day from companies I've never heard of. I dread picking up the mail at night.
Did the mortgage company sell my name and address to some central mailing house? Any way I can get off? I just sent a letter to the mortgage company telling them not to sell or trade my name and address but fear it may be too late. Thanks.
Michelle Singletary: You do know that people can check county records to see who had sold and bought homes, right? So don't rush to judgment thinking it was your mortgage company that sold you out.
I love to know the answer to appreciate the things they have. My daughter (12) is always looking for the next shopping spree
Wanda Urbanska and Frank Levering: One thing to do is to ask your child to list all of their toys and personal items. If they can't, they have too much. (That includes the ladies, too, when it comes to your wardrobe.) What we suggest with our seven year old son Henry is that he give away an item for every new item that comes into his realm. One rule of thumb for all of us when it comes to simplifying our life is: If you buy something that you may already have, you have more things that you can than you thoughtfully own. This applies to adults, children and seniors.
Michelle Singletary: Wow. Great answer. I'm going to do that with my kids. I bet they end up with just two toys, which is probably the only two they really play with anyway!
Upper Marlbor, Md.:
I don't have a huge amount of debt but my bills have fallen beyond considerably. I am a single mother of two children. I have initiated paperwork for child support for both of my children. I have a court order for child support for my youngest child but the non-custodial parent does not pay regularly better yet he has never made a regular payment. I feel really horrible about what is happening in my finances. I have never been this far behind before. I have applied for higher paying jobs but I have not been successful as of yet. I would love to go back to school to finish my bachelor's degree in Business Administration but I can't afford it and I don't have a evening babysitter. How do overcome this season in my life that I am in? What kind of advice do you have for me and the many other single moms who may be in a very similar situation?
Michelle Singletary: First, don't beat yourself up. Debt happens. But you are on the right track. Continue to push for child support because that is for the benefit of your children. Next, really look at your budget and I mean REALLY. Cut everthing and anything that is not absolutely necessary (at least until you can get back on sound financial feet). That means no cable or only basic cable, no eating out (just for awhile), cook economically, rent videos from the library instead of going to first-run movies, etc. Short of getting another job and your child support payments you have to look at your expenses. If you have room, consider getting a roommate to help out with the expenses. Finally, understand that with hard work and cutting as much as you can this is a season that will pass.
I look forward to watching your upcoming PBS show and learning great tips. Would you recommend any simple living resources online (e.g. web sites or online discussion groups) to connect with others trying pursue simplier living and to exchange tips?
Wanda Urbanska and Frank Levering: One great resource is what we call the Sierra Club of the simplicity movement. It is Seeds of Simplicity. You can reach them at seedsofsimplicity.com or 877.UNSTUFF. Currently they're initiating a nationwide "Do Not Stufficate" campaign. Everyone should spend $25 to join and support them. WorldWatch Institute, based in Washington D.C., focused on consumption issues in their State of the World book last year. This year their focus issue is security. They're a great resource for "big picture" environmental and other answers. Michelle's Book the "Seven Mantras of Money Management" is a great resource. Our previous book, "Simple Living: One Couple's Search for a Better Life" has been helpful to thousands of readers. Cecile Andrews' book, THe Circle of Simplicity, is widely read and useful in starting "simplicity circles."
Dear Ms. Singletary,
Ready for a scolding and some hard-butt perspective here. Would you ever recommend stopping contributing to a retirement plan (currently at maximum) for a year to pay off debt and start with a clean slate?
We're pretty frugal, but it's still hard to cover basic expenses plus the kids' education fund. We shop/go out very little. Old car, little driving, very low insurance. We're both striving to increase income and there's promise ahead, but meanwhile the cash flow is relentless, precluding us from saving anything for emergencies.
Debt: About 20K for home improvements, at 0-4% interest (these are personal and 0% credit card loans). We still have excellent credit and pay all bills on time.
We do have a LOT of equity, thanks to the insane housing market, but a home equity loan to consolidate debt wouldn't get us a better rate than the current 0-4%. We have the best mortgage rate possible so refinancing wouldn't help.
Channeling one year's worth of retirement contributions to our debt would wipe it out. Of course, we would pay higher federal taxes that year, without the retirement deduction. What would you do? Thanks in advance.
Michelle Singletary: Ok, you did ask for a hard butt perspective. Although I would have said a Big Mama spanking :) STOP CONTRIBUTING TO THE KID'S EDUCATION FUND. There I said it. And I mean it. And you won't be bad parents for it. Your retirement comes before the kids cuz you can't borrow to live in retirement (unless you borrow against your home via a reverse mortgage). They can borrow to go to school or get a job or go to a community college first. In other words they have years and many options to pay for college. So take the money for the college fund and apply it to your debt. After that you can resume putting money in the kid's college fund.
Is getting connected to your community part of "Simple Life"?
Wanda Urbanska and Frank Levering: Yes, community life has been eroding in this country. Lewis Feldstein, president of the New Hampshire Charitable Foundation, whom we feature in Show #4 of the SIMPLE LIVING television series makes the case that getting connected to your community can not only improve the quality of your life, but save it. (Quite literally, if you join one civic club in a year's time, it will cut your chance of dying by 50%) But it takes time to build community. So if you can simplify your life, reduce your purchases and overhead, you can direct some of that time into fulfilling community life.
I'm glad you're happy in your new life, but there isn't enough land for us all to become farmers (even the Amish are diversifying their economy).
Population pressure dictates that some of us will live cities -- which means either paying exhorbinant housing costs or throwing away rent money while not building a nest egg. Others will have to live in suburbs and absolutely depend on automobile ownership and bid against another family for one of the homes in good school districts.
Assuming we can't all "pack up move where life is cheap" is their enough monetary savings in simplicity to keep us out of the "two income trap" (high expenses that can't overcome the loss of one income from job loss, illness or divorce)?
Wanda Urbanska and Frank Levering: Yes, you must be resourceful in seeking a simple living in a high cost environment. Many people are doing this successfully in urban areas. You might seek out options such as cohousing, such as cooperative babysitting, gardening, etc. Look into forms of bartering, use public transporation, buy items used and shun status purchases - whether it's clothing, cars, housing etc. Look for free forms of entertainment, which are common.
A question about simple living:
I have a full time job, as does my husband and we have a 10 month old. Our life seems so hectic all the time...plus our place has been invaded by baby stuff (not just toys, she actually doesn't have that many)...how can we simplify our life?
Wanda Urbanska and Frank Levering: Having a new baby in your life definitely complicates it, but it also simplifies your life as your priorities are very clear. Baby comes first. Baby must be fed and changed and if ill must have medical attention. The challenge is to not let the stuff overwhelm your space. So don't be buying products all the time and if people want to give gifts, tactfully suggest money gifts instead. You might want to check out exchanges, such as one that exists in Roanoke, Va. when you borrow items that are used short term, like bassinets, and when your term is through turn them back in for re-use. If one of these exchanges does not exist in your area, start one.
You know, it's hard to live simply. For one, it takes organization. I am a typically busy Washingtonian, and have many other things to do besides organize my basement (where I keep my tools, household project items, etc). Spending another 10 or 20 bucks at the Evil Orange on something I already have, or think I have, seems so much easier than fighting my way through the mess at home. Help!;
Wanda Urbanska and Frank Levering: Yes, it can be overwhelming to get organized, but you know you're wasting money and resources by buying things again that you already own. We suggest organizing your home in baby steps. Don't do the whole house at once; today you'll clear off one shelf from the fridge. Tomorrow one dresser drawer. And I bet you'll discover some new treasures. And just resolve to be a more thoughtful consumer in the future.
Michelle Singletary: Folks I so agree with Frank and Wanda on this (by the way they are both answering the questions). As some of you might now I moved recently. I was about to throw something out that was very old (like 20 years) just because it looked a little beat up (it was that tray that holds your folks, spoons etc. Can't remember the name now). Anyway, I decided to keep it and save some space in a landfill and some money. Why should I care that it's old? Besides who will see it but me and my husband? Just like Frank and Wanda said, take baby steps.
Michelle, I have a dilemma and I would appreciate your advice. We're doing a lot of renovation to our house with a home equity loan. We will have enough left over to replace our 30+ year old gas furnace. While I would like to ride it into the ground, since I agree with your philosophy about avoiding trading up and leasing cars, I'm dreading having it give out on us in the middle of winter. I could carpool, ride the bus, or even stay home a few days if a car died on me, but if the furnace gives out we'd have to stay in a hotel, board the cats, and repair damage to pipes and assorted possessions. In addition, if we don't replace it now, when we can budget for it, I'm concerned that it could take most or all of our emergency money in the next year or two.
Wanda Urbanska and Frank Levering: If an item such as a furnace is fuel inefficient, it may be worthwhile to replace it with a new energy system. This may be a good time to investigate solar panels, to improve your insulation and to do an energy audit. Also, we advocate in our book getting acclimatized to lower temperatures in the cool months and higher ones in the warm months. Adjusting your ammount of clothing is the easiest and cheapest way to go. Fans are good, too. Good luck!
if he owned the house prior to marrying her, why should her name go on the title? now the next one, sure.
Michelle Singletary: Why? Because she is his wife. They should be one financially. What's his is hers. What hers should be his. He's sharing her love, body, etc. And besides, she might be homeless if he decides to run off with some home wrecking hussy. That's why.
"tactfully suggest money gifts instead" boo hiss. why should someone else support you? gifts are gifts, not to be asked for or, or suggested. and miss manners would slap you silly if she was the slapping kind.
Michelle Singletary: Now, now Miss Manners would also not like your being rude to my guests :)Besides I'm the only one who can do the slapping on these chats.
Wanda Urbanska and Frank Levering: If people ask you what you'd like to have, you can tactfully say, "How about a contribution to the college fund -- even a modest one." Another idea is a gift of time: wouldn't you like to have a night of babysitting if you're a new parent? Or someone to bring over a homecooked meal. This is what we call a "vanishing gift" and it doesn't contribute to clutter.
Capitol Heights, Md.:
Michelle, it's me again.
Is it still true that in 7 years old debts are dropped from your credit report?
Michelle Singletary: Yup. True, expect a bankrupty, which stays on for 10 years.
While I have a ways to go in terms of simplifying my life and tossing stuff that is just taking up space and I don't really need, I think Freecycle is a fabulous resource. Freecycle is the Internet equivalent of putting something out by the curb that you don't want anymore but is perfectly good -- go to www.freecycle.org and you can sign up for the list in your area (the DC region has numerous lists so you can pick the one in your area). I have no affiliation with them other than that I've given things away through them and was glad to see my unused items go to good hands.
Wanda Urbanska and Frank Levering: Dear Alexandria,
We have heard testimonials to this organization and read about it. I wish it would come to Mount Airy, as we're advocates. In show #4 of the SIMPLE LIVING television series, we feature a wonderful idea from Wellesley, Mass., which is a "take it or leave it" idea for a community. You can drop still usable things off and pick up others for reuse.
Michelle Singletary: Frank and Wanda, how can people overwhelmed with stuff (like me) begin the process of living a simple life? It's just so hard not to have stuff?
Wanda Urbanska and Frank Levering: This is a philosophical question, as well. We need to work on changing our mindsets so that we're not defined by what we own, what we drive, how we furnish our homes, the clothes on our backs. We need to fight the urge to buy things on impulse. We offer a number of tips to do this in our book and on the series, such as delaying purchase, using what you have, borrowing when possible, loaning things out, etc. It becomes more challenging with kids in the picture, but it's important to instill these values in them as well.
part of the issue with getting organized is people feel overwhelmed. don't try to organize a basement you haven't touched in years over a single weekend. COmmit to getting rid of 3 things a week until you have gotten rid of or organized enough to make the rest of the task manageable.
I did this with clothes. I change wardrobes in fall and spring (house isn't large enough to keep all seasons of clothing out). My rule is that except for special occasion items (evening gowns, etc). if I didn't wear it in 2 seasons it goes, no matter how much it cost me. I sell some, donate some. AND I don't go out and buy new stuff, either. In 2-3 years I have managed to get rid of almost half of my clothes, and I STILL think I have too many choices. IT is possible to do.
Wanda Urbanska and Frank Levering: Dear Maryland,
Great ideas, here. You must either have figured it out yourself or be part of a simplicity circle!
I would like to sell a large amount of clothing. Do you know of places that will offer cash for new or gently used clothing, as opposed to places that will provide a tax deduction?
Wanda Urbanska and Frank Levering: We sell to a consignment store, but you'll never recoup the money to put into new clothing. You can also set up a yard sale or a swap circle with friends and colleagues. But you might as well kiss that big money you put into your threads goodbye.
Very quick to recent poster:
Old debts come OFF YOUR REPORT in seven years, but they are NOT forgiven are STILL COLLECTIBLE. The "harassing" phone calls and letters don't stop.
Michelle Singletary: True. Thanks for the addition.
Washington, D.C. to Big Mama:
Thanks for the response. Of course, retirement contributions are close to 20K a year, whereas the kids' fund is less than 5K a year, so the former would eliminate our debt, but the latter would just put a dent in it. So you're saying we should not touch the 401's regardless and take our time paying off the debt.
Michelle Singletary: Yup. Don't touch that retirement money! That might mean it will take you an extra year or two to retire the debt but take that time as opposed to robbing your retirement fund.
Lake Ridge, Va.:
My husband and I want to start a family in the next year and we both agree that I should leave my full-time career and take a part-time job in the same field that requires only 15 hours per week. Ideally we would do this at least until our child is in school full time.
My question is, is this going to be a major set-back in terms of retirement? I know the part-time gig is the best choice for our family, but I will constantly be thinking, "How much more would we have in savings/investments if I were working full-time?" How do I let go of this? I am normally a little paranoid about money anyhow.
Wanda Urbanska and Frank Levering: Great question. By staying home, you will save all kinds of money from costuming, eating out, transporation as well. If you have kids, you will avoid paying day care and give them and your new family much better quality care. If done in the right spirit, you will bring grace and margin to your lives and life of your family. Not everything can be measured by retirement accounts and amounts. Some of the happiest people we know don't have huge savings, but have put their life energy into their lives!
Michelle Singletary: Well folks, that's it. I just want to give a great big thank you to Wanda and Frank. They are such wonderful people and they truly inspire me to live simply. It's hard for me being the pack rat that I am but I'm trying. And I hope many of you will do so too. Get their book, it's such a nice read. Thanks to all who joined me -- especially the people who let me fuss at them. Remember my goal is to help you live up to your financial potential. See ya in two weeks!
P.S. Sign up for my weekly newsletter at www.washingtonpost.com/newsletters. I often answer questions in the newsleter that I couldn't get to in the chat.