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Color of Money

Color of Money

Free-for-All Discussion

Michelle Singletary
Washington Post Business Columnist
Wednesday, August 4, 2004; 1:00 PM

Whether you are buying a house or working through your student loans, Post columnist Michelle Singletary will give you tips and answer your personal finance questions.

Join Post columnist Michelle Singletary online Wednesday, Aug. 4, at 1 p.m. ET to discuss personal finances.

_____Michelle's Column_____
The Color of Money

The transcript follows.

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.

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Michelle Singletary: Well hello everyone. It's sunny. I'm in a good mood (although sore from working out) but ready to take your financial questions. So let's get going.

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Laurel, Md.: Michelle, I think this is your first "open forum" since you gave your penny-pincher of the year award, so I have to register my protest of the winner. For readers: a man driving his wife to the hospital in labor who didn't want to spend $2 for a toll road.

This is exactly the kind of frugality that no one should be encouraging. Complications from childbirth can cause a lifetime of handicaps for both mother and child. The risk-cost in both money and quality-of-life make this just a very foolish, stupid gamble.

It's very easy to save money on health care by using less of it, but of all the savings not to realize, this has to be at or near the top of the list.

Michelle Singletary: Okay, did you see my response to you in my new electronic newsletter? If nothing else you are persistent. If you want to see the newsletter register online at www.washingtonpost.com/newsletters. Anyway, what I said was you need to buy a sense of humor. The guy didn't put his wife in any danger. The trip was just an extra 10 minutes and she wasn't having any complications other than the normal I want to bite a nail in two. So register your complaint but I thought the whole thing was funny. I know it was a little crazy (even his wife admitted that) but I talked to her and she was fine with what happen and that is all that counts. Can we move on now?

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Germantown, Md.: Hi, Michelle. I just traded a high rate credit card for a much lower rate card. I sent a letter to the old company (certified, return receipt requested) asking them to close my account. Other than shredding the old cards, is there anything else I should do?

Michelle Singletary: Nope. But if you pay off your bill every month than you don't need to worry about the interest rate, right?

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Arlington, Va.: Hi Michelle,

What is better when I'm looking to buy a house: A number of years spent at the same company making a decent amount of money or taking a new (but still stable job) making substantially more money?

Michelle Singletary: Lenders like to see you at the same job but if you're going to a position that is similar you shouldn't have any problems (and your credit score is good)

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Pittsburgh, Pa.: Had a question on buying versus leasing a car. Under what circumstances is one the better path to take?

Michelle Singletary: People, must I repeat myself. Leasing is a BAD financial move for 99.9 percent of the people who do it. So choose the path of wealth and buy your car.

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Springfield, Va.: Trying to navigate the various options available for saving for the kids college education can be daunting. For example, is there a body of conventional wisdom regarding 529 accounts. More specifically, is it generally better to leverage one of the state sponsored programs, such as Virginia's VEST, or is is better to go-it-alone with your favorite mutual fund company?

Michelle Singletary: Basically I like the state-sponsored 529 plans. But I also save for my kids' college fund in something outside of one of these saving vehicles with lots of restrictions. Go to savingforcolleg.com for more information on all.

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Dupont Circle, Washington, D.C.: Hi Michelle
I just joined your club and received my free copy of this month's book on credit. I've looked through it and plan to read it thoroughly, but I'm wondering if you've thought of a way to recycle these books? I don't anticipate wanting to keep it in my permanent library, its important information to share, and time sensitive. Keep up the good work!

Michelle Singletary: Why thank you so much. Glad you won a book. If you find that you don't need it just send it back to me (at the Post) and I'll pass it along to another reader. Anybody out there who could use a book on how credit scores work?

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Ellicott City , Md.: I am a 44-year-old finanicial blessed professional woman with an excellent credit history. Other than my mortgage, my current debt is low and insignificant. However, I am in the process of reassessing my retirement goals, which now appear inadequate.

I am planning to purchase a luxury vechicle within the next 60 days. My question is should I use $20,000 of my money for the down payment on the vehicle,which presents no financial hardship and leaves me with six months of my expenses saved in the event of an emergency (plus I have other investments), or should I access my home equity line of credit, in which I have never used- for the down payment, or even purchase the car with the home equity line of credit?

Which option would you consider the most financially savvy?

Michelle Singletary: Whew. You're asking a lot of me. Sounds like you want permissiont buy that big expensive car. So girlfriend if you got it like that buy the car BUT be careful about tapping into your home equity to do it. Things are good now but what if something happens? So use the $20,000 get a car loan and leave the equity at home.

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In D.C.: Hi Michelle - Hoping you can help a sista out and lend some much needed advice.

My fiance and I will be conducting some renovations to a condo he bought about a year or so ago. We both live in the condo and will contribute to cost of renovations. Currently, my name is not on the title of the condo, and as you know, cannot be added until we marry or refinance the house. We will not marry until next year, or so, and have opted not to refinance. My question... is there any way to protect my monetary contribution, even though my name is not on the title?

Michelle Singletary: Get married now and stop shacking up (really, you knew that was coming right.) Seriously, why are you worrying about protecting your "monetary contribution?" If you're going to get married then no problem, right? The condo becomes an OURS and your money was well spent on a joint asset. So the really perhaps you are rightly worried because you haven't married the guy and are concerned the marriage won't happen. So if your name isn't on the title (which by the way he can add even if you are not married) don't pay for anything. Get the ring and then give him the money. Mixing major money with your honey before you get married is a no, no in my book.

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Pittsburgh, Pa.: On your answer to my question on car leasing versus buying. Why is buying better?

Michelle Singletary: Read my column archives.

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Northern Virginia: Michelle,

My fiance has a lot of credit card debt. We are working to pay off our debts (my credit cards will be paid off this month!) and we would like to get a consolidation loan to work on his four or five evil cards. Once we get the loan and pay off the cards, what is the best way to handle the accounts after that? My concern is how it affects his FICO score. Do we cut them up and keep them open for a certain amount of time or do we cut them up and close them? I'm sure that we will keep one VISA card but we would like not to use the rest of the accounts. Thanks!

Michelle Singletary: When you say "we" are working on getting a consolidation loan do you mean "you" will be co-signing on the loan before you get married? If so, don't do it. I suggest you help him pay off his credit card debts with HIS own money. If you are planning to get married talk to a financial counselor about how to manage your merged assets. Also have you talked about why he/you got into debt in the first place? As far as keeping a card. Yes, I do think it's a good idea to keep ONE card open and close the others. If his credit score is low. He could start charging on the card (just little things) and paying it off every money ON TIME. That's the best way to build back up his FICO score.

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Washington, D.C.: Hi Michelle,
I recently was laid off but fortunately found a job within a few weeks. I have received severance and since the new jobs starts soon, I don't need to use it. What do you recommend I do with (a few thousand) - CD, Money Market, savings? I just don't know.

Thanks! Love the chats!

Michelle Singletary: Thank you and with the extra cash make sure you have an emergency fund of 3 to 6 months. Since you now know what's it like to lose a job you definitely would understand the need to have some cash in the bank. And that emergency money should be kept liquid (very short CD (3 months) or saving acount, money market etc.

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Saving money at work: OK -- this may be more an Amy Joyce question BUT:

How do I avoid having lunch meetings with my boss? She wants to go out and have working lunches (which don't count as work, but as lunch so that is my "break") at a restaurant. I do not want to spend the money (I almost always bring lunch with me) and I want to have a real break. Any suggestions? So far, I say I really need to run errands or something like that, and we then meet during worktime but I have still been corralled into the lunch meetings for the most part.

Michelle Singletary: In situations like this it's always best to TTT (Tell The Truth). Really, explain that you love meeting with her over lunch but that you can't afford to eat out every day. Hopefully she will understand but you will never know until you confess. I believe it's always important to practice financial intergrity and generally when you do people will understand. Good luck.

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Reston, Va.: I married two years ago and moved into my wife's townhouse. The townhouse is titled in her name. What are my options to ensure the house becomes mine in the event that my wife passes away?

Michelle Singletary: Get your name on the title. She can add your name to the title. Or you can refinance and the put your name on the title and the loan. Contact a lawyer.

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Silver Spring, Md.: Hi Michelle, I love your advice! I have a question about credit reports. I received my credit reports free because I live in Maryland, but cannot locate my credit score on some of them. Do you have to pay extra for this information? And if so, why?, because that information is just as important!? Its all very confusing...

Thanks for your help!

Michelle Singletary: Sorry dear you have to pay for that all-important credit score anywhere between $12.95 and $14.95. Getting your free report (all three) doesn't include a free credit score.And I agree that consumers shouldn't have to pay but we do.

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Washington, D.C.: Michelle,

I have a new co-worker I'd like to give a present of a book that might help him with his personal finances in his special situation. He's an ex-offender. He just got out of prison after 20 years. He went away as really no more than a boy, and now is figuing out things like budgets and credit and the like for the first time. I was trying to explain some things, like interest rates and looking at the true costs of bank fees, and I wasn't doing such a good job. Is there any book or website you can recommend?

Michelle Singletary: Well, you know I have a book out and it's very easy to read and funny! I would also recommend you go to my page on the Post web site and look thu my book club selections. There are a number of books that could help your friend. And while I'm at it good for you for trying to your friend out. In fact, why don't you e-mail me (singletarym@washpost.com) and I'll mail your friend a few of the books for FREE. Just identify yourself in the e-mail from this chat.

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Washington, D.C.: Michelle - you ROCK! Just read your book and I love your no-nonsense attitude. My financial pet peeve is how much folks spend on cars. If you scan Warren Brown's chat you see all sorts of questions along the lines of "I have $25K to spend, what sort of car should I buy?" Who wants to spend $25K on a car?! We bought a 2002 sedan with low miles for less than $9,000 (a Consumer reports "best bet" and dealer certified no less) AND we paid cash. We could afford something shiny & new but what would be the point? And, yes, we'll be keeping this car 'til we're on a first name basis with the tow truck guy!

Michelle Singletary: You ROCK cuz you think just like me. If I had $25,000 I could buy THREE cars and still have some money left over. But hey it's their money and I can only fuss so much.

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Orlando, Fla.: My husband ran into a bunch of credit card debt and resorted to a debt consolidation loan. He should be finished with the loan in three years. After he is done, when should we start looking for a new house?

Michelle Singletary: Order your credit scores (myfico.com) and that will give you an idea of where you stand. It might take a few years to build your credit up but don't worry it can and has been done. By waiting you improve your credit and chances of getting a good/decent interest rate on your home. Good luck.

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Washington, D.C.: Hi Michelle-
I had to leave school three years ago (at Maryland) because I had lot my full time job on the Hill and now have been a yea in my first fulltime job in over 3 years. When I left school, I had about ten thousand in debt plus student loans that equal about $28,000. My credit rating really took a hit but I've paid about $6500 of the ten thousand since I started my fulltime job in October. I make regualar monthly payments on my student loan. I have two questions-how soon after I pay the balance of the ten thousand dollars in debt should my credit rating get back to where it was? Also, I want to finish my degree (only 30 credit away) and go to law school without anymore than necessary debt-what are some options for me?
Thanks and I love your chats-you are awesome!;

Michelle Singletary: Ah thank you. Well, good for you for working hard to repay your debts. Right now don't worry about your future credit rating unless you plan on making a major credit purchase. As far as how long it will take to rebuild your credit it all depends on you. Just keep paying your bills on time and it shouldn't take more than a few years (maybe less). And I think you are right about not going back to this debt page again. If you can, try to save up as much as you can so that when you do return to school you won't have those loans looming.

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Suburban Virginia:
The writer who closed her higher interest card may actually be damaging her FICO score. Sometimes you need to keep those older accounts open because length of credit history is one factor they use when determining score.

Michelle Singletary: You are right. I missed that. It is important to keep the older cards since that shows a longer credit history and that is good for your credit score. Thanks for pointing that out.

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Woodbridge, Va.: Michelle: I would love to receive the "recycled" book on credit scores. I have a great score (760), but my friend is a single mom who made some bad choices in life. She's trying to get everything together and could really use the guidance. Thanks for the consideration.

Michelle Singletary: Just e-mail me. I'll send the book when I get it.

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Centreville, Va.: Hello Michelle,

I am a 25-year-old, single African American woman. I just purchased my first Condo in April of 2004 at 100 percent financing. I'm really interested in investing in more property but don't have the cash right now. I have heard about 125 percent products to refinance my second (HELOC) and have some extra left over. I realize the rate is much higher than the prime + 2 that I have now but if I use the cash to invest in a brand new development and flip it when its delivered I'm almost assured to make a profit. What is your opinion on 125 percent products and does this sound like a wise thing to do?

Michelle Singletary: Okay, you need a slap upside the head. Girl, you financed 100 percent of your first home and now you want to leverage that even more to invest? Wrong move. What if something happens (you lose our job, the property you buy doesn't go up in value.) Listen, you're young so I'll give you some slack but the smart/wise thing is to invest with savings. And on that note you should be saving up your 3 to 6 months emergency money and not worrying about buying investment property right now.

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Shacking up renovator: What if the fiance were to die? Provisons could be made in his will but would it be more beneficial to have her name on the title? Or could they put the house in a trust that they were both beneficiaries of?

Michelle Singletary: What part of get married is not clear. I just believe that if you want all the benefits of being married than get married (in this case). I think she should wait until they tie the knot and he puts her on the title before giving up the money. I'm just conversative like that. But she asked.

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Gaithersburg, Md.: What do you do after you've used your emergency fund?

My car was totalled in an accident a month ago and the insurer paid about half what a new car of the same kind cost. To get the cash incentive I paid for the other half with cash.

But now that my fund is gone, should I try to replace it quickly with a HELOC or lifestyle sacrifices (i.e. spend as if I'm living in financial straits) or just save a little a month until it's back?

Michelle Singletary: SAVE. Don't take on more debt just so you can have savings. Tighten your belt as much as you can.

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Washington, D.C.: Please settle a dispute between me and my husband. I accidently paid one of our credit card bills a couple of days late. He told me that this stuff goes on our credit report. I said that companies only report this stuff if it's more than 30 days late. Who's right?

Michelle Singletary: Look at your credit card statement and you can settle this argument. If you pay one hour late, it's late. You have to look at the date or days they give you before a payment is considered late and honey it ain't no 30 days these days. But I will say this if you are a very good consumer and this is a one-time thing the company may not have reported it. So call. Ask.

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Arlington, Va.: In relation to fiancees and money, I know that couples getting ready to get married don't sit down and figure out what debts are being carried into the marriage. A friend of mine got married and was looking forward to getting her tax refund, as she always did, and found that her new husband had unpaid debts to both the state and the Feds and her refund was going to pay his debts. I guess it is OK since they are still married but...

Michelle Singletary: But your point is right. Couples need to sit down and discuss the money thing. It's so important.

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Hyattsville, Md.: I practice family law (in Maryland) and would like to strongly affirm your advice to the woman in D.C. who is living in a property owned by her "fiance" and planning to make major financial contributions to HIS property. She seems to have a relationship issue brewing. He could put her name on the deed now, if he really wanted to. Please don't let your heart destroy your common sense. If they ever get married (she sounded shaky on that!), she had better stay on him to put her name on the condo, or better yet, sell it and buy something in both names. Marriage gives you property rights (why do you think the gay community is fighting for it?) -- living together does not. Hopefully she will see the light.

Michelle Singletary: See told you. He could put her on the deed right now. Thanks for the info.

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Outside the beltway: Two thoughts for two queries:

1. Luxury car buyer: If you think your retirement savings are "inadequate" why are you looking at a luxury car. Get a set of wheels, end of story. Otherwise you're throwing it away when you can't afford to.

2. Working lunches: Letting your boss know that buying lunch doesn't work within your budget may plant the seeds that you could use some more cushion -- not that you'd spend it having lunch out, mind you.

Michelle Singletary: Good points. But stop it. Don't you guys want me to keep my job. I'm suppose to be giving the advice here :) And you know I got three rugrats to put thu college.

P.S. With the boss thing. Hey make it a joke. Everybody and their mama at the Post knows I'm cheap and so now NOBODY ask me to go to lunch with them :)

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Washington, D.C.: Hi Michele,
I own a small condo and fiance owns the house I'll move into once we're married (I hear you on the shaking up issue and we've already talked about title changes once we're married). We've decided that my condo would make a great rental property (low mortgage payment in high rent area) but what are your thoughts on using the excess rent payment to pay down the mortgage. should we pay down my mortgage or his first, or at all? other advice on what we should do? Thanks! If you've covered this I'm sorry... I've just recently discovered your chats.

Michelle Singletary: Well welcome to my chats. I'm glad you came and please come back again. Read the note from the attorney. Make sure you guys put both names on all properties and then sit down and talk about how to rent/sell/pay down or whatever.

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Falls Church, Va.: Michelle, I am expecting a baby in a few months and would like to not go back to work. Do you have any suggestions on how to go from living very comfortably on two incomes to living much more sparsely on one income? Any expenses to cut out that we haven't thought of, maybe?

Michelle Singletary: Girl, you will be so tired you won't want to do anything but sleep -- big cost savings :)As far as advice just look at thing that can really go. Only you know your budget so I can't think of anything other than the normal things but just know that whatever you might have to give up that baby is getting so much more.

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Bethesda, Md.: I have about $15K that I want to invest but may need to access it over the next 6-12 months. What do you think is the best option? Love your columns!

Michelle Singletary: Don't invest. Investing means you may/could lose your money. If you need the money in the next 6 to 12 months you shouldn't be investing it.

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Need advice and/or encouragement: Hi Michelle --

Maybe it's because I received three different statements in the mail yesterday, but I am feeling discouraged about the amount of debt I owe (medical bills on credit card, student loan, car). I know that none of the amounts are terribly large but it just feels like the end is never in sight, that something else will arise and keep me in debt or eat up my meager savings. Any advice on how to do a better job on keeping this from happening (or at least minimizing it) and not feeling so down in the process? Thanks!

P.S. Thanks to your book "7 Money Mantras" I have cut out clothes shopping and don't miss it -- I just hear "if it's on your a--, it's not an asset" in my head whenever I am near a mall.

Michelle Singletary: First, don't beat yourself up. Debt happens. You are on the road to recovery and that takes time. It might help to do a timeline of when you expect to get out of debt and just mark those days off the calendar then you can feel like you've accomplished something. Reread the chapter I have on Priorties lead to prosperity and enough is enough. I'm proud of you so just let yourself be proud too.

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Alexandria, Va.: Just when I think my financial life is under control, the rest of my life decides to interfere. So after major car work, major teeth work (stupid non dental plan), and emergency trip home for family stuff, the credit card weeps when I pull it out. I have put it away and started to cut spending in other places (bringing lunches, no more movies and dinners out, etc). I have been putting at least $100 in savings/Iras each month. But should I divert that money to my credit card instead?

Michelle Singletary: Do both. Continue to save AND pay down the debt. If you don't continue to save if something else happens you could get into a credit jam again.

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Arlington, Va.: If we're making a choice between extra mortgage or car payments and eliminating credit card debt, the debt should go first, right?

Michelle Singletary: High credit card debt first.

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Alexandria, Va.: Ms Singletary,

I attended your lecture/book signing at the Arlington library. How does one go about scheduling you for another before the end of the year. I e-mailed a few friends of mine at a nonprofit organization that I am involved with to attend.

Michelle Singletary: Just e-mail me (singletarym@washpost.com)

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Crystal City, Va.: Hi Michelle! Love the chats and I hope you can help me with a mortgage question. I'm building a new house and plan to use an interest-only loan (10 year fixed) to keep my payments and interest rate super low on such a large amount of $$.

I plan to pay it as if it was a 30 year loan at 6%, so I'm going to pay the interest-only payment PLUS a payment to principal. I figure, but the time the 10 years is over, I'll have paid down the principal quite well. After the 10 years is over, is it wise to get another interest-only loan? I'm quite sure I can pay off my house in 20 years rather than 30. Any thoughts?!

Michelle Singletary: Sounds like you have it all figured out. And not a bad plan (if everything goes as you plan).

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Washington, D.C.: Hi Michelle,

I got one for you.

My fiancee' and I just purchased a home (built during the 30's) in Washington, D.C., although we received a good price, just in the short time we've moved in the equity has increased, due to the work (improvements), I've done. However we have a major problem... the plumbing in the house is the original plumbing -- 1930's -- and we are definitely in danger and are cooking and drinking with purchased water (I'm sure you are aware of the water issue in D.C.).

Our budget can not afford to pay to have the entire house re-done, as Im sure you know plumbing is "very expensive."

Keeping in mind we have a wedding to plan for!

What does one do for such an expensive and needed home improvement?

Thanks

Michelle Singletary: So let me get this straight. You are already living together. You have a major house repair that needs to be done so you can have a basic requirement AND you are still thinking about paying for a wedding. Big Mama is turning over in her grave. Child, please. Get the repairs done. Skip the wedding for now, you're already living like your married so why go thu all the fuss and expense when you have a more important expense to pay.

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Rockville, Md.: Michelle, I love your column and have benefited from your advice immensely. I bought a condo this year -- with help from Montgomery County first-time home buyer program -- (I highly recommend this) and I am glad I did. However, I don't earn very much for this area -- mid 40s and I am depressed about money. There just isn't enough for me to really live. I am pressed to save and put 8 percent into my 401 K -- but there's no money for fun -- for a car (mine's going to the heap this month, 86 TOyota) no money for vacation and uh oh Christmas is coming. I could afford the apartment but I'm very discouraged about trying to slice my pennies into a hundred pieces -- my salary just doesn't do it in this area and I AM looking for a new job. Any suggestions? I just had a large repair in the condo which hurt too.

Michelle Singletary: So sorry. I know it's hard. Why don't you think about getting a roommate, if you are living alone. Get someone in there for now to help you with the expenses.

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Washington, D.C.: Hi Michelle, and thanks for this chat. I have five young nieces and nephews (all under seven years old). I've been purchasing $50 savings bonds for them on their birthdays and as gifts on major holidays. Are there other financial, investment gifts I can give them instead that won't break my bank? I figure they'll appreciate the investment when they turn 21 or so... much moreso than the memory of receiving a toy that they broke or destroyed in a matter of months. Thanks!

Michelle Singletary: Why don't you set up a 529 plan for the little tikes and contribute what you can to that. Now that's a present they will definitely appreciate. If you don't want to do that ask their parents.

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Washington, D.C.: After reading two of your columns, (Long Term Care & Financial Planners). I want to say thanks very much for the wonderful work you are doing.

Michelle Singletary: You are so welcome!

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Michelle Singletary: Folks I'm so sorry but I have got to go. Thank you so much for joining me today. I hope I helped (and didn't fuss too much.) Well, I did but some of you needed it.

There are a lot of questions left so I'm going to try to answer some in my new electronic newsletter. Subscribe at www.washingtonpost.com/newsletters.

Take care and remember to come back Aug. 18 at 1 p.m. when I'll be discussing the August selection for the Color of Money Book Club.

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