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Color of Money

Color of Money Book Club

June Selection and Free-for-All

Michelle Singletary
Washington Post Business Columnist
Wednesday, June 23, 2004; 1:00 PM

What are the financial lessons high school graduates need to learn before heading off to college? Join Post columnist Michelle Singletary Wednesday, June 23 at 1 p.m. ET to discuss June's Color of Money Book Club selection, "Getting Through College Without Going Broke."

Michelle will also be taking questions on her most recent columns such as divorced dads often being seen as just cash machines and criticism of the Federal Trade Commission's decision to phase in free credit reports for consumers.

_____Michelle's Column_____
The Color of Money

Dads Need Our Support, Too
It's Free, but You'll Have to Wait

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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Springfield: Can you suggest an alternate book - Amazon and Booksamillion have a 1-2 month wait for your current title. My oldest starts college in August, I'm not sure we can wait.

Michelle Singletary: Good afternoon all. Glad you could join me.

First let me say I'm so pleased with the response to this month's book club selection. I've had hundreds of high school graduates try to win one of the free books I'm giving out. All that to say, the reason you have a long wait is that the response has been so huge. But don't worry about the wait. Your oldest will be fine if he or she gets the book in Aug. or even Sept. I really like this book. There's plenty of time to learn the right way to handle his or her money. When the book comes in use it as an opportunity to discuss how his/her budget has been going thus far.

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Washington, D.C.: Michelle,

All other things being equal, does it make more sense to pay off student loans as quickly as possible, or to pay the minimum monthly and put the difference into savings? My instinct has always been to get rid of debt as soon as possible, but someone pointed out that you actually MAKE money by paying the minimum if you put the difference (what you can afford minus the minimum) into a savings account/cd/etc with a higher interest rate. Thoughts?

Michelle Singletary: You instincts are right. Get rid of debt as fast as you can as long as you can still save at the same time. As far as the advice from "someone." Are they living on Mars? Savings accounts/cds etc. aren't making much these days and even if you are lucky enough to have a student loan at 3 percent you are better off paying off the student loan debt. But again, don't stop saving. So if paying more than the minimum would prevent you from building up a good savings just pay what is required for now.

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Big Apple New York: I am the least financially-savvy person I know but the most in need of loans for college. Any place on the Web that has a good, comprehensive but idiot-proof guide to student loans? Thanks.

Michelle Singletary: First, get the book I recommend for this month. There are lots of resources mentioned. But there are two sites you should visit: www.finaid.org and www.studentaid.ed.gov. Good places to start.

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Washington, D.C.: Hi Michelle,

I recently finished grad school with only $5000 in student loans, on top of the $5000 I had left to pay off from undergrad. I've been hearing a lot about how this is the best time to consolidate (before rates start to go back up), but I understand that consolidating now would mean that I'd have to start paying back my loans right away, whereas normally I'd have until December thanks to the grace period. To complicate matters, I'm trying to save as much as I can since I'll need to buy a car in the next month or two, and need to have funds in reserve for an upcoming move as well. Would you recommend consolidating now while the rates are low (and have to start paying the loans back just at the time that I'm trying to be extra careful about money), or wait until December and risk higher rates?

Michelle Singletary: If you consolidate during your grace period you can realize some nice savings. But you don't have to do it at the beginning of your grace period. Wait until Nov. and then consolidate to give yourself some breathing room. But yes, I would recommend you do what it takes to lock in the lowest interest rate possible on your loans. Even if is just saves you $20 a month that comes to $240 more in your pocket a year. I know you have some short term needs but you should also consider your long term savings.

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Denver, CO: Hi.
I consolidated my student loans when 7.0% was a good deal...not such a good deal anymore.

I have seen that a couple of bills have been introduced in Congress to make refinancing student loans more flexible (right now you can't refinance an already-consolidated loan).

Are these bills going anywhere? Are there any other ways to get a better rate on these loans?

Thanks

Michelle Singletary: Bills aren't going anywhere right now. And nope no way to get a better rate other than paying them off using money from someplace else -- home equity loan, lottery winnings etc. Sorry, really. I think you should be able to refinance those loans.

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Georgetown: ... it isn't cheap. And it's full of us driven, ambitious types who came to D.C. to get internships and experience in the working world while we study. But being from a less-than-wealthy family, I simply can't afford to take unpaid internships, despite a generous financial aid package. Which means while friends can afford to intern for free in the offices of prestigious senators and at top-notch consulting firms, I'm toiling away at the fax and xerox machines on campus to make money. I love my school, but how can I find a decent-paying internship in this city?

Michelle Singletary: Start very early in the year (Sept. Oct.) and ask the people in your college office for recommendations. Trust me they know about the paid internships.

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Arlington, Va.: Michelle,

I attended your lecture last week, and thoroughly enjoyed it. It was a pleasure getting more of your common sense advice with an extra serving of humor and candor. I wanted to point out that a financially sound life can often lead us to a more sound life in general. Cooking from scratch instead of buying prepackaged goods, supporting local farmers' markets, raking leaves instead of buying a blower, and walking for local errands all save money and are often healthier options. I would love to see you explore this idea further, particularly in these times of the impending obesity crisis, supersizing, and lack of personal responsibility. It's amazing that being healthy can be cheaper and better for the community. Thanks again.

Michelle Singletary: Thank you so much. I so enjoyed the crowd at the Arlington Library. I was honored. It was standing room only. And yes you are right. Living a simple life leads to great savings. Heck, one of the reaons I'm trying to lose the last 10 pounds from my last kid is because I'm too cheap to buy bigger size clothes. I have explored this issue in my columns and chats many times and will continue to do so.

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Falls Church, Va.: I have a problem with my family asking me for money. My father, who is truly in a bad financial position, wants me to co sign on a loan for him. Which I know is stupid, but I can't give him money - which I have done in the past and wouldn't do again. I feel like the only way I would do this is if I could have complete control over his finances because he REALLY can't handle money (ie won't open bills, bankruptcy, etc). But really, I don't want that kind of responsibility either - but I don't want this to keep issue coming up over and over again (which it will). Any words of wisdom?

Michelle Singletary: Don't co-sign for daddy. Pray that he learns to handle his money better. Offer to help with organizing his bills (like opening them to start). But most important he's a grown man and you shouldn't feel guilty for not enabling him to continue to be financially irresponsible. Listen, been there and done that lots of times. Won't again. I help those who are truly changed and trying to better themselves. Don't put yourself in financial trouble and if your daddy hasn't handled his business in the past and you co-sign it's a sure bet you will end up paying the loan.

Say, daddy I love you but the ATM is down!

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Kensington, Md.: Your Sunday column gave me pause. I 'm a domestic relations counselor for mostly low and middle income women, and as such am sympathetic to their needs. Often there is not enough income to support one household, much less two when the household splits apart. However, while we've all heard the stories of a devoted father who is now living in a garrett because his greedy ex took all his property and 80% of his income, I can tell you this just doesn't happen. Despite child support guidelines that are supposed to take into account each parent's earnings, and earning potential, awards are often ridiculously low (just try raising children on $100 a month). And many of the fathers don't even pay that pittance, t ho' they can well afford to. It's as if they let antagonism towards their children's mother carry over to the children, which is so sad. It's so easy in most areas, like DC, to move from one jurisdiction to another, to stay ahead of collection efforts. That, while I certainly agree that, in an ideal world, mothers should not speak unkindly of their children's fathers, I can see why many find it extremely difficult not to do so.

washingtonpost.com: Dads Need Our Support, Too (Post, June 20)

Michelle Singletary: I have to tell you that column has generated all sorts of mail from fathers, mothers, new wives, children of divorced parents etc. Everybody is pointing fingers at each other. Some dads got what I was saying -- that fathers are so important to the healthy upbringing of children and we should stop calling them deadbeats -- even if they are. Other dads -- really angry dads-- are pissed off about the court system that just sees them as cash machines. They are right too. So too are the many women who hooked up with bums, who run off without looking back as to their responsibility. Mostly I feel so sad for the children. They are the losers in this whole mess. Parents fighting. Father's denied access to the children. Mothers bad mouthing the father of their children (So Wrong). Father's giving only what the courts demand and not a penny more. Dads giving so much and more but only seen as cash machines. Dads angry because they see support as money in the pocket of the mothers and not as a resource to help pay rent, buy food etc. Some moms struggling. New families made amid all this mess. So new wife mad that resources taken from new family Everybody is right and everybody is wrong.

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Arlington, Va.: How do we find out where you will be speaking next? I would have loved to attend your presentation at the library but didn't know it was occurring. Thanks! You're the best!

Michelle Singletary: Oh, how sweet. Well, I'll be posting any public speaking events on the Post web site (although many of the things I do for private groups.) But keep an eye out. By the way my book is coming out in paperback in Dec. so I should be doing more events around then.

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For the georgetown intern:: The best place to get a paid internship is with the federal government. The key is to decide a couple offices that you would be interested in and look on the web for the name of a manager in each of those offices (don't just contact human resources offices or the cabinet secretaries). Contact that line manager directly about a month after their department's appropriation is approved (which is when they tend to know their budget for the year) and tell them why you are interested in their office and project and how much you would like to intern for them. This isn't fool proof, but its a pretty effective way of getting a paid internship.

Michelle Singletary: Good advice. Thanks!

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Gaithersburg, MD: Hi there. I appreciated your column about divorced fathers as cash machines. When I entered a junior college (at age 21), two of my three roommates had fathers who deposited checks into their accounts monthly and would complain if he was a day late. The other roommate (whose parents were still together) and I WORKED our way through college, paying our bills and buying our groceries before thinking about beer and party supplies. It seems the majority of kids with divorced parents are, in my opinion, victims of this "expect a check" syndrome and it doesn't teach them anything, except Daddy will bail me out of trouble and I don't have to be responsible for anything.

Michelle Singletary: Thanks for the comments but as you see from my last response things are not all one way. There are plenty of kids of divorced parents who appreciate both parents (especially their father) and not for the money.

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Washington, DC: Have you written the column with all the stories of "frugal" people? I have been looking forward to it and don't want to miss it!;

Michelle Singletary: It's coming up. Maybe this coming Sunday. I've received thousands of entries so it's taking a while to get thu them all.

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Largo, MD: I have a similar question to the one asking if it's better to pay off student loans right away. I had begun paying more for my mortgage payments, hoping to pay off the loan a little faster. But then "someone" told me that I would be better off investing the extra money somehow and taking advantage of the tax benefits the mortgage provides me. I have about 28 more years on the loan, so I'm pretty sure I won't be paying it off anytime soon. What do you think?

Michelle Singletary: Do what is best for you. If you plan to move soon don't worry about making extra payments. If you know you want to retire in the home and don't have other major expenses coming up (such as sending a couple of rugrats to college) than pay down the mortgage so when you retire you won't have to worry about that expense. So really the answer to your question is it depends. I'm not making extra payments because any of that money is going to funding my kids' college funds. But as I get closer to retirment, I'll probably make extra payments OR sell take the gains (if there are any) and buy out right my retirement home. I just don't want that expense in retirement. Others, who know they will have a good and steady stream of income in retirement, argue why give the bank your money to hold. If you put it in your home, you have borrow (producing debt) to get it out.

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Temple Hills, Maryland: My son is desperate to go to college. Though we make good money we are unable to assist him because of a bankruptcy and paying off bills incurred by my youngest daughter. Should he be able to get some type of aid even though he has to list our incomes because he lives at home? He is looking for a job to try to offset some of the cost.

Thank you for your advice.

Michelle Singletary: The only way to tell what he will qualify for in the way of aid is to fill out the Free Application For Federal Student Aid for. Go to www.fafsa.ed.gov. You never know how much he may get. And even if it isn't a lot there are so many alternatives. He could start off by going to a community college and then transfer to a 4-year college. He could work for a year, save and go back to school. Really, there are so many ways to get to college. So tell him not to give up. And get this month's book, which has tons of information about scholarships, web sites etc. to help with financial aid.

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New York (formerly DC): Will you be speaking in New York anytime within the next year??

Michelle Singletary: No but would like to.

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Alexandria, VA: I just want to say that I love your book. I am recommending to all my friends as required reading.

Michelle Singletary: Thank you. So glad you enjoyed it. I have to tell you this little story, which is completley self-promotional but then I do have rugrats to send to college. Someone met me at one of my book signings and said she was reading my book on the Metro and kept laughing out loud so much that someone asked what in the world was she reading. She said "7 Money Mantras For a Richer Life." The person said what kind of book is that? She said: " A personal finance book." She said the person was stunned that a money book could make someone laugh so much." True story.

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Frederick, MD: Michelle - I enjoy your columns!; I know this is something you have said before, but... Kids are going to learn by watching parents!; Start early!; We're sending our youngest off this fall (now two in college!;) and can only hope they have had our values pounded into their heads. I truly believe if you talk to them (not down to them) they will listen. I can only hope mine have that common sense in all areas of life - moral judgements as well as money matters.

Michelle Singletary: Hey if you did your job that's all you can do. But you are so right. Just keep talking about money, your values and chances are they will get the message. Listen, if someone had told me while I as rolling my eyes and shaking my head at all the things Big Mama was telling me about money that I would be passing along that same advice and writing a column based on it I would have said: "Shout your mouth, that woman is cheap crazy." But you know I was listening and Big Mama was right.

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Washington, D.C.: I'm in college ... should I be investing? I work a lot during the year and over the summers, so I have a little extra cash, and rather than blowing it on beer (again), I'd like to parlay it into something more substantial. Problem is, no idea if I can/should/where to start ....

Michelle Singletary: If you have the money and won't need to pay off student loans and have emergency money set aside (three to six months living expenses) than yes invest. Start with an IRA.

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Stafford,VA: I am a 17 yr. old, entering college in the fall. My mom is on disability and receives very little income. Because of this, I was able to receive financial aid. However, now she refuses to sign any papers on my behalf. Can I do this by myself? What should I do? I am really scared I won't be able to go to school.

Michelle Singletary: I'm so sorry to hear about your situation. You should contact the financial aid office at your college to find out your options. Make the call now. But you can do it by youself. It will be harder or may take a little more leg work (call the financial aid office now). My grandmother was the same way. She refused to fill out the FAFSA forms. She was scared to give up any financial information. Luckily, I received a full scholarship to college. But if I hadn't I would not have let her fear stop me from going to college. I wish you all the luck!

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Washington, DC: Hi Michelle,
I LOVED seeing you on "To the Contrary". You were so cute and smart and funny!; (and your hair looked GREAT!;)
I am mid-40s and never married. I am well educated, and have a job I like that does not earn me big bucks, but it's the kind of job where I know what I'm doing is something that helps people. I am active in my church, and believe in a tithe.
I have always rented because I never thought I could afford to buy, and, okay, I admit, I kept waiting for Prince Charming to come and we'd buy a house and I'd live happily ever after. It is finally dawning on my that Prince Charming must have gotten lost on the Beltway, cuz he ain't nowhere to be seen!;
I have NO debts, pay off the full balance of my credit card every month, contribute something, but not a lot, to a retirement fund, and ... finally a year ago, put money down on a condo that is being built. There have been delays and more delays, and I still don't have a mortgage. What's a nice girl like me to do? I'm afraid that by the time I can finally get the mortgage, I won't be able to afford it anymore.
I live modestly -- don't even have cable!; What's your advice? How do single women ever buy anything in this town? By anyone's standards, I am not poor, but not rich either!;

Michelle Singletary: Aren't you sweet cuz I hate my hair! Girl, keep the faith. Keep doing the math and if you can't afford that condo don't sweat it. If you have to rent awhile longer doesn't mean you are a failure. If you have to rent forever doesn't mean you are a financial loser because you said all the right things. You are doing with your life something that means something. Hey, have you considered buying the house with a sister or cousin or some other family member? Bottom line: You may in fact someday buy your home with or without your Prince. So don't worry. Watch the rates. Do the math and buy if you can afford it. If you can't that's all right too. Just means you might have to save a little bit more for retirement instead of relying on equity you might build up in a home.

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Fairfax, Va.: Michelle, your advice is always so good!; I'm considering going back to graduate school. I am nervous because it took me a long time to pay off credit cards and loans from undergrad, plus now I have a nice salary and some savings built up. Any advice on how to smooth the transition from salaried professional to graduate-student stipend? I will probably take out some loans, because the interest rates are so good, and to preserve my savings and investment money.

Michelle Singletary: Take your time and do the math. If you don't have enough saved take another year or two. But learn from your past and all the debt you used to have. I wouldn't go back until I had a nice cushion. But if you do decide this is the time just watch your budget and don't try to live like you do now with a full-time salary.

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alexandria, va: Michelle, I love your column. I'm a big fan of being financially stable and responsible. Here's what I'm struggling with. I grew up in a family with very little money and lots of siblings. Today, my parents and siblings are all still struggling financially, while my husband and I have good jobs, minimal debt (house & student loans), good retirement savings, and no kids. Which means we have lots of money to play with, while my parents and siblings sometimes can't pay for basics but won't accept any help. In fact, they are upset even when I spend money on gifts for them, since they can't reciprocate. I feel helpless, guilty, and somewhat ashamed of what I have. Add to that the fact that my in-laws are well off and keep buying us expensive gifts or giving us cash -- which we don't want or need.

Is there anything I can do? Or should do? I have several nieces, I'd at least like to put away something for them since I don't plan on having kids myself.

Thanks!;

Michelle Singletary: Stop feeling guilty and replace it with "I'm blessed." Stop buying your relatives gifts if if makes them feel bad (although I bet after awhile they may want otherwise). And I love your idea of helping your nieces. Have you thought of setting up 529 plans for them. You can. In fact, you can set up an account for each niece (and get a tax break. It's $2,000 per account in Va. I believe). You don't HAVE to tell the parents but wouldn't it be a wonderful gift when they graudate and believe me they won't resent the money when it comes time for them to go to college.

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Re: Paying for college: I just wanted to support the people out there. My parents make enough money so that I didn't qualify for anything other than unsubsidized Stafford loans (everyone qualifies for those), but they refused to help pay for college. The financial aid people could not offer to help me other than to offer me alternative loans. I still made it through college. I worked part time during the year and full time in the summer. It can be done. The 17 yo with the disabled mother should qualify for quite a bit of money. Also, lots of people qualify for work study which makes getting a part time job much easier.

Michelle Singletary: Good points.

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San Diego, CA: About student loan consolidation: because of the type of loans I had (Stafford loans), and because I condolidated with the US Department of Education I do not have to start paying back right away. I am actually still a student (but paying with my own money now) and I have until I am no longer a student and my 6 month grace period before I have to start paying back my now consolidated at a low interest rate loan. I would strongly suggest calling them, the number is on their website: http://loanconsolidation.ed.gov/ and asking them about this. Also, a question, I am putting away $150/month for retirement currently. All of that is into a Roth IRA. I cannot get matching funds at work for my 403b, so I think this is the best way to do it. Would you agree/have any other suggestions?

Michelle Singletary: I agree with all!

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Bowie, Md.: Just wondering what your thoughts are on allowances for kids. My daughter is only 4 and is already driving us a bit crazy wanting everything in the store. (We usually say no; a word she's VERY familar with.) She's already got the idea that money comes from the bank; she just has no idea how it gets there in the first place! We're working on that. Anyway, when to start giving allowances, how much, tie it to chores or not?

Thanks & love your columns/chats.

Michelle Singletary: Hey. I did a number of columns on allowances. Go to the archives and you might find them. Think it was last year. I don't think you HAVE to give an allowance, especially for a 4-year-old. If you want to stop her whining stop taking her to the store (as much as you can). Seriously. That's what I do. I try my best to keep them out of the malls, stores, etc. If you do decide to give an allowance don't tie it to chores. Chores are what she is supposed to do and shouldn't be paid for it.

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Arlington: For the college bound whose mother is refusing to help with the paperwork - contact the financial aid office there. My mom was the same way when I was applying to grad schools, and the office said I had to submit an affidavit explaining why my parental income information could not be verified. Unfortunately, I was under 24 and unmarried so it was very difficult, and I had to put off grad school for several years. But try it - times might have changed and it might be easier now.

Michelle Singletary: Again, good points. You guys are so caring.

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Boston, Mass.: My college offers me a decent amount of financial aid, but if i win outside scholarships, they subtract the amount I win from the amount they give me -- so basically I can never get more aid than they think I should have. But their idea of 'full need' is very different from my family's ... any clever ways I can get around this?

Michelle Singletary: Nope! Why would you want to? I like to think if you don't need the aid than it's going to someone who does. If you need extra money for those extra things (pizza, clothes, etc.) get a job. I don't mean to be harsh but financial aid funds are so limited don't try to get more than you need. It may mean some other student gets what they need.

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Hope I am not too late: Both my husband and I contribute to our 401ks, we are in the process of paying off credit card debt and trying to control spending, I have student loans, a car loan and a mortgage. In your mind, is paying into a 401k the same as saving? I can't imagine adding to our savings cushion and our retirement plans with all this debt hanging over me. For what its worth, we are in our late 20s/early 30s.

Michelle Singletary: Contributing to your 401 k is saving and investing for your retirement future. If you can do both (save for retirement and pay down your debts) than stay the course.

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Baltimore, Md.: Dear Ms. Singletary: Re saying you might pay outright for a retirement home. Robert Bruss, who writes the real estate column in the Saturday Post, advises people to never do that. If you suddenly need money, it is hard to get it out of your house.

Michelle Singletary: Bruss can say what he wants on his chats. I don't want a mortage in retirement. That's what I learned from Big Mama and it really saved her from a lot of headache. But if you think otherwise that's fine too. That's why they call it "personal" finance.

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Re: Single women and houses: If she can qualify for a mortgage, one great way (though not for everyone) is to get a house and get a roommate. If you buy a house with a walkout basement or something it may not even be that much of a hassle. I know she's older and probably is used to living alone, but she may only have to do it for a few years.

I speak from experience-- I bought a house in 1998, as a single woman, and had two roommates who paid more than 2/3 of the mortgage. They were friends, and we had a lot of fun. I could never have afforded my home otherwise.

Michelle Singletary: Good idea.

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THANK YOU: Thank you thank you for your comments on buying vs. renting. I can't tell you how many times people say that I should buy but I simply can't afford it. "But rates are so cheap", they say. BUT THE PRICES AREN'T. And even if I could afford a condo, I most certainly cannot afford the condo fees. There is just so much pressure to buy buy buy and while I understand the tax advantages, I still need to eat and pay my other bills and save for the future. Just because you own a house/condo most certainly does not ensure a financially stable future. Rant finished.

Michelle Singletary: Rant good.

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Washington, DC: I'm a part-time grad student with a full-time job. I'm trying to get an internship for the fall to gain some experience in my field, but that would require quitting my job (which I'm OK with) and I wouldn't have a source of income. I have some money in savings and my wife will help out, but I'm nervous about not making money. On the upside, the experience would be helpful for trying to find a job after graduation since it's a competitive field. What do you think?

Michelle Singletary: Well if your honey is okay with the plan and you will have enough to cover your needs sounds like you have a plan.

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Michelle Singletary: Well folks got to run. Great chat. Good questions. Thanks for all who sent in their advice. Take care and I wish you financial peace!

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