Michelle Singletary
Washington Post Personal Finance Columnist
Thursday, December 6, 2007; 12:00 PM

Need advice about how to handle your personal finances? Whether the struggle is saving for retirement, organizing your bank files, talking about money responsibility with your spouse or loved one, Post personal finance columnist Michelle Singletary offers her advice and answers your tough questions.

A transcript follows.

Read Michelle's latest columns, check out her Color of Money Book Club selection archive or sign up for her weekly e-mail newsletter.

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Michelle Singletary: Good afternoon to all. Lots of questions so let's get started.

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Washington, D.C.: My birthday is in January and my husband's is in March, and we like to get our gifts early, during the sales. We have been debating whether the better deals are during the pre-Christmas sales or the just after Christmas sales? It seems like the prices get hiked and then put on sale, so you don't really save anything.

Michelle Singletary: I would suggest you just figure out what you want to buy for each other and just keep an eye out now to price out the item or items. Then just keep checking the Web sites for where you might purchase the gifts.

You can get good deals before and after the holiday. There are also Web sites that help with price checking such as pricegrabber.com.

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Alexandria, Va.: Hello Michelle,

Recently,I've tried to pay down my credit card balance faster by sending in checks with "apply to principal only" written on them, but I was told by my credit card company that payments, as per my cardholder agreement, can only be applied to interest, fees, then principal. Is this true?

Thanks,

Daniel

Michelle Singletary: With credit card companies, anything is possible.

Call back and ask to speak to someone higher up than the customer service representative. Or if possible get a credit card offer with zero percent interest, transfer the balance and pay off the charges the way you want with the extra payments.

However, with this strategy be careful you don't get duped into paying transfer fees, etc.

That will show the lender.

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Fairfax, Va.: Hi Michelle,

I'm trying to figure out the best way to help my husband pay down his credit card debt. This is debt he incurred before we got married, so it is not my responsibility (We have a pre-marital agreement).

He has 3 cards in which he owes approximately $10,000 total. He is not late on his payments, is paying above the minumum (as much as he can), and has good credit. What else can he do to expedite paying down the debt? Would it make more sense to combine his debt to the card with the lowest interest rate?

Michelle Singletary: What would help is his wife seeing that this is an "our" problem.

You married the guy and his debt. Help out for goodness sake.

Just think, working together using all avaiable extra income you could knock that debt out and save some interest payments.

But if you don't see the right way, then tell him to work on the credit card with the lowest balance first. Then just make the minimum on the other two cards. When the card with the lowest balance is paid off apply those payments to the next card with the next lowest balance, etc.

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Expensive place out West: I currently rent, and am considering moving to an area with much lower home prices. It is possible that I will be able to purchase a home with what I've saved for a down payment here.

Are there any consequences or downsides to buying a house for cash that I should consider?

Michelle Singletary: Downside to being debt free?

Well, let's see. You would be different then the rest of America. You will have peace. You won't be a slave to some lender.

Now, I wouldn't put ALL my cash down so that I'm house rich, cash poor. If you have an emergency fund and extra funds for the things in life that happen (car repairs, etc.)

Then live debt free.

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Kathleen, Ga.: How do you move from struggling with financial infidelity to recovery and remission?

18 months ago I discovered that my lovely wife was hiding an impulsive spending addiction. She comes from a family with several generations of overspenders and shopping as therapy. She was doing everything Ms. Michelle urges to avoid - multiple payday loans, spousal identity theft, we were too close to losing the house and the financed car when I found out. We are miles away from where we were. We found a great consumer credit counselor through work and are almost halfway to paying the cards off.

I grew up listening to stories of the Depression from Granny so reckless spending is foreign to me. I don't buy stuff if I can't afford to pay cash or it's an emergency.

We've gotten help - psychiatrist, perscriptions for underlying mental conditions, couples counseling and she joined Debtor's Anonymous on her own. We're sticking to a good budget. The end of our world has been postponed indefinitely.

She still slips in her impulsive spending and talks about struggling to do the right thing. I've tried tough love, supportive spouse, money cop, good communicator and cheerleading life couch.

What are we missing?

Michelle Singletary: Honestly, sounds like you are taking all the right steps.

Now you have to let time heal. Getting her trust back takes time and evidence that she really is changing. It might help to get counseling on your own to deal with your frustrations, mistrust, etc. It's not like you have reason but perhaps a professional can help you deal with it better.

Just know nothing you say will change her. She has to want it for herself. So step back from playing cop (except to make sure the bills are being paid. Clearly you should be the household treasurer).

Keep being the cheerleader and coach however. Let her know when she's doing well and fights back the urge to splurge.

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Washington, D.C.: Hi Michelle,

Are the protection programs credit cards offer a waste of money? My husband and I have a bet riding on this one.

Michelle Singletary: Waste.

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Wheaton, Md.: Hi Michelle!

My husband just got a notice from a collection agency last week. It's supposedly for 7 parking tickets that were incurred in DC in 2005.

Now, the notice lists where the tickets were given, and it is near where we used to live, so it's entirely possible that my husband was parked illegally. However, he never saw tickets on his car or got any notification in the mail...this is the first we've heard of these tickets.

Should we just go ahead and pay? I imagine that it's way too late to argue with the DMV. Also, will this affect his credit?

Michelle Singletary: I would at least try to argue. He should DMV and see what his options are. It might be in error. And if it's where you used to live perhaps the notices when to the old address and weren't forwarded.

Worth at least a phone call or two.

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Fairfax, Va.: Michelle please help!! I'm dating someone who was a finance major. Of course we talk about money and debt and spending! He really thinks it's ok to borrow money to buy a house when you already have cash accruing interest. He says that the cash is earning a high interest rate but you can borrow at a low rate. He also thinks it's ok to have an equity line of credit. In his defense he's not an advocate of credit card debt, but it seems that he's all about the return value and interest rates. What can I say to him to show that ALL debt is essentially bad other than "Because Michelle said it is?" or "You must have bumped your head!!!"??

Michelle Singletary: First, calm down. The man isn't selling totally crazy.

I would need more details to settle this argument. If you are saving that you have ALL the cash to pay for a home AND you have investments for retirement, emergency money, life happens fund (see previous chat answer) then I would pay cash for the home and be debt free.

Now if he is saying makes sense to keep some cash and not be totally house rich (meaning ALL your money is tied up in your home) then he's right.

So it's a balance.

Where to send him. Have him read my first book, "Spend Well, Live Rich."

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Baltimore, Md.: I'm considering saving money for my 3 year old for college in a Roth IRA because her college is most likely going to be paid for by her grandparents, but I don't want to be caught off guard if they don't come through. Does this approach make sense, and if so, what sort of funds should I invest in?

Michelle Singletary: I like the approach. Can't recommend any funds however.

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Westminster, Colo.: How can I listen in on your discussion with the authors of your live chat? I read about it in your December 2nd column under "The Color of Money". Thanks

washingtonpost.com: You can read the transcript of Michelle's last Color of Money Book Club discussion here.

Michelle Singletary: When I announced the book club selection for the month I also list the date for the online chat with the authors.

The next chat with the authors of my current pick, "The Financial Wisdom of Ebenezer Scrooge" is scheduled for Dec. 20th at noon.

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Emergency fund: Hi Michelle,

My husband and I recently got married, and we'd like to start an emergency fund and a life happens fund. But we're not sure where to put it. Should we get CDs, put it in a savings account, or something entirely different? Any advice would be much appreciated. Thanks.

Michelle Singletary: I keep my life happens fund in a credit union account -- no fees. You really want to keep this fund liquid since you will be spending regularly out of it.

For the emergency fund you can do a number of things:

-- money market fund

-- Buy some very short-term CDs so you don't have to pay a penalty should you need the money.

-- Search online for high-yielding savings accounts by internet-only banks (ING, etc.)

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You married the guy and his debt. Help out for goodness sake. : how can you advise her to break a legal agreement? She said they had a prenuptial agreement about debts incurred before the marriage. I'd be very careful advising someone to break a legal agreement!

Michelle Singletary: Are you serious or just breathing in some fumes somewhere.

Who is she going to sue, herself?

She can decide to help HER husband with the debts. A marriage is supposed to be about "us." It's not about "You."

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Hypotheticalville: Hypothetical situation: A near-retirement mother has three sons. The eldest and youngest flatly refuse to help support her, sticking the middle one with all the bills. The woman who married the middle son was promised (as a condition of the marriage) that this would not be the case, and was misled about how high the bills would be. Should she stay? There are no children yet. Any opinion?

Michelle Singletary: Stay. Get counseling. Try to make it work. After all what you have is a wonderful husband who is trying to do the right thing for his mother. Should his brothers help, probably.

But should you leave a marriage over this, I wouldn't.

I mean if that were the case my husband could have left me YEARS ago. I'm always helping out my family financially. Neice called yesterday. Got her car booted and needed $75 to get it unbooted. She was running for a job interview (she's in college) and didn't see the sign that she couldn't park where she did. She called in a panic. I called hubby. We talked it over. He called MY niece got her to talk the parking person down from the $75.

Why am I telling you this story. Because when you married someone you marry all the that goes with them. Sometimes its helping family.

If you are uncomfortable with the amount going out of your household, talk to your spouse or "hypothetically" talk to the spouse in question. Express your frustration. Work out something. With me my husband and I agreed we would only help family members trying to help themselves or those who couldn't because of diability, etc.

I stop giving to every triflin relative that asked.

Niece isn't triflin by the way.

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Washington, DC: Michelle: I love your column! Thank you for your great advice! Two things in the news that bug me:

First is the subprime rate freeze agreement between lenders and the White House? This seems to reward those (borrowers and lenders) who made bad decisions, and punishes those of us who pinched pennies and didn't buy, or bought houses we could afford.

Second, last week in Iowa, Michelle Obama said that she and her husband only paid off their student loan debt last year, and only were able to because of his income from best-selling books. I know they are public servants, but I graduated grad school in May'06 and will have my debts paid off in full by Easter!

What are your thoughts???

Michelle Singletary: First thanks.

Second, writing about the "bailout" for Sunday so saving my good thought for that column, although I may use your comments in the column.

And glad the Obamas saw the light and got out of debt when they began to get extra money. I hestitate to judge because I don't know their full financial history.

Just pat yourself on the back for not carrying the debt as long as they did.

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Maryland: How can you save money for a child in an IRA, Roth or otherwise? You have to have income to put money into an IRA and I don't see how a 3 year old has income.

Michelle Singletary: I assumed the person meant "THEY" would save the money and the use it to pay for college if he or she needed to in case the grandparents didn't come up with the college money.

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Are you serious or just breathing in some fumes somewhere. : Michelle I like when people question your advice. Then you let them know why YOU have a column in the Post and not them! One of your biggest fans!

Michelle Singletary: Ah shucks.

Thanks.

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Principal Only: Almost every credit card agreement has a clause stating that payments will be applied to the lowest interest bearing debt first. So, if you transfer debt to a zero percent card but continue to charge on it and accrue additional debt at the regular interest rate, your payments will be applied to the zero percent debt while the new debt racks up interest. The companies don't care what you write on your checks. Years ago, I tried to split my additional payment by paying with two checks--one at the minimum and a second check two weeks later for the extra payment, specifying that it be paid on the higher-interest earning debt. Company didn't care, and applied it to the lower amount.

I finally conquered my credit card debt by finding a zero-percent transferred debt deal that required only that I make two purchases a month -at any- cost. I could buy a pack of gum twice a month, as long as the purchases were between certain dates (the 6th and the 5th, if I recall correctly), and I would not incur any interest on the transferred debt. Because I kept my required purchases to a cup of coffee or smaller, I only ended up paying interest on about $200, instead of the much larger debt with which I had started.

Michelle Singletary: I see where you are going. But you could transfer the debt and make NO charges, which I thought I implied. Then just make as large a payment as you want until the debt is paid off.

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Baltimore, Md.: I absolutely agree with your advice to Fairfax. It's only $10,000 and you're married--work to pay it off and then enjoy your debtfree life together. It seems like her heart is in the right place but if they really want a true marital partnership, they should get back to even and then work to ensure that they don't go back into credit card debt.

Michelle Singletary: I like second opinions that agree with me and make sense. Thanks.

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The Myth about Seperate Accts. and Gifts: My husband and I married in our thirties. We both brought "money" to our marriage. He brought alot more than me, though, due to some smart real estate moves. We have a joint account and share everything.

Recently he bought me a beautiful anniversary ring. I determined how much to spend (not too much since i am frugal) and I negotiated down at the jewelry store since I only wanted him (us) to spend a certain amount.

There is this fantasy out there about a husband going to the jewerly store and buying a beautiful ring or pendant. What is so wrong about both people being responsible for the money? Trust me--my husband was beaming when I told the jewelry store that we needed to get to XX or we were walking. Being smart about our money instead of living out some jewelry commercial is the way we make it work--with a joint account.

Michelle Singletary: Love this tale.

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Atlanta, Ga.: My fiance has close to $28,000 of debt and $10K of that is to the IRS. When I said 'yes' I knew he had changed his lifestyle dramatically and pays bills on time and regularly. Now he's looking for a new job that will pay him more money and still manages to put money towards a retirement fund. However, I'm still stressed; we want to buy a house in late '08, stop renting as our friends tout, and put the lease in my name as his credit is not good enough right now. I've saved close to $10,000 already and plan to continue, and my parents have offered to help with a down payment - instead of a big wedding they'll give us $20,000 toward the house.

Is this even enough money to consider buying a house (I've been approved for a mortgage of $250K)? Or, should I put the money I have saved towards paying off his debt? I know you advise joining finances.

Thank you.

Michelle Singletary: Before buying I would just tackle that debt. Start off your life and home without that debt baggage.

And for the record I don't think people who rent are financial losers. You are not a failure if you rent. Is homeownership an important? Yes.

But stop letting those friends make you feel like you are a failure. It will force you to jump into homeownership before you are ready. You've got time. Take it.

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Washington, D.C.: Ok, this is probably a ridiculous question, but after reading this discussion occasionally, I am not sure what income level corresponds with what level of wealth. People on this chat appear to think that married couples earning over $100,000 are wealthy. Congress apparently feels that married couples earning over $150,000 are wealthy. The state of Maryland (thanks to O'Malley) now feels that married couples earning over $200,000 are wealthy and should pay higher taxes. What actually constitutes the middle class? What is in between middle class and wealthy?

Michelle Singletary: Wow. I would need like another five hours to go into this.

If you compare a $100,000 salary to what the average household in the US makes (about $42,000 I think), yup you are doing quite well.

But we all know that $100,000 in large cities with big housing costs doesn't go that far. And keep in mind that $100,000 is before taxes.

So you can't whine if you earn six figures but you can ask for help, guidance, etc. on how to do better with what you have.

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Re: Fairfax, Va.: I'm the one who wrote in asking about my husband's credit card debt and the PM agreement.

What I didn't explain is that I have taken over most of the household bills, mortgage payment, other bills, little money for savings, etc. He is only responsible for his car payment, some groceries, and his credit cards. I do help him out as best as I can but I want him to concentrate on getting rid of the debt and learn to be less dependant on those cards.

Michelle Singletary: Thanks for writing back in. But I still think you are going about this all wrong. All income and ALL debt should be viewed as belonging to both of you. If you are the family treasurer, which it sounds like you are, then come up with a plan to pay off the debt with any and all extra money coming into the home.

Develop a budget that includes input from both of you. There's a template on the Post site.

You see I want you both to be accountable to each other. He should feel like he's part of paying the mortgage, other bills, etc. He's not a child. He's a man, your husband.

Work together is all I'm saying.

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S. Rockville, Md.: Michelle, I think this is the wisest thing I have ever read from you: "Because when you married someone you marry all the *stuff* that goes with them."

My situation: My wife and I took in her younger sister and her two toddlers. She pays us rent and has a lease, and her share of the phone bill, which is in my name. She's got damaged credit, which is holding her back in some areas. Is there any way her making payments to us can help restore her credit?

Michelle Singletary: Good for you for helping out. Really.

I would try to get her to put bills in her name. That's the best way for her to rebuild her credit to the point where she can get an apt. or hopefully one day a home of her own.

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Maryland: Quick question, my husband and I now have the life happens and emergency fund, no credit card debt, just one car payment so it seems like now we think we are all set or something and our monthly spending has just been out of hand- our credit card bill has been $3-7k each month, we pay it off but we also realize we are wasting so much on just blantant consumerism. I guess all we need is the advice of being a little more disciplined but.. any words of wisdom?

Michelle Singletary: Make sure EVERY penny has a purpose.

If you are set with emergency fund, life happens fund..then if you had kids I would say save aggressively for them.

If no kids (and assuming you didn't have that debt you just racked up) then work on boosting your retirement savings. If retirement savings is going well, then why not go after your mortgage.

Or look around and see who you might blessed. Is there a niece or nephew struggling to pay for college?

The trick is if you are doing well financially, budget in fun money so you don't look up one day and realize you've consumed away money that could be used for better things.

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RE: In the news: Michelle, in response to the news comments. There are also many of us in this area who were smart about borrowing, saw a coming crisis, and waited for prices to level or fall. Many of us, like hubby and I, have also staying in small apartments (500sqft for two!) paid off credit and student loan debt, and more importantly, PUT OFF HAVING CHILDREN until we could afford a larger place. It steams me to no end that people who made bad bad decisions when plenty of people (like you!) were telling them how stupid ARMs were. The headline in the news today really made me upset, as it will likely keep prices at inflated levels and has made those of us who were smart these past three years feel like chumps.

Michelle Singletary: Don't be too steamed. Have some compassion. And I have never said ALL ARMs are bad.

I said make sure you can afford your mortgagg now and later if your rate jumps and you can't refinance.

But I understand your frustration.

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Washington, DC:"I would try to get her to put bills in her name. That's the best way for her to rebuild her credit "

But not bills for your household ... you don't want your power/cable getting cut off if she can't handle her business. (And I'm guessing she can't handle her business if she's in this situation to begin with.)

Michelle Singletary: Yes, of course I meant she should put her own bills in her own name. For example, is he has a cell phone, should be in her own name, etc.

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Washington, D.C.: Re the Obamas - Michelle Obama is not a public servant. She was making almost $300k working for a hospital. And he only entered the govt a few years ago. He was a professor at U of Chicago, among other things.

I was shocked too.

Michelle Singletary: I'm sure sure about your information but why are you people shocked.

For decades people have been told don't worry about paying off student loan debt early, it's good debt.

Heck just about every week when I tell people to pay off their student debt some knucklehead says, I'm wrong that that if the debt is at low interest rates, it's better to invest the extra money.

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Lorton, Va.: to out-of-control-spenders:

My husband and I were in a similar situation. All of our bills were paid, we just spent incredible sums of money on extras. We've given ourselves an allowance: we each get $60 a week IN CASH from the ATM, and that's our "extras" spending money for the week. It has made a HUGE difference, and we still feel like we get to spend "fun money". Good luck!

Michelle Singletary: I like the idea of the allowance.

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Michelle Singletary: We're having a little bit of technical difficulty so I will answer more of these questions in my e-letter next week. Thanks for joining me today.

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