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Michelle Singletary
Washington Post Columnist
Thursday, December 20, 2007; 12:00 PM

Personal finance columnist Michelle Singletary hosted an online discussion with Ted and Brad Klontz and Rick Kahler, the authors of "The Financial Wisdom of Ebenezer Scrooge: 5 Principles to Transform Your Relationship With Money" (Health Communications Inc., $14.95), on Thursday, Dec. 20 at Noon ET.

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In her column from Dec. 2, Michelle writes that the authors know what it is about your personal issues that make you think about why you're a spendthrift or a miser.

A transcript follows.

Read Michelle's past Color of Money columns.

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Harry, D.C.: A spouse of 20 years has forged the other spouse's name to checks and spent tens of thousands. There is also deception on taxes similar to what Eleanore Holmes Norton experienced with her ex-husband.

How common is this kind of deceit? Do rational people stay in such marriages?

Ted Klontz: Cheating on one's spouse in financial ways in some form is quite common. 30% of couples admit to doing it. My hunch is that the actual figures are quite higher. This is the extreme form, but money scripts about money and what to do and hide from significant others are pretty common.

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Michelle Singletary: Merry Christmas and Happy Holidays to all. Lots of questions so let's get rolling.

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Arlington: Hi Michelle, will we be getting any further updates on the Challenge participants? I've fallen a bit off track in paying off some debt and I'd love a little inspiration.

Thanks and happy holidays!

Michelle Singletary: Oh you have wonderful timing. The last installment is coming out on Sunday.

And this piece will INSPIRE. They all did well, with great coaching from yours truly.

Lots of debt paid off. But it was hard work for them all as I'm sure you are finding out.

But even if you get off track -- as the couple did -- get right back on. We all fall sometimes. Even me :)

Just keep thinking about that day when you pay off that last bill. What a feeling of joy.

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Chicago: A friend told me the other week that it makes no sense to save when you have your first job out of college, as saving will become easier in the future (when you presumably make more money). The rationale is that your savings in the future will be so much greater than what you are saving now -- so what we are saving now will be negligible or "a drop in the bucket." (Hope that makes sense)

Is this true? I just turned 24 and am engaged to be married and we are both save every month by scaling back. We rarely eat out, don't go out as much as we'd like to, don't live where we'd like to save on rent, etc.

We max out our Roth IRAs every year and have a very cushy life happens fund and are working to pay off our student loans. Should we just wait until saving gets easier, or is my friend a moron? I would appreciate your insight on this.

Ted Klontz: Start the habit now. Your friend is not a moron, but at the end if she practices what she preaches, she will have more-on the table to use when she needs it.

Michelle Singletary: Ted is too kind. Your friend is a moron. So at a young age you won't need savings? Your car won't break down? You won't lose a job? Your won't get sick, disabled.

Complete and utter nonsense.

Savings is a habit best learned at an early age. Ask all the old folks struggling because they never learned to save when they were young.

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My husband IS Scrooge: LOVED the book-especially your personal stories. My husband is so Scrooge-like and I've grown weary. Latest: his parents are in assisted living facility this year, and he handles their checkbook. I mentioned that he should write a check to thank all of the many caregivers who are kind to his folks. He said, "that's their job, I pay $10,000 of my parents' money each month." I cringe. I know that the aides get minimum wage. I know that he is worried (like his 90-yr-old father) of money running out. But they have over $500,000. I am a stay-at-home parent right now so I don't have my own money to use. What can I say? I am always generous with teachers, etc. and I can't stand his miserliness.

Rick Kahler: The conflict you and your husband have over this issues are your conflicting money scripts. I am not sure if he has read the book, but I would encourage the two of you to do the money script exercise, specifically as your beliefs apply to giving. Remember, no money script is always true or always false. Miserliness has its place in time, just as generosity does.

Michelle Singletary: And it might not be that your husband is a miser -- just scared for himself and his parents. His words were a bit harsh but perhaps that's the only way he knows how to express it.

As for you, while I'm sure the workers may want or need money there are other things you can do to show your appreciating. Why not host a holiday party for them. Bring in good food, baked goods, etc. to show you know their job is hard. Often people just want you to acknowledge that they are doing their job and well.

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Washington, D.C.: Good afternoon & Happy Holidays! Speaking of finances and relationships; we just had a new baby and are at odds about starting a 529 fund. What is your quick advice on this and if you decided to open one, where would you do it?

Rick Kahler: I love 529's. I think they offer the best of many worlds and the time to start them is when your child is a baby. If for any reason he/she doesn't go to college, you have many choices, which include giving the money to another child or extended family member, using it for you education, or taking the money out of the plan and paying a 10% penalty on the appreciation.

Michelle Singletary: Why are you are odds?

I agree with Rick. I have three for my rugrats. In fact, use it to get them to pick up their clothes.

Me: Clean up your room or I'm giving your 529 money to the kid down the block.

Kid: Nooooooooo

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DC: I've seen you address this before but I could use a summary. Why, exactly, should I be concerned with moving in with my boyfriend, who owns his place, without having my name added to the mortgage? I know its not a good idea for my best interests, but I can't remember the reasons why.

Rick Kahler: The concern may be more of your boyfriends, depending if your state is a common law marriage state. I don't see any downside for you, unless you are contributing financially to the purchase or payment. I that is the case, you definitely need to be on the title to protect your investment.

Michelle Singletary: And so why would you want to help build equity (hopefully although in this market who knows) for a mere boyfriend?

Such relationship fail at an amazing rate. Then what?

Live on your own. Accumulate your own money, assets. Don't shack up just to save money. Your worth more than that.

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Healthy money scripts for our kids?: In your book you note that children will take different messages from money scripts. How can we help them take the most healthiest approaches? For example, if we vigorously tell them "NO", (Michelle, I'm thinking of your approach that you mention in your columns)...one kid may internalize that message rebelliously, while another may 'get' what we're really trying to teach. Also-with the growth of McMansions and such wealth in the DC area, so many kids feel so entitled to money...yet their anxiety will rise because they must be so competitive with one another for jobs in the future!! What can we do??

Rick Kahler: We are teaching our kids every minute of every day by what we say or don't say about money, and what we do and don't do with our behaviors. I don't believe there is anyway to insure that a child will go into adulthood with certain beliefs that we parents would like. As you note, two children can have very different money scripts from the same parental actions or beliefs.

Ted Klontz: What I was referring to in the book was when "things" happened financially and the kids just watched. The parents made no attempt to explain what was happening, why it was happening, what was being done about it, parents were not involved in getting outside help about it, etc. Money events (as are all events in a family's life) in a family's life are actually a great opportunity to use as teaching moments to the kids about how (in this case) money works, what responses reasonable adults have to those situations.

In most families there is no discussion of anything that the kids are seeing, so they just make up what is happening, why it is happening, and what they think might fix it.

Kids do this with other stuff. For example, at a certain age, if the kid gets in trouble, they just close their eyes. The thinking is "if I can't see you, you can't see me, no problem". This is a three year old's adaptive behavior. This "closing my eyes" approach, transfers to adult behaviors that literally do the same thing. I will close my eyes to what is really happening".

Michelle Singletary: Well my approach isn't to just say NO.

In our family we talk about values. We talk about why savings is important and why debt is evil.

We talk about priorities -- if we spend on this or take you to eat out often we won't have the money for our two-week family vacation.

We involve them. We engage them as Ted points out. I use lots and lots of humor. And I point out people -- like trifling family members -- who have made bad money choices. Then ask them what they might have done differently.

I firmly believe that if you raise up a child right with love and with limitations, without giving them everything and all the stuff their friends have they will do the right thing with their money.

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Washington, D.C.: Thanks for selecting this book Michelle. I was in counseling some years ago due to the deterioration of my marriage. A lot of the problems were due to my issues surrounding money. Thankfully, I received a large sum of money that enabled me to pay off the debt and turn things around, but the marriage did not make it through the fire. I remained in counseling and began to tackle issues other than marriage to include my attitude towards money.

Fast forward to today, I still struggle with some money issues. I have gotten better in some areas, but I still struggle...specifically with "more money would fix it". I have a hard time saving and have struggled with the discipline to pay off debt and maintain an emergency fund.

I remember reading in a past column of yours that we must do whatever us necessary to pay off debt, so I have been looking for part-time work, which will accommodate my full-time work and part-time school schedules.

Collectively my husband and I have approximately 50K in student loan and consumer debt.

I would like to read this month's book....as I am still struggling with several issues surrounding spending.

I love your column...it inspires me to do better!

Ted Klontz: When working with one of my clients the other day I heard myself say something that I liked. I am not sure it is original, but it seemed very true. A relationship where both partners are at peace with their money stuff, is usually at peace in the other areas of their lives also. I believe this is true because money touches every aspect of a relationship.

On the other hand, if a couple is not at peace with their money stuff, there are other areas of dis-ease also.

Michelle Singletary: Thank you so much for your question and honest. It's hard to admit you have issues. And boy do I have issues. Now my issues help me save. I think I'll be homeless or something so fear often motivates me. But not so much anymore thanks to counseling, great husband and far less drama than I grew up with.

But here's the thing. You have identified the source of your problem. Really that is half the battle and what the authors adress in their wonderful book.

Keep searching, examining and trying. Have you set up your savings automatically in an account far from you with no ATM card. That helps.

But mostly keep going. Don't give up. You are a work in progress but my goodness who isn't.

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Md.: Your friend IS a moron. The $25 a month I saved when I was only making $23,000 a year at age 24 is what got me into the habit of saving. 10 years - and a couple of better job leaps - later, I now have over $180,000 in retirement accounts. It has been PAINLESS because it was something I did all along. When I got a raise, so did my automatic savings plan.

Rick Kahler: This is very cool! Do you know that 53% of baby boomers live hand to mouth, and of the 43% that save, the average amount they have in retirement plans is $50,000?

You've done great and you make an excellent point that if saving is begun early and becomes a habit, it really can be painless! Congrats.

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Seaford, Va.: Does low self esteem connect with compulsive spending?

Brad Klontz: Yes it is. Research shows that compulsive buying is also associated with anxiety, depression, obsessive-compulsiveness and a host of other psychological concerns. It is an addictive cycle where the compulsive spender experiences an irresistible impulse to spend, loses control over their spending, and continue to buy despite the consequences. They end up feeling shame, guilt, and regret after making purchases, and feel worse about themselves than non-compulsive spenders. The good news is that compulsive buying can be treated successfully!

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Around reason to save at your 1st job: You may make less money than you will in the future, but your expenses are lower: no mortgage or kids. So it is sometimes easier to save when your responsibilities are fewer.

I make more money now, but more of it is obligated for mortgage, insurance, taxes, so sometimes it feels like I actually have less discretionary money left over than when I was making 1/3 of what I make now. Save early because your responsibilities only increase as you age.

Michelle Singletary: Good, good point. Thanks.

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Baton Rouge, La.: I recently ended a relationship with a boyfriend of two years because of his financial past and present. He is 54, filed for bankruptcy in May, filed for bankruptcy about 10 years ago, and has no savings or assets. He told me about the bankruptcies only a few weeks ago; he had led me to believe before that that he had paid off the most recent debt of $30K. The former bankruptcy was a complete surprise to me. I felt if he could not keep financial commitments there was little chance of a marital commitment, which I am seeking. Any comments or advice?! As for me, I think I tend to be very reluctant to spend money on myself, because I want to be prepared for a rainy day---of which there have been a few of the plumbing kind in past months. But I also think I have a hard time letting myself enjoy buying things for myself because as the youngest of 7 children of not-wealthy parents, I feel at some level I'm not worthy! My mentality if more like someone who grew up in the Depression Era (I'm 47)! I may have inherited it from my mother. Thank you.---Margaret

Ted Klontz: I do believe there is a direct link to financial fidelity (telling the truth about money) and other types of relational fidelity. I think you have saved yourself a lot of grief by reading the signs. Second, work with someone to give you an idea of how much safely, you can spend on yourself. For example, working with a financial planner, figure out how much you can safely "have" to spend on yourself on a monthly basis without compromising your future needs. Sometimes just having a number in your head makes it easier to give yourself permission to spend on yourself and other people.

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Western Mass.: Michelle, I'm looking for a common sense approach to a touch financial situation mixed with a dash of compassion - you're the woman to ask. My husband is an only child. His parents need our help financially (awful planners, had long term care insurance, got rid of it, now need it) in a pretty substantial manner. Could you give us some advice as to how to best get through this and trying to do it with a smile? I don't mind helping family, since family comes first in my book, but I am from a family with parents that repeat the mantra "we will never be a burden on our children" so this is a little bit of a new mentality for me to get used to. I'm trying! Whatever is my husband's burden is my own, I just wonder if there are any "insider baseball" tips for weathering this storm a little easier.....

Michelle Singletary: Girl, I so know what you mean. And so does my husband since it's my family we often end up helping out.

But you know you do this:

-- Make sure you have a budget and then see how much money you can devote helping his parents.

-- Sit down with your husband and work out a plan based on the budget.

-- Get your husband to get his parents to do a budget and see how they can manage better whatever money they have coming in.

-- Love on your husband and let him know you are there for him and his parents. I say this because you never want it to feel like it's them against you.

-- Set limits. You can't let helping them take you down. In a loving, gentle way tell your husband that. You want to help but not at the risk of your own family.

-- Realize people -- family -- make mistakes. They don't save as they should but help in a way that doesn't enable them to continue bad money management.

And know that to whom much is given much is required.

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Fairfax, Va.: I have an extra $500 per month (due to recently paid off car loan). I have a 5.125% 30-yr mortgage. Does it make more sense to pay extra mortgage principal each month or invest the $500 elsewhere?

Rick Kahler: That's a hard question to answer without knowing more. I could advise either direction, depending on hearing more facts.

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Richmond, Va.: Why does Mrs. Scrooge say "I'm a stay at home mother, so I don't have my own money to use."

If she's staying at home for their kids, all the money he earns is her's too! I'm worried about her ...

Michelle Singletary: Maybe she didn't quite mean it that way...I hope so too.

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Anxiety about not working: Hi, I'm working part-time while raising 3 kids. When my husband gets anxious about cash flow (our income is $110k), he will say to me, 'what have YOU earned over the past 10 years.?" I know it is HIS anxiety, but then mine kicks in (well, I haven't earned up to my full potential, I've taken lower paid jobs to be more accessible to kids...I'll therefore never make more money, I'm 50 years old, who do I think I am?"). How can I calm myself when he goes ballistic? (Oh-the kicker---- our net worth is $1.5 million...but he says 'we still have 3 kids to put through college' we're poor).

Rick Kahler: Well, it won't help to tell him that according to the Gallup poll, the average American says if you earn around $110,000 or have a net worth of over $1 million, you are considered rich!

Rich is relative, isn't it. $1.5 million will safely generate $45,000 to $60,000 of retirement income, so your husband may have a point so far as robbing your retirement income to pay for the kids education. We all have a lot of money scripts around education. One of the most pervasive scripts I encounter is, "Good parents pay for their kid's college education." I would suggest that we may do more for our kids by taking care of ourselves and our retirement first. Once that is funded, then help the kids out with their education.

You have done a good job understanding that you've contributed greatly to your family by being available as a parent. I doubt there is anything you can do or say that will help your husband understand that, but he may hear someone else, like a financial coach or planner.

Ted Klontz: Though you won't necessarily change his script that "the best way that you can 'take care' of your kids is to make money so that you can give them a good life", (which when he asks you the question 'how much money have you made lately' your reaction tells me that you buy in too, to some degree)what if you can consider that it is also possible that the very best thing that a parent can offer their child is to be there for them. On their death bed, I know that on my death bed, I will not be wishing I had made more money, even for the kids, I will be wishing I would have taken more time to be with them. My hunch is they will be saying the same thing.

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Rapid City, S.D.: What motivates people to address their money scripts when there aren't major debt or overspending issues?

What other creative ways have the 3 of you approached or addressed this topic out in the non-financial, non therapy world?

Merry Christmas friends,

Laura

Rick Kahler: Laura,

Many, many things like portfolio problems (especially a sudden loss of net worth), disputes over wills, business succession planning (especially when the successors are family members). Basically, I see people willing to address money scripts when they are in financial pain. And, as we say in the book, pain is a wonderful tool to let us know we have an unconscious money script in operation that needs to be uncovered and looked at.

Brad Klontz: We can't forget RELATIONSHIPS. Money is one of the most common areas of marital dispute and the number 1 cause of divorce in the early years of marriage. Many people see our help due to how money is affecting their marriage, relationships with kids, etc. Our relationships act as mirrors where we get feedback about how we are living our lives around money. Rarely do our money scripts match up in every area with the money scripts of those around us. However, if handled with care, these conflicts offer excellent opportunities for learning, growth, and developing healthier money beliefs.

Ted Klontz: I am in Hawaii at the moment, and some people speak a special type of language. In this case it might be "if no problem, no problem". My perspective is that in every relationship 'problem' there is a money angle. It is my job to gently go after finding that link.

For example I often asked the question "What is the connection between love and money". Most people give the 'right' answer(it actually isn't 'right', but rather a money script, that like all others is only partially true). A more accurate answer is that money can make it easier for a couple to learn how to have a more intimate relationship by being able to do their own personal therapy, couples therapy, pay babysitters so that they can have more date nights, go to couples skill building workshops, travel for time out together, and the like.

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Md.: Some retirement facilities won't allow workers to accept tips and gratuities even around the holidays. Definitely include all of them on your card and holiday baking list. or ask if you can bring in some trays of stuff from the grocery store or bakery for all to share, marking it as a gift from your FIL.

Michelle Singletary: Thanks for sharing.

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St. Louis, Mo.: I am a total scrooge when it comes to money. In fact I am waiting until after the holidays to buy your book because my father always gives me a book store gift card for Christmas. I operate in fear with money, always afraid I won't have enough, so I am a hoarder. In the last eight years my husband and I have saved over 120,000 for our childrens' education. This money is not in a 529 account because it will be used for private high school expenses. My husband is growing frustrated with me because I won't get more aggressive than CDs or money market accounts. I am so afraid of losing this money and not being able to pay for children's education! Lastly, nine years ago my husband had a windfall of about $80,000 and we invested with a broker and our return has only been about 2.5 percent. The returns we have had with the broker have been so disappointing it is another reason I hold on so tightly to our education money. Do you have any advice for more aggressive investing yet still secure. Thank you for your time!

Brad Klontz: You are not alone. 73% of Americans say that money is the number one stressor in their lives. I really hear you about the fear of not having enough. This fear is based on what we call a "money script"- a typically unconscious belief we have about money that we learn early on in our lives. Given the reality of your situation (you seem to be doing quite well), we can be sure that your money script is not entirely accurate. It is based on a half truth. The key to moving forward for you with confidence and peace is discovering where/how/when you received the message that "there will never be enough." When you can make this discovery, you are on the road to rewriting your story around money.

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Washington, D.C.: My sons have 7 teachers and daycare providers between them with teacher's aides. We have many people who do service jobs for us, from picking up dry cleaning to a weekly cleaning lady. I forced my wife to sit down and calculate all the presents we had for these people and it came to $530!

I don't feel right stiffing these people, but a $50 bill in an envelope for a daycare provider who is with your kid 8 hours a day, ever day, isn't much at all, yet that's $350 for all seven!

What would you do?

Rick Kahler: I have a number of clients set their Christmas budget around January and fund it so they have all cash by December. They commit not to borrow. They go thru their list and set firm spending parameters for everyone. Ultimately, not everyone on the list is going to get something. Some clients get very creative with their give giving, to include hand made items, gives of service, or simply a personalized heartfelt card telling them how much value they add to their lives.

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Big Grinch Here: The adults on my list don't NEED anything. Including my wealthy FIL and very comfortable BIL. The only gifts I am buying that are needed are bonds for my nephews. I think Christmas is so out of hand. All year long my husband and I deny ourselves stupid things we don't need (cable, fancy dinners out) and then I have to give someone a gift card to a huge electronics chains for stuff that wont enrich their life.

Christmas lights are on all the homes in our neighborhood. Can these people really afford the extra amount on the electric bill? what about the environmental impact? They couldn't find something smarter to spend that money on??

I am a big grinch but I do wonder why, with all the financial problems Americans have, we are letting one holiday control the last quarter of each year?

Brad Klontz: Have you explored your money scripts about the holiday season? What were they like when you were young? What did you learn about gift-giving from the adults around you- either from what they did or what they did not do. Of course, your money scripts around holiday spending DO contain elements of truth (Americans make 1/3 of their annual consumer purchases during the holiday season and then spend months paying them off). All money scripts do contain elements of truth. However, your points do not contain the entire truth about Christmas and gift-giving. I would encourage you to recognize you have captured only part of the story and invite you to explore the rest.

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Goldville: Hi Michelle,

I'm hoping you can help me figure out how the national economy is likely to affect my personal finances (and relationships). My fiance and I are in good financial shape, with comfortable savings and our only debt the mortgage on his house and some manageable student loans. He's concerned that the subprime crisis is going to snowball into recession, banking failure, and general economic crashing and burning. He's been reading about buying gold, and the doomsday scenarios that the gold dealers put out just make him more worried. So, a couple of questions. Do you have any ideas what I can say to him to help him feel that our money is safe in the bank? (Talking about the FDIC doesn't seem to help.) And is there anything wrong with taking a part of our savings and buying some gold to put in a safety deposit box? Thanks for your help!

Rick Kahler: Goldville,

Well I am not Michelle, but I am an investment advisor. I am a strong advocate of asset class diversification. What this mean is having investments in a number of asset classes which would include gold. In my clients portfolio, we include gold through a ETF that invests in an index of commodities, which also includes oil, soybeans, coffee, aluminum, etc. Having 5 to 15% of a portfolio in an unleverage commodity index can be prudent.

Likewise, you would be smart to have US/International stocks, US/International bonds, REITS, TIPS, and perhaps some junk bonds. I've been managing money for over 20 years and I will tell you this, the less I mess around with portfolios and stick to the asset allocation, with periodic rebalancing, the better my client's portfolios perform!

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Western Mass.: Michelle, thank you so much for your advice. Merry Christmas!

Michelle Singletary: Thank you and Merry Christmas to you as well!

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Merry Christmas because of you!: Mrs. Singletary,

Just wanted to let you know that reading your chats and columns has inspired me to pay down on my credit cards. My husband and I don't have many, and the limits are not high, but we were almost at our max on all 4 of them. I know owe about $1000 total. 2008 will be about starting with the smallest balance, paying it off and on to the next. We'll be left with our mortgage, car payment and student loans. On to the savings.... Thank you for your advice.

Michelle Singletary: A big pat on the back to you for getting your financial life together.

But one thing. You should still try to save a little somethin somthin. Otherwise, if an emergency comes up you have to use credit. So I still tell folks paying down debt to save.

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Carolyn Hax chat going on now: I do not know if you check other chats that are also on the Washington Post, but there was a question from a wife who was upset that her husband was saving $300 by having their daughter take an earlier flight. She said that her husband's frugality causes her to feel unworthy.

In this case, which person has the incorrect attitude?

Ted Klontz: A couple of questions would make any answer more appropriate. How old is the daughter? Who is left feeling unworthy.

For a moment, let's assume we are talking an adult daughter. If there is not a way for anyone to talk about this openly in the family, we have just come across one more thing members of the family can not talk about.

Another way to handle the situation is for mom and dad to agree ahead of time, to offer a certain amount of money towards the plane flight, and let the daughter make the decision.

Hopefully, if mom is left feeling unworthy, she can talk to her husband about that, if it is the daughter, hopefully she can bring that up. My hunch is that like in many other cases, money is being used as an indicator of worthiness. Money cannot give a true sense of worth but we can make up that it can.

Michelle Singletary: Amen Ted.

Why would you feel unworthy if it's your daughter taking a early flight to save money. Heck in my book $300 is a lot of savings. Are you helping her with school expenses?

Sounds like a lot of drama around money.

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Alexandria, Va.: How can I estimate my monthly reimbursement from my 401K if I retire in 3 years at 70 1/2?

Rick Kahler: Could you say more? Are you wondering about how much the RMD will be at age 70 1/2? How much do you have in your 401k? As a general rule of thumb, you will have to take out around 4% your first year.

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Oviedo, Fla.: Many financial writers bog down in the question "how much do you need to save for retirement?" There is even backlash to this, with some experts saying people over-save. Well the missing link is - how much to you want to leave to heirs? How do I know if my savings ($550k) at age 49 are enough for retirement - I want to leave two kids $300k each in today's dollars. This nut for heirs will affect how much I draw down - right? Yet I never see this addressed. (I do not work and do not plan to set aside more money - busy with special needs teen.) Will I have "enuf" for $3k/month for life starting at age 64, leaving that inheritance behind? I project 7 percent return after tax.

Rick Kahler: The short answer is "no" you will not have "enuf."

I've done a lot of research on this topic and I think I can make it really simple, because it is.

First, your return is spot on for a 70/30 portfolio, which is one of the best allocations there is for a retirement nest egg. If you are earning 7% and inflation is running 3%, the maximum you can take out is 4% and have your principle maintain it's purchasing power. On $550k, that' a retirement income of about $1,850 per month.

If you wanted to leave the kids $600k, in todays dollars, you would probably need to cut your retirement income in half, to about $1.5k per month.

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Nashville, Tenn.: According to a study done by the Chicago Federal Reserve, 38% of homeowners are sending extra money to their mortgage company INSTEAD of saving it in an emergency fund. Lack of liquidity or a "cash flow interruption" has taken down many companies and people. Why don't more people do the smart thing and get a big long mortgage and save and invest the difference?

Ted Klontz: I believe that one of the reasons is because that a huge money script being promoted at this particular time (Dave Ramsey, take a bow) (or that is what people believe the script is saying, but actually Dave Ramsey does encourage people to have an emergency fund before paying off a mortgage) is that "all debt is bad, all the time, so always pay off all debts all the time, first". You might notice a lot of 'alls' in that script. That is usually one of the indicators that the belief is a limiting script. Money scripts are always true a part of the time; never true all of the time.

Michelle Singletary: Hey, hey Ted back off of that all debt isn't evil my friend.

It is. Practically some debt is necessary (home loan) but it all makes you a slave to the lender.

I recommend you save enough for at least three months living expenses probably six months. Then have a Life Happens fund for the things in life that happens (car repair, etc.) The save for retirement, kids college fund if you got rugrats. Then get rid of ALL consumer debt (credit cards, student loans, personal loans).

THEN after all of that if you have extra money pay it down on your mortgage and be unlike 90 percent of debt loving Americans.

Never met a retiree with savings, retirement savings, no student loan debt AND a paid off mortgage that was not smiling.

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Life insurance quandary: Dad dies before changing the beneficiaries on his life insurance to include his new wife of one year. Life insurance totals $250,000 and the beneficiaries are two adult sons. Before he died, dad told Son 1 that he was planning on changing his life insurance to be $50,000 for the wife, with the rest divided between the two children. Of the three survivors, the wife is most in need of the money. Son 1 is least in need, but could still use it, of course. Son 2 does not like the new wife and was not privy to the conversation with his dad about changing the beneficiaries, and so has no intention of giving New Wife any of his share of the money. Son 1 now has a decision to make. Not giving New Wife any money is not even an option being considered. Should he A. give new wife his half of the $50,000 she should have received, B. give her the full $50,000 out of his share, C. something in between, like her $25,000 plus a $10,000 "I'm sorry, but this is as much as I feel is fair to pay for the fact that my dad was careless in updating his policy and my brother doesn't care what happens to you" fee, or D. other suggestions welcome.

Rick Kahler: I like C!

Michelle Singletary: Son 1 is a good man. Son 2 selfish.

Son 1 go do the right thing. Like Ted I think the $25,000 at the very least from your money and anything above that and you get your wings!!!

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Washington, D.C.: Hi Michelle-

I apologize for the off-topic question, but can we expect a Color of Money Challenge update in the next few weeks? Count me among those who are rooting for your participants...

Michelle Singletary: You can. This coming Sunday.

And a preview: They did GREAT!

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Throwing precious money away?: Hi Michelle, I know you will be able to give me some sensible advice about this - I am contributing 10 percent of my income to my 401k (actually the gov't TSP), half of it going to the international fund, the other half invested in the large-cap stock fund. Despite my contributions, the balance in the account hasn't increased at all for the past three months! Should I cut my losses and reallocate to safer, less risky funds? Every time there is the slightest increase due to a temporary rebound, I feel validated that I did the right thing. But I am beginning to think now that I am actually throwing money down the tube. What should I do?

Rick Kahler: I am not Michelle, but I can't help myself.

Investing is for the long haul. I don't change my asset allocations very often. I would recommend that you continue to put your 10% in on a monthly basis, and forget about the rises and falls. This, of course, assumes you are in two good funds with average to above average management. I don't know how old you are or how much you've saved, but the younger you are the more it makes sense to sock it away in stock mutual funds and forget about the month to month fluctuations.

Michelle Singletary: I don't mind Rick. Good answer.

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That Carolyn Hax question: The husband also told his wife her request for a scarf (generic, no designer mentioned) for Christmas was too expensive. I think he doesn't value her, and uses money as power in the relationship.

Michelle Singletary: The plot thickens.

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Parents needing help: We are going through a similar situation with my inlaws. One thing that has helped us is that my husband and I have agreed on exactly what we WILL do. Yes, we will pay the electric bill. No, we will not send the $200 that goes to the electric company to them - we pay the actual bill on line. In addition, we have started sending easily prepared meals (omaha steaks prepared meals) - that way we know that they aren't sacrificing food for other expenses.

Brad Klontz: There is no absolute right or wrong answer as to how money should or should not be used to help others. Too often couples square off, each arguing that their way of seeing the world is the accurate one. In effect, two different sets of world views, money scripts, and family legacies are in conflict. Relationships that work involve a series of successful negotiations. It doesn't sound romantic, but in the end, that is what keeps couples together. Sounds like you and your husband have found some common ground. Excellent work!

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RE: Husband IS a Scrooge: She says she's a stay-at-home mom so she doesn't have money of her own?? Michelle, I'm surprised you didn't point this out, but that money is hers too. They're married and she "works" in the home. She should work with her husband to find an amount to contribute that's comfortable for both of them.

Or she could bake cookies or some other treat. The facility could have a rule against monetary donations.

Rick Kahler: One way a number of my self-employed clients honor the non-income producing spouse is to set up a SIMPLE or 401k plan, pay the spouse a salary of $10,500 to $20,500 (depending on the plan limits and age) and then contribute the salary to the retirement plan.

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Northern, Va.: I find that I regularly lie to my wife about money. With good reason. She is a compulsive spender. If she thinks we are poor, she does not spend. So, I keep her credit card nearly maxed out (the extra $100/month in interest is a bargain)!

Brad Klontz: Compulsive buying is an addiction, similar to alcoholism. Spouses and partners of compulsive buyers often find themselves in roles similar to that of the partner of an alcoholic- either enabling, confronting, covering up, trying to control, etc. Anyone doing anything with money believes they have a good reason for doing it. We agree with them (it all makes sense when you hear the full story), but we also believe there is often a better way. Couples counseling can be a very effective tool in helping you and your wife.

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Washington, D.C.: My husband has an opportunity to open his own business and he'd be great at it. He has done a business plan and consulted with various pros. But he started down this road with a promise to me that our house/equity would not be at risk. Well, now the friend/investor who was going to provide start up money wanted unreasonable terms and we are looking at using our house as the collateral on a Small Business Administration loan. I'm freaked out - your "never risk your house" advice keeps echoing in my head. There is also the question of using a home equity loan for the "down payment" on the SBA loan. Am I crazy to go along with this? Is a business loan actually "safer" than just raising the cash from our home equity, or does it not really matter when your house guarantees either loan?

We are careful with our finances, no debt other than mortgage and 1 car loan, but daycare expenses this year have been nibbling at the savings. Thanks!

Ted Klontz: I am not a financial advisor, but I would suggest that the two of you talk a lot about this before deciding what you are going to do. This might be something to get someone else, a dis-interested party perhaps, to help facilitate the discussion.

I am not suggesting that everyone live like this, but my way of dealing with situations like this (and believe me I have taken similar risks) is to assume the worse happens. I ask myself, "Am I ready to and could I live with the consequences if it doesn't work out".

Michelle Singletary: Me, wouldn't risk my home. No way, especially in the current housing environment.

That's me, scared grown woman who was raised by a low-income grandmother money script and all.

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Md.: The stay at home mom who took lower paying jobs to be accessible to the kids should give her husband a "bill" for nanny services/cooking/cleaning/etc. that she has done for the past 20 years so he can see how much they didn't have to pay OUT rather than allowing him to focus on what she didn't bring in.

Rick Kahler: This is very true. I am sure the figures are old by now, but the cost of hiring out what a stay at home parent is worth used to be quoted at $25k to $50k.

Michelle Singletary: Can we say fight?

No bill but your point is well taken.

And yes, folks I overlooked that remark because well, typing fast. Yes his money is her money. Yes she should lovingly point that out to the clod -- of course without calling him a name.

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Richmond: We need to buy a used car for my husband (hit and run driver smash his station wagon!). It's $8,000. I feel like I want to take it out of savings rather than finance it, but a back teller once told me it's better to fianance a car (ok, not unbiased). I'd rather just pay and be done with it instead of paying interest for the next few years.

Rick Kahler: Personally, I am with you. I am not much of a fan of consumer debt. I advise my clients to pay cash in most cases.

Michelle Singletary: Rick. Love ya.

Pay cash as long as it doesn't deplete ALL your savings.

And yes totally biased advice from the teller.

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Arlington, Va.: Michelle, with the current steep rise in grocery prices, how would you recommend that families save on groceries?

I prioritize healthy eating (fresh fruits and vegetables) rather than the less-expensive casseroles, etc.

Would you recommend that a couple (2 professionals, no kids) join Costco?

What do you do?

Ted Klontz: I'm not Michelle, but I once heard a student say to one of their meditation teachers, (who by the way, had just suggested that people eat organically), "But organic foods cost twice as much". The teacher said, "If that is true, eat half as much". In this day and age, I think there might be something to that. It is probably true that many of us eat way too much. I have found that if I eat slower, more consciously, I feel 'full' sooner and eat less.

Rick Kahler: I've belonged to a food coop in may area and I figure it saves me 33% on food and 50% on vitamins.

Brad Klontz: I live in Hawaii and I am still trying to figure it out!

Michelle Singletary: Brad visited Hawaii last summer and well we ate lots of bread.

I belong to a food club. We cut other places and try and eat healthy.

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Friendly, Md.: Wishing you and yours a Merry Christmas and a Happy New Year filled with love, peace, joy, and good health.

I have used the I Bonds to create my emergency (house burned down, lost job, etc) fund. This way the money doesn't talk to me every time I get a bank statement. By purchasing I Bonds and creating this fund, it has eliminated the fear of not having enough in case of an emergency. Now, we have a cushion and the money in the bank can now be used to do the home improvements, we need.

Michelle Singletary: Not a bad plan for emergency money since I Bonds are designed to keep pace with inflation.

See my column today about changes in bond limits.

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College Students: Michelle, I would like to raise something that really has me riled. Yesterday, I spoke with a co-worker about his younger brother's struggles to support him self while attending college. The brother works and pays his own tuition and all his own living expenses. When he's not in school he stays with his older brother (my co-worker). I asked my co-worker if his brother was receiving any aid (Pell Grants, need based scholarships, etc.). He told me no, their dad makes too much money for the son to qualify. OK, here is where I get mad. This boy's father is still claiming him as a dependent for tax purposes even though he's not supporting him. This is not the first case like this I've seen. Some people think that just because their child is under 24 and a college student that they can claim them on their tax return; WRONG. The parent also has to have provided more than 50 percent of that child's support during the tax year. These parents are ripping off their own children. The child can't get financial assistance or claim themselves on their own tax return because of the greed of their parents. A student in this position can challenge this with the IRS, but many of them don't know that or they're afraid to stand up to their greedy parents. Paying your own way through college is admirable. Your parents making it harder on you by fraudulently claiming you as a deduction on their own tax return is not admirable.

Ted Klontz: A perfect example of how Dad's money scripts (and the rest of the family who are not confronting the situation with dad) act as acid in family relationships.

Michelle Singletary: Can you or the co-worker point this out to the college student?

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Alexandria: Math? The person asking about withdrawals could take out $1850 a month from her savings of $550,000, or if she wants to leave $600,000 to her children, she would have to cut it "in half, to about $1500." My math says half of $1850 is $925. What math are you using?

Rick Kahler: She would need to cut what she had hoped to withdraw, $3,000 per month, in half, or $1,500. Sorry for the lack of explanation. My fingers aren't keeping up with my mind!

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Baltimore, Md.: Who owns the money in a 529 account, the parent or the child? When my children's paternal grandmother died, she left each child $10,000. By the time he was 18, my oldest son had dropped out of high school, didn't want to work, and then demanded "his money" so he could move in with a girlfriend. I talked him out of taking all the money, fortunately, because he eventually moved back home and is now going to community college full time and getting A's and B's. But there is a danger when the money belongs to the child and not the parent.

Rick Kahler: The parent owns the account, which is one reason I like them so much.

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Chicago, Ill.: Just a note on the importance of saving/emergency funds. I am 27 and have been married for 2 months (husband is 27; we met in grad school). Even before the wedding, we were open about how we wanted to save. We each put 15 percent in our respective 401Ks and a small amount in our ESPPs. We each also had an emergency fund and started to put money away for a house downpayment fund (while still having some fun). No debt at all (thank goodness for being Grad Assistants).

Now I'm glad we saved as much as we did. I was laid off just this past week (but as a "favor" to me, they are paying me through Christmas/New Years). Because of our savings, I don't have to rush out and grab the first job I see to make ends meet, but am taking the time to find a job that's a good fit. For this and an incredibly supportive hubby, I am thankful this holiday season.

Yes, young people need emergency funds too. It is worth the small sense of security we have now.

Michelle Singletary: Thanks for your testimony.

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Trouble: My solution for dealing with money troubles is to stop paying attention to them, don't check my bank account balance, stop opening my bills, etc. I don't always act this way, but if a big stress or a large bill comes into my life, my brain shuts down and says "stop paying attention to it." Could you suggest ways to make me more in tune with (and therefore more responsible with) my money? Thanks so much.

Brad Klontz: The problem with denial is that it works- at least for a while. Surveys show that more than 30% of people admit to avoiding thinking about their finances. However, as you know, the problem just keeps growing and growing. Paying attention to something that causes us emotional strain can be difficult, but it is essential. Only by staying with our stressed out feelings will we find the motivation to change. It sounds like a bitter pill to swallow, but it is true. Seek some help is setting up a solid savings/spending plan and help in putting it into action. Then focus on all the things you want your newfound financial health to do for you.

Michelle Singletary: Brad is so right. I know A LOT of avoiders and when it comes to money avoiding will cost more in the end.

Even if you don't have the money for the bill -- call the creditor, lender. Explain. It can't hurt.

It's hard I know. Scary. And if you can't stop avoiding on your own, perhaps counseling is in order.

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Rick Kahler: Thank you Michelle for inviting my co-authors and I to your web chat today. It's an honor to address your readers.

By way of introduction, I've lived all my life in Rapid City, South Dakota, known as 'fly over country' to some! I became a Certified Financial Planner(CFP)in 1983 and have a master's degree in Personal Finance.

I need to tell you that writing and speaking is certainly not my day job! I am a practicing fee-only financial planner with my firm, Kahler Financial Group. In 2007 Wealth Manager magazine listed our firm as the largest financial planning firm within a seven state area. We serve about 70 very special clients nationwide and specialize in what we write about in our book, integrated financial planning. I define that as the merging of financial coaching (life coaching or life planning) and counseling (therapy) with traditional financial planning and investment management services. I might add that not all our clients use every service we provide.

One of my biggest honors came in 1998 when I was appointed by the South Dakota State Legislature to the South Dakota Investment Council, charged with managing the state's $10 billion retirement fund. In addition to "The Financial Wisdom of Ebenezer Scrooge," I've also co-authored another book titled "Conscious Finance."

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