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Michelle Singletary
Washington Post Columnist
Thursday, July 30, 2009; 12:00 PM

Personal finance columnist Michelle Singletary hosted an online discussion with Jerry A. Miccolis and Dorianne R. Perrucci, co-authors of "Asset Allocation for Dummies" on Thursday, July 30 at Noon ET.

This Story

In her July 5 column Michelle writes that the authors have done their best to simplify asset allocation, an investment strategy that can be intimidating for many people. Read more in The Ins and Outs of Asset Allocation (Wiley, $24.99).

A transcript follows.

Read Michelle's past Color of Money columns or check out her past Book Club picks.

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Michelle Singletary: Welcome all. Hope your summer is going well. There are quite a number of questions so I won't delay. Let's get started.

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Los Angeles, Calif.: I'm retired. My allocation is 25% equity (15% of my equity is in foreign), 75% other stuff, which includes bond funds, ibonds, cds, tips fund. But I'm concerned about future inflation, so I have about 6% in reit etf VNQ and 6% commodities etf DBC. Am I on the right track?

Jerry A. Miccolis and Dorianne R. Perrucci: The best protection against inflation includes holdings such as TIPs and commodities, both of which you appear to have. So, you seem to be on the right track. But the larger issue of how much of each you should have, relative to everything else you have in your portfolio, is, of course, the subject of the book. In your particular case, we would encourage you to start with Chapter 8, where we show some sample allocations for various type investors, and Chapter 15, where we take an illustrative family through a life-cycle case study.

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Richmond,VA: I am posting this before the chat so I apologize if its been answered.

I am 61, have a decent size mortgage and plan on working for about 5 more years.

Is asset allocation only something for the young?Should I keep everything in the (security of a) guaranteed income fund?

Jerry A. Miccolis and Dorianne R. Perrucci: Asset allocation is absolutely NOT just for the young. It is a sound, scientific, and time-tested investment approach that is appropriate for investors of all ages, weights, heights, and persuasions. Also, assuming you're in reasonable health, 61 is quite young as far as your life expectancy (and therefore your investment horizon) is concerned, so don't be too conservative in your investments, or you'll find yourself losing ground to inflation. See Chapter 6 in the book.

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Cambridge, Mass.: Michelle, love the chats! So helpful for someone just starting out... trying to avoid big mistakes! Question, is it worth going into debt for a degree? Or is it better take a masters program with full ride instead? The full ride would be a state school vs. a big name with a big price tag. I have $15k, but nothing else saved for school... thoughts?

Michelle Singletary: Well, if it were me I would go for the full ride -- and I did.

I had a FULL scholarship to my state school and no money for a school out of state. I wanted BADLY to leave the state but I went for the money. Best decision EVER!

I got a great education (University of Md, College Park) and still ended up at a great paper with my state degree. Been here going on 18 years.

Don't go into debt.

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Alexandria, Va.: Hi, Michelle, My husband and I are faithful readers of your chats and columns! I have a 401(k)/IRA question. I have two IRAs that are roll overs from previous jobs, and my company recently split up, so now I have the current 401(k) and the 401(k) from the last job. Is it best to try to consolidate these all under one money manager (my previous two IRAs, and the new soon to be rolled-over IRA), or should I (as long as they are doing okay) leave them where they are? It's my understanding that when you close a 401(k) to roll it into an IRA, you have to start another new IRA, it can't just be dumped into an existing one. Is that correct? Thanks so much!

Jerry A. Miccolis and Dorianne R. Perrucci: As we say in the book, it is a good idea to consolidate all your IRAs and old 401(k)s into one IRA. The benefits are explained in Chapters 6 and 10. You do not have to start a new IRA each time.

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Washington, D.C.: Hi Michelle, I just wanted to say that you have become my motivation for buckling down and losing weight. How's that? Because I have realized that my financial present is very secure (thankfully) and I am saving very aggressively for my future/retirement. But my money will go so much farther if I am healthy in that retirement - why save so hard all these years if I am ruining my future health with bad eating & exercising habits? If spending $300 a month on interest you can avoid is a no-brainer, I figure spending $300 or more a month on diabetes or cholesterol drugs (if I can avoid it) in the future is also dumb. So, I'll kick myself in the rear now to get motivated so I am not slapping my forehead when I am 60!

Thanks for the motivation!!!

Michelle Singletary: Wow. What a great testimony. Thank you. And you know what, I could use this message myself. I hate exercising and I love UTZ chips.

But you are absolutely right that getting your finances straight is similar to staying healthy.

Good message for the day!

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Deep in the Heart of Texas: Michelle, I am tempted to take advantage of the $4500 cash for clunkers program. My paid-off Ford Explorer qualifies but it also drives just fine. I am only 5 months from paying off our second car as well. I have about $2000 in CC debt I need to focus on as well. I should pass on the offer, shouldn't I?

Michelle Singletary: You should!

Why go into debt to get a $4,500 break. Now if you want to trade the truck in because you ONLY care about the gas it is guzzling and the impact to the environment that's something different.

Me I would stick with the paid-for truck and find ways to be sure I'm using as little gas as possible.

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St.Louis, Mo.: Hi Michelle, I love your advice. I have always been a good saver for various goals for our family. My husband would like to do some renovations to our home. We have saved about $60,000 so far for home improvements. We also have saved about $150,000 for our children's private high school education. My oldest is five years away from starting high school and needing this education money. What my husband wants to do is borrow $40,000 from our education money to pay cash for all of our renovations. This money is earning about 1.5% in a money market account. We would make payments to ourselves as opposed to a bank. Lastly, we have 20 years left at a fixed 4.75% on our mortgage, over years emergency fund. What do you think?

Michelle Singletary: I like the way your husband is thinking. But you need to feel comfortable too. So be sure you sit down and really discuss this and make sure you will stick to the plan to put back the money for the high school.

Good problem to have in a time when people are having trouble paying their mortgage or buying food.

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Temple Hills, Md.: Hi Michelle, Love your column. I am a fed who is about 2 years out from retirement. Fortunately, I am under the old CSRS retirement plan, so my benefits are virtually intact except for my TSP investments. Here's my question...when the market crashed I, like so many others, lost a significant portion of my TSP (probably 30% to 40%). Should I continue to leave them as is in hopes of a comeback in say the next 5 years? Or should I cut my losses and move my money to more secure (yet lower grossing) investments?

Jerry A. Miccolis and Dorianne R. Perrucci: The answer to this question depends on many things that are specific to your situation. However, one general truth is this: to the extent you get more conservative in your asset allocation after the markets have gone down, then you'll be depriving yourself of the opportunity for the markets to give it back to you when they inevitably rebound. You're essentially locking in your losses. That's the trade-off: more "security" (meaning less future volatility) but less up-side potential. As we said, the right mix is unique to each individual. If you would like a more specific response to your particular situation, please feel free to share your details with Jerry at www.brintoneaton.com.

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Reston, Va.: Michelle - Help!!!!!

My husband and I are currently living in separate states. He is in the Army and had to move to a different post (permanent move). Right now, my daughter and I are still in D.C. because we cannot sell our home. Because of my husband's rank, he cannot live in the barracks and has to rent off-post. He is renting a furnished apartment that includes all utilities (including cable and internet). Our budget is stretched as far as it can go, but there is enough money to make the budget work?

Every paycheck, a set amount of money is placed into a separate account for husband to use for all his living expenses. (gas, food, eating out, entertainment etc). He also took our credit card (we have a zero balance) and promised he wouldn't use it unless he had an emergency. He's been gone only 3 weeks and he already has overdrawn the amount of money he got for the last pay cycle and used the credit card this week for gas. I've tried to get him to understand that if he takes out cash and lives off the cash, he'll be able to keep a better eye on his balance. He agrees - but doesn't do it. I don't think he even checks his balance.

I am angry - but worse than that - I am just really sad. Every day I check his account to make sure he has money and I feel like I'm treating my college-educated, 40-something, smart husband like a 2-year-old old child and I feel like crap. I don't know how to get him to understand we don't have the money like we used to - our budget is literally down to the dollar. We don't have it. I've already cut my living expense allowance to half of his and given him that extra. I've told him that - he keeps telling me he gets it - but it's obvious he either doesn't, or just doesn't care. Even if I took something else out of our budget (example, got rid of the cable at the house), and gave that money to him, he would blow through it. It's not that there isn't enough money for him to live off - it's that he will blow through whatever he's given.

What do I do? Other than money - he is an amazing husband and dad and I love him dearly. He's told me from the beginning of our marriage that he can't handle money and boy is he proving it.

Michelle Singletary: I wish I had more time to really address your issue, which isn't really about the money you know.

You have to figure out what's going on with your hubby. Is he lonely? Is this living situation so stressful that it's causing him to overspend? If so, perhaps you can rent your home in this area and bring the family together. Or let the house go, or whatever it takes to save the family!

He's violating your trust and putting your family at financial risk and that is what you have to try to communicate to him.

The other thing you can do is get him to cancel the credit card. And you both agree you won't put any extra money in the other account. Then let him deal with the overdrafts, etc. If you keep cutting and giving into his overspending by shoveling money back into the account he won't stop.

And on your next visit with each other (either there or in DC) make an apt to see a marriage counselor. You both need outside help to come up with a way to help your husband see that what he is doing is not good for the family.

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re: Cambridge, Mass: Especially if it's for undergrad, GO for the scholarship. Going into debt sounds easy now, but it's not easy to pay tens or hundreds of thousands of dollars in monthly payments for college. Especially, also, if you are going into a field where the name of your school won't matter-- the degree will (the very vast majority of fields).

Michelle Singletary: How true!

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Austin, Texas: Michelle, I sent to you briefly a while back the things that had been going on with me. I never received a response.

Michelle Singletary: I'm sorry. I get hundreds!!!! of e-mails and letters from people in need. I just can't possibly respond to everyone.

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We also have saved about $150,000 for our children's private high school education: Puh-lease, St. Louis! Send the kids to public school, then all your financial problems are solved.

Michelle Singletary: Oh please yourself.

If they have the funds, and they are doing everything else right financially there's nothing wrong with spending YOUR money the way you chose.

They have the money and just need to move it around a bit. I don't have a problem with that. At least she wasn't asking me if they should go into debt for renovations while ALSO sending their kid to private school.

Not everyone on this chat or that I help is down and out and broke.

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Bowie, Md.: Thanks for your book and this chat. It feels like everything I ever knew about investing turned out to be completely wrong.

What are the major classes of assets, among which you need to choose to diversify your investments? For someone with (hopefully) 20 years until retirement with a fairly OK appetite for risk, what would you suggest for an allocation mix now?

Jerry A. Miccolis and Dorianne R. Perrucci: The asset classes are, in broad terms, fixed income (i.e., bonds and bond index funds), equities (i.e., stocks and stock index funds), and alternatives (e.g., real estate, commodities, etc.). By index funds we mean both open-end mutual funds, and exchange traded funds (ETFs) which we actually prefer to mutual funds in many cases due to their tax advantages among other things. Then there are various sub-classes, such as small-, mid-, and large-cap stocks, different industry sectors, various bond maturities, etc. The appropriate asset mix for you is a matter of a number of things in addition to your investment horizon and risk tolerance (e.g., your lifestyle, your return requirements, your tax situation), but it is safe to say, given what you've told us, that the majority of your holdings (i.e., more than 50%) should be in equities.

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Arlington, Va.: Michelle -- Keep preaching! This may sound like bragging, but it's a good lessons (I hope): My husband and I were young and broke when we got married, and we learned to live pretty frugally. When our careers started to take off (and our salaries increased), we mostly kept to our frugal ways: We don't eat out often, rarely go to movies, won't buy a new car until we really need one, etc. Because we put so much into savings, when my husband lost his job a few months ago, we didn't really have to cut back on anything and had enough money saved up for several months of mortgage payments. He got a new job (thank goodness!) but took a really big pay cut. But, because we're used to living way below our means, we know we'll survive. The emergency fund was a blessing when we needed it.

Michelle Singletary: You live the life I've been trying to get people to live for decades.

I hope others learn.

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What to do what to do: Should we pay off our car payment by continuing to doubling up on the payments or should we save up the money for college that our child will need in two years? We have 12 months worth of payments by doubling up. I am trying to figure out is it better to pay off the car loan at 5 percent or have the money for college?

Yes we have an emergency fund and a life happens fund.

Thank you!!!

Michelle Singletary: With college coming so close I would try to do both. Get rid of the car loan but definitely begin to stock pile cash for college. If you feel you can't do both I would go for college.

If you have a lot in the life happens fund, use that to quickly get rid of the car loan.

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Washington, D.C.: What is your opinion of funds like 2040 funds that automatically adjust allocation over time based on your estimated retirement date?

washingtonpost.com: Target-Date Funds Can Be Hit-or-Miss

Michelle Singletary: I like target date funds. They have a good purpose but you have to be careful and do your homework. Read the column I wrote recently about these funds.

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To "Deep in the heart of Texas": I too looked at that $4,500 offer. We have a Grand Caravan that shows signs of future transmission problems. So, I went online to see if it qualifies (it does) and to see what is out there that has the pull and cargo space of the Grand Caravan.

My answer: it's not worth it. The cars/vans are not out there with the requirements that do better than 4 MPG. I agree with Michelle; no "bonus" for us! We usually by 1-2 year-olds anyway; not new. We have no payments other than CCs, but no new debt for us. (We're in our early 60s.)

Michelle Singletary: Good choice!

Good advice. Thanks for the backup.

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Austin, Texas: The bottom line of my concerns Michelle is, I am a single mother, with a full time job, and I attend school full time as well. I do not have a savings account, and I receive little help from one of my children's fathers, which is helpful when it comes. I need a beginning. I need to save money for emergencies (that emergency fund you speak about does not exist). I need some assistance. I left my #/email for you to reply back since we were conversing via facebook, but I didn't receive a message.

Michelle Singletary: I need more info. E-mail me directly at singeltarym@washpost.com

Basically with the details I have you have TOO much going on. If you are paying for school or acquiring debt for it, perhaps you can stop for a semester or two until you can save more money.

The only way to get out of your situation is to cut expenses or make more money. If you are working full-time and going to school full-time you can make more money. So start with your budget. Do you have one? If not, you've got to start there. Even single mothers who aren't getting proper child support are often spending more than they should.

And have you been aggressively trying to get child support from the fathers? Have you filed for a child support order for both fathers?

Maybe you need to move to a cheaper place or get a roommate.

I wish I could wave a wand and make it better for you but I can't.

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Los Angeles, Calif.: There was an article in the Wall Street Journal (sorry! not the Post!) recently about how financial advisors and institutions are considering whether asset allocation failed during the current economic downturn. Is there any thought to adjusting the focus of asset allocation or to the development of a new theory?

Jerry A. Miccolis and Dorianne R. Perrucci: One of a series of recent articles that ask one version or another of the question "is asset allocation dead?". A number of folks - not the informed majority - have in fact concluded that asset allocation "failed" or is "dead" in light of the recent market downturn. That's a lot like, in the wake of the century's worst combined earthquake, hurricane, and wildfire, complaining that your house didn't appreciate in value and, in fact, sustained some damage! Does that mean you're better off living on the streets from now on?

Asset allocation was never designed or intended to avoid loss in all conceivable (let alone inconceivable) situations. It is designed to get you the best result given your risk tolerance. In the recent meltdown, virtually everything you could invest in (save some categories of Treasury bonds) lost considerable value at the same time . The nature and extent of that massive combined downturn was in many ways unprecedented.

The only way to have avoided the wealth destruction of recent months was to not be invested at all. Well, that's simply not a sustainable strategy - you'll lose economic value, i.e., purchasing power, every day. The only worse strategy is trying to time when to get into and out of the markets. Nobody consistently gets that right - it's impossible - and it's really gambling, not investing.

Informed asset allocation is the way to go. Especially in times like these, it's best to get back to basics with your investing. With apologies to Winston Churchill, asset allocation is a flawed system - it's just worlds better than whatever is in second place.

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RE: Arlington, Va.: : I was in the same boat as you guys. I lived under my means and saved and paid off debt. I was laid off for 4 months and did not have to cut back on anything because I didn't have much debt. I too found another job and took a 25% pay cut and even though I make less, I still am not hurting because I still continue to live below my means!

Michelle Singletary: Thanks for sharing your story.

And I don't believe it's bragging if anyone is thinking that.

I think it's another example of how you have to live tight in good times so that when the bad times come, you can weather the storm a bit better. You might get rained on but you won't get soaked!

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use life happens fund to pay car loan: I'm not the poster - but could you give a more general rule of thumb for using life happens to pay off debt? How much should you have left in it? How do you approach figuring out at what interest point should you pay off? How important is it to have a backup plan if life does happen after you've paid off the debt and you don't have much left in the fund?

Michelle Singletary: Good question.

First if things get really bad -- you lose a job, etc. -- then you pull from the emergency fund. I use my life happens fund for car repairs AND for paying for home renovations etc.

So the life happens fund can be used to pay down debt. Try not to deplete it but if you do that's okay. Just build it back up after you pay off the debt. That's really what it's there for. It's a fund standing between you and life stuff and your rainy day fund. This way you aren't draining the money set aside for when things are really, really bad.

Just another strategy to manage. The rules are loose.

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Burke, Va.: I understand the "why" of asset allocation, but I get held up when I consider the tax implications. For example, if I sell mutual funds to re-balance my portfolio, I will pay capital gains tax (and go through the nightmare of tax forms). Don't the tax implications offset some of the benefits?

Jerry A. Miccolis and Dorianne R. Perrucci: Tax efficiency is an integral part of our approach to asset allocation. Because, after all, it's not what you make but you keep that matters. Chapters 10 and 14 go into some detail on how to do this. You'll see that where you locate your holdings (i.e., which accounts you put them in) has a big impact on your bottom line. You want to put tax-inefficient holdings such as mutual funds in tax-deferred accounts such as IRAs to the extent you can. By the way, your mutual funds will often generate taxable capital gains distributions to you whether you sell them or not! That's one reason we prefer exchange traded funds (ETFs). Finally, remember that you want to be tax-smart in your investing, but don't let the tax tail wag the investment dog.

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Takoma Park,Md.: Comment: The comment earlier about paying attention to health and fitness now, at a young age, is right on. However, even those of us who did not do this, can benefit -- dramatically --- by starting at any age. We are well into our 60s and are now, in the last couple of years, addicted to a reasonably-priced gym and exercise routine. This is one expense that will not be cut from our budget. Get fit whatever age --- you can do it.

Michelle Singletary: Totally true. Thanks for pointing that out.

I love the give and take of this chat.

Makes it really feel like a community of people trying to help each other. Much better than the hateful, spiteful, unhelpful things people write on the comment sections of Web sites (including this one).

We definitely disagree here and people don't always like what I say (and I can get testy) but there still is this feeling that we are trying to be helpful.

Sorry, just want to say thanks for those of you who come back regularly, who comment, ask questions, and even challenge me.

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McLean, Va.: For an investor who buys stock in companies rather than in mutual funds, what does the research say about how many stocks you need to be invested in to be appropriately diversified?

What's the largest % of an equity portfolio that should be committed to a single stock or a pair of stocks?

Jerry A. Miccolis and Dorianne R. Perrucci: It's not a matter of number of stocks that determines whether you're properly diversified, it's how well spread out they are among different size and sector categories. For example, you can own 100 stocks, but if they're all in the energy sector, you have a terrible asset allocation. In addition, you want more than just just stocks (and stock funds) in your portfolio. You should have alternatives (e.g., real estate and commodities) too. And, unless you are very aggressive, you should have bonds and/or bond funds, too.

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Odenton, Md.: I am one of four kids from a his, hers and our family. I am her kid, the kid who is disabled (I have CP). It took me awhile after college to find a job, about ten years. My siblings all worked, married, had kids and remarried over the years. Two of the three made more money than I did. However, none have the net worth I have today because not one is a good money manager. I am not, but I'm learning from you and from the Bible. I have only one credit card with a balance and will have that paid by year end. I have two savings accounts. One is for long term- working on getting six months of pay. The other is one is my freedom account or as you put it life happens. Keep on preaching to us!

Michelle Singletary: You bet I will -- preach that is. It's what I'm called to do.

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RE: State School Full Ride: I completely agree. I went on a full ride to a State School and had a very good education. In addition, because I did not have to work during the school year (summers was different), I was able to stay very active in the non-classroom stuff that I enjoyed (student government, marching band, etc.). And, graduating debt-free meant that I could go to graduate school. While I took out some loans for graduate school (don't yell too loudly, Michelle), I was not adding to large loans already. No regrets whatsoever about undergrad at a State School on a full ride.

Michelle Singletary: Power to the state!

And I won't hell too loud about the grad debt -- just get it paid off real soon.

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for the military mom: I agree this is about more than the money. aren't there military family support groups she could look into as well as marriage counseling? You read about them all the time, but of course I'm blanking on names. Either a nonprofit or the military branch itself. Perhaps someone online this afternoon knows.

Maybe she should submit her question to Carolyn Hax as well :) Carolyn has all sorts of support groups handy.

Michelle Singletary: Really good suggestion. The military does provide help. Unfortunately a lot of members think it hurts their career if their CO knows they are having trouble. Nonetheless, get help with the larger issue and the money will follow.

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life happens fund: Is it a bit like building up my condo buildings reserves ...? I -love- the way my condo is managed financially. We replaced two elevators without a special assessment! We had a consultant analyze and amortize our upkeep over twenty-five years so we could plan effectively.

Michelle Singletary: Exactly!

Life happens money is to be built up and spent on stuff or debt or whatever...so you don't touch the emergency fund until you have a real big emergency. So it will get depleted from time to time. My best friend (hey Terri) swears by the life happens fund. It helped save her family when her husband was in between jobs. She says it's one of the best things I've come up with.

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Boston, Mass.: For the person looking at college costs: Between paying for law school for my husband and graduate school for me, we're now paying more than $750 per month (!) JUST in very-low interest, 20-year loans. That's three car payments per month. When I lived in the Midwest, that would have covered my rent. You do NOT want to lose hundreds of dollars per month for the rest of your working life to pay for a degree, believe me.

Michelle Singletary: I believe you!

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Crofton, Md.: I just wanted to say a big thank you! You give such great advice, debt is evil! Last year my husband got laid off and was out of work for 4 months. We had an emergency fund, and made it through without taking unemployment, and without going into debt, not even one cent! He has a job now, but still with the economy being so bad, we are actually living off of less money than we did when he did not have a job. But like you always say, live within your means! I just wanted to say for others out there struggling, try to be happy, for one thing. I know it is hard, but maybe you have good health, or get to stay home with your kids, or had some really great friends over for dinner. Try and keep everything possible, and know if you are trying to stay out of debt, you are sleeping better at night! Thanks Michelle for your unwavering advice. DEBT IS EVIL!

Michelle Singletary: Amen. Amen. Amen.

And you are welcome. I love what I do and when I get notes like this. Makes ALL the criticism worth it.

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Not financial related, but...: I moved from DC to San Francisco about 5 years ago and I totally miss Utz chips!!!

Ok, so the financial question: my mom moved out of my childhood home and I'm currently living there, paying rent to her to cover the mortgage. I have yearnings to move elsewhere at some point, but my mom is insistent that she wants to sell the house if I do. I'm caught between wanting to hold on to this stable investment (unlike many situations in the news, the mortgage is very low and secure) or "moving on" from the house I grew up in. I don't feel stressed out about it yet, but I feel an impending decision in my near/distant future.

Michelle Singletary: UTZ rock!!!

I would enjoy the low rent now and just wait things out. I understand about living in the family home but I love the idea of passing down family homes. Why not? Why not keep a great asset in the family for generations to enjoy. Why have we become such a toss away society? I have dreams of paying off my home and keeping it for my kids or one of my kids and having my grandchildren grow up in the home their mom or dad grew up in. In fact, I'm not even thinking about counting the home in my retirement plans other than having it paid off. I would LOVE to "give" it to another in the family.

It's how I've handled my cars. I do not trade in my cars when I'm finally ready to get another one. I give the car to someone in the family who needs it.

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For the Military Wife: Not sure what branch, but speaking with a credit union will help. I'm not military, but a civilian working for the Navy and Navy Federal Credit Union has helped me tremendously with my money management. Even their website has really good advice calculators, etc. With their help I am paying off my credit cards and car loan rapidly.

Michelle Singletary: There are a lot of good credit union and bank web sites with good money management tips. But I suspect this problem won't be fixed with a online calculator.

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Marblehead, Ma.: Is deflation ever considered when planning asset allocation? I always read about inflation but not much about the possibility of deflation. What type of asset allocation is the best protection for both, if possible?

Jerry A. Miccolis and Dorianne R. Perrucci: Bonds are a good holding in a deflationary environment, since the fixed income will buy more and more as prices go down. Commodities and TIPs are good investments in a heavily inflationary environment, as their value rises with inflation. Our advice is to not try to predict inflation trends (it'll go through many cycles before you're done investing), but to have a good mix of all relevant asset classes.

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Silver Spring, Md.: This is very timely as just last night I ventured online to look at my 401(k). For the past year I've been putting my contributions in a money fund and have left my other holdings as they were - mostly in a retire2020 account.

When the market started tanking last year I couldn't stand seeing my new money go down the drain so I felt all cash was right for me. But now I'm willing to tiptoe back in.

When I delve into the 2020 account I see it's about 50% in domestic equities, 15% in foreign stocks and the rest bonds. I'm OK with that, but I'm wondering if now that I'm considering putting my new money back into the market if I should continue with this?

Domestic equities could be anything -blue chips, small caps, mid-caps. I don't have endless choices in my 401(k), should I be concerned about what kind of domestic equities I put the money into?

Jerry A. Miccolis and Dorianne R. Perrucci: Your 401(k) administrator (or your employer) can give you the actual holdings within each of the investment choices they give you. If that information is not readily available on the Web site, you should definitely ask for it, you are entitled to know what you're investing in!

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husband got laid off and was out of work for 4 months. We had an emergency fund, and made it through without taking unemployment: Why would anyone NOT apply for unemployment? It's not charity, it's an insurance fund that one pays into. Sort of a government version of the "life happens" fund.

Michelle Singletary: True. It's okay to take unemployment. But it's employers who pay into it. And these funds can run out.

So if this person didn't take it I'm not mad at him or her.

_______________________

Re Life Happens Fund: Do you recommend this be combined with the emergency fund? I keep my funds in a MMA and I have everything combined, my emergency, and my vacation funds as one. I don't touch the money unless I'm going on a trip and only touched the emergency fund when I was laid off.

Michelle Singletary: If combining works for you that's fine. I just like to keep it separate. And I find others have to because they see a big pot of money and spend it.

_______________________

And I won't hell too loud about the grad debt : You're funny, Michelle!

P.S. Keep on preaching, you're great!

Michelle Singletary: Did I really write "hell?"

Oh I'm so, so, so sorry. But it is kinda of funny since credit/debt is evil.

_______________________

Washington, D.C.: Hi,

Couple of comments, probably redundant---

Take the full ride. I got a full ride to undergrad, and now have a 10 year vet school (for my DVM) loan that I am paying $900/month for.

Life happens fund: I am preaching the "gospel of Michelle" after having set up one of these. I tell them about you and what a "must" this fund is!

Thanks so much for your columns and chats!

Michelle Singletary: You are so welcome.

Oh the love today. So needed. So very much appreciated!

_______________________

McLean, Va.: In an otherwise well diversified portfolio split 50-50 equity/bonds, what's the max % you'd recommend committing to a single stock or pair of stocks?

Jerry A. Miccolis and Dorianne R. Perrucci: No more than 10% of your overall portfolio in any one stock. Less than 5% is even better.

_______________________

Baltimore, Md.: A well-known and respected financial adviser is saying that, given the current economic situation, we should focus on paying the minimum on CC debt and save as much as possible. Do you agree?

Michelle Singletary: I would only pay the minimum on CC if you are facing a job loss.

Otherwise, pay off the CC AND save.

_______________________

Michelle Singletary: I could do this all day but I have to finish my Sunday column.

Thanks to all of you for joining the chat today. I'm very sorry if we didn't get to your question -- just too many.

But Jerry and Dori have promised to answer some leftovers which I'll print in my e-letter next week. If you don't subscribe to the e-letter please do. You'll find a link on the personal finance section in the business section on the site.

Take care and come back.

_______________________

Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.


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