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Michelle Singletary
Washington Post Columnist
Thursday, October 22, 2009; 12:00 PM

Personal finance columnist Michelle Singletary hosted a live discussion with Noreen Perrotta, Money Editor for Consumer Reports, on Thursday, October 22 at Noon ET.

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

A transcript follows.

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Michelle Singletary: Welcome. So glad you could join me whether you are submitting a question or just viewing the Q&A.

Lots of questions so let's get started.

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Heene Hoax: There is no doubt that these idiots should have to pay for the hoax. The nerve of them, to waste important resources to gain their 15 minutes of fame. If they have to pay, and pay dearly, then other hoax-sters will maybe think before they act do foolishly.

washingtonpost.com: Should Balloon Boy's Parents Have to Pay Up?

Michelle Singletary: Totally agree. If they did this just for some show, make them pay every penny it took to search for their boy.

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Layaway: While layaway is better than credit card debt, one potential problem is that, if you can't make the payments, you lose whatever money you have paid and don't get the merchandise. I grew up dirt poor, and we sometimes went hungry to see that that didn't happen. And I'm talking about needs, not wants.

On the plus side, that made us all very frugal. Big Mama would approve! We're all doing well and enjoy making our parents' lives easier as a way of saying thank you for all they have done for us.

Noreen Perrotta: You should also be aware that if the merchant closes or files for bankruptcy while you're enrolled in the layaway program, you could lose all or a big portion of your payments-as well as the merchandise. Given the shaky finances of lots of retailers these days, you should try to pay any layaway items off as quickly as possible.

Michelle Singletary: These are all good point and why in my eletter this week tried to make the point that while layaway is a bit better than accumulating credit card debt it has its faults too.

And really, what stuff won't be there if you just saved up the money in your bank account and THEN purchased it once you had the money?

My grandmother used to put our winter coats on layaway because it was hard to find FIVE coats for five kids once they were picked over. But there are so many more places to shop now.

Just be as careful with layaway as you would with credit.

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Maryland: Hi Michelle, I'm posting early with the hopes you get to my question. I have a 2002 car that has failed the MD emission testing. It will cost me $1068 (dealer part) for just the part for my car. The labor will cost about $150; I have a personal mechanic that will be replacing the catalytic converter. My issue is that the blue book value of my car is around $1500! It has 150 miles on it. Do I pay to have my car to be fix or purchase a nice used one?? I'm currently payment free and like my current car.

Michelle Singletary: This is when it gets tricky about replacing the car. Here are some questions to ask yourself:

-- Could I get a good used car for the $1,218 you have to shell out to fix the car you like? Would that pretty much keep it going for awhile longer?

-- Do you have cash to pay for another used car (trying to keep you out of debt)?

-- A nice reliable late-model car can run you between $6,000 to $10,000. Compare that cost with $1,200. Which is less.

-- Many cars today can go way past 200,000 miles.

So if money is tight and you don't have the cash and don't want a car payment I would fix what I have. Now if the repairs need are making the car unreliable (meaning you can't plan to take it in for repairs) and you keep getting stranded ... then I would spring for a used car.

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Falls Church, Va.: My wife & I have two CDs worth $10K each that will mature soon, both earning 4.69% with Navy Federal Credit Union. However, interest rates have gotten considerably lower. Do you have any recommendation where we could put this money when they mature? We prefer dealing with NFCU, but would look around at commercial banks if better offers are available.

Noreen Perrotta: You can look for CD rates on bankrate.com to find the best ones available in your area. I would warn you not to go too long-term in your quest for yield. For example, you can get yields over 3% on five-year CDs, but you'll be locking up your money for quite some time, and if rates rise during that period, you won't be able to take advantage.

You might also look at the money market accounts on some online banks. ING Direct, for example, pays 1.3% on its money market account, and won't tie up your money.

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Washington, D.C.: The family should also pay back the farmer whose crops are now ruined because the emergency services had to drive over them.

Michelle Singletary: I would so sue them!

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Baltimore, Md.: Hi Michelle, Remember Christmas Clubs? You put away a certain amount every week, and by December had a decent sum to spend for Christmas. I did this as a child in the 50's, and still follow the same procedure for "wants." 20 years ago, I put aside $20 per month for 20 months until I had saved up enough money for a Coach purse, which I still own and use daily. The only difference is that today I put the money in a savings account where it earns a smidgeon (these days a very small smidgeon) of interest.

Michelle Singletary: I do remember them. My grandmother always had a Christmas Club Account.

Today I call that my life happens account...cuz in this life you got to buy gifts for folks even tho they don't need a darn thing in Dec. or Nov. or Jan. :)

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Centreville, Va.: I recently rolled my 401k from a previous employer to a rollover IRA. I am feeling a bit overwhelmed with all the choices I have now. The company I am going through, Fidelity, has offered a program where they manage my money for me, but charge 1% a year.

For someone who only knows a little about investing, would it be a good idea to go with this or should I try and do it on my own anyway? I understand that both ways can make or lose me money. I am just trying to decide on whether I just want them to do it and back off.

I would appreciate your thoughts.

Noreen Perrotta: Most 401k plans offer lower-cost options, like index funds or target-date retirement funds. Index funds track segments of the market, or the entire market, while target date funds set up a mix of investments that is geared to your age and when you want to retire. Target funds appeal to lots of people like yourself--because the decisions on how to invest are left to a professional. But when the market went into freefall last year, some target funds that should have been invested conservatively--like those geared to retirement in 2010--fell over 20%. Bear in mind that there's no guarantee that the adviser you're paying 1% to will do better than the market as a whole. Most fund managers don't outperform the market. We always advise that investors keep their costs as low as possible--those fees can take a big chunk out of your total return over time.

Michelle Singletary: I totally agree with Noreen. 1 percent for what you have seems a bit high when you can get that lower with an index fund.

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Anonymous: Michelle,

I enjoy getting the weekly e-mail and all you do - thank you!

My question is regarding life insurance for singles with "no" dependants. Is it a necessity? My job offers a benefit for .60/pay for $10,000 flat rate of life insurance. I spoke with a funeral home and figured that for what I would want (in the end), the cost would come to about $2500. This would more than take care of things and not put a financial burden on anyone. I realize this is a bit of a morbid subject (for some), however, I am trying to be financially responsible. What are your thoughts?

Michelle Singletary: Well for 60 cents a pay at 26 weeks that's about $15 a year.

I would get the insurance for that (and have). You could tell the beneficiary that you want part of it to go to your funeral costs and the rest to someone in need or to pay off any bills you may have left.

But you are right. You don't "need" much life insurance if no one is depending on your income.

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Washington, D.C.: Hi there,

I'm a little stuck on what should be my next step with my savings. I'm 24 and have built up both an emergency fund and a "life happens" fund. I don't have any debt (no loans, no credit cards).

So, I know I've got to keep saving, but I'm struggling to define my goals. My career doesn't require a Master's degree and don't plan to buy a car because I live in the city and use public transport. The only forseeable major investment I have coming up is purchasing a house, but I don't anticipate doing that until at least 5-10 years from now. I don't know what my price range will be or even what city I'll want to live in at that time, so I'm finding it really hard to discipline myself to save more without a tangible goal I'm reaching toward. Any advice on how to approach this?

Noreen Perrotta: Really the best way to save is to do it automatically. You can have a set amount taken from your checking account each month and put into a separate savings account or a no-load mutual fund and just let it build. If you can spare the money, you should just do it, without worrying about how you'll spend it. I'm sure you'll be glad it's there when the time comes to buy that house.

Also, be sure to take advantage of any 401k match your employer offers. If it'll give you 3% of your salary for your 6% contribution, that's free money, and it's tax deferrred as well. You're young and probably not thinking of retirement yet, but the best way to assure a good lifestyle in your later years is to start early.

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Brookland, D.C.: Hi Michelle,

I'm a big fan. Here's a million thanks for all of your advice. I wish they could be dollars, but I'm not in that kind of position -- yet.

My question is whether I should transfer my monster credit card debt balance (over $9k) to another card. My hesitation is that my limit is over $12k and if I transfer the balance I fear losing all of that potential credit. I'm pleased to report that I've been aggressively knocking off my small credit card debts this year. By the end of this month I'll have paid off and CLOSED four card accounts totaling a few thousand dollars. I will only have that $9k+ card and another store card with just over $1k (which I hope to knock off early next year). My interest rate is about 16.5% on the $9k card. Is it worth it to look for something better or just keep chipping away?

Michelle Singletary: Again, thanks.

I see you are following my suggested plan by attacking the smaller debts first. Good choice.

Definitely go for the $1,000 first. If the card you want to transfer the debt to has a lower interest rate, I would do it. Now of course if the other card's limit is close to $9,000 that may lower your credit score but at this point the important thing is to get rid of that debt.

And you are already near the limit on the current card.

If the rate isn't better or the same, just keep chipping away at it where the debt is now.

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Waldorf, Md.: I'm saving as much as I can through my employer's tax-free program and by just plain saving what's left of my paycheck in order to accumulate cash for retirement in 18 months. The problem is, it's going to sit and get 2% interest at the most for these next months. I'd like to do better, I've bought some stocks that are doing well, but I don't count them as cash, they are just attempting to get a good return, and if it happens, it happens. My question is, what do I do with this cash, which I hope to use to redecorate my new home and buy a new car, that sort of thing. Should I be satisfied with 1.5% interest? It's making me CRAZY!! Barbara

Noreen Perrotta: You probably shouldn't put money that you have earmarked for a specific purpose--like a new car, etc.--into anything that could drop in value before you need the money, like stocks. Low interest rates are very frustrating now. You can look for the best short-term CD rates on bankrate.com. You might be able to do a little better than 1.5% on a 1-year CD.

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They should pay up and pay for therapy: Yes of course the Heene's should pay "us" back (law enforcement, first responders, Denver Airport officials, the traveling public, etc.)

But let's not wipe them out: money should be set aside to get all the children, not just Falcon, appropriate counseling. Vomiting on national television is just one manifestation of the trouble that child will be facing because of the selfish parents.

Michelle Singletary: The kid probably do need help but I think the kid was throwing up because he was sick.

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Washington, D.C.: Another question about life insurance. I am single, no kids. I just bought my first condo. Do I need life insurance? I have no debt and have some savings.

Michelle Singletary: I always like to remind people that life insurance is really income replacement.

If you aren't taking care of anyone and you don't want to leave a boat load of money to anyone, then no you don't "need" life insurance. But please, please get disability insurance.

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Cincinnati, Ohio: I wanted to say thank you for the subscription to the newsletter. I received my first edition this week, and learned some new things, particularly in the section about personal information. Thank you for all that you do. :)

Noreen Perrotta: Thank you for the compliment. And please let us know what you like and what you don't like. You can write to us on the address and website listed on the last page of the newsletter.

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Southeast D.C.: Hey Michelle, I have been reading your column for a long time and it has helped shape my financial philosophy. So thank you. I am 25 and have no debt - just paid off my $20k student loan and have always bought my cars with cash. I am a journalist and scrap to save as much as money as I can because I would love to buy a house in the city, eventually. I have also never had a credit card. Now that this debt is paid off, is there anything I should do to keep improving my credit? I got credit checks from annualcreditreport.com and they looked fine, no late payments or anything, but I didn't spring for the credit score. Any advice? Think I will be OK when I apply for a mortgage in a couple years? It doesn't make sense to get a credit card just to supposedly improve my credit score if I don't need one, right?

Michelle Singletary: You should be fine. Don't worry. If you have had credit and you have (student loan) that helped build your credit profile.

Besides the top way to get a good score is to pay your bills on TIME!

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Cincinnati, Ohio: What a coincidence: your column today is on the reality of college expenses for most families, and the other story on the kid at Georgetown who can afford to hire a personal assistant. I had scholarships and a part-time job, did volunteer work, got a BA in 3 years, and did my own laundry the whole time. What a difference a generation makes!

washingtonpost.com: Georgetown Student Advertises For a Personal Assistant

Michelle Singletary: What a difference.

But then we all know there is a wide gulf in this country between those who have and those who do not.

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Rockville, Md.: Michelle - I really loved today's column. As the somewhat embittered mother of a child who should graduate next year after 5 years with a 2 year degree, I think your last paragraph should be put at the top of every college application:

And students need to do their part. Your parents give their hard-earned dollars lovingly or put themselves in debt because they want you to succeed. Show them that you appreciate their sacrifice by making more affordable college choices, working hard while in school and graduating on time or ahead of schedule.

Part of the problem for parents, though, is that the colleges do not keep parents informed about how their child might be doing. Grades are accessed online by the student and never mailed home. And if a child is having problems, they often don't want to tell their parents about it. The schools say these are privacy issues. Somehow though, privacy is not an issue when it comes to paying tuition. So I am bitter, and poorer, and with a less-educated child to show for all my years of hard work and saving.

washingtonpost.com: Getting through college these days almost requires a degree in thrift

Michelle Singletary: First, I'm so sorry for your trouble. But don't be bitter. That's a wasted emotion. Go from bitter to better by being tough. When the kid finishes and has to live at home or needs money, charge rent and say no.

And you are so RIGHT about that grade thing. I should write a column about that. The schools should change the policy so that if a parent is contributing to the cost they deserve and have a right to see grades. I have told my oldest who is 14 she WILL sign the waiver allowing the school to send me a copy of her grades. NO see grades, no money. Period!!!!!!

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Springfield, Va.: Hi Michelle,

For that fund of 3 to 6 months of expenses in case one is laid off, should one put it into a savings account or a money market fund? Where would you recommend I look into getting one of those funds? I've never invested before, so any advice would be appreciated. Thanks!

Noreen Perrotta: Understand the distinction between a money market account at a bank and a money market mutual fund. The bank kind is protected by the FDIC, up to $250,000 per depositor. Money market mutual funds are not protected and some carry more risk now than they ever have thanks to the credit crisis. And you'll likely get a better rate at a bank than a money market mutual fund. The key is that it is liquid, meaning that you can get at it with no penalty whenever you need it. So don't lock it up in a CD.

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Rockville, Md.: For the person who is wondering if their car is worth fixing: If you went shopping for a used car and you found a car that is just like the one you have now, with the part replaced and a new catalytic converter and any necessary work done, and you knew for certain that it did not have any hidden faults, and it were selling for $3,000... wouldn't you jump to the opportunity? What a bargain!

Michelle Singletary: Good point. I've kept cars that needed major repairs for a long time. I get rid when they become totally unreliable.

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And really, what stuff won't be there if you just saved up the money in your bank account and THEN purchased it once you had the money? : Plus, by then it WILL be marked down! The few times I've ever bought something NOT from the clearance rack, I SEE the same item on the clearance rack a few weeks/months later and kick myself for not just waiting.

Michelle Singletary: True that!

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RE: This is when it gets tricky about replacing the car: Thanks, for the advice Michelle, my car is great condition and driveable except for passing the emissions test. I have decided to repair my car, thanks again.

Michelle Singletary: YEAH!!!!!!!!!

Smart move. Love it when people listen.

And you can also start saving up for a replacement. Just make a monthly car note to yourself while you enjoy a few more years with your current car.

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Bonifay, Fla.: Your October 11 column said, "I knew to go to AnnualCreditReport.com or call 877-322-8228." "Great", I say, and I immediately went to the website. Page 1 asked me for identifying information. A later page asked who I wanted the report from, I checked all 3. A subsequent Experian page asked me for $7.95. FREE means "no money changes hands", NOT "we'll give you a 30 day free trial of something, which you need to cancel." If I had a sudden unique need for a "specialty vehicle" I might use GM's money back offer (gaming the system) instead of renting, but that's about the only way I'd accept an "I must cancel" scheme.

washingtonpost.com: Underlining the "Free" in Free Credit Report

Noreen Perrotta: The downside to annualcreditreport.com is that there's a lot of upsell to the services the credit reporting bureaus offer. The FTC is currently looking to change that (see www.ftc.gov/opa/2009/10/freecredit.shtm). In the meantime, just be careful what you click. You can get your those credit reports for free but you'll have to go through those offers carefully to make sure you don't sign up inadvertently.

Michelle Singletary: Yes, in the column I wrote that you I too was offered stuff but I just clicked no.

You have to read very carefully to find the button for the free report but it is there.

This is why I wrote that annualcreditreport.com should be commercial free.

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there is a wide gulf in this country between those who have and those who do not. : That gulf was always there, we middle and working class just would have never made it into college. Back in the day, all college kids had wealthy parents.

Michelle Singletary: You are right. And it was harder to get to college for many.

But I'm just advocating that people don't try to be like the rich and pay for schools they can't afford. There are people ways to go without incurring $40,000 a year or more in debt.

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Interest bearing accounts: Hi Michelle, My husband and I currently have checking accounts, and interest bearing MMA, and a high-interest savings account. The MMA account is where we keep our readily accessible "what if" stash. I'm sure it's more important to have it available and saved rather than worry about it building interest but I can't help but feel like it's not beneficial to keep in where it is. For the past 2 months, we've earned $.21 on $5000 - should I look elsewhere? The high-interest savings is through on online bank and while I like it, it's not readily available in an emergency. Any suggestions?

Noreen Perrotta: Many online banks let you link directly to your local checking account. You can move money within days. Some also let you speed up transfers to one day for a fee. See if your online bank offers this. If not, look for one with higher rates that does.

Noreen Perrotta: You can also simply look fort a local bank or credit union with competitive rates.

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Vienna, Va.: Regarding college costs: Please spread the word about community colleges. In Virginia, a student who graduates with an associate's degree has guaranteed transfer to every public VA college/university (as long as the student meets required GPA). There are even transfer scholarships available. The tuition is lower, the quality of teaching is higher, and the class sizes are smaller than at four-year universities. I'm amazed at people who go into debt rather than have their children go to a community college.

Michelle Singletary: Already been spreading the word. I'm a big fan of community college.

And if you transfer your degree is from the four-year school.

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$$$ College $$$????: In less than two years we, parents, will be writing a huge check. We do not meet the criteria for financial aid based on income and our child is bright but not Einstein.

We are not looking at out-of-state colleges. Wonderful child will apply to some out-of-state and private colleges and hope scholarships appear, but we have a budget and the goal is a degree and no loans.

No harm in colleges pushing the study abroad programs, but I am encouraging our child to GET A DEGREE AND THEN GET A JOB OVERSEAS.

Michelle Singletary: You have the same plan we have. Our kids can apply anywhere they want (within reason) and then we'll see what free money they get. Not enough, they are staying their butts in-state because we will not allow them to take out any loans.

But I do disagree with you on studying aboard. I studied aboard during undergrad. Wonderful experience. And if you plan well, and save well, it doesn't have to be more than what you would pay for the semester at their home school.

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Alexandria, Va.: Re life insurance for singles with no dependents: my dad didn't buy life insurance when he was single, nor when he and my mom were married because both were working. Then at some point after we four kids came along, he tried to buy life insurance but couldn't, as he had developed high blood pressure. He died at age 43, leaving a wife and four kids under age 10. Not a good situation. We struggled financially for years. So part of the question about life insurance is not "Do you have dependents NOW?" but also "Do you expect to have dependents within the next 10 years or so?" If so, you need life insurance. Convertible term can be an economical choice, as it's a cheap way of guaranteeing that you can "convert" to whole life insurance if/when you need it. If those dependents never come along, you can drop it or just convert to a smaller amount to cover funeral expenses. Everyone becomes "uninsurable" at some point, and you don't know when that point is going to be.

Michelle Singletary: You make a good point.

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Waldorf, Md.: Michelle, Big fan of the chat. First time posting. I was trying to figure out the best way to pay off my mortgage a lot earlier then the 30-year loan suggests. I need a tool or guide that will help me instead of just blindly throwing money at the mortgage. Can you recommend anything that could help me with this? Enjoyed the article on college cost. I too am about to help a niece go to school.

Michelle Singletary: Thanks for the compliment.

And there isn't anything complicated about paying down your mortgage early. To knock several years off you only have to make one extra payment a year. The thing is make sure your lender or the company servicing your mortgage applies that payment to principle. Make that clear on the check or any online payment. In fact, you might send it separate from your regular payment. Here's the link for a nice calculator on www.bankrate.com that will help you figure out how much interest you can save by paying off your mortgage early.

http://www.bankrate.com/calculators/mortgages/mortgage-loan-payoff-calculator.aspx

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First time home buyers: Hi Michelle,

I love your chats and I'm looking for your opinion/advice for a first time home buyer. My husband and I have been renting for the past 5 years and we're getting tired of it and want to get a house. We have about 10k saved up, however, I have a loan on which we still have 13k left to pay - I did a consolidation loan (for cc debt) last year which lowered minimum payments and have not used credit cards since. Since opening the loan we've managed to pay off 8k in 12 months. Our minimum payment is $344/month but I'm usually paying close to 1k to get it down. Our only other debt is car payments (total monthly payment is $1k for 2 cars and motorcycle).

We've NEVER been late on any payments, have good credit scores (mid 700's) and just started doing a 401k.

In your opinion should we start to look for houses (we're paying $1,600/month in rent) or wait another year to pay down the loan even further? We're just getting so tired of renting and I want something to call my own. We wouldn't start the home buying process until June (8 more months) since that's when our lease is up.

Since we have $10k in savings, would you pull that and apply that to the loan to pay it quicker and then just build up the savings again?

I feel like i'm at a loss and never going to be able to get a house.

Michelle Singletary: You will be able to get a house. You just have to be patient.

If it were me I would want to be debt free before I bought. Look at what you've got going:

-- $13,000 in consumer debt. Pay if off before you buy.

-- $1,000 a MONTH in car payments. Really, truly that's incredibly high for me. Think about that. You're paying almost as much for your vehicles as your rent.

-- You only have $10,000 saved. So is that your emergency fund? Should be. And it might not be enough. You should have saved at least three months of living expenses. And with $1,000 in car payments a month that's $3,000 right there.

-- You need money for a down payment on the house. These days that could be 20 percent. And you can't use the $10,000 you have save. That money is already taken for emergency stash.

So you have a bit to go before you are ready to buy in my opinion.

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Washington, D.C.: "The tuition is lower, the quality of teaching is higher, and the class sizes are smaller than at four-year universities."

Not quite. Tuition might be lower and class sizes smaller but the quality of teaching is not higher. I'm not saying it's lower but it certainly isn't higher.

Michelle Singletary: Really and how do you know that?

I've seen and had some awful professors at four-year university.

And had the pleasure of knowing some great professors at community college.

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Safety Deposit: This might not exactly be a "money" question, but my bank offered us a free safety deposit box, when my husband and I opened up more accounts with them. We've never taken advantage of it and I wonder if we should. We don't own a safe at home so all of the important documents are just in files (birth certificates, passports, car titles, house deed). I've seen one article that said to only keep the copies of these things in the safety deposit box and nothing original or worth a lot of money. What's the point then?

Noreen Perrotta: You can use the safe deposit box for things like valuable jewelry, say, if you're concerned about keeping it at home, as well as important papers like stock certificates, wills, titles, deed, etc. I've heard the opposite--that the originals should go in there and the copies kept at home. But if you do put your will in there, make sure that someone close to you or your executor can access it when needed. Also remember that the valuable in there are not covered by federal deposit insurance. If you don't take your bank up on the offer, you should get a fireproof box for those important papers and keep copies somewhere outside the home as well in case of a disaster.

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Washington, D.C.: Regarding six months of living expenses, I'm wondering what's the best way to calculate exactly what my target amount is for six months of living expenses. I've multiplied my take-home pay by six, and added $500/month on top of that for what I would have to pay for COBRA. Does that sound like a good estimate?

Michelle Singletary: You add up ALL your living expenses for the month:

-- rent/mortgage

-- utilities (cable, cell phone, telephone, gas, etc.)

-- transportation

-- insurance

-- food

-- debt payments

-- get the point.

You don't have to guess. Take what you pay every month to run your household and multiply that times three or six.

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College grades: At least in the state of VA (maybe everywhere?) if a child is a dependent on your taxes, you do have the right to see the grades. The college has a form and process to follow. You can also meet with the professor and ask about grades and performance, as long as your child has given written permission (or is in the meeting with you).

Michelle Singletary: Not sure about what states or schools require. You may be right.

But I KNOW my kid is going to tell me, show me or whatever or the funding is cut. She (they) will sign whatever is necessary to see their grades for me to keep paying. I'm also going to get them to sign a contract. I'm serious.

It will say:

-- You have FOUR years to graduate (unless they are in a bonafide five year program)

-- You have to keep a certain GPA (just like they might if they had a scholarship). I'll give some leeway for the freshman year but you better bring me good grads or explain why you can't.

-- You have to study aboard at least one semester. I did and it was such an incredible experience. Exception will be if their studies make it difficult.

-- No drinking, smoking, nookie. Yes, I'm going to have a morality clause. I know I can't watch them. I know they may stray away from our values. But it will be there for them to be reminded I expect them to behave and do what they would do if they lived in my home.

My money. My rules.

--

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Washington, D.C. - Whole Life?: Hi Michelle -

We're buying life insurance - the company suggests buying whole life insurance that has "cash Value". I am hesitant about treating life insurance as an investment - what do you think? We're definitely going to do term - and it's just us, we have no children (and don't plan on having any). It somehow doesn't feel right but we wanted your opinion!

Thanks.

Noreen Perrotta: We always recommend term life insurance--it's cheaper than whole life and gives you the protection you need. If you have coverage at work, you might not need a big policy to begin with.

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Working overseas: As someone who's recently returned from working overseas for the past four years, I just want to point out that it can be very difficult to have all the paperwork approved (so much depends on what the current political climate is like between the countries), and that in some cases, you actually lose money in the process. I'm very glad I went - but were I not single and excessively debt-free before I left I would not have been able to swing it. (I'm still single and debt-free, but there were years in there that my costs - increased cost of living, having to fly back twice for family emergencies to places I couldn't use miles - were just slightly greater than my earnings.) If I had used my university's programs to study overseas, the semester or year abroad would have cost me no more than staying at my university did. I don't regret working instead of studying abroad, but from a strictly financial p-o-v the decision wasn't the best I've made.

If one absolutely must work abroad and isn't with a government agency or contractor, do be certain to pick a country that has a reciprocal tax agreement with the U.S.! You'll still be paying taxes almost anywhere else in the world, but at least you may avoid having to pay them also to here when you're not living here.

Michelle Singletary: Thanks for the advice.

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Re: college costs: It's not the college's job to set your boundaries with your kids, who are legal adults by the time they go to college. As the parent, it's your job to decide and enforce the terms under which you pay for college. Honestly, I tend to think that if you can't trust your kid before sending them to college, there might be bigger problems. My parents never asked to see my or my brother's college grades, but made it clear that, if we got into academic trouble, we'd be home and in community college so fast our heads would spin. And we knew they meant it.

Michelle Singletary: I operate under, "trust but verify."

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retirement planning: Hi Michelle,

I earn about 50k a year, am 30 and with my company match, put away %13 of my salary in a 401k type account (I contribute 3%, my company contributes 10%, which is immediately vested). I worry that I'm not being aggressive enough in my retirement saving, but am not sure what next steps to take. Is 13% enough? I could probably add another 2% without feeling it too much in my monthly budget. I'm not even sure how to figure out how much I'll need in 35 years! I'm feeling a bit overwhelmed...any thoughts of how I can better plan for 35 years from now?

thank you!

Noreen Perrotta: Before you increase your retirement contributions, make sure you have an adequate emergency fund, equal to about 6 months of your living expenses. Also pay off any high-interest debt you're carrying. If you're set in those areas and can afford putting the extra money away, the do so.

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Washington, D.C.: To Rockville. If your kid was doing so poorly, why did you keep paying tuition? My parents paid my way through college but they insisted on seeing my report card every semester. They didn't have to ask the school for it, I HAD to show it to them. And if I did too poorly one semester they would not have paid for the next semester.

Michelle Singletary: Some parents just aren't tough enough.

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Oakton, Va.: Hi Michelle,

I have a Costco American Express cash-back card, and a Visa card. Both are paid in full every month.

I recently got an offer for a Fidelity Investments Amex card which would pay more for our types of purchases.

We have an excellent credit score, and I don't want to jeopardize it.

My question: Should I close the Costco card before getting the Fidelity card or get the Fidelity card first, or doesn't it matter?

Thank you for your help!

Noreen Perrotta: Both the Fidelity and the Costco Amex are good cards for people who pay their balances in full each month, as you do. Closing a long-held credit account might have a short-term negative impact on your credit score. So can opening new accounts. I think, though, that if the Fidelity card is better suited to your needs, it might make sense to change it. Your score will recover in short order.

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The Truth About Living Below Your Means: I've read the WaPo chats for years and since the recession began--it has been hip for people to write in about their frugality. People write about how they are so different than the immoral others out there that are spending money they don't have. I can tell that these people are full of it because folks that genuinely live below their means have tax challenges, issues with lousy interest rates on savings and frustration when trying to pay cash for a brand new car in a "car payment" world. People that live below their means do it for a multitude of reasons. Some of it is sheer willpower but the main reason is fear of what the future holds. Another secret--it is much easier to live within your means when you make enough money that not spending 20 or 40 or 70 thousand doesn't impact your basic needs. So lets stop with the rhetoric about how "those people" are so flashy. If you really live within your means--you don't think you are superior--you just think your smart and lucky.

Michelle Singletary: Little hostility in your note but the kicker was right.

Don't be smug if you got it like that.

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Linwood, N.J.: I'm 51, but I still remember vividly how a fire at our local department store robbed me of my majorette boots my parents had put on layaway for Christmas. Every time we drove by the wreckage, I cried for my boots! Never got them, and my parents never got a refund of what they paid!

Michelle Singletary: So sorry. Bet you would have looked great in those boots.

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Alexandria, Va.: Reference: the recent Post article about how spending is making a comeback. I am a single mother who lost my job in March. I sent my kids to live with my parents in Oklahoma and am circulating among friends while job-hunting and taking classes to become a nursing assistant. While I try not to begrudge those who have it better than I do, the thought of $1000 "faux lizard" purses (faux??) and, in particular, the $30,000 watch actually made me cry. How can they do that when people are desperate? Those people have their priorities seriously skewed.

washingtonpost.com: Frugality Falling Out of Fashion?

Michelle Singletary: You have to understand they don't see you. They don't know what you are going through. They have to live their lives even if it means spending what would be food or a car payment or rent for you.

And we have no idea if these folks give and give generously.

So while I would never spend $600 plus on a purse I try to look at it from both sides.

Now if you are spending like that and you have debt and have to borrow to buy a car or go to school and don't have an emergency fund, shame on you. You're an idiot.

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Fairfax, Va.: The credit card company that I am affiliated with is raising interest rates. I was informed that I can opt out by December 1st or the interest rates will go up to 16%. Do I opt out carrying a balance with a lower interest rate or do I continue with a higher interest rate? Please advise.

Noreen Perrotta: If you opt out of the rate increase, that means you won't be able to use the card anymore but you can continue to pay off your balance under the existing terms.

Michelle Singletary: I say opt out especially if you are carry a lot of debt and that 16 percent rate will seriously delay your getting out of debt.

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help me PLEASE!: I love my husband dearly - but I'm about to go psycho on him if he overdrafts his account one more time!

He grew up poor and says to him, money in his pocket (or in his account) is spending money. that's the first issue. The second... he can't add! He never spends more than $20 on anything - most purchases are small - so in his head he's only used $7 even if he's spent $7 on 5 different items. It's terrible. I pay all of our bills out of our joint account, but when he overdrafts on his account or over spends, I end up having to dig into the household money. So I think I'll have him use nothing but cash from now on and see how that works... I feel like that would be treating him like he's 2, but he's willing since he knows it's a problem.

Tonight we are having a "why is using a credit card bad" talk, and I don't think I'll have much success in getting the WHYs through to him. Any words of wisdom?

Care to come over and talk to him??? Please?

Noreen Perrotta: The banks love people like your husband. You could take his debit card away and give him a cash allowance. Or let him use a credit card instead. The overlimit fees that some credit cards have been imposing without your consent will not be allowed once the new credit card law goes fully into effect in February. So his credit card will be rejected if he goes over the limit. Also, some banks now let you opt out of automatic overdraft protection for debit cards. Check and see if your bank is one of them. If so, then the card will be rejected if there's insufficient funds.

Michelle Singletary: Put the man on a cash allowance.

And keep talking to him.

Oh and maybe you should have all joint accounts and you stay the treasurer.

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What a difference a generation makes??!!??: I'll have to beg to differ; the Georgetown student is much more the exception. As a college professor at a Big 10 school, I continue to be amazed by the work ethic of the current generation, especially in the past few years where parental contributions have been limited during the recession. If you look past the kids on your cul-de-sac you'll be inspired as well. This is the generation that will pay off the debt we are accumulating now.

Michelle Singletary: Good point.

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"kids today": Just a quick note about that Georgetown student - he is an exception, NOT the rule! I am a fairly recent graduate and paid for school with scholarships, part-time jobs and student loans - most of my classmates did the same thing. Plenty of us "kids" are trying to live by Singletary guidelines, don't give up on us yet!

Michelle Singletary: We won't. I won't.

We can't.

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CEO Land, USA: Michelle:

Help, I'm in trouble. I have a $15M mortgage on my house in the Hamptons, a $5M mortgage on my townhouse in NYC, two nannies and all the household staff to pay, and now my salary has been cut to $500,000!

OK, I ran my bank into the ground and cost a lost of people to lose homes and jobs, but what about me? What am I supposed to do on a measley half-mil?

I never did an emergency fund - I figured the ultra platinum AMEX would cover me, but it's been cancelled.

Where should I start to budget?

Michelle Singletary: LOL!!!!!

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Alexandria, Va.: Hi Michelle,

I'm paying $4 per month for an Experian credit monitoring service, which doesn't give me full access to my credit reports but alerts me to changes, such as new accounts being opened. It also gives me some insurance for identity theft--I think $50,000 protection.

This service also does not give me access to my credit score.

Should I switch to the monitoring service offered by MyFICO, which will cost $5 per month, only offer me $25,000 for identity theft protection, but will give me my FICO score?

Do you think these services are worth the money? I always check my full credit report for free once per year.

Thanks!

Noreen Perrotta: We generally don't recommend any of the credit monitoring services. If you want to buy your FICO credit score, you can pay a one-time fee of $15.95 at myfico.com. Instead of credit monitoring, check your credit reports through annualcreditreport.com. You can get one free every year from each of the three major credit reporting bureaus. Get one every four months and you should be on top of any possible discrepancies with your credit report. Just watch out for the upsell to credit monitoring services on that site.

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Michelle Singletary: What a great forum today. Thanks so much for all your questions and interesting and thoughtful comments.

I so enjoy this time with readers. It gives me a chance to see what's on your mind, what issues you are facing.

Thanks to Noreen from Consumer Reports, a magazine that I highly recommend you get. It's my bathroom reading, that's how important it is :)

Take care and join me again soon.

P.S. If I didn't get to your question check my weekly eletter you may find an answer there. You can sign up for the eletter (I can't do it for you) on the Post personal finance page.

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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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