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Michelle Singletary
Washington Post Personal Finance Columnist
Thursday, November 5, 2009; 12:00 PM

Need advice about how to handle your personal finances? Whether the struggle is saving for retirement, organizing your bank files, or talking about money responsibility with your spouse or loved one, Post personal finance columnist Michelle Singletary was online to offer her advice and answer your questions on Thursday, November 5 at 12 p.m. ET.

This Story

A transcript follows.

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

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Michelle Singletary: Welcome everyone. I'm so glad you've joined me. No guest today. Just me.

Two announcements:

First, if you haven't signed up for my weekly eletter (like a newsletter) please do. There's some commentary from me but also links to personal finance stories I think are interesting. It's also a chance for you to comment on money issues. You can sign up by going to the personal finance section of the Post site and looking for my link.

Second, a great new feature started this week on the site called "On Success." I write a little about in the eletter coming out today. Check both out. Here's the link for On Success http://views.washingtonpost.com/on-success/

And if you subscribe to the eletter, please read it. I know we all have a ton of things to do but one of the best uses of your time is to keep up on the latest personal finance issues. You want to prosper? Then make reading about personal finance a top priority.

Well that's it. Let's get started.

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Rockville, Md.: Hi Michelle,

I have been saving for my son's college fund in a 529 account. It is performing poorly and has not recovered from last year's financial crisis. I was wondering can I transfer the funds from that 529 plan and open up a new 529 plan with another financial firm?

Michelle Singletary: I feel your pain. I have three 529 plans for my rugrats and they all took a big hit. But they are recovering.

You can move the money. According to IRS Notice 2001-55, account owners may change the investment strategy selected for a section 529 account once per calendar year or upon a change in the designated beneficiary of the account.

You will find that info and more on 529 plans at http://www.finaid.org/savings/529plans.phtml.

I would also recommend you look at the other investment options within the plan you have. Perhaps there are some ways to better what you are getting without moving the money, especially if you are getting a state tax deduction, which you do if you are a Maryland resident ($2,500 a year per account).

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Washington, D.C.: Good morning, Michelle. Your article today couldn't be timelier. Young adults need to understand that managing money is about establishing priorities and managing responsibilities. Our 25-year-old son who makes good money moved back in with us because he is in credit card debt. He created the debt, not us. I said he had 3 months to get his act together. His father said 6 months. Why is it that some of these young adults don't get that they can't get everything they want? Do you think instant gratification, including cell phones and the internet are to blame? I think this started with MTV and dance videos where young people started worshiping and emulating celebrities. What is your spin?

washingtonpost.com: Adult children's finances can be parents' business

Michelle Singletary: I don't think kids or young adults overspending is a new thing. But I do agree that there is much more marketing and advertising aimed at getting them to spend and upgrade and have the latest whatever. I mean really why does an 8-year-old NEED a cell phone?

But it's not just the fault of the marketers. Parents have to take some responsibility. When you allow your kid to have a TV in his or her room and be exposed to hundreds of thousands of commercials regularly that's a problem.

We give in to their demands because we (well you guys) are too afraid to say "No." So we create young adults who don't know how to say no to themselves.

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Rockville, Md.: Michelle, I found today's column very interesting, although I think that by young adulthood, parents need to disengage from their kids financial matters and let them learn on their own. I do agree that it is incredibly important to teach kids to handle money wisely and to exert our influence in the younger years. And if you want to help your young adult children and let them move in with you, that is fine as long as you are not enabling them to keep on depending on you. But if it comes to the point where you are resentful of the resources you are providing and the lack of progress they are making, then I say it is time to let them go and fend for themselves. When dealing with all adults, even our children, we have to respect boundaries. And they have to accept our boundaries as well. If a young adult feels smothered by her parents' intrusiveness and need to control, then she needs to move out and find a way of supporting herself independently. And if a parent feels the need to control an adult child, the parent needs to step back and realize that the child is an adult and should be allowed to make and live by his or her own decisions. We can teach our kids, but we have very limited control over the decisions of grown adults. And that is as it should be.

Michelle Singletary: You make a good point. And I agree at some point you have to let them live their life. But I don't agree that you step out of the picture.

I believe you step to the side. That way you are still guiding them without making decisions for them.

I don't believe you ever stop being a parent. They need our help just like we need the help of mentors in your private life or on our jobs.

What do others think?

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Rockville, Md.: " especially if you are getting a state tax deduction, which you do if you are a Maryland resident ($2,500 a year per account). "

But only if you hold the 529 at the Maryland plan through T Rowe Price. Other 529s and you're out of luck on the deduction.

Michelle Singletary: That's right. If you invest in the Maryland plan and you are a Md resident.

What's wrong with that?

Would you expect NY to give you a state deduction for investing in its plan, when you don't live in NY?

Not sure your point.

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Rockville, Md.: I guess I am too old to understand, but when adult children are at home and their parents talk to them - they should pay attention to more than the volume. Perhaps they should not "shout." But the child should pay attention to what they say and not how they say it.

Or am I really hopelessly out of date?

Michelle Singletary: Well, as someone who can be a raise her volume...not always helpful in any decade. My husband's approach is best. Listen, let them talk, and talk back quietly and with compassion.

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Alexandria, Va.: Hello,

Should I pay off my bills because so many jobs are looking at your credit score? Or should I pay off my IRS bill that I pay every month on? I want to get a better job and that is why I wish to pay off my bills, but on the other hand I can't owe the IRS and go out for some government jobs because they require you not to have a payment pending even if you are on a monthly payment plan.

Please advise.

Thank you so much for your time.

Angela

Michelle Singletary: Well, do both. Definitely pay Uncle Sam.

And yes pay off the other bills. It's really not an either or situation. Both are important to your credit scores and ability to get another job.

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Anonymous: Michelle, Love your chats and e-letters. Keep up the good work!My question: my husband is changing jobs (thank goodness he found one in this economy!) and he got paid for unused vacation time. It's almost the amount of 2 weeks pay. Should we stick it in savings (we are over 1 month's emergency savings as of now) or pay off my car loan, which is less than the extra pay, and which will be paid off in 6 months? It would just feel so good to get rid of that loan!

Michelle Singletary: If it were me I might boost the emergency fund.

In fact, you might do this. Take half and boost the emergency fund. Take the other half and create a life happens fund. That would be money for car repairs, you know the things in life that happen. That way you won't need to touch the emergency money until it's a God awful emergency.

Then just keep slugging away at the car payments. You only have 6 months to go (YEAH!).

Now when you are done with the car payments, keep making a car payment to yourself. Put that money in your life happens fund. So down the road when you need to replace your car or a car you might actually be able to pay cash for it. That's what I do, did. Paid cash for the last two cars I purchased.

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Rockville, MD (part 2): "Would you expect NY to give you a state deduction for investing in its plan, when you don't live in NY?

Not sure your point. "

Of course not (regarding NY question).

My point was that you made it sound like Maryland is nice enough to give a deduction upto $2,500 per account to all residents who open a 529 - regardless of where it is located.

Heaven forbid a reader in Maryland sees that and opens a 529 in Utah (lower fees there) and then loses out on the deduction - and ends up worse off.

Michelle Singletary: I have no idea why your britches are in a bunch.

I meant nothing other than to point out the state deduction is worth considering. And the Maryland plan is a good plan with low costs. It has been rated highly by Morningstar compared with other state plans.

Wonder if you are selling Utah's plan my friend!

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Silver Spring, Md. : M - In the past months I've gotten numerous automated calls and some letters from collection agencies addressed to someone that does not live at my address.

I went so far as to Google the name, and she lives around the DC area, so I returned the letter with the suggestion they use this other address.

Now I'm getting a call on my answering machine saying "if you are not XXXX" hang up, if you are XXX call 887765 about a debt." Does your answering machine taking the message constitute an agreement that you are whoever they're looking for?

Should I call this place and tell them that the person they're looking for can not have lived at this address for 20 years?

It's crossed my mind that this babe could have stolen my identity, but it's not like I'm getting credit card bills to my address or anything else you read about that indicates you've had identity theft.

I'm beginning to get a little paranoid about this.

Michelle Singletary: Definitely check your credit reports if you haven't already this year --- www.annualcreditreport.com (only official site).

If everything appears fine, call the company that is bothering you and ask it to stop. If it doesn't write a letter. You can find information about how to stop creditor calls on the FTC website.

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Falls Church, Va.: Hi, Michelle,

Just a note of thanks--I've been reading your column and thanks to the advice have nearly paid off all my credit card debt. I started at 16k of credit card debt and will be finished paying it off in a few months. Based on other advice you have given, I called my credit card company and asked for a better rate; they gave me a much better rate, just for asking. Thanks & keep up the good work!

Michelle Singletary: What a wonderful testimony.

Thank you so much and congrats.

I may have pushed you, but the work was all yours.

Good for you.

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Washington, D.C.: Hi, Michelle. While it's fine to say you won't pay for your kids education if they smoke, drink, become sexually active, don't get good grades, etc., do you honestly think you could go through with that? My next door neighbor has a 20-something child still living at home, but he has nowhere to go if she throws him out (no nearby friends or relatives to take him in) and she can't send him out on the street.

On a somewhat related note, what a terrifying article on drug use by Chantilly HS students. An addict who is in the process of kicking the habit says 75-80% of her classmates were users! If that doesn't make every parent's blood run cold, I don't know what will. But are all of them to be denied parental support for college?

washingtonpost.com: One daughter's secret revealed, ultimately too late

Michelle Singletary: My children know the rules. And I tend to live up to my word.

I expect much from them. Just as my grandmother did for me.

So yes, I can honestly say I plan on being a parent.

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Anonymous: Do you think they're leaning towards extending the $8K tax credit for new homeowners?? Just you thoughts, I know it may not happen.

Michelle Singletary: They are. And I think it's a mistake.

Really, why are we giving our money to people who can buy a home anyway.

We are in debt up to our eyeballs.

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Washington, D.C.: When I was little, my parents started putting money away for my college education, using a full-service brokerage firm because they knew their account manager well. The money was put into a few mutual funds and a single company's stock.

I didn't have to tap into the savings for college, and the money wasn't enough to really make a dent in my graduate school tuition, so I still have it. But it's woefully out of balance, and I really need to do something about re-directing that money. But every time my account manager calls me, I always feel like they're trying to pressure me into buying a new type of investment, rather than working with my concerns.

What's the best way to get away from this broker? One option I guess would be to sell it all and pay as much of my student loan debt as it would cover. Is it possible to simply keep the stock and dump the broker? Thanks!

Michelle Singletary: Don't be pushed around. It's your money.

Find another money manager, broker and have them transfer the money. There's a way to do it I believe where you don't always have to cash out.

I've switched financial advisers before and I didn't have to cash out investments.

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Chicago, Ill.: I think sharing of information with children on personal finance (and the underlying values)is a process that begins as early children can understand, building on concepts over time. Starting with saving through other related topics as living within your means, budgeting, goal setting, investment allocation, credit management among others. I believe it's easier to have an open dialogue with your children if you have laid the groundwork early for open, safe (non- judgmental) discussions.

Alan Brazil

Michelle Singletary: I definitely agree.

Thanks for your comments.

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Washington, D.C.: I enjoyed your column today. I'm a 30-something and one of four kids. Three of us spent at least 3 years at home at some point in our early to mid 20s. My parents didn't talk to me much about finances, but I wish they had. My feeling is that a lot of young adults get in trouble because their parents didn't teach them enough about money when they were younger. I know my parents had some issues with credit when my youngest brothers were small. I don't think they should have told me much about it at the time, but I do feel like when I got my own card they should have shared their experiences. I think I would have avoided some of my credit issues (now over, thankfully). So I'd say to parents, don't be embarrassed or anything, but help young adults avoid the pitfalls you've encountered. That being said, there's probably nothing like going out and making your own mistakes for teaching you a lesson!

Michelle Singletary: I'm glad to hear your perspective.

And hopefully with the right conversations, people don't have to learn the hard way. My grandmother taught me well and I did avoid a lot of money mistakes because of it.

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re: "Calls" : That used to happen to me, but it was because my number was recorded on someone's credit report. I had no idea who the person was, and continually asked x person's debt collectors to update their systems to reflect such. Some of the time, I wasn't pleasant, the other times I was.

Michelle Singletary: It's happened to me a few times. I simply corrected the collector and told them not to call me again.

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Alexandria, Va.: I am part time graduate student working full time as a federal employee. I recently just paid off all of my credit cards. NO MORE CREDIT CARD DEBT. YAY! I do have student loan debt now, but not from undergrad - I had a full scholarship.

I am now considering buying a condo in Northern VA since Congress is extending the tax credit. The only bills I am paying now are rent and utilities - no car payments or anything. I am saving a large portion each month where I can have at least 3% in down payment, if needed, but I am hoping to participate in programs that will pay for it for me. Is that smart or should I wait?

Michelle Singletary: How much student loan debt do you have?

Me, I would wait to be debt free.

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Washington, D.C.: Michelle,

Great column today. I wonder if you have any advice on the reverse situation? Adult children talking to their parents about their finances? My husband and I are worried that my in-laws may not have adequately planned for all their needs in retirement, not just financial. From what we can tell, they based everything on staying in their current house and dying before they needed any medical care. They are very private, so I'm standing on the sidelines for any discussions, but do you have any suggestions on getting them to open up and consider all the potential scenarios? Thanks!

Michelle Singletary: Thank you.

I've written about this from the reverse side.

The best you can do is just try to talk to them. Go to AARP's website. It has some great tips on starting the conversation.

You could just print out some articles and ask them to read it or just say what do you think, etc.

With the cost of health care, you definitely want to begin figuring out how they will make do in their retirement or you may be faced with taking care of them.

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re: stopping creditor calls: I had this happen a few years ago. When you take a call, ask for the company name and phone # and document when and how often they call. Keep this by the phone. Often, I'd have to say to the person something to the effect of "This is your company's X call to my home and each time I have told you I don't know the person you are calling. If you continue to call, I will file a complaint with the state AG and the FTC"

Usually, that company would stop calling, but 100% of the time I'd start getting calls a few weeks to a month later from another company. When the leads run out, the debt collector sells the debt to someone else, who then just starts calling you. I eventually had to change my phone number for it to stop.

Also - this person was using my phone number (which I'd had for years) but not my address, so it didn't show up on my credit report. He even used it to get a Safeway bonus card - so that when I used mine once I saw his name at the bottom of my receipt that all my points were going to him. Double check everything.

Michelle Singletary: Good tip.

Thanks.

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Arlington, Va.: Follow up to today's article about parent involvement. I have witnessed this with several friends. Some successful at helping their child get back on their feet and some not. I suspect that the parents really want the child to move out, but do not feel they can say so, since they do not want to abandon their child. However, when they see their child buy another $6 handbag because it was on sale and only $6, it gets under their skin. They are worried about their own retirement years. The child probably isn't paying rent, contributing to the food bill, doing the laundry, helping around the house, etc, and then they want their parents to butt out. Well, that is why they don't. So, for any child living at home and the parents are interfering, take a real hard long look at what you are contributing to the household, your budget, and your goals for moving out and on with your life. No one said parents are an indefinite free ride.

Michelle Singletary: So true. Again, great advice.

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Orinda, Calif.: re: Wash DC's mutual funds and college debt. Michelle, I'm amazed....you forgot to tell that person to pay down the debt! If the money/investment was intended for paying for college, whether undergrad or grad school, then why not cash it out and pay down the debt?

Michelle Singletary: I did forget.

Thanks for reminding me.

It is what I would say. I was just focusing on the point that the person feels pushed around by the broker.

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Rockville, Md.: Michelle:

Never miss your column.

As you did, we paid cash for our new car, so why did we receive a notice from Experian that the dealer had checked our credit report? If there's no credit other than a small charge to a credit card, why should anyone need a credit report?

PS: Anyone living at home with parents with a full-time job and not going to school should pay room and board.

Michelle Singletary: Same thing happened to me. I was pissed.

But the dealer gave me some lame excuse. No matter, it gave me a chance to capture my credit score for free -- a $7 to $14 savings!

And I agree with the rent issue. I've had relatives stay with me and as long as they were working their way out of financial trouble, no rent. The day I started seeing money mismanagement -- rent charged!

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Fairfax, Va.: When a friend of mine started her first job at age 15, her mom took all of her earnings and put them into envelopes. Each envelope was marked with where the money could go: car savings, general savings, gift savings, and spend money. At the time, this friend and I would commiserate about how mean and awful her mom was for keeping all her hard-earned money.

Ten years later, this friend does the envelope method herself, except electronically. She has absolutely no debt, and is doing great financially, even after being laid off for a few months in this economy. Her mom is/was a genius. We didn't realize it.

I think sometimes parents are so afraid of being marked as "mean" that they forget sometimes kids don't know best, and being "mean" is the only way to be! Sometimes taking the hard stance is the best way to have your kids end up in the right place.

Michelle Singletary: I'm often seen as mean by my 14-year old.

She don't know mean.

I just laugh and say to her:"One day I will get my glory. One day you will appreciate my so-called meanness."

You see I know she can't understand now. So I take the mean looks she gives me. I take the hit now knowing that down the road she will see.

Besides I'm not afraid of her. I'm not trying to be her friend.

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Atlanta: You can absolutely move those securities to another broker. Just talk with broker - they will be happy to help you fill out the paperwork and have that money with them rather than you. If you would prefer to sell and put money towards your student loans (and probably you should do that with at least some of it), be sure you understand the tax consequences, i.e., the basis for the securities you are selling.

Michelle Singletary: Good point.

Getting great help today.

Love it.

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Arlington, Va.: Michelle,

A very non-financial -- and also sort of financial -- question for you. Is there ever a perfect time to have children? I feel like I'm still too selfish (emotionally, financially) right now, which is why my husband and I haven't had any. When did you know? And, on the chance we have one eventually, how can we prepare financially for a child?

Michelle Singletary: Bill Gates is prepared financially.

The rest of us....well we get by.

I'm not sure I knew for sure it was time. But we did plan for it. We saved up for the months I would be home and not getting paid (six months). We knew we had money in our budget to begin putting money away for their college fund. We didn't have a lot of debt, student loans, credit card debt, etc. We knew we could pay for daycare and still put money away for our retirement. We had savings.

Most importantly we had a budget and had lived as husband and wife long enough to have a great rhythm going financially.

I don't think you can ever have as much money as you might like, but if your household is run well financially and you are ready mentally for kids...then it may be the right time.

Of course, I say that knowing many, many people don't have all that lined up. Have kids and still do fine.

So just plan as best you can. And seriously bring them into a house full of love, respect and fun. That is priceless.

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Washington, D.C.: "As you did, we paid cash for our new car, so why did we receive a notice from Experian that the dealer had checked our credit report?"

The dealers do this since they are letting you drive away with a new car after you give them a piece of paper (the check). Unless it was a certified or cashier's check, they don't know if it's good.

By pulling your credit report, they are deciding if they are going to trust your check to be good. They are just protecting themselves.

Michelle Singletary: Thanks.

Good to know.

And I did drive away after giving them a personal check.

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Parents and kids: If a child, even an adult, is getting financial support from his or her parents, then they have every right to be involved in that child's finances.

But once that child is independent, then a parent should give advice only when asked. I greatly resent when my parents or in-laws give my husband and me unsolicited financial advice. Some things are simply none of their business. Not to mention that they don't know all the facts when offering that advice.

Michelle Singletary: I can't say I won't give unsolicited advice. Just not in my nature.

So speaking from a parent who will do that, don't resent. Just know they probably just want to help. Nothing wrong with listening on the off chance that maybe, just maybe they are right about something or that they may guide you in a direction you never thought about.

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Kansas City: What would you do if you were getting $15,000 at the end of the year--pay off 8 small bills or pay off one large bill? I'm worried about improving my FICO score.

Michelle Singletary: I recommend listing all eight bills, starting with the one with the lowest balance. Pay off as many of the small debts as you can with that $15,000.

That will help your credit scores and your spirit. It may even help you quickly pay off that larger debt.

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Responding to Fairfax: My mother (Depression-era teenager) had the same method. She used those little brown envelopes from the bank. Then she would take out the bottom drawer from the electric stove and put the envelopes in that cavity so that burglars would not find the money (though we never had a burglar). She would give my Dad a cash "allowance" every week after he gave her his paycheck. The system worked all those years until he died.

Michelle Singletary: I love the envelope system and recommend it quite a bit to people who have trouble managing their bills.

It's very effective.

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Stone Ridge, Va.: Comment - for the person trying to lose their broker: They can ask that the account be transferred "in kind" meaning as it is now (not cashing out) - they must follow that direction except where something is a proprietary investment or fund (say, a Merrill Lynch fund), then they cash that one out and send the rest as is.

Michelle Singletary: Right, I believe that's what I've been saying but good to have more of the same.

Thanks.

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Washington, D.C.: Great article today and an issue I know a lot of people struggle with. I was really lucky that my parents taught me about money from an early age. I think they had good money habits because they didn't have much money. They offered an allowance, but I never over spent it. I watched my mother save (in her lingerie drawer) for family vacations, our after school lessons, prom dresses. They and I both saved for my college from the time I was a baby - if we got a cash gift, 10% had to go to the church and a portion (we discussed how much) into my college account. The rest was for my use. I saved out of my allowance for years for the SLR camera I wanted (and still have it). I was often told that I could only pick two of the clothes items I had found that I loved. When it became clear that grad school was in my future, I made the tough call to transfer to the local college and lived at home so that the money would cover the extra two years. Once I left for grad school, I've managed my money with the knowledge that there was no one to bail me out if I got in trouble. There were some lean years, but it feels good now. The key in our family was that my parents modeled good financial behavior - pay bills on time, save, buy less than you want - AND we talked about money and made decisions together for close to two decades before I really was on my own.

Michelle Singletary: Modeling. That is the key.

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Laurel, Md.: Great article today! I need help with trying to figure out how to recover from a Chapter 13 bankruptcy. Don't scream at me, but I had to do what I had to do, and now I'm paying it back; "a very expensive lesson." However, what should I do now to try to re-establish myself? The Chapter 13 will be discharged in about 18 months (long time), but oh well. I can never seem to save money, something always comes up. Just this morning, my engine light came on in the car and I don't have the funds to get it looked at, so I will just drive it until I can get funds to take it in to the mechanic. Any advice is appreciated. I thought about opening a saving account at a bank in another state, so that I can't get to the money easily and just have funds directly deposited into that account, but not sure!!!!! HELP ME!! I'm willing to be a case study!!

Thanks, Recovering from Bankruptcy in MD!!

Michelle Singletary: I won't yell. At least with a Chapter 13 you are paying back most of your debts. Good for you.

If you can eek out a little bit of money to save, try to do that. As you are finding out without a cushion any crisis becomes major.

As for the car, don't just keep driving it. You may make matters worse. See if you can find a reasonable mechanic and find out what is wrong. Maybe it's not so costly. Maybe you can negotiate to pay the bill in installments for a local mechanic not connected to a dealer.

Just try.

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Michigan 20-something: A little note to all you parents out there - Us 20-somethings didn't see you struggle, eat ramen, and worry about the cost of diapers. We do remember the nice tv, 300+ cable channels, and the cruise to the Bahamas. Let your kids know that you have to work your way up to your parent's lifestyle - you don't automatically assume your parent's economic status once you graduate from college!

Michelle Singletary: Really, really good point 20-something.

Love hearing from you young folks.

Thanks.

Totally agree.

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Parents & kids, again: I should have mentioned that my husband and I are in our early 50's now! And that my in-laws have some financial problems of their own, so I don't see them as role models.

Michelle Singletary: Oh, now that I can see.

I do have trouble taking advice from people who aren't taking their own advice.

Still, when this happens to me, I don't resent. I just smile, be respectful and do what I want.

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Washington, D.C.: Hi Michelle,

I absolutely love your column. You are wonderful!

Here is my question:

I have a credit card with Bank of America and of course they increased the interest rate, but I opted out. Now my interest rate is at 13.99% and I can't use the card anymore or else the interest rate will be defaulted to the higher rate. I really want to get rid of this debt ASAP ($3,800) but every time I make a payment I am getting hit with a $50 finance charge. I pay $100 which is more than the minimum. I have called multiple times to get a reduction in the interest rate but they are not budging.

I have tried to do a balance transfer for 0% interest card but I have not been approved. What can I do aside from what I am already doing (throwing as much money as possible towards it)?

I thought about taking out a personal loan with Navy Federal Credit Union ( no I am not in the military, just was able to join through a family member) but I am unsure about that. The interest rate is around 11%

Are there any other options for me? Aside from waiting on my tax refund?

Thank you so much.

Michelle Singletary: First thanks.

Second, if you can transfer the balance, don't take out another loan.

Just keep doing what you are doing. Throw $100 or more as often as you can. Be patient. It will get paid off.

And then remember the PAIN!

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Rockville, Md.: I have a finance question I'm hoping you can help me with. My wife and I bought a house two years ago. We have two mortgages, one at 6.5%, the other at 8%. We can't refinance as the house has lost too much value and we owe a lot more than it's worth.

Thanks to a recent inheritance, we can afford to pay off the second mortgage if we use all our savings. We should then be able to refinance the first mortgage at a better interest rate. Does it make sense to wipe out our savings to do this? We both have good, secure jobs and should be able to start saving again straight away.

Thanks for any advice you can give me.

Clive

Michelle Singletary: I just cringe when you say "wipe out your savings."

Can you keep some savings and wipe out as much of the second mortgage as possible. Then spend a few months paying off the rest and then refinance.

It's just I've seen too many people with so called secure jobs, not be as secure as they think.

And it's not just a job loss. What if one of you becomes ill or another major financial crisis happens.

Don't wipe out your savings.

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Re: Saving for a Child: Before we had our son, we added child care expenses and a 529 payment to our budget. Rather than paying a child care center or a 529 plan, we put the money in our brokerage account. This covered us in 2 ways, 1) we knew our budget could handle those expenses monthly once the child arrived and 2) by saving ahead of time, we managed to get way ahead of ourselves. This is a good way to prepare financially. If you don't have adequate liquid savings (we do, which is why we saved into a brokerage account), save the "expenses" in a savings account rather than a brokerage account.

Michelle Singletary: We did something similar.

Good tip. Sort of a financial trial run for the baby.

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Please give me some advice: I know you love to give it, and really, I will listen to you.

My husband and I are still living in a 2-bedroom condo we bought years before the real estate boom (and bust). We bought it cheap and have paid off the mortgage. We also have 2 cars that are paid in full. Not new, but they are in good working condition and have at least another few years to go before they die. We live in a good neighborhood with great schools and have two young kids. So why have we not upgraded to a bigger home? First, it was because the real estate boom made it a very big stretch to afford something better in our neighborhood. Now we can afford it, and have been saving for a long time to buy something. Our condo is paid off with equity of about 200k. We have 50K in savings and 200k in retirement. No other debt. So why am I finding it so hard to suck it up and buy something? I feel paralyzed by fear of losing our security to debt, but at the same time, we need more space. Any insight on what I should do to get my arms around this psychologically?

Michelle Singletary: Don't let fear run your life.

If you've worked the numbers and you seem like a person who does and you can afford to buy -- buy.

Have faith in what you've been doing, which is the right thing.

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Philadelphia: Michelle: Our daughters thought we were mean too. The oldest is now living on her own with a job and health care. She now -asks- for advice. I recommended that she get renters' insurance for her apartment contents.

The younger one has a full tuition state school scholarship, and a credit score of 750 (she showed me) at age 21.

After college, I lived at home to save money for our wedding. I also paid my parents rent, and helped out with chores around the house.

Don't be a friend, be a parent.

Michelle Singletary: So true. So true.

Hate me now. Love me later.

I can wait for the hug. Get lots of them from my fine, sexy husband!

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Arlington, Va.: After reading your columns and chats I finally realize that I have a debt problem. I'm about 6k in credit card debit after a variety of things (some emergencies, some poor choices). I'm trying to put $900 at it a month, but that leaves no room to add to my savings. I know I need to prioritize and pay off my debt first but things keep popping up and I don't want to drain my savings (around $7500). Any added advice besides keep going?

Michelle Singletary: You don't have to choose between saving and debt.

Do both.

But have a plan.

Figure out how much you want in your emergency fund. $7,500 might be enough. So then you don't have to keep adding to it. Do you want three, four, six months of living expenses in your emergency fund?

Three is probably good if you have a good, stable job.

Then some money in the life happens fund -- maybe $500 to $1,000 for the stuff that comes up.

Then set on a plan to pay off the credit card debt. Maybe $900 is too much because you need to divert it to savings. You are in a rush to get rid of the debt. I get that.

But you probably didn't get into that debt overnight and you won't get out of it overnight.

Definitely aggressively pay it down but not at the expense of having some savings peace.

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Elkridge, Md.: Michelle, My mother was shopping at Walmart and someone cut the strap of her purse and stole it off of her shopping cart. The thief charged over $300 in the store before my mother tried to check out--and found her purse was gone. She reported the missing purse to Walmart. She notified her bank and they helped her notify her credit cards. She reported the theft to the police. I helped her get a new State ID Card and lent her cash since her credit cards and bank account were frozen to prevent anymore theft. I called her health care insurance company and they'll send out a new card. I got her apartment door lock changed since the thief had her address and keys. At her request, I got her library card cancelled so that the thief couldn't use her library card to steal library books and sell them. I visited the SSA website and will follow their instructions to get Mother a new Social Security Card (we're supposed to keep the SS Card in a safe place--not in a purse). Whew! I will help Mother monitor her credit cards and bank statement and health care documents and Social Security statements. Did I miss anything? Thanks for your advice.

Michelle Singletary: Can I adopt you!!!!

Looks like to me you've covered the bases. You might want to put a fraud alert on all three of the credit reports.

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Ready for Kids: They say if you wait until you can afford them, you will never have kids. Michelle has is right, you live by a budget; kids or no kids.

As for when it's right, you will know in your gut. I knew when I was 40, but wasn't yet married to my wife. We still waited almost two years, but we both knew we wanted kids...

The real question is how many kids? haha

Michelle Singletary: Good point.

I had three. They outnumber us.

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Chapter 13/check engine light: Before you take the car anywhere, check your fluids and your gas cap. A quart of oil doesn't cost much but could cause the light to come on. These days, some cars check engine light will come on if your windshield washer fluid is low. Did your gas cap click when you tightened it last? If the cap isn't tight, that can also cause the check enghine light to come on.

Michelle Singletary: Hadn't thought of that.

Thank you.

Just please check. Don't keep driving without doing some checking.

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Atlanta: My sisters and I all moved home after college because, well, we had no money and no job and well, didn't have $1500 a month for rent (in NY). Mom charged us some minimal rent, and we wanted to get out as fast as possible (what's that "Breakfast Club" quote? about wanting to leave home? - "if it were pleasant, no one would leave").

I see no problem if the parents have space and charge their kids rent. I always say: if I'm fine with how the kid is doing, the rent would probably be low - I'm not unhappy, and the rent increases. You don't like it - you can leave. My kids are only 7 and 4 now, but I don't see my attitude changing at all. But the parents can't be wishy-washy either. My sister-in-law lived with her parents after college - and she was the youngest - and well, they didn't want her to leave. They didn't charge her rent because well, they didn't want her to leave and so they were scared to. So then she went off to grad school - and she's NEVER held down a job that could possibly pay even half her bills. I don't necessarily think that this a good thing.

Michelle Singletary: A cautionary tale.

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Courthouse: Hi Michelle-- My husband and I recently married. How do we begin to merge all of our accounts? Where's the best place to start? Thanks!

Michelle Singletary: Can I be a bit bias on this one.

Get "Your Money and Your Man." Great book by yours truly and lays out how to merge your money with your spouse.

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for unsolicited advice form laws: remember - turn around is fair play. Don't forget the person who wrote in worried about her inlaws retirement plans. Use this as an opportunity to discuss your inlaws finances and retirement plans.

Michelle Singletary: Good point.

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Laurel, Md.: Thanks. I will check the engine light!

Michelle Singletary: Great!

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Michelle Singletary: Oh guys, I'm so sorry I have to go. There are so many good questions I didnt' get to. I'm so, so sorry.

But I'll answer some in my eletter. So sign up -- and open it up.

Or I might answer in my print column.

Thanks again for joining me today. Thoughtful comments.

And can I ask a favor?

Can you look out for and/or pray for the many, many people who are suffering in this economy. I'm helping a few and well it's overwhelming for me to watch them suffer.

Someone asked during the chat about what to do with some extra money.

How about giving it to some people in need right now. Buy some groceries or gas for someone out of work. Check in with friends or relatives or former co-workers to see if they need anything.

In some cases, don't even ask, just help.

It's so tough for a lot of people. So of you have it to give, give.

Take care and see you back real soon.

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Online: Can you please have a chat everyday? Just being in the frame of mind that saving is a priority has kept me from buying anything today.

I am eating away at my emergency fund with online shopping. I have always been a saver, but now that I own my own home, I can't stop buying all the stuff I couldn't buy when I was saving for my home.

What gives you motivation to not buy "stuff"?

Michelle Singletary: I'll toss this last comment in even tho I signed off.

I have a budget and so less temptation.

And honestly, I see so many in need, my need to buy stuff I don't need is so much less these days.

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