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Michelle Singletary
Washington Post Columnist
Thursday, November 19, 2009; 12:00 PM

Personal finance columnist Michelle Singletary hosted a live discussion on Thursday, November 19 at Noon ET with Lynn Jimenez, author of "¿Se Habla Dinero? The Everyday Guide to Financial Success," a personal finance book geared toward multigenerational Hispanic families, and Randy Grindley, a certified financial planner who consulted on the book. Jimenez is also an award-winning business reporter for KGO Radio 810 in San Francisco.

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: Good afternoon everyone.

Looks like it's going to be a great chat. Already some good questions.

So let's get started.

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Boston: Michelle, this Money chat is like "Monday Night Football" in that you have the entire Post noontime chat hour to yourself. Are you feeling the pressure of the extra attention?

Michelle Singletary: LOL!!

I THRIVE under pressure.

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Hyattsville, Md.: Hello Michelle,

Thanks for your excellent advice!

I have two credit card accounts and am trying to pay the balance on both. One has a balance of $879, at an APR of 15.24%. The other has a balance of $1308, with an APR of 10.9%. I am paying off the minimum monthly payment on one, but doubling the minimum amount on the other (the one with the bigger balance). Which one should I concentrate on paying off first? Thanks.

Randy Gridley: In almost all cases you want to pay off the highest interest rate balances first. That way over time your payments will be less interest and more principal so in the end you'll pay the balances down faster. So pay off the card with the 15.24% interest first.

Michelle Singletary: I differ from Randy, although a study by Consumer Reports recently indicated that most methods of paying off debt are about the same as long as you stick to the plan.

I typically tell people to pay off the debt with the lowest balance first. That way you get a HUGE emotional boost of getting striking one debt off your list. That in turn typically motivates people to quickly get rid of the next in line debt. If you pay off the debts sooner, then you don't end up paying much more in interest anyway.

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Severna Park, Md.: I have a daughter (age 23) who, despite being under-employed at a minimum wage job still thinks she NEEDS a new pair of jeans this week and needs something else next week. I am not supporting her, but I would like to offer her some guidance. I have always budgeted and been frugal (for example, taking in lunch), but any attempt to discuss budgeting results in her attempting to justify why she eats out constantly/buys more clothing, etc. What book would you recommend as an introduction to budgeting and identifying wants v. needs? Thank you.

Lynn Jimenez: It's hard for young people who've depended on the bank of Mom and Dad for a long time to change their ways. In my book I try to explain that money is just a tool. It's how you use it that counts. You can use it to look rich...spending on clothes and vacations. You can use it to become rich..spending on education, and investments that appreciate.

The game to all of this is to try to keep as much of your money for yourself instead of handing it over to others, so you have options to do what you want.

The resistance to budgeting isn't unusual, but if it's positioned as a game plan or blue print for independence it may appeal a bit more.

My book helps with that..but so do many others...what's more, there are online budgets, even budget games. Maybe offering your daughter a challenge to match a certain amount she saves, and also providing her with a budget blue print would help.

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Baton Rouge, La.: What is a safe, reliable way to invest in gold? I don't have a "financial adviser." Where do you go to buy gold?

Randy Gridley: Investing in gold can be tricky an never entirely risk free. You esentially have two options, invest in companys that mine or refine gold, or invest in the metal itself. The mining companies are not usually the best bet as they can get hurt in a bad economy due to a fall in gold demand from jewelery and luxury goods. The actual metal is better but it raises the issue of safekeeping. If you have a safe deposit box or similar very safe place to keep it then I'd recommend gold coins or bars but be sure to buy them ONLY from a reputable, established dealer. As an alternative you could buy gold ETFs (Exchange Traded Funds) like GLD which you should be able to buy directly through any stock brokerage house. ETFs have the advantage of being easily bought and sold but also cost a comission and ongoing management fees. Be careful because gold prices can be very volatile so it's possible to make AND lose a good deal of your investment in a short period of time.

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Washington, D.C.: Hi Michelle, Thanks so much for these chats. I always learn something from them. I have a general question regarding financial planners. My partner and I are in the process of merging accounts and our finances in general. We need to find a financial planner to help us figure out where we are now and plan for the future. I have the feeling that many planners only advise on investments and investment portfolios (stocks, bonds, etc.) Am I wrong? Where can I find someone who can take a general look at our finances, including our assets (two condos), liabilities (consumer debt), retirement accounts, expenses, etc. and design a road map for us to know where we are going. Thanks so much!

Randy Gridley: Hi. You're right that many Financial Planners mostly want to manage your investments. This can be a problem for people who are just getting started saving or have investments like real estate or a business and as a result don't have much to invest in stocks and bonds. The good news is that there are lots of planners who will work on an hourly basis, charging you only for the time they spend. You can find them through a variety of sources including through the Financial Planning Association at fpanet.org (go to the Planner Search function). When all else fails, call planners in your area and ask, most will know collegues that do hourly planning. Your Planner candidate should be willing to talk to you about what he/she does before you hire him/her. Look for someone with a CFP (Certified Financial Planner) credential as that will guarantee you a high level of expertise.

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Fairfax, Va.: Hi Michelle -- Not a Book Club question, but I'm wondering if you can give me advice on something that has me absolutely FUMING. I received a notice in the mail yesterday that Citibank is jacking up the interest rate on my MasterCard to 18.99%. This is an increase of 12% in less than a year (they increased it once before, in January 2009, to 11.99% from 6.99%). I have had this card for 15 years, always pay more than the minimum and have never paid late even once.

The options they offer are to either accept these new terms or close the account (which will hurt my credit rating). Their rationale for the increase is so they "can continue to provide our customers with access to credit." Citibank accepted BILLIONS in federal bailout money last year, and has made a HUGE profit 3 quarters running in 2009. They also continue to bombard me with balance-transfer offers at 0% so I can borrow MORE money, while making it almost impossible for me to pay off the balance I already have (yes, I know, I shouldn't have a balance at all -- but when you've been laid off multiple times in just a few years, it's quite a challenge to replenish those "emergency" funds, keep food on the table, gas in the car and a roof over your family's head without touching the credit card).

Who do I call/talk to at Citibank to get them to reduce this rate? I'm really trying to get this balance paid off, and they're making it impossible for me to do so. Do they really not want good customers like me any more? Thanks for any advice you can offer!

Lynn Jimenez: You can call the number posted on your card to ask for a reduced rate. But don't settle for an answer from the first person you talk to.

Even before you call, have a list of reasons why you deserve the lower rate. (you pay on time, your length of on-time payments, your other services from the issuing bank, if there are any). It would also help if you've done some shopping to see if you can get a new card somewhere else with a lower rate and favorable terms so you can explain you may have to switch if you can't get satisfaction.

Then when the first person you talk to says they can't do anything for you, you should ask for their supervisor. Never raise your voice or threaten. Always write down the date, name of the person you spoke with and what was said.

Michelle Singletary: One more thing to add to the great advice from Lynn.

If you are not carrying any balances on this card or others, you can close the account. According to the company that produces the widely used FICO scores, closed accounts often stay on your credit report for YEARS. I just checked all three of my credit reports and cards that I closed years ago are still listed and contributing positively to my length of credit history.

So again, unless you have an outstanding balance (which means closing an account can impact your debt ratio), kick that Citibank card to the curb!!!!

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Cincinnati: Michelle, I know you've had a ton of questions along this line but I don't know if you fielded this one yet: I closed out my AT&T Visa, because Citibank raised the rate twice in the last 4 weeks. First they said I had had a temporary promo rate that expired in September, and they didn't notify me until they sent the October statement. There was no opt-out to keep the 7.99% rate, and the balance went to 14.99%. Then this week I received a letter saying the rate would go to 18.99% in December unless I chose to opt out. When I called to opt out, I was told the 14.99% is only good until they raise rates again, and that there is no limit or maximum on rates for the card. Is this legal? I opted out because I can pay the balance off with a home equity line, which I know you don't approve of, but it has a much lower rate than any credit card. I don't care if the credit card closing goes on my credit report as bad, I've been paying off debt slowly but surely, am just very disappointed over the raised rate, since I never paid late or missed payments, have excellent credit.

Michelle Singletary: You are right in that I would advise you NOT to use the equity in your home (if you have any) to pay off credit card debt. Bad move in any economy. You essentially take unsecure debt and make it secure debt. Not good. Don't do it.

Take the hit and time to pay off that debt using your money and not more borrowed funds.

Furthermore, when a credit card company closes an account because you opt out of being gouged with a higher rate, that act in of itself (closing the account) is not considered bad or good on your credit report. It only matters really if you have outstanding debt, which you do. Then it impacts your debt ratio.

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Washington, D.C.: In this economy, it seems that credit card companies will close your account if you do not use them. I've kept several cards open that I no longer use, which in the past year were all closed due to inactivity. I didn't really care but I recently looked at my credit report. Most of those companies reported the closing "at the consumer's request" which I know is good. However, only one said "closed by card issuer" or something similar to that. I don't have the exact language in front of me. Does it matter? Does this hurt my score? Thanks.

Lynn Jimenez: Closing a credit card at your request is acceptable, but it reduces the amount of credit available to you. Depending on how much credit you carry from month to month on any card that can still hurt your credit because it changes the ratio of what you borrow to what you're able to borrow. Now, as to the card closed by the card company: you have the right to find out why, and the right to post your side of the story. So, you can post a message saying, the card was closed because I did not use it. I hope that helps.

Michelle Singletary: But again folks, doesn't matter who closed a credit account. That specific information does not factor into your credit scores. So it doesn't matter who closed the account, you or the lender.

It only matters if the resulting closing was because you defaulted but it is the default as opposed to the notation of who closed the account that matters.

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Worcester, Mass.: Michelle - I love your columns and chats. I'm LOL at my desk about your comments today on Eggo waffles and celebrities sex videos. I mean, really, are Eggo waffles so good that they're worth $49.99?!! It was my thought that sales were down and an artificial shortage was just the thing to drive up business!

washingtonpost.com: Today's e-letter: I'll leggo my Eggo...for a price.

Michelle Singletary: I aim to please. And I love it when people are amused by personal finance stories.

The Eggo one is a total trip.

And don't tell my hubby about the sex video line :)

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Fairfax, Va.: Michelle, regarding today's column, I have a comment and a suggestion.

First, regarding gift card receivers' spending more than the cards' value when redeeming them: Of COURSE they're going to do that -- it is very difficult to spend exactly the value of the card, and if they spend less, then they're stuck with a card with crumbs left on it, which is even harder to remember to use.

The suggestion: For anyone who, like you, puts a gift card away and then forgets about it, I suggest converting the card to cash yourself and putting the money away in an envelope, with a little note on it "gift card from Aunt Marcy for -insert store here], $XX, Christmas 2009". Then you can use the gift card itself on hair rollers, diapers, or whatever else you need, and still have a redeemable surprise when you come across the envelope again. Of course I realize this doesn't work for every card, and we might not have the spare money to convert all the cards to cash, but it protects us against a store's going out of business before we use the card, we can spend the cash anywhere we like (whether at the original store or not), and it's a start while we wait for the Feds to eliminate the fees.

Lynn Jimenez: I love that suggestion! and for those of you who give gift cards, beware! Many general purpose cards, say from Visa, Mastercard and others carry lots of fees. Beyond the fee you may pay to buy them, if your gift recipient doesn't use the card for 6-12 months, he or she may have to pay a monthly inactivity fee. That chips away at the value of your gift. What's more some cards won't let you redeem the value of what's left over if it's too small...and so many people leave that money sitting on the card, to be used by the card holder. What's more some cards expire. The laws differ by state, so read the fine print!

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Financial Counseling doesn't work?: Hi Michelle,

I recently attended an event at a DC think tank about the Consumer Financial Protection Agency (CFPA). My primary reason for attending was to see what banking industry leaders would say about the CFPA regulating financial activity including financial literacy.

Unbelievably, I heard some elitist academic saying that he hasn't seen evidence that financial counseling works except right before people make a significant purchase. What about teaching kids in school about savings accounts and checkbooks or minority communities about banking in general? I think the problem is that there isn't enough financial counseling and literacy among all ages and groups but especially those who have never been raised knowing about it!

Thankfully another panelists shot down statement (the lone voice of reason on the whole panel). Can you believe that people think this way? Unfortunately, some of them are the ones swaying policymaking here in DC for the nation. Just a comment.

Michelle Singletary: I can believe people think that way.

Idiot!

I've seen up close and personal that financial counseling does work. I've counseled many people and they have gotten out of MAJOR debt. Seen people save their marriages.

So glad someone shot that knucklehead down.

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Washington, D.C.: We have just paid off a lot of debt, and we're buying a house (hooray! We should be left with about a month-and-a-half of an emergency fund after closing. Budgeting wise - how can we update our budget for utilities and other outside-of-the-mortgage expenses that we can't predict right now? We are saving at a very good clip right now, and I don't want to lose that ability in those first few months in our home.

Lynn Jimenez: Kudos to you! You sound as though you control your money instead of the other way around.

First, if you're shopping for a home, you can always ask the neighbors whether utility bills in their area are high. In some cases, if you know the square footage of the home, and the kind of heating and cooling systems, you can check with the local utility company about the average bill. This should make it very clear why double paned windows and proper insulation are important things to look for when home shopping. Your realtor may be able to help you with this as well.

Next, you can't predict everything about the cost of being in a new home. You've heard the term "money pit". That term refers to houses. So just keep up or improve your current saving habits.

Finally, you need to boost your emergency fund to a minimum of three months (though in this economy a minimum of 6 months if wiser). You sound as though you have a level head on your shoulders. Happy house hunting!

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Bowie, Md.: Ms. Jiminez, people who think outside the box about overspent Americans have long pointed out that we have a much lower percent of multi-generational households that most other industrial nations. (Of course, we're also less densely populated.)

From what you've observed, would increasing household sizes be a feasible large-scale economizing move?

Lynn Jimenez: I love that you think outside the box. Keep it up.

Frankly, I doubt that increasing household sizes would have a significant impact. Though you may find this interesting: The population of Hispanic Americans is growing about 4 times that of the general population. The fastest growing segment among Hispanics in the U.S. is that of second generation Hispanics. That means 88 percent of Hispanic children are born in the U.S.

What does this mean for size of household? Hispanics often live in multi-generation homes. Grandma, parents, and children live together to contribute to the household. So as that population grows, the average size of the U.S. family may edge up a touch.

But remember, as the 2nd and then third generations grow, so does assimilation, and there's no guarantee lifestyle patters will remain static.

So, to answer your question? It's not likely to have huge impact, but good try.

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Best Financial Choice: Hi Michelle - I hope you can provide some guidance on a dilemma I'm facing. I purchased a condo 4 years ago with an ARM. It's scheduled to reset next December. So, I've been aggressively trying to pay off the second mortgage so that I'll only have the first mortgage to deal with when it comes time to refinance. I will be done paying the second mortgage by next August. The dilemma is that I've found a perfect job that starts at $20k below what I currently make and would affect my ability to continue paying off the second mortgage. The salary reduction and lack of long-term employment (if I take new job) may also affect the interest rate I get when it comes time to refinance. I have life happens and emergency funds and no debt besides the two mortgages. I live below my means so taking the salary cut would not be a problem. I just need to know that it makes sense to try to better position myself when it come time to refinance. Is this a good strategy - trying to pay off the second mortgage to be in a better position to refinance?

Randy Gridley: Mortgage lenders will look at two things when they consider your refinancing request. 1. What is your income? and 2. How much equity do you have in your home? These days you need to make both hurdles in order to get refinanced. You didn't mention what, if any equity you have in your condo but assume you'll need a minimum of 10% (no more than 90% loan amount to the current value of the property) and probably more, to get a new loan. If your combined 1st and 2nd mortgages exceed 90% of the value of the property then you'll have a very tough time refinancing regardless of your income. If you do have more than 10% equity, and better still closer to 20%, then the issue really revolves around do you have (or will you have) enough income. A very rough rule of thumb is that your total monthly cost of mortgage payment + taxes + insurance + condo fees (remember that's a monthly cost) can not exceed 28% of your gross (before taxes) monthly income. This is only a rule of thumb and some lenders will allow exceptions so it might be useful to actually ask what size loan you'll qualify for based on your expected future income. Try just chatting with a lender at a local bank to see what their requirements are. If they're not really busy, they're usually very willing to help even if you don't plan on getting a new loan anytime soon.

Michelle Singletary: Randy gave you some great details.

But let me ask you something else.

How important to your life (mental health, happiness) is it to take the new job?

You are facing a huge pay cut for sure, but if what you get in return is better job, something you really want to do, etc.? I would think about taking the job.

Please do consider job security in this economy, however. You may want to pass on the job if there is a high percentage possibility that you could be out of work.

So having said all that, what I'm getting at is peace is worth adding to this decision.

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Los Angeles, Calif.: Hi Michelle - Love you and all your great but tough advice!!

Two things: First, I want to thank you and your readers from the last chat for sharing their experiences with putting cash in envelopes as a way to help stick to a budget. This is something I've thought about implementing for my husband and myself for months now and to hear about other peoples' success with this method has motivated me to finally do it.

Second, I want to thank Lynn for writing this book. My husband is a young, native Spanish speaker who is not much better with money than I am. I'm THRILLED that there is now a book that we can sit down and read together to get ourselves on the same page (pardon the pun!) about our finances!

Lynn Jimenez: You make my heart soar. Thank you for such a wonderful compliment. I wrote this book out of gratitude for the opportunities I was given and with a vision.

I imagined a family with Grandma speaking only Spanish. She hid her money in the mattress. The parent's English was spotty, and they may or may not have used a bank. The children spoke "Spanglish" and their idea of money management was to have a credit card.

And there they were around the table trying to send the eldest to college, buy a home,or start a business. I hoped this would help them be able to speak the same language when it came to money.

That you and your husband find my book useful means the world to me, and thank you for your kind words.

Michelle Singletary: I do have great chat participants with great financial wisdom.

So this shout out goes to all of you who help others during this chat.

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Rockville, Md.: Regarding gift cards. I don't know why they are so popular. If I want to give money, I give cash, with a nice card.

I really think consumers should protest the shenanigans of the companies that sell gift cards and boycott them entirely. Cash is way better.

washingtonpost.com: Can the Fed end my hatred of gift cards?

Michelle Singletary: Way better!

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Washington, D.C.: Dear Michelle, We just learned that we are expecting twins!! We are very excited (my 2-year-old will probably be less excited). Am I crazy to quit my stable, six-figure federal government job once the twins arrive? Our household income would thus be cut in half. Though we have no debt except for our mortgage, I am worried whether we can manage. Do you have any advice on how to prepare for this drastic change in finances? And then there's the issue of how to get back into the workplace once my kids are all school-age (perhaps that's for another time to discuss). Thank you so much!

Michelle Singletary: One word. BUDGET.

Seriously, work the numbers now.

Here's a calculator on how quitting would affect your monthly budget

http://workingmoms.about.com/library/bl_quitbudget.htm

You may find that after factoring child care for three kids under three, clothes, commuting, etc. quitting and losing that money won't be so bad.

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For Washington, D.C.: FYI, when you're buying a house, you can ask to see the last year's utility bills (our sellers had already pulled that together before they put the house on the market). That will give you at least some idea of what heating and cooling costs will be.

Also, don't forget to check whether the house comes with window coverings! Learned that one the hard way -- even the "cheap" stuff is WAY expensive when multiplied by 15, 20, 30 windows!!

Michelle Singletary: Thanks.

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Gift Cards: I'm confused about the suggestion to convert gift cards into cash, yourself. How do you do that?? I can't just take a $25 Macy's gift card into the bank and say "give me $25 cash for this please."

Michelle Singletary: I think the person meant, you put aside the money yourself and then regift the gift card to someone. That way the $25 you would have spent for someone else is the $25 you can now use for everyday stuff you didn't want to waste buying with a gift card.

I think.

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Richmond, Va.: I recently inherited $60,000. I would like my two adult children to share it. Is there a way to give them the money without them having to pay taxes on it?

Randy Gridley: Current tax law allows you to gift each child (or anyone else for that matter) up to $13,000 per year, tax free. If you give each child $13,000 before December 31st and another $13,000 after January 1st you'll have gone a long way toward distributing this money and if you wish you can gift the remaining balance in January 2011. Also you can gift up to $13,000 to each of their children too if that helps. Keep in mind though that gifts to minors (those under 18) need to be done in a trust account (called UTMA or UGMA accounts). These can be easily opened at any bank for free. Better still, if you have grandchildren headed to college in the future, consider opening up a 529 college savings account for each of them.

Michelle Singletary: You might also inquire as to whether they have any debt -- like student loan debt. Then use the money to pay off that debt making the payment directly to the lender.

Or help pay off a car, etc.

When people found cash they often don't think to retire debt.

Just a thought.

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Baton Rouge, La.: Thank you for your advice about gold. Where do I find a established dealer or make sure they are reputable?

Randy Gridley: As low tech as it sounds, look in the yellow pages. Scammers tend to do business online or through the mail, so a shop with an established storefront helps. Sometimes big banks can help you out too. Many people prefer to buy coins as opposed to gold bars because it much harder to fake coins.

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Cincinnati: Hello Michelle,

Despite all the news about the economy rebounding, I am a self-employed consultant who was in bankruptcy court two weeks ago today (chapter 7). Hard to pay one's bills when my income is one-third of what it was this time last year.

My question concerns my car: I'd like to keep it, but it is upside down in its value. My attorneys say lenders will sell me a new car (high interest rates, of course), but most want wait until my case is discharged in February. I'd like turn in my car to my lender now, but don't want to lose my car. I can barely meet the payment.

Do you have any advice on this and how to handle it logistically?

Michelle Singletary: And you didn't want to give the car back in the bankruptcy, so that what you owe is discharged in bankruptcy?

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Washington, D.C.: My husband and I have a family of five. Our mortgage payment is only $200 more than our daycare bill. We've come close to missing our mortgage payment twice. We've called Wells Fargo to inquire about getting some kind of help, but they've not been able to offer us anything, stating that they only help when a payment is actually missed. Is there anything we can do?

Lynn Jimenez: My heart goes out to you.

Run, don't walk to www.makinghomeaffordable.com to see if you qualify for a mortgage modification program run by the Treasury Department. You should not and do not need to let your mortgage lapse to take advantage of this. Make sure you get all the material required together to press your case.

At the same time, you may want to check in with www.nfcc.org to see if they can intercede with your lender, or at least help you squeeze out more savings to go toward your mortgage.

Also if there are any events by www.naca.com in your community, go. They also link you and your lender up.

Here's the bottom line: Your lender has a bad history when it comes to helping with mortgages. Frankly, there's not a lot in it for them. They don't want to accept less money than they expected for their loan, and they may have sold your loan to a large number of investors who can't agree on whether to modify it for you.

If you fall behind on your mortgage, make a short sale, or are foreclosed upon, your credit score goes down 150 points. If you get the making home affordable modification, it stays static for the next 6 months at least.

Do all you can 24 hours a day to get that modification, or failing that to get your lender to move.

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Reston, Va.: Hi Michelle,

We refinanced our mortgage, and the lender sent us a summary of our credit reports. While our scores were very high, one comment on mine had me scratching my head. The credit agency didn't like the proportion of available revolving debt to its balance.

Since we pay our revolving cards off every month (and thank God for that - Citi is raising our rate to 24%), I can only surmise that not carrying a balance is a negative.

Is that true?!

Michelle Singletary: Not true. Not carrying a balance helps your credit score, not hurts it.

You have to sometimes ignore the codes or explanations on reports. They often just list something to list it. It could have been that one month --before you paid off the balance -- you were close to your available balance. Keep in mind that credit reports are pulled all thu the month.

And your credit card company is raising the rates because it's suffering, not necessarily because of anything you did wrong.

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Twins: Since the soon-to-be mom of three is a federal employee, I would highly recommend looking into the possibility of part-time work. I worked part-time for two different federal agencies when my children were younger. You keep your "hand in" and some of your income, but life is a lot less frantic than if you were working full-time.

Michelle Singletary: Good point.

Although, with three little ones even part-time seems a bit much.

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Washington, D.C.: What advice do you have for sticking to a budget? I can do it for one or two categories at a time, but more than that just makes me go off course.

Randy Gridley: Sticking to a budget is like being on a diet; it's much harder to do that you think. Try paying for things in cash as much as you can instead of using your credit card. Constant small charges on a credi card quickly add up, but if you're paying with cash it forces you to visit the ATM regularly and you become much more aware of what you're spending. Also limit your ATM withdrawals to $50 or $100 each visit so you are actually a bit inconvenienced if you want to by something big. Leave all your credit cards in your sock drawer (or somewhere else out of sight) and start paying cash. It can really help.

Michelle Singletary: Also, if every penny has a purpose, it becomes harder to spend outside your budget.

By that I mean you need a plan, a purpose for what you want to do with your money. For example, mine is to save enough to send all three of my children to college without borrowing any money. So with that in mind, it's hard to overspend. I want them to get a good education and get out of my house so I can run around naked again for my hubby!

See purpose, hard to spend.

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Vienna, Va.: Hi Michelle! Thanks so much for your great columns. I have a question about credit card limits: My husband and I are 29. We've never paid a bill late and always pay in full. We really use one credit card (Master Card), though we do have a couple of store cards we only use to take advantage of store sales. Right now, our Master Card limit is only $6,000. Should I ask for a credit line increase? Does that improve our credit score, hurt it, or not affect it? I'm not looking for the increase in order to purchase more things, but just potentially help our credit scores, which are very good.

Michelle Singletary: No need to ask for an increase. Keep doing what you are doing.

Having a larger line if you pay off your balance every month does not do anything for your score.

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Best Financial Choice Again: Thanks Randy and Michelle for your response. I am under water on my condo by $100k, so there's no equity and I would not have 10% to put down especially if I take the new job. With the new job, my housing costs would exceed the 28% of my gross. But, you're right Michelle, I'm taking the new job for sanity sake, but don't want to create a financial situation that I will regret. I appreciate your feedback.

Michelle Singletary: Thanks for the additional info.

Please watch that ratio for housing. I believe in being happy at work, but you don't want to end up unhappy in your finances.

Go back and rework those numbers because it could be that your dream job may have to wait.

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Although, with three little ones even part-time seems a bit much...: I might beg to differ, twins can be overwhelming. Mom may need some part time work just to keep her sanity.

Michelle Singletary: Beg if you want.

But I have three kids, stayed home six months with each one and I had NO energy, mental or physical, to do a part-time job.

Taking care of three little ones (twins) will be a full-time and part-time job. They won't be little for long and she can return to outside work.

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Alexandria, Va.: Resetting an ARM... it was mentioned by someone here that their ARM was going to reset soon.

With interest rates very low, shouldn't the new rate be very low as well?

(I've got a 15 year fixed at 5 1/8 myself.)

Randy Gridley: The new rate will likely be low but depending on the loan, it also will probably reset again in a year, if not sooner. If you have lots of capacity to handle a higher payment down the road this may be a game worth playing. If you're more conservative (and many people with 15 year loans are) then you may want to consider refinancing into a fixed rate loan, even though it may cost you a little more in payments now.

Michelle Singletary: And if the person was not paying interest, adding that can make the payment higher of course.

It also depends on what index the lender is using and how much of an add (prime plus whatever) is part of the mortgage. So yes, even with rates lower, many people may still end up paying more than they are paying now.

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Fairfax, Va.: A tip on gift cards..I put a tiny sticky w/the card balance on the back of the card which I keep in my wallet and update each time I use the card. When the balance gets low ($5 or less) I make sure I use it on a cash purchase and use the last penny.

I had also gone through the house and found every gift card I had and planned my purchases so I could use the cards with minimum use of my own cash.

Michelle Singletary: Good tip.

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Financial Ed: Financial education and financial counseling are different things. Even those who deliver financial education in schools say there is isn't a lot of evidence to say that it leads to the right behaviors. There are reasons to provide financial education, but they must be supplemented with systems and processes that support the behavior change (e.g., educating people to save has not lead to the same level of positive results that making enrollment in a 401(k) an "opt out" instead of "opt in" has).

Lynn Jimenez: You're right. But if people don't understand the basics taught in education, they won't understand what questions they need answered by counseling. I say give them both!

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Washington, D.C.: Thanks for the chat! Michelle, how do you know when you have enough in your emergency fund and life happens fund? Also, how do you balance the savings for medium term vs. investing for retirement?

I have enough in the emergency fund to cover about 6-7 months of expenses plus an additional $9K in my life happens fund. I want to start saving for things like getting married (my bf and I will be footing the bill ourselves), a house and things like that. But if I focused only on that, I won't have much leftover to put into retirement, beyond my FERS government savings (which I am maxing out).

How do you balance saving for things like a wedding without debt, a down payment for a simple house but with 20% down versus saving for the future?? I've been going around in circles and can't seem to find the right answer.

Lynn Jimenez: I never like to recommend that you stop saving, and I won't. But I would like to remind you that you can't, and shouldn't put your life on hold. It sounds as though you are very risk averse, but you're also young and that you deserve to enjoy life a bit.

Unless you think your job is in danger, it sounds as though you have have enough cushion to get you buy for about 9 months. If you choose, you can extend that to one year. Then start saving for your wedding and home and the other things you'd like to save for.

As to retirement, why don't you agree to allow yourself to continue to save the way you are for now and not change it until you've been married for 6 months or so? That way that stress is off the table until you've had a chance to see what life brings you as a couple.

Your question about balance is a good one, and one we all struggle with. Realize there will always be a trade off between spending on the present and saving for the future. Then help yourself with that by setting up a game plan, (aka budget) that takes that into account. Don't starve yourself now, or you won't make it to the future. Just save constantly and automatically, and you'll be fine. Your parents raised a smart child.

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Houston, Tex.: My in-laws' business is being badly hurt by the economic downturn and they've been hit hard for the past two years. Although they have already made a lot of tough decisions with regards to downsizing, they are faced with even more. They are now considering selling some property that they've had for 20+ years and were planning on for additional retirement income. I know Michelle generally does not advocate loaning money to family--and I know my in-laws would not accept a gift from us (more than likely, they would not want to accept a loan from their kids either). I know we do not have enough money to be able to make a big difference in the state of their business right now, but perhaps we can help their personal finances to get them through this rough patch and eliminate the need for them to raid their retirement nest egg.

They're business has been around for over 30 yrs and has a good fluid model to be able to recover once the economy picks up. I am not worried about their ability to earn, I am worried about their ability to get by until the earning returns.

How would you suggest that I approach them with this offer? And what terms would you suggest I put on the money? I would feel comfortable making it a gift, but I don't think they would be comfortable with that. We have the ability to help and we're family, I want to help.

Lynn Jimenez: You are a wonderful daughter or son-in-law. Selling the property now when the market is so bad would be a shame.

I would suggest that you explore a couple of options. First, if you want to give it as a gift, check any tax ramifications depending on the size of the gift (13K is the limit).

I think a better approach would be to suggest that they let you invest in the business with them by making a loan to the business. This relieves them of having to repay the loan should the business go under. And allows them to see it as an investment instead of a handout.

Always put any loan in writing to protect both sides. You can set up terms to make it an interest only loan for the next several years at least. That will make a small amount of money go farther.

Don't forget you have to declare the interest paid as taxable income or the IRS won't be happy.

Let your in-laws know you believe in them, that you understand it's a business, and that you WANT to help.

Then, if they say no, live with it.

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Washington, D.C.:: Just wondering if I buy a car, does my credit score take a hit? I was just wondering what sort of impact that has on one's credit score.

Lynn Jimenez: It depends on how you buy the car. If you pay cash your credit score is neither helped nor hurt. If you pay a little at a time, you can help your score by building a positive credit history. But that happens ONLY if you're not borrowing above 30% of the total credit you have available to you. If the cost of the car would make your use of credit jump beyond that, you should make as big a cash down payment as possible, and pay the rest monthly.

Michelle Singletary: Taking out a loan can decrease your credit score.

That's because you have now increased your debt load.

But if you pay on the loan on time, all the time, that's good.

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Fairfax, Va.: I too got "The Letter" from Citi. I would happily close the account and open a different one if I could be sure the new one wouldn't immediately raise its rate, too. Is there a best time to make the move? Isn't something happening next February to limit further rate increases? Does it make sense to wait until then to compare rates and decide whether to switch and where to open the new account?

Lynn Jimenez: If you can, wait until the new law passes. That way it will be more difficult for card issuers to boost rates dramatically.

Michelle Singletary: Also remember if you don't carry a balance doesn't make a difference what the rate is.

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Student loans and savings: My husband and I managed to pay off an extra $13,000 in student loan payments this year (that's a total of $24,000 by year's end). But we have put very little into our housing fund. We have an e-fund and 6 months expenses saved. Should we cut back on SLs next year and start saving for a house? I guess the decision is whether to have a bigger downpayment and more SL debt, or a smaller down payment and less SL debt.

Michelle Singletary: I would stick with getting rid of the debt. That way when you are ready to buy and have saved up for that purchase you won't open the door to your house carrying a burden of student loan debt.

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Converting gift card to cash: I think the earlier commenter meant this: if you tend to save gift cards for 'special' things and then never get around to using them before they expire, do the following:

- Put the cash equivalent to the $ amount on the gift card in an envelope with a note on who it's from, to save for a special purchase (as the giver intended.)

- Spend the gift card NOW on everyday things that you need and would otherwise use cash to buy (shampoo, socks, food, whatever.)

- Eventually, use the cash in the envelope as the card was intended - for something nice that you would not otherwise buy for yourself.

Michelle Singletary: Got it.

Sounds complicated. Guess I should just spend the gift card on stuff I need.

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Gaithersburg, Md.: The Latino population in my area has soared in the last decade. One of the off-shoots of this has been an expansion of "checks cashed here" storefronts. Michelle has railed against payday loans (one of their core businesses) for years, but do these establishments provide ANY type of service a person with a checking account might be interested in?

Lynn Jimenez: No. There are now so many ways to send money back and forth across national boundaries now that even payday loan outlets that do that for customers are not providing a service people can't get elsewhere.

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Washington, D.C.: Just a comment. Thanks for your years of column writing. I missed your first couple of years because I thought you were replacing James Glassman, and one of your early columns said you and your husband went to a financial adviser for help. I thought, why do I want to read a financial advice column from someone who needs help from a financial adviser? In the end, I realized you fulfilled a much different role than Glassman, and I have enjoyed you ever since. Thanks.

Michelle Singletary: Thank you very, very much.

And just a clarification. Going to a financial adviser doesn't mean I don't know what I'm doing. To me it's like going to the dentist. You use professionals to help guide you in areas they have more expertise in. I have someone who does my taxes. I hired an attorney to update my will.

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New York: Hi Michelle, thanks for the chats! We have a nine-month-old, and have put off starting a 529 plan for him because of our concerns about how the account would do in the current economic climate. Recently, I've been reading more advice to forego these plans altogether in favor of a more traditional (though earmarked, not touched) savings account, as they are more of a sure thing. Do you agree with this? We're scared of what college costs will be in 2027, and while more than willing to make our son work for his tuition, would also like to contribute.

Randy Gridley: Congratulations on the baby! There are lots of different opinions about 529 plans but in general 529 plans are an excellent option, especially for parents with very young children. The problem is that every state has it's own plan (although some states share them) and the quality differs. The good news is that you do not have to participate in your state's plan if it's not a good one. The penality of using an out-of-state plan is that when you take the money out you'll have to pay income tax to your state (but not the Feds) for any income that has built up over the years. Preferrably, you want a plan that is not sold through a broker so has no comissions and has low fees. It's also good if the plan offers an age based investment option in case you don't want to fool with managing the investments. New York actually has a pretty decent plan through Vanguard, so I think it's worth considering. As to the markets, it will be 17+ years before your baby heads off to college so over that period it's likely your investments will do pretty well, especially if you're adding money to the account on a regular basis (basically dollar cost averaging). Long term, the tax advantages of a good 529 plan usually make them a preferred option.

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Ignorance is not bliss: Books like these are so critical to EVERYONE!! Unfortunately, being financially uninformed is a dangerous situation. Swindlers prey on people who often give their trust and money to these thieves. If you think only "certain people" get taken...you only have to look as far as Bernie Madoff.

Keep up the good work, Michelle!! A blessed, joyful, and peaceful Thanksgiving to you, your family and your staff.

Michelle Singletary: So nice.

Good wishes right back at you!

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Houston, Tex.: Lynn--thank you for your response to my question about helping my in-laws. I hope they are not too proud to accept the help. They have done so much for my husband and I and I would be honored to help them in their time of need.

I will approach them with the offer to invest in their business. They might go for that!

Thanks again!

Lynn Jimenez: My pleasure and good luck!

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Silver Spring, Md.: Hola Lynn, Hola Michelle,

This is a great chat, thanks for holding it! As a Latina I often see how Latino families (especially among immigrant families) often are overwhelmed by things like banks, IRAs, etc... I saw it in my own family, so thanks for the book!

This might be too touchy a subject, but what can families do as far as savings for the future when they or a family member is undocumented? This is an issue that I am sure touches many Latino (and non-Latino) immigrant families. I have heard of folks who work their entire lives, raise their U.S. citizen kids here, but because they are undocumented and don't have access to things like IRAs etc. (Or can they access them?) They don't save up and then have to rely on their kids to support them. That puts a real strain on their kids, who often are supporting kids of their own.

Thanks!

Lynn Jimenez: !Hola! No subject is too touchy!

First, even people (from any nation) who are undocumented can pay taxes. Paying taxes may lead to the opportunity to become a citizen should any programs be offered in the future. Programs under discussion would require proof you paid taxes, the ability to speak English, and the absence of any criminal record.

So, I say the way to start saving for the future by paying your fair share now. Call the IRS and get your ITIN. That's an individual taxpayer identification number. The IRS is charged only with collecting taxes. It does not enforce immigration law. There is no cross reporting.

Even people who are here legally, through marriage, who are not citizens entitled yet to a Social Security number use ITINs.

Then save in cash with a relative, using a document to spell out the legal owner.

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First Time Home Buyer, Va.: Michelle,

Question about your column on the first-time home buyer's tax credit. You state that the tax credit is for people who don't need it, but it's unclear if you apply that statement to both credits, or just the new $6500 one for existing homeowners.

As a first-time home buyer who's incredibly frustrated at the housing prices in the DC market, I have to say that even though I've saved a ton of money for a down payment, I wouldn't be buying without the tax credit. So even though I could afford to buy without it, I can now put more down on my house up front since I will see that $8K back in my tax return. This means more equity in my house and a lower monthly payment, which I wouldn't have if I just kept $8K in my savings because the credit didn't exist. I would think that you would support such a credit since it will help make home buying a better financial decision and for many people, replenish savings they wiped out for a down payment.

Michelle Singletary: I meant that statement to apply to the $7,500, $8,000 and $6,500 credit.

And I'm afraid you made my point again. You said: "So even though I could afford to buy without it. . . "

That is my point. Our government is borrowing money to give to folks like you who don't "need" the money. So it puts all of us in debt so you have and a little bit more of a cushion.

Not a good use of taxpayer money.

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Philadelphia, Pa.: Lynn, This was a very necessary book for sparking an intergenerational dialogue about finances in the Latino community. Do you think you will write a follow-up? Also, how do you manage your time and deadlines among all of your media responsibilities?

Lynn Jimenez: Whether my publisher asks me to write another book depends on the sales for this book. As you can imagine, it's been a challenge to sell books in this economy. So...think Christmas gift! Seriously, I would love to do another..or at least update this one...and do much more on home buying and online financial issues.

As to the deadlines---I juggle constantly. But I have to tell all of you, no one juggles like Michelle. She is an industry of her own. And I'd like to take this opportunity to thank Michelle for this chat opportunity. I've had a ball!

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Albuquerque, N.M.: Lynn- Do you ever speak to student groups? I coordinate a financial literacy course for New Mexico High School students. They would love to hear from someone like you.

Lynn Jimenez: yes...I do.

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Alexandria, Va.: A new car purchase and a recent home fire in my neighborhood have prompted me to take a careful look at my insurance coverage. Can you recommend a good resource to help me determine my coverage needs?

Randy Gridley: In insurance the lowest premium doesn't usually translate to the best policy or claims service. State Insurance Comissioners can sometimes help you steer clear of companies with high complaints. Beyond that it helps to have a good insurance agent, especially one who represents more than just one company. Also try to ask the right questions when you look at a new policy. One of my favorites is to ask if your house burns down will they replace the house as it was exactly regardless of cost or is the amount capped at some level. Getting into the what if? scenarios will help you better understand how good your coverage really is.

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Michelle Singletary: Well as usual the time is way too short. I have to go. But Lynn and Randy have agreed to answer some questions they couldn't get to.

Thanks again for joining me on the chat. And please sign up for my weekly eletter (newsletter). It's a quick and easy way to keep up on interesting, crazy, important personal finance stories. You can find a link to subscribe in the Post biz section under personal finance. Just click on the link next to my photo.

Oh and when it's delivered to your inbox please take the time to open it. If you want to handle your money better or wisely it's important to stay informed.

See you next time.

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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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