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Michelle Singletary
Washington Post Personal Finance Columnist
Thursday, March 18, 2010; 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, Mar. 18 at 12 p.m. ET.

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Michelle recently released a book called "The Power to Prosper: 21 Days to Financial Freedom. Find out more about the book and download budget templates and journal activities from the book.

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

A transcript follows.


Michelle Singletary: Good afternoon everyone.

Glad you could join me for another online discussion.


Fairfax, Va.: Michelle, I know you say this all the time and I can't help but agree: try not to take out loans for education, and if you do, take out the lowest amounts you can. I went into over 100k of debt for law school and I now have a job that pays well, but that you don't even need a college degree for it.

Our family makes enough that we can meet all our obligations like day care and car payments and save some money besides, but I'm still writing a check every month for just over $750 that is going towards a debt that right now looks like it will take me over 20 more years to pay off. When I think of what that money could do for getting us more living space, paying for our children's education, or saving for retirement, it makes me sigh. In addition, I'd love to start a new, different, career, but we can't take on more education debt.

So let me add my voice to yours and others to say that avoid education debt if you can, and if you can't, keep it as low as possible. Your future self will thank you.

Michelle Singletary: Thank you for this note and cautionary tale.


Washington, D.C.: Hi Michelle, Love your columns! I'm a single woman with no children who is preparing to change jobs for the first time in 13 years. It's a nice increase in salary, but more importantly, I'm excited about the work I will be doing.

Financially, what should I be thinking about as I transition into this new job? Do I roll over my 401K? Do I increase my withholdings to prevent getting one big refund? Thanks!

Michelle Singletary: First congrats on the new job.

Here's what I might do:

-- First I would start banking the increase right away. Since you are already living on the old salary and it seems can comfortably take the extra cash and save it. Later you can decide what you might want to do with the extra money such as buy a home, or pay down the mortgage on a home you may own, boost your retirement savings, help someone in your family go to college, give more, etc.

-- As for the old 401 (k), you certainly can roll it over but if you have the old plan and the expenses are low, no reason to move the money UNLESS you want to decide how to invest the money. With a rollover IRA you aren't limited as you might be in your current plan. Meaning you can invest the money any way or in any fund you choose. If you do rollover the money make sure you set up an account first and have the money transferred directly to the new account. Don't take possession of the funds otherwise your old employer has to withhold money for taxes.

-- Finally, yes, double check the withholdings so that you are getting your money in your paycheck. The IRS has a withholdings calculator to help.


re: Destination Weddings: A family member of mine (and fiance) decided to have a destination wedding for their second wedding. Not a problem, as that was their decision, but when I told them we (my spouse and I) were unable to attend due to not being able to afford it as well as conflicting schedules (we were moving -- buying and selling a house moving -- not just moving from one rental to another), they felt we should reschedule our closing and dip into some of the profit we had just made on our house. (The folks whose house we bought didn't want to settle until the end of August for some reason, even though we had a ratified contract in May, before they were even engaged.)

We ended up not going as it really wasn't something we could pull off. ($2600 for airfare and three all-inclusive days...sorry, I don't think so.)

Apparently they had a great time (as did most of those who went), but that was pretty much it. They ended up separating four months later.

I realize this isn't really a money issue, but I just had to share it, considering the topic.

washingtonpost.com: Today's e-letter: Money Manners

Michelle Singletary: Wow. This comment is in reference to a topic I talk about in my e-letter today. Weddings and money and how ugly some people can get.

I've heard so many stories like yours. You, of course, made the right decision --- to do what you could afford.

I've seen marriages fall apart before they even finished paying off the wedding debt!


Rent as percentage of income: Michelle, what percentage of income would you expect a young couple to spend on rent when they are trying to save for a house. I know the guidelines is no more than 35%, but is it different for a renter? Bear in mind, if you pay 25% of income on rent, $2000/month rent requires an $8000 income (yikes!)

Also, when calculating "how much home you can afford" should you take into consideration the tax break of writing off mortgage interest? Is it really that significant?

Michelle Singletary: If you are saving for a home then you would want to try and keep the percentage of your net income on rent as low as possible. The range for housing cost is generally 26 to 36 percent of your take home pay.

And no when calculating how much house you can afford, stick with the percentages. You will find that any tax break you get will be offset with the extra costs of owning a home (property taxes, larger insurance bill, home improvements, etc.)


Austin, Tex.: Ms. Singletary,

First, just wanted to say that I'm a big fan of your chats, books, and financial wisdom. I was curious about your thoughts on retirement savings vehicles. I am already putting money into a 401k at work through a voluntary deduction. In the summer, I am eligible for an employer match into the account. I am currently putting into the 401k at a higher percentage than what I would need to get the match. Wondering your thoughts on reducing my contribution to the minimum percentage that gets me the maximum match, and starting another vehicle such as a Roth IRA with money that I had been putting into the 401k. Already allocate monthly into a separate general savings/emergency fund. Credit cards, if used, are paid off monthly.


Michelle Singletary: First, thanks. You are so kind.

Second, sounds like you are doing pretty good with your retirement savings. If you are eligible for a ROTH, then it might be nice to save in that vehicle too. With a ROTH, as you probably know, you put in money that has been taxed but that means your money and returns are tax-free when you take them out later.


Parental teaching helps: I am two months away from being completely debt free! I am giddy and as much as following you has helped, the real reason behind this achievement is my dad. Growing up I never got lectures or talks about saving money. What I did get, from the age of 5 or so is every other Friday, was that I would sit with my dad and pay bills. He would pull out his check register and we would pay each bill and then subtract it from the total. That is all we did, but what that taught me was invaluable. I learned that a good paycheck diminishes immensely as soon as one considers bills that have to be paid. I learned to pay bills on time. I learned that what I have in my checking account has to be enough to cover bills going out. How many people know that? Plus, whenever we wanted to buy something fun, dad would always say "Great! Let's save up and buy it." Then every week, we'd make the point of putting something away and then when we had enough we'd make a big production of buying it. It was all a fun game, that taught me valuable lessons. Thanks Dad. Valuable lessons for all parents.

Michelle Singletary: What a GREAT gift your dad gave you!

I hope other parents on the chat follow his lead.


Olathe, Kan.: Just some feedback. I submitted a question several months ago about having $15,000 to spend on 8 bills or one big bill. You advised 8 bills as a way to feel lighter for one thing. You were so right! Now I'll work on the big one, but in the meantime, I feel like I can really get it done! Thanks for the happy advice.

Michelle Singletary: Congrats!

First for feeling that much lighter bills-wise and for listening to me (smile).

It's all a mind game. With fewer bills you feel as if you've made progress. That in turns heats you up to get rid of the others. Stay on track and let me know when they are all done.


Northern Va.: Hi Michelle,

Finished the 21 day fast and loved your book! I can't believe what a change it has caused. Would you believe that not only are our finances in better order, but somehow, I've also managed to lose weight? It's almost as if the careful behaviors in the money fast also made me careful in other areas.

Thank you so much for all that you do.

washingtonpost.com: The Power to Prosper"

Michelle Singletary: How wonderful that the book was a blessing to you. I've heard from so many how have been helped with the 21-day financial fast.

It's hard but it does work!

See the link for others who want to get the book and try it.


Washington, D.C.: Michelle, this is a serious suggestion.

I love your columns and chats, and have given numerous copies of your first two books as gifts. I still have a stash of # 2 to give to friends and relatives involved in serious relationships.

However, I knew from the introduction to your current book that I myself can't read it, nor can I gift it, because of the religious orientation. While I respect your beliefs, I don't share them; and neither do the majority of my friends.

I did skim through the book enough to determine it would be possible to rewrite it from a secular viewpoint. Rather than citing Biblical principles, you could cite sound financial principles, etc. That way your message could reach a lot more people, and you could earn some extra money, too!

Just a suggestion, but I hope you will consider it. I'd be very happy to help you share your message if it did not come with religious strings attached.

Michelle Singletary: Well hello, and I take all the questions seriously.

But consider this. I wanted to write a book that used biblical principles to help people do better with their money -- people who wanted divine inspiration.

I knew, know and understood it would not be a book for everyone. But this third book is based on something I've tried and done with my church for years. It's based on something I wanted to share with people who do share my beliefs.

If this isn't the book for you or your friends, I get that. I'm cool with that even if it means I earn less money.

My other two books are secular and just as helpful.

And by the way, the biblical principles in "The Power to Prosper" are as "sound" as any secular principles:

-- Don't go into so much debt.

-- Don't co-sign.

-- Don't use credit to live above your means.

-- When you are in debt, you are a slave.

-- Give and give generously.

-- Prosper so you can help your family and community.

All biblical principles that are as sound as any you will hear in a secular way.


Albany, Ga.: My niece is getting married in California. I feel so guilty about not going but being the East Coast it is going to be a long trip and I am swamped at work so I can't take much time off. In addition, my sister who is always broke wants to go and I would have to pick up most of her expenses too. So, airplane tickets, hotel rooms, rental car, incidentals. I just don't think it's worth it. Yet I feel so guilty about it. All the family is on the East Coast but she is entitled to have her wedding anywhere she would like to. Help me out here.

Michelle Singletary: You obviously care. And you would go if you could afford it and had the time at work.

So tell your niece what you just told me. Tell her you love her and would love to be there in person but you can't.

Send a lovely card and gift you can afford and offer to be there for her before and after the marriage for any advice, tips, etc.

As much as all of us want to, we can't do everything we want.

You are right, she chose to get married far away from most of her family. So she has to accept that many won't be able to attend. That's the consequence of HER choice.


cheapest wedding ever-- and it was fun!: this doesn't answer your question about ridiculous wedding spending, but it makes a point.

My friends got married in 1994. She was a very low-wage seasonal park ranger; he was a graduate student. Fortunately, we all worked together in a national park, so it was a destination wedding of sorts-- however, the only person who traveled to it was the groom's mother. I think they just didn't invite a bunch of people.

We walked from our houses to a pretty place along a creek, where the bride and groom said their vows. It was perfectly charming and heart-felt. Because this was Montana, there was no requirement for an "officiant," so it was all do-it-yourself.

Afterward we went back to the ranger station and had a big pot-luck. We all had a wonderful time. The bride and groom bought a case of beer to kick off the potluck, and the groom bought the bride some flowers at a local 7-11. Total cost to them: under $25.

16 years later, the bride and groom are still married-- and still frugal.

Michelle Singletary: Love this story.


Wedding Follies: My sister-out-law (as in, my now ex-husband's sister) asked me to be a bridesmaid in her wedding.

I went along with it, but squawked when I was expected to shell out for a $350 bridesmaid gown, as we were already flying in from overseas to attend. She de-frocked me, then reinstated me and chipped in for my dress. The other bridesmaids were all of modest means, so it was inappropriate of her to saddle us with $350 dresses in the first place.

But that's not the worst part. The dress was floor-length, heavy black taffeta with layers of crinoline. In the Deep South. In September. Bridesmaids were keeling over from the heat like hairsprayed bowling pins.

The lesson? Learning to say no saves you money AND discomfort!

Overall, I'm pro-wedding if you can afford it and you keep things sensible, but you have to be careful not to get your heart set on things that are discourteous and impractical (such as heavy, overpriced dresses that make your closest girlfriends faint!)

Michelle Singletary: Imagine that, a bride thinking about the people in the wedding, and not ALL about what she wants.



Richmond, Va.: Question about paying off my mortgage. I am about 3 years away from retiring from a government job that will pay a defined pension. Do you think I should delay paying off my mortgage so I will have the interest deduction to offset some of my pension income, or is that backward thinking? Thank you.

Michelle Singletary: If you are close to paying off your mortgage the interest deduction isn't much as this point.

Pay it off before you retire and enjoy going into your retirement years with the largest debt monkey off your back.


Alexandria, Va.: Two questions from this new, first time father: 1. Would you recommend opening up some sort of line of credit (minimal, secured) for my newborn (parents would manage the account, obviously), then immediately put a credit freeze on his name, with logic being he would benefit from 18 years of good credit ratings as he reaches adulthood? 2. Would you recommend using 529 Plans or Roth IRAs to save for college? I like the flexibility of Roths (investment options as well as usage options), and one never knows if college is in the cards for a child.

Michelle Singletary: No, I would not open up a credit card for my infant. Not necessary. This in from the creators of the credit score used most by lenders: It takes just six months to build up a good credit history.

I favor investing in a 529 plan. There are many options and state plans to choose from. And if your kid doesn't go to college you can transfer the money to another kid, relative or yourself.


Greenbelt, Md.: Are you familiar with the 2008 home buyer tax credit? I'm unclear on both the repayment schedule and the payoff process if I sell my home before repaying the full amount? Can you please help clarify? Thanks!

Michelle Singletary: There are several versions of the home buyer credit depending upon when your home was purchased:

* For homes purchased in 2008, the credit, with some exceptions, must be repaid and takes the form of a $7,500 interest-free loan.

* For homes purchased in 2009 prior to November 7, the credit is for a maximum of $8,000 and, with some exceptions, does not have to be repaid, but it's only for new home owners who have not owned a home in the prior three years.

* Beginning November 7, 2009, an additional category of new homebuyers, long-time residents (who owned their own homes), was added. The credit for this group is a maximum of $6,500, which, with some exceptions, does not have to be repaid.

Here's some info from the IRS:

For homes purchased in 2008, the first-time homebuyer credit is similar to a 15-year interest-free loan. You must begin repaying the loan the second year after claiming the credit. It is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed.

For example, if you properly claim the maximum available credit of $7,500 on your 2008 federal tax return, you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 federal tax return. Normally, $500 will be due each year from 2010 to 2024.

If you claimed the credit in 2009 and it stops being your primary home within 36 months of the date of purchase --the property is no longer used as your principal residence-- you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due.


Re: Wedding Follies: That description of the fainting bridesmaids in the South reminds me of when I was six months pregnant, and was asked to wear a floor-length (lined) polyester bridesmaid's gown in my brother's wedding in Charleston, SC in JULY. I dutifully wore it, but balked when I was asked to shell out for the four inch strappy HEELS that my now sister-in-law wanted us all to wear. I love her dearly (she has mellowed a lot since the wedding in 2004), but she was out of her mind. And that dress was thrown in the trash that night - it was tailored to my 6-month pregnant belly, so I knew I would never wear it again - and it wouldn't fit anyone else!

Just saying no to being a bridesmaid is sometimes a really good idea.

Michelle Singletary: Just say no.

Good answer.


NYC: Hi Michelle ---

I am a Muslim and I really like and value your books, have been following the ideas to debt-free success for ages. (wiped out $24,000 of credit, car and student loan debt in 4 years, on a roughly $30,000 salary. AND took 8 paid-off-in-advance international vacations during that time.)

The religious tone is just fine with me, even if it's not my own. I respect anyone who has beliefs they stand by. You have to stand for something or else you'll fall for anything.

Michelle Singletary: Thank you!


Md.: on the other hand, I had a friend who had a cheap wedding/reception, but in order to save money, didn't provide bathrooms for guests, didn't have a tent for the outdoor reception (107 degree heat), and didn't provide any bottled water - only beer and wine.

If you can't afford to keep your guests hydrated and make bathrooms available, you are doing something wrong.

Michelle Singletary: Absolutely agree!


Thank you, Thank you: for coming out against destination weddings that pay for the couple's wedding and accomodations. I feel that this is the shakedown that it is, and perpetuates the trend that the wedding couple is somehow special above anyone else, and every whim must be granted. I hate the feeling that I'm just a vehicle for giving gifts, and my vacation and other financial plans take a back seat to a demanding bride and groom. Couples who want to get married in the Caribbean and elsewhere should just expect that their parties will be small. Rant over, that is all.

Michelle Singletary: Always good to get a rant in. Relieves the soul.


Washington, D.C.: Hi Michelle, Love your chats. Quick question regarding retirement savings. I am at the point where I no longer qualify for Roth IRA contributions (I do max out contributions to my employer sponsored 401K), and am trying to figure out where to put that money now otherwise. I've read conflicting advice regarding putting excess monies into a non-deductible IRA versus just investing in a taxable brokerage account. Any thoughts? Thanks.

Michelle Singletary: I was at this point several years ago and sought advice from a professional.

Once you hit that limit, you do have to look at other options. I've liked municipal bonds which give you a tax advantage.


Washington, D.C.: Thanks for the budget template. I use this and it has helped me a lot. We are able to save 10% of our income, but are having trouble deciding how to divvy it up amongst the savings categories. For instance, do we put a certain percentage in college, vacation, etc.? I know this is a somewhat personal decision, but any guidance you can provide would be very helpful. It can be overwhelming to think of all the things that parents need to save for and consider.

Michelle Singletary: The best thing is to first figure out what you need in those other areas (college, vacation, etc.) Then set the limits or how much you need to put into each fund.

For example, Vanguard has a really nice college calculator that we used and that helped determine how much more or less we needed to save every month. That in turn helped us figure out what percentage of the money we slotted for saving should be directed to the college fund.


Wedding horrors: As a church organist, I have seen a lot of weddings and the bigger the dog-and-pony show (12 bridesmaids! 15 foot train!) the less confidence I feel about the longevity of the marriage. The bride with the 12 bridesmaids came to her father shortly after the wedding, saying she wanted a divorce. He had a heart attack. Another doting father took out a second mortgage he could ill-afford to fund a wedding for a marriage that lasted maybe 6 months. I can count on one hand the number of weddings I played for that I thought had even a slim chance of lasting. The emphasis was always on the DAY, not the marriage. As Miss Manners says, "Do you expect it to be the happiest day of your life? Miss Manners sincerely hopes not. Few of those who prattle about that "happiest day" seem to consider the dour expectations this suggests about the marriage from the second day on." Amen to that!

Michelle Singletary: Amen to you and your sight.

Cuz I've been there too. Big wedding, lots of money no one could really afford and people whispering that they give it two years at most.


Roth IRA follow-up: Michelle - I thought starting in 2010 that there isn't an income limit for the Roth IRA.

Michelle Singletary: You are referring to special exception to Roth IRA conversions.

This year there's a special exception to the typical income limits on who can convert a traditional IRA to a Roth IRA. It will allow high-income people to make a Roth IRA conversion.


Biblical principles: I'm as secular as they come and think the Bible is an amazing piece of scripture/literature/inspiration.

I have no problem with your book or beliefs as they apply to my financial life.

It's the MIS use of Biblical principles to justify everything from discrimination to murder (capital punishment) that keeps me up at night.

Thanks for your good work!

Michelle Singletary: You are welcome.


Alexandria, Va.: Michelle, I want to thank you for writing your latest book with Christian religious principles under-girding the advice. As I understand it, virtually every major faith, be it Christianity, Judaism, Muslim, Buddhist, and others, have religious principles that speak to how people should manage their financial life. Details may vary, but it often boils down to avoid debt, be wise and frugal, help others, and avoid ostentation. Being religious is not separate from how a person conducts their financial life: it is all part of that individual's governing principles. So thank you for using guidance from the Judeo-Christian tradition in approaching financial management and by implication, showing that one's religion is not just a one-hour-on-Sunday sort of thing, but a practical approach to many issues in life.

Michelle Singletary: That was what I was aiming for. So thank you for getting it.


Favorite wedding: Definitely not a horror story. My favorite wedding (after my own) as one where both my wife and I were in the wedding party. Bridesmaids were asked to wear their own black cocktail dresses. Groomsmen were asked to wear their own tux if they had one, otherwise they could rent one at their own rental place, or were given the option of a local rental location and a selection of 1-2 inexpensive rentals. Everyone looked great -- tasteful, upscale, complementary, and imagine everyone was wearing clothing that complimented their own figures! Very refreshing.

Michelle Singletary: Very refreshing story. Clearly this couple was thinking about others.

Love it!


Arlington, Va.: Michelle,

Love your chats and advice. What's the best vehicle to use if you want to help friends save for their kids' college?

I'm single, no kids, and no nieces/nephews. If I am still single and childless in 10-15 years (I hope not!), I'd like to help two families who will need money for their kids' education (both are in ministry and don't earn a lot).

I think I'm looking for something that will earn some interest but would give me flexibility to use the money either for these kids, or for my own kids, should I be blessed to have them.

I already own a home, I'm maxing my 401K, Roth, and my mortgage is my only debt. What vehicle do you suggest?

Michelle Singletary: Wow.

What generosity. You rock!

I still like the 529 plan. Although you designate who gets the money, you keep control over the account. So you could in fact give the money to the other families or change the beneficiary to your own kids.


I realize this isn't really a money issue, but I just had to share it, considering the topic.: Michelle and poster, I am disappointed this was posted. I appreciate that attending the destination wedding was not in your budget among other reasons. But inclusion of the couples separation few months later and the lack of a question in your poster seemed needlessly smug. To the poster: Was the real point to point out your "better" decisions? Did you really have to share?

To Michelle: I guess I'm just disappointed, but it is your chat.

Michelle Singletary: I didn't think the comment was out of line at all.

I took the point to mean that many couples spend so much energy and money on "the day" that they don't focus enough on who they are marrying and how to make it last.

It's all about the show. So they put on this big production costing a great deal of money with people, I might add, spending their own money to attend, buy gifts and then split so soon after.

It's a tragedy.


Atlanta: Thank you for the financial fast. I was a scrupulous budgeter when young and poor; but the habit has died away as I've become middle-aged and have a healthy, stable income. I don't think of myself as a shopper -- clothes, furniture -- but I must be a fritterer: the month I did the fast, my AmEx bill dropped by half. I have spent the six weeks since then reinstituting a budget and monitoring my spending. What a great tool for accountability to oneself!

Michelle Singletary: I've heard from a lot of folks who say the financial fast helped them think about their money or go back an reexamine their spending.

It's the best part of the fast. That it makes you think. Sounds so simple, but it isn't.


Greenbelt, Md.: I now have a good savings--a 3-month emergency fund and a bit more!--and am wondering the best way to use those extra funds is in terms of paying down some debt. Should I pay a little extra on my mortgage each month (my highest interest loan, but one that I have no hope of paying off for 20+ years)? Pay down my student loan (of a lower interest rate, but also a lower amount owed)? Save up for a car, which I plan to purchase later this year? Thank you!

Michelle Singletary: So sorry, but my time is up.

Thanks for all your questions and comments. I'll keep the unanswered questions and hopefully get to them in my weekly e-letter or in my print column.

Thanks again for joining me today.


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