Column Archive | Sign Up for Weekly E-Mail Newsletter

spacer

Color of Money Live

Network News

X Profile
View More Activity
Michelle Singletary
Thursday, August 5, 2010; 12:00 PM

_______________________

Michelle Singletary: So sorry folks, was just finishing on the live video chat.If you missed it, you can see it on our Website. But wait until after the text chat (smile).So let's get started.

_______________________

When my mortgage is paid off...: Hi, Michelle. Thanks to your advice and that of your readers, I am months away from having my mortgage paid off. Hooray! But the bank has always asked for escrow and paid my property taxes. Would you explain (to the non-financially-minded) how I do that myself and any other potholes to watch out for? Thanks.

_______________________

Michelle Singletary: So sorry, hit the send button before I answered this question: Hi, Michelle. Thanks to your advice and that of your readers, I am months away from having my mortgage paid off. Hooray! But the bank has always asked for escrow and paid my property taxes. Would you explain (to the non-financially-minded) how I do that myself and any other potholes to watch out for?make sure they close out everything and send you the paperwork to prove you no longer are in bondage to them.

_______________________

Credit card debt counselling: Are there credit counseling services you recommend for people who have excessive credit card debt and are having trouble paying more than the minimum due each month? I have heard that some are good and some are not, but do not know whom to turn to for the best assistance. Thank you.

Michelle Singletary: Yes, you do need to watch out for the ones that ask for thousands of dollars -- money you could use to pay off some of your creditors. I recommend you go to www.debtadvice.org and search for a non-profit agency near where you live. And don't pay a lot of money for the help. About $50 to set up a debt payment plan and about 30 a month for the fee to have them do the bill paying for you.

_______________________

Michelle Singletary: You certainly can continue to submit questions in text form but but if you want yours answered on the video send them to colorofmoney@washpost.com. Please include your city and state (and at least a first name).

_______________________

where to keep emergency funds: Michelle- where is the best place to keep one's emergency fund (3-6 months of salary)? Should it be invested? savings account? cash in a safety deposit box? thanks!

Michelle Singletary:

_______________________

Husband's Mindset toward (enough) savings: The catch: I've calculated that our net worth is $2.2million with $600K in cash which includes paying off our mortgage. I keep telling him that "we have the money, we have college savings." He says- 'we can't touch ANY of our savings for college, we must fund everything through cash flow, so you need a job and we shouldn't spend money." Michelle, I'm pretty frugal. My 11 year-old car literally has 250,000 miles and I'm aiming to keep it in good shape until 300,000 miles. I just feel that I'll never get through with his attitude. Even though I try to demonstrate that we are 'way more than fine'...he discounts everything I say. I thus feel very anxious about money also (his worry can be contagious) and the fact that I'm not contributing any income for the next 4 -6 months. Your thoughts?

Michelle Singletary: His fear is too large for you to handle yourself. Would he be open to seeing someone? If not, you go and get help in figuring out how to handle his fear of losing it all.I think you are right that if you have the cash to go back to school to reposition yourself in this job market that's a good use of your savings. But I'll admit, I'm much like your husband so I know how he feels. But you have to do what my husband does, which is talk me through it all, show me the numbers, put his arms around me and say, "Baby, we are okay!)

_______________________

Best saving strategy: Hi Michelle,I was wondering if you could provide some insight into a good savings strategy. I am recently engaged and my fiance and I will be paying for our wedding ourselves. We will need to save to do this, and while I don't need all the fancy trappings of an over-the-top wedding day, I would like to be able to accommodate my large family, with whom I am close, and my dearest friends. We will have to aggressively save to accomplish this goal, but I want to make sure we are also saving for other things as well, since we will probably need to replace the 10 year old car sometime in the near-ish future, and eventually, we would like to buy a house. When you have a near-term goal, and long-term goals, what is the best breakdown (percentage-wise) on how you should allocate savings? Thanks for your advice!

Michelle Singletary: I'm so glad you said you want to save for the wedding. Good for you. I just cringe when I hear people borrow for a wedding -- one day!So how to do this and fit it into your overall plan. Here are a few things to consider or at least ask yourself:-- Do you have any debt especially school loans?If so I would pay those off before I spent a large amount of money on a wedding. Start your married life off as debt-free as possible. Trust me. I've been married almost 19 years and it's the years and days after your wedding day that really count.-- Do you have an emergency fund? Look at what will be your joint expenses and determine if you have enough saved up for at least six months.to pay for other larger expenses so you don't have to tap your emergency fund?-- Which is more important, spening thousands on a wedding or using that money for the down payment on your home? You may decide you still want to do the large wedding thing (even scale back) but at least have the conversation.Just think about how much money you have, what you can save and what's really, really important long-term if you can't do it all.

_______________________

Student Loans: Ms. Singletary,I've read some of your articles, and I've heard you speak on the radio, and I value your professional opinion. I would like to purchase my first home as soon as possible. I have good credit (last time I checked, it was at least 703), NO credit card debt (only store cards that I use and pay off as soon as the bill comes), a car note, and...the worst of all, student loans! **shudder** Unfortunately, due to pure ignorance on such matters, I took out private loans in college and they have varying interest rates. I didn't consider while I was in school the fact that interest was already beginning to accumulate, so now a $40k loan principal has ballooned into over an over $70k balance. I make the (ridiculously large) minimum payments every month (because I can't really afford to pay more), but I feel like my hands are tied. When I've tried to apply for a mortgage loan before, they told me my debt-to-income ratio was too high. Unlike federal loans, I don't see how I can possibly refinance them. I don't want to have to live at home with Mom for the next 15 years until they are paid off. Do you know of anything that I can do to get me into my own home and making bigger strides in paying off these loans?

Michelle Singletary: Thank you for your kind words so I hope you are ready for some tough money love (cuz it is in llove).Stay with mama. Yup. I don't know what you are making but let's say it's abgout $50,000. Stay with mama for three years throwing every single cent you can on that debt and you can move out and into your home in five years or less. If you work for the federal government or you are in a certain public career area you might be able to get some help with your student loans but again, it's likely this is your debt to payoff.So I'm serious. If you can stay with mama do that and live like a student until you can be rid of that student loan debt.

_______________________

Saving/mutual funds: My question is mostly about mutual funds, though I am trying to save for retirement. Where can I go to get good information about mutual funds, like a "mutual funds for dummies" class?

Michelle Singletary: You are not alone in feeling like a dummy on this issue. And I don't mean that in a mean way. Heck lots of people who are investing know don't have a clue what they are doing. Start by going to www.choosetosave.org. This site has a wealth of good information about investing.And there is actually a dummy book for investing. Also, look thu the archive of the Color of Money books I've reviewed. There are several about investing.

_______________________

Roll-over 401 (k) to Gov't tsp: A week or two ago someone asked about rolling over the money from a former employer's 401(k) plan to the gov't TSP. You recommended going into an IRA. That poster should know it IS possible to do that rollover, and the gov't TSP has probably the lowest cost of management of any plan around. Well worth doing it; you will end up with more money come retirement time. The website tsp.gov has an explanation of how to do that rollover.

_______________________

Interest vs. Inflation: I have saved up around 30k and am trying to save towards a house down payment. I am concerned that neither CD rates or money market accounts are keeping up with inflation. I seem to be making no interest whatsoever after inflation is taken into account. Is there anything that I could be doing to get a better rate?

Michelle Singletary: Thanks for the info.

_______________________

Excessive Savers: I love your chats, your advice proves to be helpful when paired with patience. My question is about over saving, if there is such a thing. I have an emergency fund, a regular savings account and even a house fund for home repairs when they come up. I follow a budget every month and monitor all my spending to make sure I do not go over budget. I find myself feeling guilty when I do spend money on nice things or going out with friends. I know it sounds like a good problem to have, but I feel like it sometimes comes at a cost to my social life or buying myself nice things when I know I can afford to, the guilt associated with making normal purchases instead of saving is not good. I see a lot of advice for people with spending problems, but is there any advice for people with saving problems? As a side not, the guilt only comes when spending on myself. When it comes to helping others who need it, I have no problems and really feel good about it.

Michelle Singletary: We could be twins! I am always guilty when I spend money. Sometimes I have to laugh at myself. Recently my husband and I sent to San Diego so I could recieve a community service award from the National Associaton of Black Journalist. On the plan ride home I wanted to watch a movie I hadn't seen on the direct TV on the plane. It cost $6. My husband wanted to watch the movie too. But I wouldn't let him buy it on his monitor too. So we just paid for the one tv and shared the ear plugs. Yes, I could only hear the movie in one ear but heck we saved $6.I have a good man!Silly I know.I tell you this story to say, it's okay to spend on yourself if you are doing everything right with your money. Don't let financial fear run your life. For example, we are putting in a patio. Totally worth the money. But on things like paying an extra $6 on a plane to watch a B-rated movie, we stay cheap. We didn't really care that we were sharing the earpiece (especially since my husband has a tendency to fall asleep on movies anyway). Plan and spend on the things that matter and stay cheap on the things that don't. Most of all keep a good sense of humor about it all and count your blessings that you have it like that!

_______________________

What to tackle first?: Michelle,Thank you for taking my question. I really enjoy your books, and have gotten a lot out of them. Between you and Dave Ramsey, your advice has helped so many people get out of debt and build a better future.I have a $4000 student loan, and $4800 in credit card debt (I paid off one other CC that had 6K by steadily chipping away at it). Which should I tackle first? I only have about a grand in savings (trying to build that up too for an emergency fund), but I want both of these debts out of my life, and I want to attack them both; unfortunately, I only have the means to go after one at a time. I've reined in on my CC spending, so the only thing accruing on both is interest (15% on the CC, 6% on the loan). What do you think I should do? Thanks!

Michelle Singletary: Be patient. That's really what you need right now. I love, love that you have a passion to get rid of this debt but you didn't get into debt overnight and you won't get out of it overnight. Besides I think the pain of paying it off slowing is a good reminder not to put yourself in this position again.So be patient and tackle the debt with the lowest balance.Then come back and let me celebrate with you when you get it all paid off.In fact, please send your story to my Debt Defeater feature for my eletter and video chat. I'll be reading the stories of folks like you who have paid of their debts. Send your Debt Defeater stories to colorofmoney@washpost.com. You can even e-mail or send me a picture of what's it like to be debt free.

_______________________

Since when is 703 considered "good" credit? On which CRAs system? Just asking. : .

Michelle Singletary: You are kidding right? A credit score on the Fair Isaac system is definitely good credit. Can you have better credit, sure. But when so many people have credit scores below 650 I cheer this person on.By the way the FICO model is generally 300 to 850. More than 700 and you are good. 720 or better golden.

_______________________

College senior: My daughter will graduate from college next spring and she already has bad credit stemming from a very late payment on a store credit card (which she's since cut up) and most recently a magazine scam which she unwittingly signed onto (thinking she'd received 3 free copies of fashion mags, but actually signed up for 2-year subscriptions for the mags). What can she do this year to repair her credit? She's applied for cards and been turned down. I don't have or use credit cards and don't intend to get any. She'd like to start her life as a post-graduate with her feet firmly on the road to good credit.

Michelle Singletary: The No. 1 way to improve your credit score is to pay your bills on time! Over time that bad credit will have less and less impact on your credit scores. And unless she needs another credit card she should stop applying for credit. That actually lowers your score.

_______________________

Student Loans-Worth It?: Hi, I'm 29, thinking of going back to school in a professional masters program (not MBA) whose avg. starting salary is 65k. I will incur approx. 40k in debt from it, but it should allow me to pursue more interesting work than what I do now. I already have 15k in undergrad student loans...is it worth it? I love school and it provides quantitative work, something that I lack right now. I kinda want to go to re-switch my gears after working in environmental consulting for 4.5 yrs.

Michelle Singletary: I would pay off the $15,000 loan before I even think about accumulating another $40,000 in debt. And frankly in this job market I wouldn't count it as guaranteed that you will get the $65,000 job.It's great you want more education but get it with cash.

_______________________

Mortgage pay-off: I have an equity line of credit as a 2nd mortgage in the amount $70K. Should I use a part of my 401K to pay it off? I am 62 years old and will completely retire at the end of the year. What do you suggest?

Michelle Singletary: This is hard to answer without more information such as how much do you have in your 401 (k). What is the other sources of income should you retire?Speaking of which can you afford to retire with $70,000 in debt? You won't get hit with a 10 percent penalty for taking the money out of your 401 (k) but you will have to pay taxes. Just think this thu and if you have a lot of other savings and this won't make you cash poor going into retirement then yes, I might consider paying off the second mortgage so you can be as close to debt-free as possible when you retire. I'm also assuming you don't have a firt mortgage (I hope).

_______________________

15-year mortgage vs. 30-year: Dear Michelle, My husband and I have a 15-year mortgage with around 10 years to go. With the present economy and with my husband working in the home improvement business, we are having some difficulty making the $2,500 monthly payment. Would it be advisable to refinance to a 30-year mortgage or should we just stick it out? We have inquired with our bank and the closings costs are approx. $6k - which we don't want to get tacked on to our principal. Thank you. Appreciate your input.

Michelle Singletary: making it worth it long-term to get some breathing room. But keep in mind you reset the loan, increasing your overall costs. However, when things get better you could go back to making extra payments thereby cutting down on the new 30-year loan.

_______________________

Car repair: Hello. Thank you for reading my question. I recently had a car repair bill of $1500. (new tires, water pump, filters, etc). While I have money in the life happens fund transferring it to my checking account feels like some sort of failure. Why does it feel so wrong to spend that much money on car repairs? It is cheaper than buying a different car but when do you start thinking about trading in the current car for something else?

Michelle Singletary: Please take a look at the video chat I did today. I tackle this very issue. Don't feel guilty. Spend the money. That's what you saved it for. Unless your car is becoming totally unreliable the numbers show cheapter to keep her!

_______________________

Re: Student Loans: Jobs are hard to come by right now, but try looking for a job that can pay (partially or completely) for that professional master's program.

Michelle Singletary: Absoltely! That's how I paid for my master's!

_______________________

No more videos: The new emphasis on video chats is disturbing. Many of us access these chats at work, and watching and listening to a video is just not an option.

Michelle Singletary: Why is this disturbing?You don't have to listen or watch at work. You can wait and watch at home. In fact, we know this is the case and have edited the video for easy viewing live or later.It's just another format. I'm still right here with you live in text.Embrace the new media. You don't have to give up the old for the new. You can have both!

_______________________

Credit score: Hi, Michelle!My partner and I are about to be married. He has stellar credit (720+), while mine is lackluster (655ish). We will add my name to our mortgage soon, but I need to boost my credit score. We are in the process of adding my name to all of his credit cards as a joint applicant (not as an authorized user). Is this smart?

Michelle Singletary: it is a good strategy to boost your credit scores. His stellar credit will become yours. But I hope you address why yours is lackluster or let him pay the bills (smile).

_______________________

Unintended Wedding Expenses: Hi Michelle,I'm planning my (frugal but fun) wedding, and several of the girls have asked what I'd like to do for a bachelorette. I suggested cocktails in someone's home, or a karaoke bar, because I don't want anyone spending bunches of money (I was taught it's rude to spend other people's money by asking for lavish gifts or fancy parties). Unfortunately, one of my bridesmaids is pushing for a road trip or Vegas weekend. She keeps saying the original plan "isn't special enough for your WEDDING!" How to I get her to put a (champagne) cork in it?In a related note, my fiance wants to do a bachelor trip that will be quite expensive for a few of the guys (one is unemployed, and several have houses and kids - but my fiance can more than afford it). I understand it's none of my business, really, but I don't think a trip is appropriate in these financial times. I think he's just enthused about the idea and will drop it when the time comes, but it still makes me worry.What do you think?

Michelle Singletary: First the friend -- tell her you are all for a road trip if she's willing to pay for everyone. That will shut her up.Do what you want for your WEDDING and ignore silly people with big financial pipe dreams when others are suffering financially.Or you could be nice and say: "I appreciate you want the best for me but what I want is to just enjoy the time with good friends. I don't want anything fancy or expensive. So please respect my wishes. "As for your boo, talk it over with him point out that others may not be able to afford it and may feel pressure to go. Then leave it alone cuz you won't be able to control the situation.Congrats on pending nuptial!

_______________________

Airplane Story: Michelle, I think you are an honest and moral person but I do not like that story. It seems dishonest and too close to stealing to me. I know that isn't your intent and it's only $6 but if there is a fee to watch a movie I think two people watching for the price of one is not a good example to set. Otherwise keep up the good work!!

Michelle Singletary: What? Really? With all the dishonesty in the world you want to criticize me on this?Petty.hands over their ears because they didn't pay for it.Does it help that he slept thu most of the movie?

_______________________

Interest vs. Inflation: Eek you posted my question on Interest vs. Inflation but you just wrote "thanks for the info." I think it was a typo and you meant to refer to another poster's question.

Michelle Singletary: I did mean it for another question. So sorry and now time out. I'll try to answer yours in my eletter.

_______________________

Michelle Singletary: Well, time is up. Thanks for joining me today and for your great questions.If you don't subscribe to my eletter I hope you will. If you haven't viewed the new video chat I hope you will (whenever you can).If you have a question you want me to answer live on the video chat send it to colorofmoney@washpost.com. Please at least include your city and state. you have a Debt Defeater story send it to colorofmoney@washpost.com. Please include your name and city and state.


© 2010 The Washington Post Company

Discussion Archive

Viewpoint is a paid discussion. The Washington Post editorial staff was not involved in the moderation.

Network News

X My Profile