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Michelle Singletary,Willie Jolley
Thursday, October 14, 2010; 12:00 PM

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Michelle Singletary: So sorry for the delay. Let's get started.

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Weight and Income: Is it possible the results are stated backwards, and income drives weight? It's pretty well known that unhappy women tend to eat; while lower-income men are more likely to work in physical occupations that keep weight off.

Sarah Halzack: Today's e-letter: The skinny on money

Michelle Singletary: Of course you are talking about my eletter item today (see the link) about a study that showed skinny women outearned overweight women.And yes, it's possible that income could drive weight. Maybe people are overeating because they are stressed over money issues.

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One debt paid...: Hi Michelle, I have written in a few times about paying off student loans and credit cards, and I wanted to give you an update: I just paid off my longest standing credit card and am this close to paying off the others! The extra amount that I won't have to pay off on those cards monthly will be split between my savings and paying off my students loans. It was such a liberating moment paying off that card that has been hanging over my head for years! It had seemed like I would never get that debt paid off and now that it has happened, it feels so amazing - I want to go out and celebrate, but instead am going to eat the lunch I brought with me! Thanks for all your great advice, Michelle!

Michelle Singletary: YEAH!I'm so proud of you, you debt defeater. It makes all the bashing I get about drumming the debt thing worthwhile.So congrats!

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529 plan for unborn children: Hi Michelle! Big fan of your chats and advice. Do you have any thoughts on grandparents starting 529 plans for unborn children? I plan to have children, but not for another 2-3 years. My parents have enough discretionary income that they could fund a 529 plan up to our state's $13,000 income tax deduction limit, and this appeals to them both to help their (future) grandchildren and for tax reasons. If they start this account (under their name), can it later be split into multiple accounts (for each future kid), or should they start multiple accounts?This seems like a great plan - am I missing something? (I figure even if I don't have children, they could give them to nieces/nephews/other family members).

Michelle Singletary: Wow, talking about planning ahead.But your solution would work. They can't open an account for a person not yet born but they could open the account in their name or yours for that matter. But the immediate tax break would only come if they live in a state that offers a state tax deduction for opening a 529 in their state. And you are right again that they could transfer the account to another person should you not have children or the kids get scholarships and don't need the money.

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finding a good adviser: Hi Michelle, my question is less about finances itself and more advice on finding someone who can help. I've lived in DC for a couple of years but just bought a house and therefore want to find someone who can actually advise me on long-term and short-term financial planning. I'm single and don't have a ton of variables, but am not really sure where to begin. Should I go somewhere like a big firm like Morgan Stanley or something? Or does it make more sense to find someone not affiliated with a big firm? Thanks.

Michelle Singletary: If you are looking for just a budget checkup, talk with a nonprofit consumer credit counselor. You can go to www.debtadvice.org and find an agency in DC. Then make an apt and just let someone help you figure out some long and short term budget goals. Once you find a few people, interview them all and see who fits best with what you want to do.

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Washington, DC: Good afternoon. I'm about to receive a small raise, and I've already arranged for nearly all of it to be automatically shunted to my student loans, mortgage and retirement. It's a little depressing not to get any more "stuff," but I feel good knowing that I'm doing the right thing, and I won't miss what I wasn't used to having anyway. I use about 20% of my take-home pay to pay down my student loans, and I've reduced the outstanding balance (to say nothing of the interest paid) by more than $25K over 2 years (just $70K more to go...). It hasn't been easy, but I wanted to thank you for your encouragement to all of us. It really does make a difference in keeping that discipline when everyone around you is going on fancy trips and buying new clothes. Keep up the great work!

Michelle Singletary: Definitely stay the course in getting rid of that student loan debt. And I might put more toward the student loans rather than paying down the mortgage right now. Same with retirement. Take the full raise and dump it on the debt.And by the way, all those folks taking fancy trips or buying clothes are probably deep in debt OR they don't have much savings.So they should envy you!

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Alexandria, VA: Wanted to let you know that in our most recent battle of Buying a Big LED TV Plus Surround System vs. Paying Off Our Last Student Loan-- the student loan won. It was a tough, multi-thousand dollar decision, but the correct one. We decided to make safety modifications on our current old CRT TV setup (we have a 14-month old) and make do with it. We can now put that extra $100/month elsewhere. Thanks for preaching your Every Penny Has a Purpose message--- it really does work!!

Michelle Singletary: You are so welcome.And yes, every penny out to have a purpose. Read the early postings from the folks who are out of debt or getting their. You can feel the joy in their written words. Also watch the video chat if you can and rejoice with this week's debt defeater.It's all for a purpose, the debt drum I beat. I want you to feel the joy of not being a slave to your debt.Besides after you've paid off that debt, and saved some money, I give you permission to buy a new TV if you want :)But by then the price will have come down anyway, saving you more money.

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want to find someone who can actually advise me on long-term and short-term financial planning. : Call your bank, many offer that service for free (mine does).

Michelle Singletary: Yes, your bank or credit union is also a good place to look, but be sure they are offering the right financial products for you and you specific situation.

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Keeping 10 year old car/buy something new: Hi Michelle, thanks for your great advice. I am a single woman, 35-years old (I'm the only one paying my bills.) I have 8,000 in credit card debt that I'd like to pay off. However, I am barely paying my bills now. Is it worthwhile to keep getting my 10-year-old car fixed or should I try to lease a cheapy model..for $69a month plus insurance?

Michelle Singletary: I don't know of any lease car that cost $69 a month. Is that a typo?I'm not a fan of leasing a car, which is really renting a car long-term. At the end of the lease what do you have?Nothing.I would keep fixing the hoopty and stay the course in paying off the debt.

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Where to park my emergency fund?: Hi Michelle,Love your chats. My question is about where to put my emergency fund. I have a Roth IRA that I do not currently contribute to, but am putting more in my 401(k) than I need for full employer match because that's the amount that the online retirement calculators say that I need to contribute in order to retire in 25 years. Meanwhile, my emergency fund is too small and growing too slowly (it takes me nine months to save enough for one month of expenses). To fix that, here are my choices as I see it: 1) Decrease contribution to 401(k) to match minimum until I build up the emergency fund, which will accumulate in a savings account; 2) decrease 401(k) contribution to match minimum, and build up emergency fund in Roth IRA, choosing a stable investment vehicle such as a money market; or 3) make no changes. I like the idea of putting money into the Roth IRA and having it grow at a faster rate than a savings account, but am concerned about quick accessibility. Which of these options makes the most sense to you, or should I do something entirely different? Thanks!

Michelle Singletary: I would opt for option 1. For now, pull back on retirement savings so you can build up the emergency fund. Also I recommend what I call a "Life Happens Fund" for the things in life that happen -- car repairs, needed vacations so you won't lose your mind, etc.

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It's a little depressing not to get any more "stuff,": I felt that way when I was young too, but I stuck with the savings. Now, when I need a new fridge, I can afford to get whatever I want because I saved when I didn't NEED, but only WANTED. Now, I am about to pay for a kitchen redo with cash because I was sensible for years. There is a gold ring at the end of the tunnel, so hang in there. You are saying no to things you want so you can get things when you need them.

Michelle Singletary: Amen to that!

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Envy: Michelle, I'm having a hard time with envy these days. We live in a neighborhood that saw an influx of people when housing prices were really high. A lot of these people seem to have a lot more money than my spouse and me. It can be depressing. New cars. Landscaping services, housekeepers, and all kinds of lessons. Any advice?

Michelle Singletary: Think grass.Yup, grass.Always seems greener on the other side, right.Well I've been to the other side, seen the grass up close and personal and let me tell you many of those people you are looking at are in financial trouble or one paycheck away from financial disaster. Or maybe they aren't.Still keep your eyes focused on your household and what you can do. You have to know you are rich.You are rich if you can get a clean glass of water.You are rich if you will have good meals today.You are rich if you have somebody that loves you.You are rich if you have a roof over your head on raining days.You are rich if you have your own teeth.Prosperity isn't just measured with cars, landscaping or housekeeping services.It's peace. It's health. It's love.Remember that when you are looking across your lawn.But I feel you know that. So I'm just reminding you. I know it's hard. I get it to --then envy bug only these days it's for women with smaller hips than me.But that means I'm eating well :)

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Vacation fund: I started a separate savings account for vacation. If I don't have enough in there then I stay home. Of course, this is only funded after all the bills are paid and the other savings gets paid. I am going to Cancun for a week in November and will have no debt for the trip.

Michelle Singletary: Can I come?Seriously, love your plan. Vacations are so much better when you don't have to worry about coming home to debt for it.

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Your advice for job creation in the nation!: Hi Michelle, I know that your focus is mostly on personal finance, but I was just wondering how you think that President Obama and the Congress should address the need for jobs in the national economy. Some economists such Paul Krugman have suggested first stimulus was too small and government should again use deficit spending to create jobs and lower unemployment. What is your opinion?

Michelle Singletary: Honestly, I just don't know. But I do know that all this decifit spending is going to catch up to us and possiblity result in a worse recession than we have now.I think there are companies now that could hire people. Heck, based on the current foreclosure crisis seems to me we need to hire more people to work with homeowners.

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To "ENVY": As Dave Ramsey points out, "The Joneses are broke."

Michelle Singletary: . .

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You are saying no to things you want so you can get things when you need them.: And the funny part is, NOW, I have more financial freedom than those folks who spent, spent, spent. Now when I need a new roof, I dip into my savings. My neighbor has to take out a loan. So all that time I felt poor because I didn't buy all the stuff my friends did, now I see they are poor because they don't have any savings. And I feel rich because I can get myself what I need without financing it.

Michelle Singletary: Good point.I know debt won't go away. I know people often borrow because they feel they have to.But for me, I just like the peace of not having a heavy debt burden.

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What next?: Hi Michelle, Thanks to your advice I have *almost* completely paid off my student loans (all I owe is $900 on a credit card that I plan to pay off before my 30th birthday in February as a gift to myself.) So my question is: What do I concentrate on after that? I have $9,000 in savings and plan to continue socking away. I have $25,000 in my 401k and a measly $700 in a Roth IRA. Should I concentrate on adding money to the Roth, or on paying down my mortgage? (Keep in mind that I only plan to the own the place for two more years or so.) Thanks for your help!

Michelle Singletary: Without knowing more such as if you have kids or other goals, I can't tell you what's next.If you are planning or moving soon I probably wouldn't put the savings into the mortgage. But if you feel you are behind in retirement savings, that's a good next move.Go to www.choosetosave.org and see what the Ballpark retirement calculator says you need. That may help you decide what to do with the extra money you have when you are free of the debt. And if you can put money in a ROTH, do that too.

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Not just pay discrimination: The less healthy the food, the cheaper. If you are struggling to make ends meet, it can be tough to buy healthy foods like raw vegetables and whole grain baked goods, and if you have to get cheaper housing far away from your job, you don't have as much time to prepare food because of the commute so you sometimes have to use boxed meals that are high in sodium or fat. This isn't to say pay discrimination doesn't exist! Just that there's sometimes additional reasons out there for the correlation between lower pay and higher weight.

Michelle Singletary: You make a good point. But we do need to get to the bottom of it because being overweight does cost more in the long run.

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Rally in DC?: Michelle. I've been reading your columns and chats for years. I know you are a reasonable and sane person offering the same advice. Therefore, are you planning on attending the "Rally to Restore Sanity" in a few weeks? It seems applicable to America's finances, i.e. "rally to restore sanity" to our finances.

Michelle Singletary: LOL.I may go. Sounds like it will be fun. And you are right, we do need to restore financial sanity.

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Putting a Dollar Value on Home Purchase Trade-Offs: Michelle, is there a formula you would suggest for weighing the trade-offs when purchasing a home to turn things into dollar amounts, or is that ultimately such a personal decision that it can't be reduced to money? I'm not talking about things that build equity (nice new kitchens and such), but rather things like a shorter commute with a more expensive house versus a longer commute and more expensive house; a tiny house with a shorter commute versus a more generously-sized house with a longer commute, that sort of thing. It seems that to have a house that is even close to the national average size, one has to go pretty far from the city, and I'm having trouble figuring out how to value it all.

Michelle Singletary: Here's what I recommend, whatever you do for whatever reason, don't get a mortgage that is more than 36 to 38 percent of your net monthly pay. The lower the better.Use that formula as you measure the other things, commute time (and the cost of gas, parking,etc.0 to peace of mind (less traffic), etc.

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To Loan or not to Loan: Hi Michelle, I have credit card debt of $15,000 with an interest rate of 10.4% and still owe 10,000 on my car loan with an interest rate of 9.2%. The monthly combined payments on these equal $700. I'm eligible for a personal loan of $25,000 at an interest rate of 7.99%. To pay the loan off in 5 years my monthly payment would be about $500. I'm considering taking the loan to pay off my CC and car payment. I'll have lower monthly payments (I'm barely making ends meet) and I'll reduce the interest I'm paying. Is there any reason not to do this? I feel like I may be missing something.

Michelle Singletary: Normally, I don't like the idea of trading one loan (or loans) for another loan but if you are SURE you won't run up that credit card again then the loan may make sense. The question also becomes what will you really do with teh $200 a month savings?I would boost my savings and then once I hit my savings goal, still dedicate the money to paying off the personal loan in less than five years.Just be careful in this decision. I've seen people combine this type of debt and then run up the card again.

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Dave Ramsey & Debt Definition: I have a friend who is a Dave Ramsey disciple. She's always going on about how she's "debt-free and loving it." Then you chat a little while, and find out that she doesn't consider her mortgage to be "debt." Is that a DR definition? I will consider myself debt-free when the only monthly bills I pay are for utilities.

Michelle Singletary: I listen to Dave all the time. He considers mortgage debt but he encourages people by helping them become free of their consumer debt. Then he pushed them to get rid of the mortgage debt. But I don't think there's any harm in claiming the debt-free status even if you have the mortgage AS LONG AS the person realizes as you have that they aren't really, truly debt-free.

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Envy - reminds me of that old commercial . . .: I think it was for some credit service, but there was a tall thin suburban dad walking around with a fixed smile showing off his big house, country club membership, fancy car, designer clothes for his family, etc. etc. Then he said to the camera: "How can I afford this, you ask? I'm in debt up to my eyeballs - somebody please help!!" All with that fixed smile still on his face. As a proponant of Michelle's philosophy (even before I know about Michelle!), I'm happy to say my family and I have the smaller house, two mid-range cars (one a minivan that's 10+ years old and still going strong) - all debt-free. What's that got me? The chance to take a dream job at lower pay when it came along !!

Michelle Singletary: I LOVE that commercial. Know it well. It was for lending tree. Such a testimony to how so many people hide their true financial situation.And you are right, it's all about trade-offs.

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Unemployment and Bankruptcy: I am in Atlanta and have been out of work for over a year. My house value is in free-fall. It has dropped more than $50K in value in the past 3 years and continues to fall. I am not living in the house nor do I plan on it ever---got it through a divorce. Tried a short sale but I couldn't get the bank to agree on the price the buyer was willing to pay. There is brand new construction in the area where the home are twice the size and only about $60 -80K more than my free falling home. I spoke to a lawyer about my possibilities and he suggested chapter 7. My only worry is that I am looking for a job and if bankruptcy would be held against me. What should I do?

Michelle Singletary: A bankdrupty won't really solve your home issue. That's secured debt and you would have to give up the house anyway.Talk to the lender about a deed-in-lieu of a foreclosure. It's not as bad as a foreclosure. HUD has information on its site about this option.If the house is the only issue I wouldn't file for bankruptcy. Talk to your lender about your options.

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Michelle Singletary: Thank you all for joining me today. I especially loved the stories from people getting rid of debt. I hope you know when you share like that it really encourages others. So bless you.Well got to run. I so appreciate that so many of you take the time to participate in these chats. If you can, view the video chat. I would love some feedback. Also subscribe to my weekly newsletter where I try to keep you posted on the most interesting personal finance stories.Take care and stay financially safe!


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