Michelle Singletary

Washington, D.C.

 Michelle Singletary writes the nationally syndicated personal finance column The Color of Money, which appears in The Washington Post on Wednesdays and Sundays. Her award-winning column is syndicated by The Washington Post Writers Group and is carried in dozens of newspapers nationwide. She has written three personal finance books, including her latest, “The 21-Day Financial Fast: Your Path to Financial Peace and Freedom.” Singletary was the financial expert for “The Revolution,” a daytime program on ABC. For two years, she was host of her own national television program, “Singletary Says,” on TV One. She is a frequent contributor to various NPR programs and has appeared on national talk shows and television networks, including “Oprah,” NBC’s “Today,” “The Early Show on CBS” and CNN.

In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges. As part of this ministry, she and her husband also volunteer to teach financial literacy to prison inmates. She is a graduate of the University of Maryland at College Park. She has received the Distinguished Alumni Award from Johns Hopkins University, where she earned a master’s degree in business and management.

To stay informed about various money issues subscribe to Michelle’s weekly retirement and personal finance newsletters, which will be delivered to your inbox every Monday and Thursday.

Archives

Books by Michelle Singletary:  

"The 21 Day Financial Fast: Your Path to Financial Peace and Freedom"

Buy it from Amazon

"Spend Well, Live Rich: How to Get What You Want with the Money You Have"

Buy it from Amazon
Recent Articles

THE COLOR OF MONEY COLUMN

(Advance for Sunday, June 24, 2018, and thereafter. Web release Saturday, June 23, 2018, at 8 p.m. Eastern time.)

(For Singletary clients only)

By MICHELLE SINGLETARY

WASHINGTON -- When you're a parent, it's hard to know when to let go -- even when your child becomes an adult.

Such was the case with a well-meaning mom who had a strong opinion about her adult daughter's next car purchase. In a recent letter to Washington Post advice columnist Carolyn Hax, the daughter asked for guidance:

"I just graduated college ... and my mom invited me to live with her rent-free so I could save up some money. I'm very lucky and have tried not to be a burden during this arrangement. The issue is, we really disagree on what I should be saving for. I want to max out my 401(k), correct some dental issues and travel. ... She wants me to save to buy a new car and is always mentioning the benefits of new car models she likes. If I had to guess, she probably thinks the timeline for me to save is urgent, since she wants to give my [current] car to my brother when he graduates next May. I honestly want a used car. My current one is 15 years old; it runs fine, and I really like it. I don't know how to talk to her about this. ... Is there a way to compromise, or politely talk it out? I love my mom, I don't want to be the ungrateful daughter."

Hax responded: "Sounds like it's time for a come-to-Prius moment.

"Setting: A time and place when you and your mom are together and at ease and not scheduled to be anywhere.

"Opener: You tell your mom how grateful you are for her generosity in giving you this opportunity to save money.

"Point: Say you are concerned lately that her goals for this time and yours might be different, and you'd feel better if you knew what she had in mind. You don't want to be an unwitting source of angst or frustration.

"Key question: Is she willing to share her expectations? Such as, a deadline for you to move out? A goal she'd like you to reach personally? A goal of her own that she has, that's dependent in some way on you? (Like your giving up your car to your brother.)

"If she isn't forthcoming, then all you can do is keep trying to pull your weight, save like the wind (we're pretending that's a thing) and get out of there as soon as it's prudent to.

"If she is forthcoming, then you work with that -- bending where you can or where it won't cost your integrity much to bend, and holding firm where you need to. And if holding firm is a problem for her, then this grace period might be up. It happens."

Wanting more insight, this frustrated daughter put the same question to me during my weekly online discussion. I wrote the following letter, asking the young woman to show it to her mother.

(BEG ITAL)To: Mom

From: Michelle Singletary, Washington Post Personal Finance columnist and mother of three (23,20,17)

I want to first commend you for allowing your adult daughter to live at home to save. What a wonderful gift you are providing for this young adult. Kudos to you. My husband and I plan to do the same thing with our daughter when she comes out of graduate school next year. In fact, we are already talking about how it will work out. And she, too, expressed concern that my husband and I won't let her travel while she's saving.

But I assured her, as I hope I'm assuring you, that we see she is a good money manager. As long as she's meeting her saving goals, we won't mind her taking vacations, especially since she won't have any school debt.

Now, mom, if I may, I think you need to listen to your daughter about the car. I believe she is right to want to hold on to the older car until she saves enough to pay for a "new-to-her" used car. Yes, new cars have all kinds of great safety features, but when I look at accident reports, people are having accidents mostly because of distracted driving, not because they don't have blind-spot warning sensors.

You've raised a very money-smart kid -- trust her on this issue. She doesn't want to be disrespectful, but I side with her and think you might want to steer clear of the car talk. She's got this.

Sincerely,

Michelle (END ITAL)

In the end, the advice is basically the same: Talk it out.

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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2018, Washington Post Writers Group

THE COLOR OF MONEY COLUMN

(Advance for Sunday, June 17, 2018, and thereafter. Web release Saturday, June 16, 2018, at 8 p.m. Eastern time.)

(For Singletary clients only)

By MICHELLE SINGLETARY

EDITORS -- Michelle Singletary is taking a one-column vacation. Her next column will move Thursday, June 21, for release Sunday, June 24.

WASHINGTON -- Readers often want to know what (BEG ITAL)I(END ITAL) would do in certain financial situations.

Many people characterize these queries as "WWMD" or, "What would Michelle do?"

I do my best to provide informed answers based on my experience and reporting, including conversations with numerous financial experts. So here are my responses to some WWMD questions.

(BEG ITAL)Q: I have about $13,000 in credit-card debt (various cards) with balances from a low of $200 to a high of $2,000. I will be getting a small lump sum of money. What's the best strategy to pay these off? Should I also consider doing a loan on my 401(k)?(END ITAL)

A: The first thing I would do is take those cards out of my wallet. Freeze them, cut them up, and don't use them again until all the debt on ALL the cards is paid off.

Then take some of the lump-sum money and put it away for a rainy day, even if it's just $100. Because if you don't have any cash savings when an emergency comes up, you'll just run up more charges on the credit cards.

Next, organize your cards from the lowest to the highest balance. So at the top of the list should be the card with $200. (Speaking of which, why is that still there? Is it a pet?)

Starting with the smallest balance means getting rid of a debt fast. In my experience, people typically get super excited when they see such quick progress. This results in their becoming aggressive in getting rid of the rest of their debt.

And no, no, no, don't take money out of your 401(k). Let that money stay invested for retirement. Don't compound one mistake (letting your credit-card debt get to $13,000) with another (robbing your retirement account).

(BEG ITAL)Q: Always love your straight-up advice. My husband and I are in our late 50s with a six-month emergency fund and a life-happens fund. We max out my husband's retirement (23 percent of his salary), and anytime I run a retirement calculator, it says we're on target. We do an annual $2,500 Roth contribution. Our accountant says I can also either put $2,100 toward a SEP-IRA (I am self-employed) or we can shave $700 off our tax bill. Our feeling is that the $700 won't be missed from our savings, but the $2,100 could work harder in a SEP-IRA. It's just hard to not be tempted to hold onto money, when we can. WWMD?(END ITAL)

A: For those who don't know: A SEP-IRA is a tax-advantaged retirement account for business owners and their employees, or for self-employed individuals. The "SEP" part stands for "Simplified Employee Pension." Contributions made to a SEP account are tax-deductible and, like money in a 401(k), investments grow tax-deferred. Distributions are taxed as income.

For self-employed individuals, there is always this conundrum at tax time. The amount you need to fund an SEP can lower your tax bill, but then you have to move money -- more than the tax savings -- into a retirement account with restrictions on withdrawals.

But, over time, this money has the potential to grow and thus help fund your retirement -- even taking into consideration that you have to pay taxes on your distributions. I would go with putting the $2,100 in the SEP-IRA. Because, as the reader points out, that's more money to work for you in the long term.

(BEG ITAL)Q: You talk a lot about how it can be hard to actually spend, even in a responsible way. My question is: What is the right amount to allocate to discretionary/fun spending? My husband and I are 29, make $250,000, max out our 401(k)s and IRAs, have fully funded emergency/life-happens funds, no consumer debt, and we aggressively pay on our mortgage -- which we project to knock out in about seven years. We allocate $1,500 per month to discretionary expenses, which includes all entertainment, eating out, gifts, vacation savings, furniture, etc. That seems like a lot of money, although it is a small percentage of our income. Sometimes I think we should spend more but feel guilty moving money away from the mortgage toward fun. What would Michelle do?(END ITAL)

A: Retirement savings on pace? Check.

Got money saved for life's economic emergencies? Check.

No consumer debt? Check.

On track to pay off your mortgage before you retire? Check.

When you can check off these important financial moves, you've got a good balance of financial responsibility with fun.

Reasonable amount of money allocated to enjoy your hard work? Check.

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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2018, Washington Post Writers Group

THE COLOR OF MONEY COLUMN

(Advance for Sunday, June 10, 2018, and thereafter. Web release Saturday, June 9, 2018, at 8 p.m. Eastern time.)

(For Singletary clients only)

By MICHELLE SINGLETARY

WASHINGTON -- Social Security and retirement go together like peanut butter and jelly -- many people just can't have one without the other.

Yet when it comes to Social Security, there is a mountain of anxiety about how it factors into retirement plans, especially for the millions of people who depend on it as their only source of income.

Politically, Social Security is often vilified as an entitlement program that costs taxpayers too much. And there's concern that it's in danger of running out of money.

Let's take a look at that last point. Social Security does have some big funding issues, according to the just-released annual trustees report. Over the program's 83-year history, Social Security has collected about $20.9 trillion and paid out $18 trillion. But the reserves for the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, will be unable to pay full benefits in 2034, according to the report. The Disability Insurance Trust Fund, which pays disability benefits, will no longer be able to pay full benefits in 2032.

"Social Security's total cost is projected to exceed its total income [including interest] in 2018 for the first time since 1982," the report said.

But even with this dire warning, the program would still have enough continuing tax income to pay out 77 percent of scheduled benefits for the Old-Age and Survivors Insurance Trust Fund in 2034. And there will be enough coming in to cover 96 percent of scheduled benefits for the Disability Trust Fund when its reserves are depleted in 2032.

So, despite its funding issues, the Social Security program isn't going anywhere, and that means you need to know how best to collect your benefits. To help you navigate this complicated and often confusing program, I'm recommending for this month's Color of Money Book Club "Social Security: The Inside Story," by Andy Landis (CreateSpace, $19.95). Be sure to get the silver-anniversary edition.

Landis is a guru of all things Social Security. He spent 12 years working for the agency, and then he put his insider knowledge to work for himself by helping individuals and professionals understand the labyrinthine program.

"Many people believe that Social Security is merely a retirement program," Landis writes. "But Social Security has always been much more than that. Today it is a comprehensive program of worker benefits, covering not only the worker but also family members."

Each chapter starts with a nutshell summary, which is a useful guide if you want to skip around to topics that interest you the most. I jumped straight to the section on "The Delay Strategy."

My husband and I have been talking a lot about when to start collecting our benefits. He wants to start at 62, even though he's fully aware his benefits will be reduced. He argues we can use the money to travel while we're still healthy. I've been arguing to delay to 70. We both reach full retirement age at 67. (Here's the link (wapo.st/2LrCc4f) to my column on our debate over whether to take it early or wait.)

"Quite simply, the later you apply for retirement payments, up to age 70, the higher they'll be for the rest of your life," Landis writes. "You'll get a higher total payout if you live at least to the average life expectancy. And the higher payments might continue even longer, for your spouse after you pass away. It's a gift that keeps on giving, for two lifetimes."

Of course, when you start collecting is an individual decision, and no set course of action applies to everyone.

It's not until chapter 11 that Landis fully addresses the solvency of Social Security. He answers the question I get all the time from young adults. "Will Social Security be bankrupt before I retire?" He says the answer is no.

"Social Security's solvency is a remarkable accomplishment in this era of troubled banks, large insurance companies in receivership, and pension plans in bankruptcy," he says. "Social Security is one of the soundest financial systems in the nation and the world. Americans can take pride in this achievement."

Landis also reminds readers that this program is insurance, not an investment. He makes this point in a discussion about fixes to financially shore up the program.

Despite the denseness of the topic, this book is a very easy read. And it's not just for folks nearing retirement. You need this knowledge long before you're ready to collect benefits. The more you know, the better you can plan.

I'm hosting an online discussion about "Social Security: The Inside Story" at noon Eastern time on June 28 at washingtonpost.com/discussions. Landis, who retired this year at 66, has agreed to join me to take your questions.

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Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

(c) 2018, Washington Post Writers Group

About
Michelle Singletary writes the nationally syndicated personal finance column The Color of Money, which appears in The Washington Post on Wednesdays and Sundays. Her award-winning column is syndicated by The Washington Post Writers Group and is carried in dozens of newspapers nationwide. She has written three personal finance books, including her latest, “The 21-Day Financial Fast: Your Path to Financial Peace and Freedom.” Singletary was the financial expert for “The Revolution,” a daytime program on ABC. For two years, she was host of her own national television program, “Singletary Says,” on TV One. She is a frequent contributor to various NPR programs and has appeared on national talk shows and television networks, including “Oprah,” NBC’s “Today,” “The Early Show on CBS” and CNN. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges. As part of this ministry, she and her husband also volunteer to teach financial literacy to prison inmates. She is a graduate of the University of Maryland at College Park. She has received the Distinguished Alumni Award from Johns Hopkins University, where she earned a master’s degree in business and management. To stay informed about various money issues subscribe to Michelle’s weekly retirement and personal finance newsletters, which will be delivered to your inbox every Monday and Thursday.

Archives

Books
  • "The 21 Day Financial Fast: Your Path to Financial Peace and Freedom"
  • "Spend Well, Live Rich: How to Get What You Want with the Money You Have"
Links