Color of Money Live

May 23, 2013

Got money questions?

Join the online discussion with Washington Post nationally syndicated personal finance columnist Michelle Singletary on Thursday, May 23 at noon ET. Michelle will offer advice on the latest financial news and ways to get your money right.

Send your personal finance questions in early or read the archives later.

-- Today's e-newsletter: In tornado's wake, the financial burden is also devastating

-- Stretch your retirement dollars

-- Health care in retirement probably cost more than you think

I'm glad we have this time to gether . . . If you were here with me I'd break out in sign off song from the Carol Burnett show. Anyway, lots of questions so let's get started.

hi michelle, great column! here's my situation: i'm a 32-yo woman who has just started a fantastic relationship with a great guy (he's 39). we've been together for approx. 3 months and we're both would like something long-term (with each other or someone else, but with each other is looking great so far). the other night, he told me he would not get married with a pre-nup. i felt a divide between us when he said that. i guess i've always thought someone that wanted a prenup is someone selfish and doesn't want to share things or their full life with someone else. i come from a family of refugees who have worked from the ground up. my family hardly has any assets and i have a middle-class salary and only a small 401(k) and stock account ($50k and $15k respectively). he's been working many years more than i have, makes double what i make, and his family is definitely more wealthy although i wouldn't expect a huge inheritance because he has many siblings, and he's doing great financially as-is and doesn't need anything from them anyway. i talked to him a little bit more that night and haven't brought it up since (we've only been dating for 3 months). i just don't know what to think...sometimes i cry when i think about it. i just don't want to get married, get divorced, and have a guy kick me to the curb or i move into an apartment. if a prenup let's him keep all his money, then i'd rather never even continue staying with someone like that. and if that's what a prenup is, why get married at all? not that i'm marrying for money, but i want a marriage to be one where we take care of each other in various ways, including sharing resources. i wonder if this is a deal-breaker and if i should bring it up with the risk it will end things between us. or perhaps i don't know what is a fair pre-nup? i feel like the the person with less money waives their rights in the pre-nup and that they are always at the advantage of the person with more money and assets. if he won't get married without one, and i don't know if i will sign one, what should i do? we live in California--after 10 yrs, everything earned after marriage is community. i would support a prenup that would follow CA law, except in the case of infidelity or if one of us turns out to be gay, but other than that, i would feel awful if a guy made me sign something that said i get 35%, he gets 65% or anything like that--i would feel that we each have a monetary pricetage over our heads...

So first, I think you meant to say your guy doesn't want to get married "without" a pre-nup. So going on that I think you should take a step back. You've only been dating for three months. A bit surprised this came up so soon but it's out there. Give yourself time to calm down and be less insulted.

Generally, I agree with you. You get married and it all belongs to the two of you. But and that's a BIG butt if both parties agree about a pre-nup, especially if they are older and there are children from previous relationships, I'm not so hard on the instrument. 

However, you do object. You do have differnent values about this than the guy you are dating. And yes, it should be a deal breaker if you continue to feel the way you do. Besides, he made it clear, right? No pre-nup. No marriage.

So if you continue to date as some point soon, when you aren't so outraged, ask the guy to talk about it. Tell him what you told me. Tell him you aren't feelilng this pre-nup thing. Listen to why he wants one.

If he insists, perhaps he isn't the right guy for you. But make the call before you get all up in love and become so invested in the relationship that you make a compromise you may regret ending in the need to use a pre-nup.

Hi Michelle, After the recent news about the vast differences charged by hospitals for Medicare patients, I decided to do a little sleuthing on my own for my dog's upcoming surgery. I asked for a few vet recommendations, called around, and ultimately will save $800. Just wanted to pass that along to the other chatters!

Thanks. Good advice. Did I tell you I got a dog for my kids?

So you mothers out there know it's my dog now. 

So mad although he's cute as can be. So yes, I've been shopping around for various things for him.

 

Stay out of the stores. Michelle you remember when people went to the store because they NEEDED something....not to look....not to see what is new....not a form of entertainment. And you surely did not go when you had no money/cash in your pocket.

Yup. I remember when. I don't shop as a form of entertainment and don't let my kids either. We go to the mall with a purpose and plan. Then get the heck out of there.

Not really a question, but I need a shoulder to cry on. Back in the day, you were told to buy the most house you could possibly afford, to get the best return on your investment. My parents are a prime example of this; the Chevy Chase house they bought for $40,000 in 1970 is now worth something like $1.4 million. My sister's Conn Ave condo has appreciated from $35,000 to atleast $400,000. Stories like this abound, but that was then, this is now. I'm a "mother hen" realtor who wants my clients to make sound financial decisions, not just make more money in commissions. But I can't save them from themselves. It's as if the recession and housing downturn never happened. Not only do twenty-somethings want top of the line everything, they are taking on far more debt than is realistic even with today's low interest rates. Last week I was at a closing (my clients were the sellers) where, after all the papers were signed, the husband said, "We have $12 in our checking account." To which I said the first thing that came into jmy head, :How are you going to pay the movers?" To which he replied, "We'll put it on plastic" and looked pained when someone pointed out you're supposed to tip in cash. They have three or four younhg children. What are they thinking? I kow you'll keep fighting the good fight and just wanted to let you know you have some allies in your efforts.

I'm happy for you to use my shoulder.

I had feared people would soon forget the lessons we should have learned from teh Great Recession. It's sad. And it continues to be my mission to get people to live below their means. Not within their means but below.

But it's a hard sell.

Hi Michelle, I am struggling with law school debt and I don't know how to dig out of this hole. I've got about $130k in student loans, with 18k of outstanding interest. I'm on an IBR plan because my original career goal was to work in public interest and use public interest loan forgiveness in ten years. Well, when I graduated in 2009, the market for lawyers was so bad that even public interest jobs weren't open. I got a corporate job, making $67k, bought a house, had a child, got divorced. So the good news is my student loan interest isn't capitalizing, but at $800 in interest a month, I'm not even paying all of that off and it keeps accumulating. How do I get out of this? I'm starting to think about looking for a public interest job again, even though I don't know how I would pay my bills, because in the long run perhaps the loan forgiveness is worth it. Those jobs pay approximately $40k. On the other hand, as long as I control my expenses an get annual raises, perhaps I'll eventually be able to afford to pay off my loans. Any advice?

I'm so sorry. Yours is the cautionary tale I try to tell people ALL the time. But I often get shouted down by people who believe all this student loan debt will pay off in high salaries. So keep telling your story to warn others. 

In the meantime yes I would at that level of debt try to find a public service job but make sure it's something you want to do. If not  you may not stay in that job and then you woul have given up a higher paying job for nothing.

Til then stay on the IBR (income based repayment plan) while doing what you can to reduce all your expenses so you can make extra payments when you can. When you get a raise earmark it immediately for the debt. Get roommates. Live like when you were a law student. I know the debt is high but I've seen people pay it off. It'll take time but it can be done. 

I know you've covered this topic before, but do you have any suggestions for a money management book for a high school graduate? I remember my aunt getting me one when I graduated from college and it was very helpful in explaining things like CDs and mutual funds and the like and how to start saving, etc.

Thanks for doing these chats!

 

 

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Hi Michelle, we have 529's for our kids, with automatic withdrawal. Older kid is going to public school next year, which suddenly frees up a big chunk of change. Should we take that money and pour it into 529 or should we do something else with it? Since we've been living without that money, I want to continue saving it.... Thanks!

Like your thinking. 

So I would ask:

-- Do you have a well funded emergency fund (six to 12 months of living expenses)?

-- Do you have a life happens fund? For the things in life that happen, car repairs, etc.? Typically I say try to save between $500 and $2,000 in this account, which you will be dipping in periodically. 

-- Then look at your retirement savings. Are you saving enough in those accounts.

-- If you can answer yes to all those questions, the absolutely pump that money into the college savings funds.

If family approches for financial support, should you just say yes or no and leave it at that? Or, is it appropriate to raise concerns about debt ect.? I'm facing this dilema. Due to immediate family recently walking away from a (deeply) underwater mortgage their credit is shot and they've dealt with some other recent financial hardships. Their child is in grad school and needed a significant amount of money to participate in a great opportunity related, but not required, to the course of study. Student or parent don't have the money and due to lousy credit can't get a loan. They approached me to co-sign but that was also declined to to the primary applicants poor credit (my credit is stellar). Rather than take out a loan just under my name, I agreeed to give a personal loan since I'm, fortuantely, in a position to do so (stable, two income household, no debt, cash reserves, saving for retirement, college funds for kids etc.). The plan to pay me back is via student loans that will come in during the fall semester. I have no worries about seeing my money back. But, as a financially conservative person I just can't help but wonder if the grad student is slidding down a very slippery slope. Now that I'm approaching middle age (yikes) I have friends that are still slaves to their student debt 10 - 15 years out of school. Curious what your thoughts are?

My thoughts. You should never, ever, ever co-sign on a loan for anybody not your spouse.

I would never, ever, ever lend people money I needed or wanted back. If you can't give them the money, you don't have it to lend.

I wouldn't have helped in this situation because you are helping this family and student live above their means. You say the program wasn't required and yet despite all the debt they went for it anyway. Not good. Not a good lesson for that students.

So yes you were right to be concerned and if it had been me I wouldn't have gotten into this deal. I hope you will be okay if you don't get your money back.

Hi Michelle, Love the chats! Any resources to help us figure out whether it financially makes sense to buy a house instead of continuing to rent? I feel like we *should* buy a place since we have enough savings for a downpayment and we both have solid jobs with a good income. But we love the place we are renting and are getting a great deal on it. Any thoughts would be appreciated. Thanks!

Call a HUD-approved housing agency and sit down with a housing counselor who can walk though the numbers with you. 

Short of that, what makes sense to you may not make sense to someone else. Owning a home it's the slam dunk it used to be, even when or if you count the mortgage deduction. 

So sit down and make a list of the pros and cons of buying a home. Some questions or points to consider: How long can you expect to keep your good rent deal? With a more reasonable rent are you saving more for retirement? Do you want more space? Could you afford all the to other expenses that go along with home ownership?

See what I mean?

Most important don't buy because you've heard it's what you have to do. Buy because it's the right time for you and you can afford to buy.

Having just gone through the process (and originally being anti-prenup), they aren't as horrible as you think. You both have to have fair representation and generally the rules change after you've been together so many years or have children. If we divorce after a year, I get nothing. But if 5 years in, after a house and kids, it doesn't work out, there is equitable compensation to account for the income I've lost raising kids and to cover the cost of raising them. The advice our priest and attorneys gave us was to go into this with the assumption that you are going to be married forever and live that way. The prenup is just to protect each party in case something happens.

Thanks for your perspective.

I would want to know if they pre-nup would be a requirement for any woman that he would consider marrying, or whether it is just something he'd want from you. If it is just you, then I would move on.

Hadn't thought of that. Interesting. I would object either way. 

Purchased my first home last year with husband. We have since separated and plan to divorce. He signed over his share of the house to me. It's a large house and challenging to keep up the maintenance, but I love it. I do have some equity in the home. I think often about downsizing. Its just me and my LO. However, I am not sure I could qualify for a mortgage now b/c I am carrying more debt (resulting from the divorce -- loooong story). Should I return to renting?

Do what you can afford. I know that sounds simple but far too often I see men and women trying to hold to a home that they can't afford and end up deeper in debt and then still lose the house.

Crunch the numbers. Look at all your expenses. If you are going to have to spend more than 35 percent to 36 percent of your net monthly income on the house you probably can't afford it.

 

My son bought a used book for a quarter, more suited for infant, than an 8 yo boy at a yard sale . When we got home, he told me he intended to give it to his teacher (who is pregnant) for her child. I told him that maybe he should buy something new for his teacher, but he said it is the thought that counts, not how much he paid.

Out of the mouths of babes.

Smart kid. 

My son is a recent college graduate and he just got a new job, he starts next week. He moved back into my house while job-hunting. He is fortunate to have no student loan debt (it was minimal and my mother paid it off). What is your general advice to someone starting their first real job? Obviously to avoid credit card debt.

So happy for your son. So many graduates don't have jobs.

My advice:

-- Live at home until he's saved at least six months of living expenses for where you might live on his own or with a roommate.

-- Also create a life happens fund for the expenses that come up that he might not have planned for. About $500 to $1,000 for him.

-- Make sure he signs of for any workplace retirement plan that is offered. Right away. He's got the best thing on his side. Time. The sooner he begins the better position he puts himself in for retirement.

-- Stay away from accumulating any credit card debt.

-- If he has a car pay if off as quickly as he can and then continue to make car payments to himself so that he can save up enought to pay cash for the next car he may need down the road.

So that should keep him busy for awhile :)

Hi, I want to donate to the victims of the tornado in Oklahoma, but I don't want any of the money to go for management fees. Any ideas?

 

How to help Oklahoma tornado victims

Please see the provided link. And how kind of you!

In the end you will *not* have a big chunk of change. there will be *something* to eat up that money (even public school - it won't be the same, but there will be expenses there). But definitely! try to save. kids keep getting more and more expensive every year (think about how much you thought you'd save not buying any more diapers)

True. There is always something the kids need. But still if you have a set amount you know you have, capture that money as I outlined.

So if I were the guy you're dating, I would read your post and wonder whether you liked me for who I am or for my money, thus reinforcing my desire for a pre-nup.

And that's what you out out of her pouring her heart out?

Wow.

I didn't see it that way at all. In fact, why would the guy NOT want to share his  things with the woman he wants to marry and share his life? Fear? Mistrust? 

I believe you have it wrong my friend.

ALSO selling is a big pain (as much or more than buying). SO if you do not plan to stay in the house for a while - do not buy. There are A LOT of expenses to moving that you just do not remember at all when writing those checks. It is a big hassle. Being able to take that dream job at any moment, well, that can be priceless. My family just moved across the country - and sold and bought a house. with a HUGE help from the company that hired my husband. And STILL it was a big hassle. We've been here under a year, and we have no ties to the community,and while I know I can sell the house (well, today) --the idea of doing it any time soon just paralyzes me, because it's such a big deal. so...wait if you're unsure and take that money and save it.

Thanks. Something else to consider.

As someone who works in the Financial Aid office of a university, I'm curious as to how this graduate student expects to have loan money to pay to someone else. Federal financial aid is usually limited to the cost of attendance, which the school calculates for the student.

Missed that point. Thanks. 

Although I have seen students get "refunds" from student loans and use that money for spring break trips, etc.

It can be done and has been done.

"The plan to pay me back is via student loans that will come in during the fall semester." I'm expressing concern over this! Student will receive another loan and use that to pay you back and not for tuition? That sounds, at the least, unethical. Possibly illegal?

Another concern.

I think many of us just feel legal or not legal this was and is a bad idea. 

Thanks for the advice! I do spread my cautionary tale of woe because when it comes to student loans people just don't think. I'm a fairly smart person and I actually just assumed my loans would be an amount I could afford. It never occurred to me to sit down and calculate it all. I guess I thought they wouldn't give me more than I could pay back. What was I thinking??? And I'll pay for it (literally) for the next 30 years. Sigh.

Interesting you should say this. I'm writing about this for my Sunday column. Studies show just what you said, neither students nor their parents add it all up. 

I do wish you the best. Stay strong. 

Well I really wanted a kayak to enjoy the water around my house. BUT I waited until all debts were paid and I had a savings, Now I can buy one. However I am now too old to lift it to the top of my car so I can't use it. Yes put off all pressure until you are too old to enjoy.

Or buy a trailer carry it behind your car!

 

Can you get a roommate or two? I know people in your situation who did that - and just a little bit can be a big help. you can always require lots of things of renters wrt upkeep too (for a bit off rent). Just a thought.

A possible plan to keep the house. Thanks.

I am not crazy about pre-nups either, BUT I think the OP isn't quite accurate in that a pre-nup means she gets nothing. Sure, like another poster said, after one year, nothing, but a pre-nup could also say that the signers split everything 50-50 or 60-40, or something like that. I can see where the person with more assets doesn't want to lose everything. The boyfriend might be thinking that he'd be willing to sign a pre-nup that gives X amount, a fair or even generous amount, rather than risk being sued for everything he has. Just a thought. (I'd still be sad if someone asked me to sign one.)

A reasonable response. Thanks.

I'd love his/her contact information! Michelle, can you share it?

Sorry. Don't have it.

You all get to ask me questions anonymously.

If I were to ever marry again, I would need a pre-nup, especially bc of protecting assets for children, retirement accts, etc. There is a business side to marriage, and it's about negotiating and making hard choices while you still like/love each other.

So many of you are weighing in on this topic so I want you to have your say.

I get protecting children. But not the keeping what you have from the person you marry just because. Nope. Then stay single. Then you get to keep all your stuff.

I am in the same boat. I never calculated the total of my loans and what it would mean on a monthly basis over time. The biggest challenge?? Putting money aside in a 529 for my LO, when I am still paying back my own loans. I'm determined though to make it work! You are not alone.

Thanks. Challenging indeed.

I try to get people to see this from the start. But again I get rolling eyes from parents and students who want what they want.

I just wish more people would count the true cost. So many more choiced that drowning yourself in debt for decades.

Unwise for sure, but neither illegal nor unethical. The loan was school-related so the student loan would properly cover it. You can get loans for tuition, school-related expenses and living expenses.

More on the grad student.

My nephew is in his junior year in high school and my sister has been discussing college re: him for at least a year now. she's in the position where they earn a lot of money (but live in NY so costs are crazy), so she believes they won't get a lot or anything in aid, but her son wants to attend expensive schools, and it's kinda frustrating, since she is like you - she doesn't think her son should be borrowing $200k for anything. even school. so it's tough..but certainly a life lesson - before he takes any classes on campus!!!

Tell her to stay firm and just say, "NO." And read my column for Sunday to her son!

You can buy roof racks that have a small wheel thingy that helps you push the kayak up. My friend is a kayak fiend and she is elderly and petite but she has no problems handling her kayak with this type of roof rack.

Where there is a will there is a way.

Thanks.

And before you know it comes the time we have to say, 'So long.'

Thanks for joining me today. Good questions and comments. Love the forum. But that's because of you.

Have a wonderful holiday weekend. And don't spend too much!

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday and Sunday. Her award-winning column is also carried in more than 120 newspapers. 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.

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