Color of Money Live

Jun 13, 2013

Join Washington Post nationally syndicated personal finance columnist Michelle Singletary Thursday, June 13 at noon ET for an online discussion.

Singletary will be available to answer you money questions.

If you can't make the live discussion, submit your questions early.

-- Michelle's Mailbag

-- Can you chart a dad's value

-- Are you the 61 percent? Most Americans remain ill-informed about personal finances

-- Today's e-newsletter - Edward Snowden: The Price of Being a 'Whistleblower'

As always I'm looking forward to today's live chat. Just FYI, I'll be away for the next two weeks. I'll pick back up on Wed. July 3 (because Thurs. if 4th of July). After that we are back to my regular schedule. 

So let's get started.

Hi Michelle, I love your advice. I'm hoping you can give me a couple of suggestions. Daughter is having a baby in October and she and her boyfriend only have one car. Right now she is partly living at home and uses my car pretty much when she wants. She has poor money management skills, no college degree, and works parttime as a waitress. Obviously she keeps getting declined for car loans, and has asked us to co-sign for her, which we really do not want to do. My husband's car has 200,000 miles on it and has been paid off for a couple of years (Toyota Highlander - the thing is a beast!) My car is 2 years old with 66,000 miles on it (75% put on there by daughter) with about $8000 left on the loan. What sort of advice would you offer about the best way to get her a car, which she is really going to require with thebaby? I wouldn't object to somehow selling her my car and getting a new one, but can't see how that would work very well either. I know that leasing is not recommended by anyone.

Ok, first thanks for the compliment. I have to say that to start because you may not like what I'm about to say. But please know I'm giving the advice with much respect and good intensions.

You need to let that grown, irresponsible adult child GROW UP.

Pull back and let her fall. I mean it. Even with a baby on the way. She's not being financially responsible because she doesn't have to be because you and your husband are doing all the heavy lifting for her.

Let's see:

-- She's having a baby and isn't married. Not a judgment but let's look at the situation compared to what else you said:

-- She can't afford to have a baby. Her boyfriend can't afford to take care of her and his baby by evidence that HE isn't factored in getting the extra car they need.

-- She's partly living at home meaning she hasn't prepared her own home for her and her new baby. 

-- She's got poor money management skills. How exactly will that improve with the pressures of a new baby that she can't afford?

-- She doesn't have a degree or I'm assuming from your note any skills that could increase her opportunity of becoming better employed. Waiting tables is a honest way to earn a living. So perhaps until she gets more training, she should try to do more than work part-time as a waitress. Got a baby coming.

-- She can't get a loan on her own, which means her credit is jacked up. Could be because she doesn't have a credit history but also a sign that she's not responsible with debt.

So my advice is as follows:

-Under NO circumstances should you co-sign for a car loan for her. No. No. No. And did I say, No! That car loan will be your car loan based on your daughter's history. Think that will improve with a new baby? Nope. You will just feel more pressure and guilt to pay the loan for her. And how could you not. You will be thinking about your wonderful grandbaby.

-- Under no circumstances should you sell her one of your cars UNLESS you can pay cash for the car you would get to replace the one you will give her.  Besides, sell to her? Really. Think she will pay you back? Probably not. If you can afford to give her the car, give it in the interest of helping with the baby.

-- Under no circumstances should she or you lease a car. Bad deal. What happens when the lease is over? She'll be right back in the same situation.

-- You and your husband need to ASAP have a sit down with your daugther and the baby's daddy. What are his intensions? What are their long-term plans financially? Ask about how they plan on caring and paying for the baby? Will she and the baby be "partly" living in your home? I wouldn't stand for that. Go or stay but not this in and out.  If she's staying, which might be best, then you have a right to inqurire about their finances, at the very least hers. You have the right to help put her on a budget or demand rent and that she help with expenses. You act grown, you get treated like you're grown.

-- Let that boyfriend man up! He's now responsible for helping make a way for your daugther and their baby.

 

So while you are concerned for the baby, help usher your daughter into adulthood by not bailing her out. Help her up but stop giving her handouts.

Hi Michelle, I am one of the unfortunate affected by furloughs. Fortunately the only debt I have is a mortgage payment. I am trying to figure out what to cut in terms of my savings for the next 90 days during the furlough, Can you suggest what to cut first my long term savings, college savings ( entering college 2014 and no I do not have enough saved), TSP. Any advice? Thanks.

If you know me, you know I'm going to say if you don't have the cash for college you may have to wait on that goal. 

But aside from that, I would start with really going through your expenses to see what you can cut before pulling back on retirement and your college savings. However, if you have cut to the bone, look at your retirement savings first if you intend on sticking with your plan to go to school next year. 

I was ready to send you a snarky comment that for someone who tries to save dollars in every phase of life, holding on to a car for only 5 years (after most of a car's depreciation) seemed to fly in the face of all your advice over the years. But then you corrected the column to say that you keep cars for 10 years. So, uuhhh, never mind. Have a great day.

 

Are you the 61 percent?

So glad you kept your snarkness to yourself. It was a copy editing error. 

Hi Michelle, hope you're safe from the crazy weather! My question is about family and differing financial ideas. My husband and I just bought a house close to my parents and we're learning the scope of the phrase "for better or for worse." We're a young couple, no kids, full-time jobs, working to build back our emergency fund after spending the majority of our savings on the down payment. Our house needs work, most of it cosmetic. My parents are financially comfortable, I guess, because they just built a $40,000 sunroom off their house. My mom in particular is very into homes, design, and decorating. It's her hobby. She's more excited than we are about our house. Last week she showed me a piece of furniture online. I said I liked it and would think about going to look at it at the store. She went out, bought it, and brought it over yesterday. This kind of thing happens often. I have explained that I don't want her buying us anything, that we don't mind waiting, saving, and buying furniture later. And that I don't want to feel like someone else just did up my house for me. She always brushes it off, saying that she just wants us to have a nice home, and don't we want to be all set up by the time Grandma visits this summer? Honestly, I don't care what Grandma or anyone else thinks about a house we've been in for only six weeks. It's supposed to be a work in progress. By the way, my mom and I share similar taste and I usually love the stuff she picks out. So I'm fighting with myself about how to be a grown-up here and reject a gift for reasons of financial dignity. What can I do, without hurting my mom's feelings? What phrasing would make sense to a serial gifter?

Very interesting problem. I also have a hard time accepting gifts from folks. So why don't you and your husband talk about this. Are you both comfortable with such lavish gifts or her giving you things?

Actually there isn't anything wrong with her buying you nice things you may want as long as you actually want and approve of the purchases.

Now here's the hard part. If she won't listen or accept your decision that you don't want her decorating your home, you t reject delivery of the items when they are delivered. I know, big thing but that might get through to her. Just send it back. Then say, "Mom, I would love your 'opinion" and decorating my house but please let me and my husband make the final decisions."  

But if you like what she offers and she's offering it with no strings attached, let her give. It's not a sign that you can't do for yourself. It's not a sign that you don't have financial dignity. It's a sign that you have a very wonderful generous mother. 

Hi Michelle. I was at your seminar when you came to my church in Detroit last year--It was awesome!. My question... My fiance and I are 25 and we are not in the financial position to pay for a wedding. Our families do not support us getting married for a mirad of reasons, one being we're 25 and "haven't lived life". We have two degrees, jobs, experienced this world, got saved, and now live for God. What would you suggest that we do? We want to be married and live our best relationship under God but also know we are not going in to debt for a wedding to satisfy the desires of our family/friends.

Thank you for your note. And I loved presenting to your church last year.

So look if you have done all the right things to make sure you are ready for marriage, then having the wedding you can afford, which might mean not having a big thing or even a little thing at all. You can get married with the big bill. Small ceremony at the church chapel lunch or dinner with small group afterwards. Or no lunch and dinner. 

The bottom line, don't go into debt to satisfy anyone. 

Graduated and I have a job pulling in $1800 a month. Right now I need to build up my emergency funds (currently at $1500, and woud like it to be $3000). Additionally, my student loans are $41,000. Outside expenses are doable, and I will be changing to a hiring paying job soon. By June 2014, I would like to be doing a 80/20 split of stocks to bonds with $1500. What else should I be doing?

Before you do any stocks and bonds splits pay off those student loans. Save enough for one or two months of expenses and concentrate first on becoming debt free. Then buckle down and start saving for retirement.

Several years ago I was denied Umbrella Liability Insurance, perhaps because I didn't have the right coverage on a boat. Therefore I've been carrying $1M on each car. My company WILL NOT write coverage on a full sized van, I'd like to buy, although they would probably write it as commericial, which kills my mutli-car discount. I've been told that if I drop coverage to $500k on each vehicle and but an umbrella policy, that the van can "sneak" onto my policy. What happens if I cut coverage and either can't get an umbrella, or the cost plus the cost of requirements is too high? I'm afraid that once I drop the $1M that they won't write it again.

I'm not sure about what you're asking. Why do you need so much coverage on your vehicles? Maybe you need to change insurance companies or talk to an independent insurance agent to get a clear idea of how much coverage you actually need. This all sounds so complicated and expensive. Similify. 

I used to keep a log book of all of my bills. At the end of the month, I could see if something was missing. It was also a good way to monitor things to make sure I wasn't spending too much. Once I got my finances under control, I stopped keeping the log. I still enter the bills into the checkbook, just not a separate log book. When I was paying the bills, I realized I hadn't seen a credit card bill for a while. When I checked it online, I found out I was more than 20 days late. I don't know what happened because I never saw the bill in my mailbox. I guess the post office looses things from time to time. (Just the other day, I had someone elses Washington Gas bill in my mail box). I don't blame the credit card company for charging a late fee, but I also don't think it was my fault. How does a person know if they don't get a bill in the mail?

First, if you haven't been late in the past call the credit card company and see if it will waive the late fee and remove it from your credit report.

Next, if you've gone electronic do the same for your credit card bills. Get them sent to you electronically. OR go back to your old system and mark on a calendar when your bill usually comes in the mail. If you don't see it, then call about it. 

I realize you are fervently anti-debt, but wondering if you have ever studied leverage? While it may not be ideal for some folks, appropriate and careful use of leverage is a strong financial tool.

Tell that to Lehman Brothers or all the companies that leverage themselves out of business. Or the people who listen to such nonsense and bought too much home and leveraged themselves into bankruptcy.

Yes, debt allows us to get things that would take decades to save for but it's a very, very dangerous tool in the hands of the average consumer. Even the so-called experts get this wrong.  

People try to put me in my so-called place all the time by questioning my education as if I don't know what I'm talkign about. So yes, I've studied it. I have a master's degree in business from The Johns Hopkins University. I've got smarts.

I'm smart enough to know that many people can't carefully use leverage. So I err on the side of caution. I err on the side of do what you can afford and stop trying to use other people's money. 

I am know if I have credit card debt I am not allowed to go out to a movie. However the Smithsonian frequently has free movies and concerts (I am assuming concerts, plays, opera and the ballet are also verboten) The problem is that to go to the Smithsonian I have to commute and either to drive and park or to take public transportation which will cost about $10. So do I have to find free things within walking distance? (They don't exist the only entertainment in my hood is standing on street corners drinking and smoking)

I'm not against you finding some money in your budget for fun. Just keep it low, very low while getting out of credit card debt. Or, seriously watch TV. Or read. Or visit with friends who can come pick you up or have free parking where they live.

The point is work hard, very hard, even if it means making great sacrifices to get out of debt. It's only for a season. 

you can have a wedding with just the officiant and you, right? how much would that cost...?

Right. And not much.

I'm confused, your family doesn't support the idea of you getting married so young but are pushing for a big event that will put you in debt? Seems hypocritical of them.

Thought that too. Or I wonder if the person meant because they don't approve they won't help with the cost even though they will come to the wedding if they get married.

Michelle Maybe you can explain why people plan on spending a down payment on a house, or the cost of new car on a single big party - when they still have student loans, and then want to go buy a house. I find such thinking insane. If you took the word 'wedding' out the equation you would get, I want to invite 100 plus people for a big party at a posh location, and (usually) I want my parents to pay for it - oh and they are retired. And look at recent studies on cost of weddings, the majority of people do not spend close to the reported 'average' cost.

I get it. Pressure. People have been waiting for the big day where they are the centered of attention, etc.

I wouldn't do it if I had debt, but I understand how it happens. So I just try my best to talk good financial sense into people.

Your 61% article reminded me of meeting my husband: one of the first things I found out (accidentally) about my now-husband is that (1) he always uses a debit card or cash to pay for stuff, and (2) he drives a nice, but older car that he bought new/paid cash for. Perhaps not a big deal in the grand scheme of things, but knowing how responsible he was financially made me look at him in a little different light. And you know? I fell in love, and his financial responsibility signaled a million other little things about his stability and generosity that make him an amazing person.

See, what I alway say. A frugal man is a sexy man!

I should know caught me one of them too. 

I'll disagree with Michelle on this. Submit this question to Hax and I bet you get a bit of a different take. I had this mom. The fact that she wants to make sure the house looks good for grandma is a hint that this is about appearances and power and status. Don't do it. This will not end up well for you. You just need to start lovingly saying no. Practice saying the following: That's pretty mom, but we had something else in mind and we're saving up. Things mean a lot more to us when we're able to buy them for ourselves. Maybe let her buy you something for your birthday or Christmas, but otherwise hold the line.

You know this my chat right? And she asked me right? And Hax and I are two different people with different life experiences, although I believe I have far more experience with actually working with individuals. I say that all in good nature. Truly.

But you know I said what you said. I said if the mom's intentions are good then nothing wrong with her being generous. Her mom isn't your mom.

Maybe she does just want to help without a lot of control. But, as I said, if the couple is uncomfortable with her giving, tell her. Said that. Told them to put a stop to it.

If you don't believe in student loans how did you afford Johns Hopkins? did big momma pay your way? Did you save up? Did you work while going to school? You tell people to go to "crummy colleges" but you did not seem to follow that advice. A " crummy college" is one where the company that you would like to work for does not interview people from that college.

First of all I don't tell people to go to crummy colleges. Where are you getting this. And why all the anger, sarcasm? And it's Big Mama. Get it right!

What I try to do is encourage people to do what they can afford. And by crummy if you are referring to suggesting people attend Community College or lesser know schools how elitest of you. Many communities have great community college systems. I try my best to live what I preach. I'm sending my daughter to a state school with money my husband and I saved. Giving up things to do it.

But to answer your questiona about my degree, I had a great employer who paid for me to go to get my graduate degree. Had the employer not, I would have still gone and paid cash along the way as my husband and I did for his master's. 

Finally, sounds like you have a chip on your shoulder about a job you didn't get because of the college you attended. But don't try to shift that chip to me.

 

 

Hi Michelle--I wrote a few weeks ago about preparing to refinance our mortgage. The big moment came and the lender offered to drop the rate instead. It's a higher rate than I could get, but it would take four or five years to repay the closing costs. Plus, no hassle. It's a great option, particularly if you're not sure how long you'll be in your current home. I wish I had known of this before. Anyway, thanks for your advice.

You are so welcome.

Hi Michelle, I love your advice, but I also totally understand the need for young couples to pay for a larger wedding than you often suggest. It is not acceptable in my family, my fiance's family, or many families I know not to invite your immediate family and provide them a meal. For us, that was 55 people, excluding a single friend (if it was friends we see twice a month, we are at 75 people). It is also often not acceptable not get married in the church (which is costing us $2600 alone). Most young couples live in small apartments and can't have a backyard bbq. I encourage my friends to simplify what they want and get as much done as cheaply as possible (print your own invites, grocery store flowers and cake, cut the alcohol, restaurant food), but it still adds up.

I hear you. But if you are getting married that should mean you are an adult and you can put an end to family tradition that put undue financial pressure on you.

Just say no. Then have a great marriage to prove you didn't need the party that you couldn't afford.

I set up e-mail reminders for my bills and then pay by getting the online balance. You can do this any way you like. Perhaps you like paying your bills sunday - set up a reminder with all those bills to come into your e-mail inbox 1am sunday morning. I get each individual reminder a few days before it's due. Then you HAVE to pay it - I do that over my morning breakfast.

Thanks. Passing along.

Thank you for answering my question. However, I disagree with your response since I believe that Time = Money. If I can be putting money towards my loans and escape them by 26, while still having some money to put towards retirement, I do not see any reason to do both. Yes, I put all money towards my loans now, I escape them, but if the market goes down, now would also be a time to buy stocks since markets recover. Your view? Additionally, great to hear yuo on APM Marketplace.

Paying off your loans is a guaranteed return. Investing = risk.

If you don't want to be as aggressive as I suggest in paying off your debt, I'm okay with that. You can save, invest and pay off debt at the same time. It's your choice. But when people ask me what I would do, I tell them what I would do.

 

Geeze, no need to be so defensive. The writer acknowledged that it might not be ideal for some folks and that it requires "appropriate & careful use". I think his point is that often your advice is cookie-cutter. There are people on the other end of the spectrum who are very financially responsible who may benefit from learning about more complex financial strategies. I think that is all he is saying and didn't intend it as a personal attack.

If you want complex financial advice, pay for a financial adviser. But I've done this for a very, very long time. I've taken many hits from people thinking my advice is too simple, too "cookie cutter" as you put it. But I point to the Great Recession and all the advice that leveraging was good. The problem is the financial products that were being pushed were not appropriate for the average consumer. Peopel didn't know what they were getting into. Then who's left to help them recover?

Me. And other consumer advocates.

I'm am very purposeful in my black and white advice becasue if I waiver, if I say  maybe this or maybe that, the very people who need a "No, you shouldn't get into that leveraging situation," will think I'm giving them permission to do what they can't afford. So I don't have much gray area because I'm speakign to the masses. I'm speaking to many people who need a clear cut (not cookie cutter) advice that will help them steer out of trouble. If you are truly as sophiscated as you think you are, then don't listen to me. Do what you want.

But I know I'm trying to help those who have the most to lose by getting financial stuff wrong.

I'm not sure why people get on here weekly to try to degrade or question Michelle's advice. If you don't agree with what Michelle is writing, stop wasting your time...and that of those of us who want sound financial information. Grow up already!!!

Thank you.

Thanks for joining me. And to some degree thanks for challenging me. It helps me to explain why I say what I say and do what I do.

Or thanks for understanding that when you are typing fast in a LIVE chat you make errors or miss stuff. My intention is always to help. 

Take care and see you when I return.

Ask Jill Biden — and that's Dr. Jill Biden — if she thinks she teaches at a crummy college. She's a huge advocate for community colleges!

Had to get this in. 

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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