Color of Money Live

Aug 15, 2013

If you are in need of a mid-week money fix, join Washington Post nationally syndicated personal finance columnist Michelle Singletary for an online discussion on Thursday, August 15 at noon ET.

Michelle will answer your money questions and offer her two-cents on today's hottest financial topics.

Be sure to submit you questions early or read the archives later.

-- Michelle's Mailbag: Doing all the right things and feeling frustrated

-- Buyers, not lenders, must decide how much mortgage is too much

-- Today's e-newsletter: Has marriage gotten too expensive?

Welcome. Another week. Another chat. And oh how I look forward to them. So bring it on. Questions, comments and even financial venting. I'm here for you. 

For years I have been following your advise and had a life happens fund and a six month expenses fund. But this year I have used up a lot of my savings on totally unforeseen and unbudgeted events! My pet has needed two surgeries and after years of just needing dental cleanings, I needed a root canal. Thank heavens I was saving for a rainy day so I was able to pay for these things without credit, but $10,000 was way beyond the emergency fund I had. So now I am funding that again and am low on my expenses fund, but at least I had the money. I will likely have to work a year longer than I was planning, but no credit was used! Thanks for the advice!

You are so welcome. And what a great testimony you have. 

I can hear in your note the relief. Way to go. 

Hi Michelle, I know this is not a question you get often, but I appreciate your input. I'm 31 and just inherited $1M (after-tax). I have no idea what to do.. I don't plan on touching it until way down the road. Should I put it in mostly equities? I realize this is a lot of money; invested properly, will it be enough for me to retire on in 30 years? Thank you for your help, love your work.

Get thee to a fee-only financial planner.

It's important you have an overall plan for the money that takes into account what you have already and all your financial goals and needs -- paying off any debt, saving for retirement, paying off any student loans you might have, college fund if you have kids, charitable giving, making sure you have the right insurance, etc.

But I want you to be very careful to find someone who will not sell you high-priced financial products but sell you a plan.

Start your search at www.napfa.org, the organization for fee-only planners.

I am quite frustrated with myself. Several work life changes have me eating out more often and then throwing away spoiled food in the frig. I never got how people are too tired to cook until I got thrown their shoes to walk in. Michelle, literally, it takes so much for me to try and fit me in my life. Right now I work a demanding job, go to school, ekking out an exercise schedule because I am sick of gaining weight at a desk job, cook on the weekends, and fall out during the week days. I hate wasting money on groceries but really getting home I am kaput to think about cooking. So I did not buy groceries and now we buy carryout or eat the snacks we avoided because we ate leftovers for dinner, M-T-W & Thurs, last week. Do you know how long processed food lasts, too long. Thanks for letting me rant. I am getting myself together. I figured out how to exercise. I can figure how to eat right again. I am upset that I am spending a lot of money because adjusting to these changes have resulted in expenses that I do not see a ROI. Work life balance.....really....BOOM!!!! so much for balance.

Oh I so understand your rant. Been there, was there last week. I was so tired last night that I almost asked my husband to bring hom takeout. But I resisted and made tacos, which were pretty good. And you know what. I felt better about not spending the money and using the food I had in the frig.

Just keep talking to yourself. It also helps when you have that conversation in your head to think about other things you can use the money for such as paying off bills, savings, etc.

Hi Michelle: Now that I am bouncing back after bankruptcy (divorce - long story that is not important), I do not know what I should do now to try to bounce back. What should I do now? What should my first steps be now that I paid my debt off through bankruptcy (Chapter 13). I have saved some money but not a lot. Any suggestions? Thanks and really have learn a lot from this experience and from reading your columns. Backing back after bankruptcy in Maryland.

First, congrats. Going through a bankruptcy is no joke especially a Chapter 13, which means you had a payment plan.

So now breathe, pay your bills on time and continue saving.

Breathe because you came through it.

Pay your bills on time because that is the top way to rebuild your credit history.

Save so you can brace yourself for future needs, wants, unplanned financial issues so you never have to file for bankruptcy again.

Good luck.

Just wanted to say that my husband and I paid off our mortgage yesterday!

WOW!

Love it. I bet that feels amazing.

Hi Michelle I love you chats but I'm not sure what to do. My husband and I bought our house 3 years ago when we had cc debt (bad idea I know) - we've been trying to pay it down but it's a very slow process on 1 income (my husband is now unemployed but wasn't when we bought). I'm able to pay the minimum on cc's, mortgage etc and am slowly chipping away at debt (which is at 20k.) The problem comes in our deck is literally falling apart and is tearing away from the house which is going to cause structural damage over time if it's not taken care of (more money). We've gotten several free estimates and it's almost 12k to redo. The deck will not make it through the winter in the condition it's in. I'm getting a bonus at work of 3k. Would you take that money and put it for a small dent in the cc bills? We don't have much in savings - about 3 full months (mortgage, minimum on cc's, bills etc). My husband wants to put it for the deck I want to put it to bills but I'm really concerned that if it does in fact full away from the house than we're going to have even more problems.

Oh my. This is a tough one.

First, for now until your husband is employed, continue to just make the minimum on the credit card debt as best you can. Don't worry about that right now. 

Second, check with contractors again to see what is the minimum you can do to stabalize the deck. Can they put in beams to hold it steady until you are in a better financial position to fix it. I hestiate to tell you to take all the bonus and fix the debt because you might need any extra months if you run through the three months of savings if you husband doesn't get another job.

So bills later. Do the minimum it takes for now to stabalize the deck if it really will have major issues for the structure of your home.  

My husband and I are 25 and 24, and we bought a house! Our settlement is next week. We were still able to maintain our "emergency" and "life happens" fund (which was great, because I had to have an emergency appendectomy a few months ago). We both graduated from college with no student loans (he paid for his and worked throughout school, my parents are wonderful and paid for mine). The only debt we have is his car loan (which will be paid off very early...in a month or so). To those right out of college thinking you can't buy a house so young...you CAN! Just buckle down and save, save, save. Thank you, Michelle, for all of your advice. I'm a longtime reader.

Oh to be so young again and SO SMART!

Good for you. Have fun in your new home.

Hi Michelle, First, congratulations to Olivia on her college acceptances and scholarships, and best wishes to her for a great freshman year! I'm sorry I didn't think to ask your expert this question last week, but here goes: Back in the 70s when I was in school, it seemed easier to finance your way through graduate school (grants, teaching assistanceships, work-study, subsidy from your employer) than it was to get similar assistance for college. Do you think that's still the case? We don't intend to go into debt to pay for our children's college educations, but we are unsure whether we should be scrimping on college (by choosing less than ideal, though still good) schools in order to hold back money for possible graduate education. The alternative would be to pay for the best undergraduate education we could afford (without debt!) and figure our kids will find some way to cover graduate school somehow if they decide they need it. (Neither one plans a career where a post-baccalaureate degree is required.)

 

Grad school, a leg up - in debt

Thank you. We are so proud of our daughter and how hard she worked to put herself in the position to get scholarships. 

And interesting you should ask this question. I was just talking to a financial aid person about our plans. Our daughter has chosen a career path that will no doubt require her to get a graduate degree. So the money we are saving on her undergraduate education because of her scholarships will stay in her 529 plan to help pay for her graduate degree.

We have decided that we will help her pay for her graduate degree because we can help. We don't want her to go into debt for that degree and since she will have little opportunity to save for it ina short time, and we are good savers, it's our gift to her. 

So in your situation I would opt for the best undergradate program that is the most affordable if that means having the extra money to help your kid in grad school. The truth is just as it is with undergraduate not as many people get full rides. The someway peopel figure out to pay for graduate school is with debt. Try to avoid that being the case for your kids.

That's what I would do and am doing.

Most people know that when you buy a single-family house, an independent inspection is essential. What would be comparable due diligence when buying a condo? Somebody can come into the unit and look at the appliances and the paint, but how would you know about construction flaws in the building, problems with central heat and a/c, condition of the roof, etc.? How would you find out about the building's financial stability, reserves, property management, etc.? For that matter, how do you find out about obnoxious neighbors with whom you might be sharing walls? How do you avoid a condo catastrophe?

I had a condo and the inspection did in fact include looking at the state of the building, how many units were owner-occupied, etc. As for neighbors, you can have triflin people next to you in a condo and single family. But as you say with a condo it's closer. So talk to other people in the building if you don't think you would get a straight answer from the condo seller.

First time writer, Michelle, but read your chats often. Sibling and I are fortunate to have parents who educated us and raised us with strong values, including how to handle money. I am single and live locally; sibling, spouse, and family live away. Spouse is educated but chooses not to work at this time. Sibling laments having no money to do anything but does and spends lots. I prefer to keep my finances private but had recent renovation expenses that were greater than planned so I'm living pretty lean right now and paying down debt. Recently, we planned a vacation at a resort to celebrate a milestone in sib's family. Last time we went there, we split the cost of our parents' portion and agreed to do this again. Until I paid for my part, which included my parents' portion. Sibling then said would cover only own room, leaving me responsible for the lion's share of the bill. Parent begged me not to create a scene and offered me money, which I don't want to take, as they took us on may wonderful trips over the years. This is not the first time this issue has surfaced but I want it to be the last. Next time, when it is decided that we're doing a trip together, should I book my room and say, "And I'm guessing you'll be covering Mom and Dad since I got them last time?" Or just not go but that means I miss out on everything with my family. We are a close family but I can't keep overextending myself, despite not having a family to support (sib's chronic excuse). Parent thinks the answer is for us to not do any more trips at all. What do you recommend?

You've given me a lot to think about and I want to spend some time with your question. So I'm going to answer it later and post in my Monday Mailbag feature this coming Monday, Aug. 19. So my questions to help me grasp everything:

-- How much money were you on the hook for when sib left you with the bill?

-- Did you talk to the sib about changing the agreement after the fact? If so, what did the sib say?

-- How often has this happened really, that sib said would pay and didn't?

-- Can your parents afford to pay their own way?

Hi Michelle I've gotten some good advice and love it! My question is about balance transfers from 1 credit card to another. I have a large amount of debt I'm working on paying down. We've cut all spending and are living "bare bones" by not going out, not spending etc. One of my credit cards has a 0 balance with an interest rate of 10%. The largest card we have has a $15k balance with 11% apr (and it has a 16k limit). Would it be smart of me to transfer most of the balance to the other card? The card with the 0 balance only has a limit of 7k so it wouldn't be able to take it all. We no longer use any of the cards and are eventually going to see the light at the end of the tunnel. We've lived with the debt and are tired of the monkey on the back. Our savings is small and I don't want to touch it. I do contribute $300 a month to my 401k - not much I know but in order to chip away at the debt I lowered it for the meantime. We've made it a goal to be completely debt free in 4 years.

Spreading out the debt on the two cards would help your utlization ratio, meaning it would look like to the credit score system that you aren't in as much debt. 

But really, in the end since you aren't going to be using debt for awhile, you can just keep plugging away paying down the debt on the debt on the one card. 

Keep your focus on the light. 

Absolutely get a condo inspection. I did and found that I needed new windows, new venting for washer/dryer and that the floors were a very good Pergo instead of the hardwoods I thought they were. The seller paid me for these. Also have the seller buy you a home warranty for the first year (about $500). Since you can't really know your neighbors until you move in, I would go at night and go up and down the halls on the floor I was moving into. It was pretty quiet so I was happy. But, a few floors down, there was obviously a smoker in one of the units and the hallway stunk of cigarette smoke. That smoke also seeps under the doors and through the vents. Check it all out before making a purchase. And, the condo documents have to tell you everything about the building, including if a special assessment may be warranted. Stay away from buildings that won't disclose everything.

Good points. Thanks.

Just a comment: invest in a crockpot and make a big meal on Sunday. That way you can rest while it cooks and you'll have enough for other meals during the week and lunches you can heat up at the office.

Keep telling myself to do this. Haven't yet but still a good idea. I have a dear friend who does this for family and her dogs (yes she cooks homemade for her dogs). 

Thanks for the advice. I will continue to save and pay bills on time. Recently took a part-time job, so I'm trying to save money. I am renting, but I want to try to purchase a house/townhouse or something at some point. Will I ever be able to buy a house and how long do I have to wait? (I'm making my landlord rich...rent is no joke). I was blown away by the other chat person that stated she and her husband just paid off their mortgage - congrats to them!

Recovery from a bankrutpcy happens much quicker than it used to be. You can be a homeowner.

Give it a few years because you want to be sure you are truly ready when you buy by having a good funded emergency fund and life happens fund (for the things in life that happen such a car repair).

We bought a condo in Virginia about a year ago and prior to settlement, we were entitled to the condo documents -- financial statements, board meeting notes, etc. In those documents, you should be able to see the reserves, building projects (past and future), owner-renter ratio, etc., condo rules, etc.

This comments (thank you) reminds me of something. Pay close attention to reserves and building projects (current and future) and how often the condo association asks for special assessments, which is when they require owners to pony up money for capital improvements or other things.

My parents paid for all of my undergrad education. Anything I wanted beyond that was on my shoulders. I am seeking a Master's, but I waited until I was in a job where the company would pay for it. I say concentrate on undergrad if they aren't POSITIVE that they need a Master's. (side note: my parents had a rule that we had to pay for any class we got a C or below AND for every class we wanted to take after that one, since our "job" was to go to school. It worked; I graduated cum laude)

It's always an indivual decision. We want to help our children with grad school. But you are also right that it's good to look for employers who will pay or help to pay for grand school.

However, no matter what, get an undergraduate education you and AFFORD.

What if she only paid to have the deck removed for now. If it's in that bad of shape, they probably haven't been using it anyway. Then when $$ is available, rebuild. Or, while husband is unemployed and he's handy, maybe he can rebuild the deck himself, esp if he has some friends willing to help on weekends? We built a deck on our house for at least half of what it would have cost to hire someone to do it. I guess my point is, there are always options that may be more affordable.

Very true. I just don't want them to spend money they may need to keep the roof over their heads.

And like the idea of the husband trying to fix but as long as he or friends know what they are doing. I've seen some jacked up decks from homeowners thinking they know what they are doing.

Money saving tip I learned; cook everything on the weekends. Sure some things taste better fresh, but some days I barely have the energy to hit start on the microwave. Cook a bunch of meals that freeze well, divide them up and freeze. Get two heads of lettuce and chop them up and put them in a mason jar. Lunch and dinner is taken care of and your wallet and waist will thank you! I finally realized this after spending $400 in one month on takeout for 2 people on top of my grocery budget!

I know this is good advice. But my weekends are as busy as my weekdays. Still good advice.

Between you and me, I dream of having a personal chef! But alas got college funds to fund!

One difference I notice from when I was much younger is how many monthly expenses have migrated from "discretionary" to "fixed." It's really doesn't pay to have long distance billed by usage anymore, not when you are almost forced to bundle communications/cable costs. I have a prepaid cell phone that saves me tons of money - usage only - but it permits only talk and text, and makes me keep it brief. Recommended insurance coverage is constantly expanding. I live in a townhome community where I pay a lump sum for many services. I'm not complaining, but it just seems that more and more expenses travel out of my control. If I want to move them back to discretionary, it's a really serious decision, because I am making access to "the modern world" very difficult, like my friend who will only use a computer at a public library. I have a budget I keep close tabs on, but sometimes I wonder why - the expense seem so fixed.

You are so right. Our wants have become our needs.

Loved your answer to the question about grad school. We have had one get a masters, and another is in a grad program now. Here is what we did: We helped them with their health insurance/health expenses, and their car expenses. They worked their way through the rest of the way with scholarships, fellowships, and working jobs. Having a car is a major expense and taking that burden from them, helped them be able to meet their rent, utilities, etc. So far it has worked out. I also let them take food and stuff from my stockpile at home.

Thank you. But I know others disagree. They argue that the kids should be on their own. They argue that the kids won't appreciate the education if they don't work themselves to death or take on loans they have to pay. I say if you raise a responsible kid, stay on top of them, then why not help them start out life with a good education and debt-free. How in the heck can they save enough in their early 20s? They can't. So if you can afford it. Help. And along the way teach them the value of dollar. Hold them accountable as you give them the financial help. I got a full ride to college and I have appreciated that leg up ALL my life. It allowed me to help others financially since I wasn't strapped with debt. 

If the original poster's deck is really in such bad condition that it is damaging the house, why not just get someone to take it off? I am sure that it would be cheaper than replacing it, and it doesn't sound like there is much worth keeping as far as the materials go.

Something to consider.

I started eating much healthier and I couldn't be successful without Sundays. On Sundays I cook meals for the whole week (usually more than I need). Individually package them too. Today for lunch I had food I cooked three weeks ago pulled from the freezer. No pressure all week long. I'm single so it's easier, but I think it could work for couples and families.

It does work. I just haven't been discplined enough to do it myself. After Sat. activities with my kid and volunteer work or trying to see friends and church on Sunday, I'm still tired.

But I hear all you very organized people. Keep pushing us. It  is a good way to eat better and save time.

Interview Real Estate agents and ask these questions. I am constantly amazed that people do not interview agents. You are spending a boatload of money, find someone you trust, talks to you and is knowlegable, not just one your friend used a few years ago!

Good advice.

My sister and I inherited our mom's house. I live locally, so I moved in with my husband. Legally, does the home belong to the three of us?

It's whatever the Will or Trust says. Unless there was a title change or it's title in a way that your share passes on to your husband or heirs, the house only belongs to you or your sister. 

You are so right about taking out the mortgage YOU, the borrower, can easily afford, vs the one THEY, the lenders, claim you can afford. There are various benchmarks: Total cost no more than 2 1/2 to 3 times gross income, or no more than 30 to 35% net for monthly payment, couple others. I always preferred to look at total cost times gross income, because monthly payments can be manipulated, with everything from a high monthly payment for a shorter-term mortgage (saving you a bundle in interest, long term) to a (seemingly) low payment for a teaser-rate ARM which might be far more costly in the long run. I have owned 3 homes over the past 30 years, and am comfortable now in retirement because my husband and I bought far less than what the lenders claimed we could afford. Putting a realistic limit on your total mortgage cost is one of the most important things you can do to having a financially stable life.

 

Buyers, not lenders, must decide how much mortgage is too much

The key is to look at how much the mortgage takes up of your net pay. It is too much you will have trouble saving or managing for the things in life that happen.

And before you know it comes the time to say goodbye.

I have to wrap up. Great questions, comments, and tips. Love this forum and reader participation. Please come back next week.

And again look for my mailbag feature on Monday. I'll be looking for the answers from that first-time participant. Her question is a good one and my response will hopefully help others.

Have a great weekend. And cook those meals!

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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