Crazy headlines and political stunts about killing Obamacare, just as it all is about to finally go into motion (for signing up, at least) -- Obamacare or the Affordable Care Act, I don't care what you call it. I have some individual insurance. I want better individual insurance. I have read everything about the exchanges and the new options for people buying individual insurance, and this looks like a very good option. I can't wait. Is there any way that they can destroy Obamacare just as it is about to come out?
The health insurance exchanges open Oct. 1. The open enrollment period runs until the end of March.
Frankly since Congress can't get much done these days but fight, I see nothing that would stop the exchanges from opening as scheduled. So go on. Sign up and look around. If you find a better health deal go for it. I've been writing about what's coming, trying to steer clear of the politics, and still people criticize me for even telling peopel what's coming.
I think we should give it a chance. At the every least many people who were shut out of health care will get coverage finally and that benefits all of us.
Michelle, I think you were too hard on last week's discouraged Mom. It can be tough when you're working your buns off and still living paycheck to paycheck. And she and her husbnd are doing a lot right. They are raising their children in a two parent home and both parents work. There are so many unmarried parents with no jobs or job prospects who have multiple children with multiple partners who expect others, or the State, to pick up the bill. They are living in one of the least expensive parts of the area. I'm sure they would like to move to where there are better schools and better servces. If you can get your kids to play board games when their classmates are tweeting and twittering on their smart phones and Ipads, I wish you would come to my house. I'm sure their children give them great joy but that doesn't stop them from feeling overwhelmed and discouraged about the future.
What I said to that mother who was in many ways complaining that she couldn't compete with the families with more stuff is to be grateful. In fact, you point out the very things I ask her to be grateful for: good husband, good family, jobs, etc.
I know tough. I lived tough. I know what it's like to be hungry. Truly hungry. Not there isn't anything to eat in a pantry or frig full of full kind of hungry.
But a little bit of graditute for what you have can help cure the look at what the Joneses have syndrome.
Look there will always be pressure on families because others have more.
And frankly you can get your kids to play board games when their friends have iPads, iPhones, video games, etc. I did and do.
Will they complain if they don't have what other have? Sure they will?
Might they get teased?
Will they feel discouraged they don't have the brand name clothes or brand name whatever?
However, you teach them to value what they have. In the end you have to live the life you can afford. And you have to figure out a way to be happy with that life or you will spend a lifetime feeling discouraged.
Hi Michelle. Do you have any recommendations for what a person should look for in a first credit card or any cards that you recommend? When it comes to building credit, does it matter if I use it every month or if the charges are very small? I plan to use it for gas, and maybe groceries when I get comfortable with it. I would pay it off every month, of course. I'm 24 and have very little credit history (a small car loan that I make the regular payments on plus when-I-think-about-them principle payments). I have no missed payments, and no other debt. I don't keep track of every penny, but I save regularly and spend less than I make. I think I'm on the right track, but I've heard so much about the dangers a credit cards that I am a little timid to get my feet wet.
When getting a credit card, try to find one without an annual fee. If you want to build reward points you may have to pay the fee in exhange for the rewards.
But really, just get a card with a rate as low as possible. Use it occassionally. Pay off the bill in full every month. That's pretty much it. In fact, you can use it for a little and then stop and just put the card away. If, when you used it, you paid your bill off on time, that helps build your credit and you don't have to keep using the card.
The point is don't charge what you can't pay off the next month. Watch how and what you spend on the card because the ease of paying with plastic -- credit or debit -- can result in your spending more than if you used cash.
Finally, to look for a card with good terms go to www.bankrate.com
Hi, Michelle. We need to consult a family lawyer but wonder if you have come across this situation in your counselling. Long story short, our 16 year old son fathered a child with a 15 year old classmate. We wanted the mother to terminate the pregnancy or place the child for adoption, but she chose to keep it, as was her right. We realize our son will have to support this child until age 18, but both parents are HS juniors and neither is in a position to raise a child. They were never a couple and the chances of their raising a child together are virtually nil. He's the second of 5 children and mnoney is tight. Obviously the mother's family is bearing the brunt of this responsibility, but what are our obligations? Most "grandparents rights" web sites do not address this situation. If you could steer us in the right direction we would really appreciate it.
This is the first time I've gotten this type of question. But as the mother of a son now 15 I've thought about what I might do in this situation.
First, it might help to get family counseling for all involved. Under a professional, you can hash out the issues and try to come up with a way for all of you to deal with the situation in a loving and healthy way.
Secondly and most importantly, if he were my son, I would start impressing upon him the responsiblity he now has and that is to contribute the best he can to helping take are of the baby physically, emotionally and financially. If it doesn't interefere with his studies, I would make him get a part-time job (at least on weekends) and most of the money would go to help support the child. I would encourage him to establish times he will help take care of the baby. You need to impress upon him that he has a BABY regardless of whether he wanted it. It's here. He's a father and he has to unfortunately become a man a lot sooner than should have happened. If he is going to college, he should factor in the the baby in his choices, which may mean staying in the area where the baby is, getting a part-time job in college, not partying like other because he'll have baby duty. Get my point?
As for you as grandparents, help the best you can and can afford. Talk to the girl's family. Offer help. Be there for teh mother and the grandchild if they are willing to let you help.
If not financially, emotionally. That baby will need a lot of support with teenage parents.
Getting back to the counselor, perhaps you can hash out visitations. Get involved because it takes a village to raise a child and most definitely in this situation.
By the way, the support may not stop at 18. Legally child support may stop but there is college and now days helping a young adult launch. Parenting, as many parents will tell you and you probably know, doesn't stop at 18!
I do wish you the best for what is probably going to be a tough road ahead.
How does a person with several forms of debt maintain an emergency fund? What is the value of having $500 in the bank if you have several thousand dollars in credit card debt? Wouldn't that $500 be better used to pay down the credit cards. In an emergency, the credit card can be used to pay the bill.
And that is why you need an emergency fund.
You are in debt and your answer to an emergency is to get into more debt by paying for the emergency with a credit card.
You need a stash of cash so that if an emergency comes up you don't put yourself further in a financial hole. I wouldn't suggest keeping thousands of dollars in an emergency fund if you have major debt. But keep enough cash so that when life happens, you aren't using debt to bail yourself out.
I just started following your columns and chats (love!) and I am not sure you have ever bridged this topic, so forgive me if I am late to the party. What are your thoughts on our education system and the lack of "life skills" (particularly how to properly manage money) provided? I am constantly infuriated by ads and campaigns that target those less educated on financial matters who then end up in the same trouble/debt with which their parents / guardians have always struggled. I feel it is a crime to not help our youth understand the consequences of poorly managed money. It seems to be a never ending cycle where those in debt stay in debt and have kids who end up in debt and the banks like it that way. Do you know of any advocacy groups or campaigns that are trying to change this?
Welcome new reader. Love it.
I have talked about this but happy to talk some more.
I believe that life skills start at home. I'm responsible for teaching my children to be good money managers.
However, I recognize that many parents, guardians, families, may not be equipped to pass on good money management skills. So there are iniatives and efforts to get the schools to teach personal finance. I support those efforts.
The Jumpstart Coalition and the varous chapters around the country are doing a lot to help increase financial literacy among kids.
Many churchs, community groups, consumer groups, etc. are doing the same. Choosetosave.org is one such organziation.
My church as a number of financial programs, one of which I direct on a volunteer basis.
I have lots of compassion for folks who are in debt or financially challenged. Many haven't been taught. But once you know better, do better.
My mother and I both wear adult diapers. I buy mine at big box stores, watc for sales and use coupons and pay about $1 apiece. I have no propblem whatsoever doing this. Last month my mother told me she had seen an ad on TV and was now ordering them in bulk from a company that turned out to be charging her $2.60 apiece with "free" shipping and handling! When I called to checki, the sales rep said, "I know we are not competitive with local retailers bu they are paying for privacy and convenience." Not any more! I now make weekly runs for myself, my mother, and some of her elderly friends. I don't charge Mom a penny and her friends pay exactly what I do. I agree a small "privacy and convenience" fee is appropriate, but this is 260%, or a $130 difference on a week's supply of diapers. My Mom has better ways to use her limited income and I'm sure others do, too.
You spotted an problem and you helped not just your mom but others. Good for you!
Hi Michelle - I'm sure you've read the recent Post articles about people in DC losing their homes when small tax bill were unpaid (or the agency lost them, etc.). The whole story just makes me mad - that there's no safety net for the elderly and sick, etc. but really gets me is that these people lose all of the equity in their home. How is that possible? How did we, as a society, get to the point where we thought it was ok for someone to take that away? Even banks don't get your equity (except what you owe them) when they foreclose. I'm just really steamed about this.
I mentioned the series in my eletter out today.
I'm just as steamed. And I agree. Shame on the folks taking advantage of these people. They are just predators!
I am trying to determine if there is a way we could be getting more out of the purchases we do have to make via credit card. Dont worry- we are very anti-credit card, pay most things in cash or debit, and always pay off any credit card balances before due. Never carry over a balance. BUT sometimes with online purchases, a credit card is required. Do you use any points/cash back type card? Do you know of a card with good benefits?
To find cards with good benefits go to www.bankrate.com
I do use a reward card. But I have to constantly remind myself -- and others --to watch what I charge because I could spend more than I intend because credit makes it so easy even for those of us who pay off our bills every month.
Hi Michelle - I have a small amount of money ($1,000) that I would like to invest in securities, but I am a novice in the marketplace. Any advise for a newbie investor? Thanks for your column and chat, love them!
Go to www.choosetosave.org. There is a section on investing.
However, before you invest the "extra" money I would ask:
-- Do you have any debt you could pay off or down?
-- Do you have an emergency fund (at least six months)?
-- Do you have a life happens fund of between $500 to $1,000 for the things in life that happen such as a car repair.
-- Do you have a workplace retirement plan that you can use the $1,000 to boost your retirement savings.
Finally, be sure the investment is part of an overall plan. Don't just invest becasue you heard that's what you need to do. If you want to play around with investing in individual stocks or securities, fine. But is that $1,000 money you can afford to lose? When I have extra money, I look where there is an investing need such as building up my retirement plan or putting more money in my kid's college fund. That in turns dictates how I invest and in what I invest.
Last week you made some comments about not comparing lower income families with "spoiled rotten" classmates who took European vacations at whatnot. My spouse and I grew up modestly, worked part-time through high school and college (fulltime in the summer), paid for college and law school ourselves (separately) with scholarships and loans, but have done well, saved well, and are now well off. We don't live extravagantly, but we make a good income at very stable jobs, have a nice house (with a very low mortgage rate), no debt other than the mortgage, maxed out TSPs each year, college funds we pay into monthly, and strong monthly savings on top of that. Our kids (currently baby and toddler) will go to public schools, do chores, earn allowances, etc. We hope they'll get summer jobs in high school, but I seem to rarely see teens working in the DC area. We limit gifts and don't buy excessive toys, gadgets, or clothes. We have one TV we hide away. We take full advantage of all the wonderful free activities (museums, galleries, zoo, Arboretum) in DC, but we do hope to take them on international vacations when they are older -- not to revel in resorts but to expose them to great historical sights, art, and other cultures. We also want to be able to pay their college and possibly grad school tuition so they aren't saddled with loans like we were. So the question is, how do reach this balance without having "spoiled rotten" kids?
You say no more than you say yes even when you can afford it.
Don't let them use shopping as a form of entertainment.
Correct them if they seem to act like their home, stuff or vacations or whatever is better than others.
You talk to them and show them by example. Let them see you volunteer or give to charity. Let them see you helping others. Talk some more.
Correct them when they are being ungrateful. Remind them that to whom much is given much is required.
Don't give them everything you can afford. Hold back. Scale back sometime even if you can go all out. For example, we got off that great birthday party thing that so many of our friends are still on. We have modest birthday celebrations (mostly just going out to dinner) and leave the big celebrations for big birthday milestones (13, 16, etc.)
Don't spoil them.
If you have a debt and want to create an emergency fund, wouldn't it mean holding back from paying off the debt. I can save $50/month for 10 months to create a $500 cash emergency fund or I can pay $50/month extra on the debt payments and get out of debt faster. I don't see how not using the money to pay off the debt would be helpful.
Folks help me out because this person just isn't hearing me. Have you been in this situation and been grateful you had money saved?
You need some savings.
Yes, that means delaying paying down or off your debts. One of the problems I have with people in debt is they now don't want to take the time to pay off the debts. It takes time.
Now you can do what you like and hope and pray NOTHING ever goes wrong financially while you are getting out of debt.
Or you can take the advice of someone who has gone though this with hundreds of people trying to get out of debt.
You are grown. Your choice.
But you asked me my opinion. What I would advise.
I advise you shave off some of the debt payment to build up a cash emergency fund. Then when you have the fund filled up, use all the extra money you have to aggressively pay down the debt.
So if you have $50 extra month, take $10 or $20 to build up your emergency fund. Because my dear emergencies happen and they happen to people with the best of plans.
Michelle, thank you so much for your answer to the new grandmother about her, and especially her son's responsibilities with the new baby. So many think that because the girl is the one to get pregnant, she, and her family, should bear the brunt of all the pregnancy entails.
I believe you are right and wrong. Yes, many might leave it up to the girl's family.
But I didn't get taht from the note. I got that they wanted to know what to do. I got that the grandparents weren't sure what to do.
You make your son be a man.
Do what you can emotionally as Michelle suggested. My 86 year old mother was the product of a shotgun wedding. My grandmother was about your son's age (my grandfather 21). My grandmother was incredibly resentful and took it out on my mum. My mum's grandparents lived in the same block of flats and made all the difference in her life. I'm not saying that should be your model or anything - just giving anecdotal evidence to Michelle's point about teenage parents meaning you could really make an emotional difference to this child.
Thanks for sharing.
When you do get a credit card, find out if it provides additional protection to the items you purchase. I always pay for rental cars with my credit card because it includes some limited insurance. I've had my debit card number stolen from untrusted websites, so I now use my credit card for online purchases (would rather have the bank shut down my credit card than debit card while they sort things out).
Again, thanks for the input.
I'm confused. If you have debt that would be wiped out by using your emergency fund, wouldn't it be better to get rid of that interest on the debt each month by paying it off and hoping you don't need the emergency fund as you build it up again. If you do, you are getting your self into debt again, true - but if you don't pay off the debt with your emergency fund ... you still have debt you're paying interest on. In short - if you pay it off now with your emergency fund, you might be able to be debt free now and for the future (fingers crossed) if you don't ... you still have debt to pay off. Can you explain more what I'm not seeing?
It's these type of decisions that put people in debt. Hoping and keeping their fingers crossed that everything will go as planned.
Hi Michelle - What is a reasonable amount of cash to keep at home? This is not my emergency fund, which is in a savings account. It is just cash on hand in a document safe in my closet. I keep a couple of thousand dollars there and I very rarely dip into it and always replace it. My husband thinks I'm nuts. W e live in a very safe neighborhood and both earn six-figures. I just feel better having cash hoarded away. Is this foolish?
And you live where?
I think a couple thousand is too much. But that's me.
A few hundred maybe.
But if that is what lets you sleep at night and you won't "kirk out" if the money is stolen sure keep the money in the safe.
I just wanted to share a bit of success with you. After trying to convince my boyfriend that he is better off paying down debt (he still had an outstanding car loan and a very high 5-figure student loan debt), he FINALLY listened! He paid off the remaining car loan (~$3000) in cash last week and he took that payment and added it to a student loan payment to reduce the payoff from 7 to 3 years. I've been trying to preach the snowball method I read about here to him for a while, and it clicked after all. (I'm doing the same with my student loan debts by paying extra, but I owe quite a bit less). Thanks for the tips!
Good for you. Thanks for sharing.
Hello Michelle I don't know what todo youw what to do. I have been to prosperity Partners, Finance classes etc. I keep my money straight for several months and then I fall off. Spending more than I have and paying bills late. I'm thinking of seeing a therapist. What do you think? Thanks In Advance.
I think seeing a therapist to get to the root of why you can't stay on track is a great idea.
Doesn't mean you are crazy. It just means you need a good professional to help you see why you do what you do and give you some tools to change that behavior.
For the person asking why they should save $500 instead of paying on their debt - what Michelle suggests is smart. If during the next 10 months you have an emergency that costs $500, and you don't have it in savings, you'll have to put it on a credit card. Then your $500 debt becomes $1000. This way, you have $500 in savings, and continue to pay down the $500 on your credit card. Does that make sense?
I hope it finally does.
It's the psychology of it that is important as well-- get out of the habit of using credit by having some cash to pay for unexpected items. Also, by not adding additional charges to the debt burden, one becomes less likely to think, "Oh, forget it-- I'm never going to manage to pay THAT all down, so why bother trying?"
I love that your reminded me of the psychology about all this.
I work hard to get people weaned off using credit to bail themselves out.
FWIW - I learned pretty quickly not to keep much cash at home - even in a safe - when my boys were teenagers and started bringing friends around. They don't break open the safe, they just pick it up and take it away with them...
Good warning. Thanks.
Michelle: I used to be one of the "pay the debt first and forget the emergency fund" people. Yes, it's in your financial best interest to pay down the debt and forget the fund. BUT, to some (if not most), being in debt is like being an addict. Once you start putting money on a card, you put a little more on next month and then boom..you're in debt again. The emergency fund is used to keep the debt balances going down versus going up when the emergency happens. The emergency fund balance should fluctuate as life happens but the debt balance should always be going down.
Right again. Thanks.
You NEED an emergency fund. We unfortunately are paying off a bunch of debt, but we have about $3K stashed away for emergencies. Like when the hot water heater went out the day before Hurricane Sandy hit (good grief! of all days). Most of the funds set aside for debt are going to debt, but a portion goes to the emergency fund.
If you do what you always do, you get what you always get.
If you keep relying on debt, you will keep relying on debt.
Scenario 1 Pay off $1000 debt with all of $1000 emergency fund. Opps have a sudden cost and have to put back in debt. Same status as if hadn't paid off debt. Scenario 2 Pay off $1000 debt with all of $1000 emergency fund. All goes well and saved money on interest payments. What is not being taken into account? It makes sense to pay off debt as far as I can see.
One word for you.