Discussions / Live Q&A’s

Before I answer can you detail how many loans (Stafford and Private), the interest rate for each and the amout you still owe for each loan?

I love that you are aggressively paying off that monkey-on-your-back debt. First, list all the debts, starting with the loans with the lowest balance. Then I would take the $10,000 and pay off the as much of the debt at the top of the list. If you can knock off two or three even better. 

Then keep doing that. Be systematic so that you see some progress and in my experience that will in turn charge you up more and before you know it all that debt will be gone.

I do have a daughter about to go off to college. She's just got her acceptance letters. Three great schools -- Towson, North Carolina A&T and University of Maryland, Honors College (I went to Maryland so Fear the Turtle!).

I don't know enough about online colleges to say it's not the way to go. BUT...if I had the money saved  I would want and encourage the campus experience even commuting. They become engaged and see people face-to-face. I loved Maryland and being directly involved in on-campus activities. I learned as much about myself and the world that way (I was the first female president of the Black Student Union). I went to poetry readings, etc.

So I would push for the on-campus experience if you can afford it. 

I feel the same way! I try to make a date to sit down twice a month and go over everything. It seems to work but, I agree, it is time-consuming. You can do automatic payments to save time and a lot of people swear by that. I admit I don't do it. I think it is important to know what is coming in and going out. 

I am a huge fan of Michelle's column! Another must read for me is my friend Liz Weston at MSN. They both have books and you can check them out. I also strongly recommend Personal Finance for Dummies. It's the most basic and unintimidating text I've ever discovered -- maybe the "dummies" in the title does it. 

I hate to tell anyone not to pay down their credit card at once, but you might be one of the exceptions. You need to have an emergency fund. Could you see if you can find a lower interest credit card? Even if it is a teaser one-year rate, it might well help you out. 

I agree. Unless you have the Life Happens Fund AND an Emergency Fund. For those who may not know, I advocate two types of cash savings -- life happens and emergency fund. You are expected to constantly dip into the life happens for the things in life that happen, unexpected car repairs, etc.

But if the life happens is your only savings, don't spend it down. Just keep plugging away at the debt. Or take half and pay down the debt and keep some savings. 

However if you also have some emergency savings take all the life happens and get rid of the credit card debt.

Ah, books have been written about that subject! And I'm sure I don't need to tell you money disagreements are one of the leading cause of the end of relationships. All I can tell you is that I am married 20 years, and the best advice I can give is to try to figure out what your values are and what is most important to you. It helps. The other advice? Never, ever lie to your spouse about what you are spending. And communicate. I know it sound ridiculous to talk about taking money out of an ATM but it's important, trust me. 

Ditto. I've been married 21 years. We have joint everything. We talk about money all the time. No secrets. We discuss major spending like for us $200 or more. Sometimes I'll even call on the way to the grocery store to double check so we don't both end up buying milk. 

You've just got to have a plan. Who will actually pay the bills, how much should you both save from your paychecks, how do you feel about debt, etc. Lay it ALL out before you get married.

And I am proud of you too! Way too go!

You make me so proud. Tearing up now. And man oh man how good it is to pay cash for a car!

Thanks for the follow up info. It really helps me to give you a better answer.

So take the $5,000 and pay off the Stafford loans. Be done with them all. If there's a little more than that, save and pay them off. Then tackle the next private loan with the lowest balance. Make a list and pay off them one by one. 

Getting rid of the loans one by one on the list will mean so much to you and you can see the progress because the loan is crossed off. And I know the lenders make it hard to do this, but make the effort. So worth the hassle.

I would consider looking for a financial coach or planner -- someone who is completely unbiased, who you can pay for by the hour. It doesn't sound like you need someone who is pushing financial product, but someone who can sit down and guide you through the process of determining your goals, your priorities and working out a pathway to get you there. 

I agree. Also look for a financial class in your local area. A lot of those questions are answered in such programs. I run a free one at my church. It's a 1o-month progam and we team you up with a mentor. But there are other such programs in many communities. 

You can also go to www.debtadvice.org and talk to a budget counselor. For a small fee that person can walk you thu some basic money issues.

Good advice. We took our daughter on a college tour. It was worth the time and money. But I have to tell you, I can't wait until this is all over. This college selection stuff is hard especially when your kid has his or her heart set on a school with a price tag that makes you choke!

Anybody out there feeling me on this?

Thank you for saying that! It's one of my HUGE frustrations with the industry and something I wish I had been able to explore in more depth in Pound Foolish. The industry needs to recognize that middle income people need help too and they not just an easy source of clients for stuff like annuities. 

You are so right. But one problem I find is the middle-income folks don't want to pay for help --even a little bit. So it's hard for the unbiased financial coaches that they need to earn a living. 

Just saying.

Hi. If layoffs are a possibility I would hoard every bit of cash you can. It's hard to give specific advice without knowing the specifics of your financial situation, so I would ask a question: how many months do you think you could live on the rainy day/mortgage fund right now? If it is less than six months, I'd say to skip the 401k -- as long, that is, as layoffs remain a possibility. I should add I really hate giving this advice but it sounds like you need cash you can access easily right now. 

Again, I agree with Helanine. Hoard cash. Pay only the minimum or what is required until you are out of the layoff woods. Even the retirement. If you look at the stats many people are having a hard time finding a replacment job and it can take much longer than six months. For some it's taking a a year or more especially if you are highly paid.

See previous answers.

Most important, hoard cash. Make only the payments you have to make.

Get rid of things know you don't need -- big cable plan, phone plan, etc.

Start now as if you're laid off so you can be in that mode when June comes.  

So sorry about the job loss but I'm happy you are back on track down.

But I want you to breathe. You are putting too much pressure on yourself. I know you want the debt gone but take your time to reset.

Build up a little savings, say two to three months. Then stop saving and then go after that debt. As for the condo, if you aren't interested in keeping it look into selling it especially if you don't have to bring money to the table. But talk to a real estate professional. 

Firs thank you. Second, remember the vast majority of people have nowhere near that amount of money saved -- most of us, in fact, have way less than $100,000 saved for retirement. I've decided the first step we need to take is to begin to talk about it. We're not going to get help if we don't start saying we need it. 

As for the small spending, while I would never tell anyone to waste their funds, I would say that a lot of talk about cutting these unnecessary expenses comes from people who don't have to do such things. The next time I hear someone yelp about someone else's cable bill, I plan to ask them how much they are paying themselves for the service!

I would hope they would engage with some of the critiques in the book. For starters, I would love for Dave Ramsey to explain exactly how you can choose not to participate in a recession. 

I would agree with all of this. All I would add is that if one person ends up taking over, make sure that person still discusses it with the other once a month. I'm that person in my house and I do it -- even as my husband looks like he wants to fall asleep! I think it is important.

It might interest people to know my husband is the daily money manager. Cuz if it were me, we would all be naked! I hate spending money. But the key is to talk. And as Helaine says, push him or her awake if you have to.

I use mint.com and like how it breaks down my expenses. I'm less enthused by their product reccomendations, and I would advise you ignore that part of the service. 

I wish I could answer that! I tend to think this is going to have to end sooner or later. There is already evidence that less prestigious (read: not Harvard, Yale or Princeton) private colleges are not able to get the tuition increases they once did. This, for the record, is one of the issues I have with many financial gurus. They often tell you to prioritize retirement savings over paying for college and while, yeah, that is good advice, it doesn't really account for the fact that most of us really feel that paying for college is one of the most important things you can do for your children. 

It's a bubble and it's busting already.

But I understand now better how this has happened. If your kid does all that you ask and gets the great grades and stays out of trouble and then looks at you with those doe eyes saying he or she will DIE if you don't let him or her to to whatever the brand name school, it is hard to say no.

But no you must. 

And no I'm going to say. 

I just want to add that I've been asked to teach online journalism classes and have said no, thank you. Part of the learning experience is the interaction between professor and students. 

I have to say it depends on the car. I just got into a similar position with an 8 yr old car. Some things are truly out of your control. 

Probably an IRA or Roth IRA (depends on what you think your income will be in retirement), invested in low-cost index funds. 

You are my idol!

Yup. You can cut cable. And a lot of other things. And as I tell people going through a rough financial season -- it's only for a season. Hang tough because tough times don't always last.

I can't suggest a particular company. But there are so many you can choose from. By the way the Roth is the pot. You put in it what you want so look for investments with low fees. Credit union or your bank is a good place to start.

I've done both and been pleased with both. If using software I have just one warning (from experience) don't wait to the last minute. If something goes wrong you could miss a deadline trying to fix it. 

Keep all the court documents and challenge anything from that company that may appear on your credit reports. So every year get your free reports from www.annualcreditreport.com

Yes I do. And then they should work their butts off to build that savings back up. But if they lost a job or got ill and didn't have the debt, they would weather that storm better.

Thank you. So without knowing more can't really say where to put the money. This could be a good time to find a fee-only planner (someone not trying to seel you something) to get good advice on what to do with the money. 

Try this site to find one

www.napfa.org

True that. Make sure the online schools are legit.

These aren't bad ideas, but you need to remember they've occurred to many other people as well. The fact is that there are not enough well paying jobs out there.  Also, speaking as a mom myself, most people are seeking regular help, and are less open to arrangements they know will be temporary. 

Right. Keep savings until you are out of the woods.

All true, but this is veering into blaming people for retireing. A good chunk of people who leave the workforce for good do it because they are laid off and cannot find another position, or they or a loved one suffers a health crisis leaving them unable to work. It's a real problem, and reminding them that retirement used to not exist isn't going to help. We also used to send elderly people who could no longer work and could not convince a family member to take them on to poorhouses. Just sayin'. 

The F word -- fiduciary. Make sure anyone you hire on has a fiduciary duty, that is the legal duty to act in your best interests.Don't accept less. 

Agreed. And ask your friends if any are using a planner. Most important don't invest or do anything you don't understand.

Thanks for the testimony. And you must be so proud to have such a financially smart kid. And thank him from me for his service to our country.

First, don't let her go to a school you guys can't afford. Just don't. 

As for scholarships I know about fastweb. College board has info on scholarships. And check the web sites for the schools. They often point you in the direction of legit sources.

The only thing I would add to this is that I think it is rather unrealistic to expect an 18 yr old to do all their own college research. I hope you are helping out in that area!

You've so much I agree with. But what Helaine said is so important. Help them -- all the way through. We have told our children and our daughter going off next year that we are partners in this venture. She doesn't pick the school. WE do. She has some say, we have some say and together we will pick what's right for her. And I've been helping and pushing and nagging her all through the process because well she's 17. And teenagers don't always do what they are supposed to do. Also for the record, she's a  great student (3.9) and still she may not get any money. That's just the way it is. So we are prepared for that and not mad. It's why we saved.

I just want to tell you I hear your pain. It's a very frustrating situation and all I can say is if we keep talking about it, maybe we can get somewhere. 

I hear your pain and living your pain. And I totally agree with you. In state costs are a trip too. It's hard for many people no matter how well they saved to have that much money. I so get you.

So if you only have so much saved, the kid has to commute and live at home or start at community college then transfer to state school. 

If we all stop paying these crazy prices something will be done. 

I'm going to take this on. I would urge you, if at all possible, not to completly sever your ties to the paid workforce. I don't mean you need a full-time job. Just try to keep a few freelance things going. I have a number of friends who stepped back and have found it impossible to break back in when their financial circumstances changed. 

But if you do decide to stay at home with the kids, work the numbers. Really look at your budget and how you can reduced expenses to make it work. Once you get settled then I agree with Helaine to keep your skills up. But many families can and do live on one-income. It can be done but plan for it which could mean giving up some stuff. But oh what you gain.

I think I addressed this earlier. I completely agree with you. I think the pundits who just spouting off that everyone can continue working into their seventies are living in Never Never Land. And I say that as someone whose grandmother worked till she was 93. 

I am not familiar with the The Debt Movement but I should say I like the idea of people banding together to pay down bills and otherwise offer financial support. My only concern is that such efforts tend to ignore the real reasons so many people find themselves in debt. It's not lattes, it's Lipitor.

Haven't heard of it. But will look into it.

Exactly!