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Jan 23, 2014

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Join Washington Post nationally syndicated personal finance columnist Michelle Singletary, Thurs., January 23 at noon ET for a Color of Money Live online chat.

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Today's Color of Money e-newsletter: Seniors Supporting Older Children

Thanks for joining me today. 

I'm here to answer as best I can your personal finance questions. And if you've joined me and the 1,000 others on the 21 Day financial fast, I'll be happy to answer your questions or accept your testimonies or comments.

So let's get started.

Hi Michelle, I've had some credit card debt for about five years now. While in the past couple years I've made progress paying it down, it always seems to be 2 steps forward and 2 steps back. I know I have a problem with budgeting and tracking where my money goes, but I'm not sure how to fix it. I know I could read a book, but I think some in-person help from a class or one-on-one sessions with a professional would work better for my learning style. Do you have any recommendations for how to find such a class or professional in the D.C. area? Thank you!

You've done the first right step, which is recognizing you need help. Many people can get out of debt on their own but many can't. I suggest you try a nonprofit debt counselng agency. You can find one in your local area by going to You put in your zip code and you will get a list of agencies. Some do telephone interviews but look for one that has in-person help.

Good luck.

Michelle: my 2nd comment/question: i haven't eaten out, snacked out, or stopped at Starbucks since fast started. I'm eating up what's in freezer and pantry, and only buying what i need at grocery store. I have had car maintenance done ($84.00) and hired exterminator for mouse issues ($345). I hope those costs are "allowable". However, I just CAN'T send my son (6th grade) to his best friend's birthday party without a gift! I plan to get him a $20 gift certificate. This is the only friend's birthday that my son celebrates, too. Comment?

I'm so proud of you. You are doing the fast well. And for those who don't know what that is go to to find more details. But essentially it's based on my book "The 21 Day Financial Fast." You can't spend money on anything that is not a necessity and you can't use credit cards.

So, what CAN'T you send your son to the party without a gift or gift card? I bet, like many kids your son's friends has so much already. A gift isn't and shouldn't be the entrance fee to a party. And yet that's what we've done with these celebrations. Remember a time when kids had parties with just cake and ice cream and the neighborhood kids just came to hang out and have fun. In my childhood, the familes didn't have much  money so we just were glad to have the ice cream and cake. But I get it. I'm not crazy. However, can you find another way to honor your son's friend. How about having your son make a gift and card. How about a gift of time, where you make a gift certificate for a day of lunch, video games, etc. Explain to your son and the parent's of your son's friend what you are doing. Talk about your desire to show that you can have fun and be with people without giving. I had a mom friend who had a party for her son and asked the guests NOT to bring gifts. Instead she enouraged folks to bring books to exchange. I know this is hard but I put that rule in the fast for a reason. Our love and friendship can be celebrated without having to buy something.

Doing my 21-day fast diversification homework and wondering: How (and should) I factor in a cash-balance pension account from my employer? I am 40 YO. The pension is conservatively invested in cash, with small returns. Don't know if my company will be here in 20-30 years. Factoring in the pension means only 1/3 of my retirement $ is in stocks. Though in my 401(k), 90% is in stocks. Thoughts?

Good for you for doing the homework!!!! 

Many people do the fast -- and without the book -- thinking they get it, that they understand it without all the information. The fast isn't just about not spending. It's about doing what you are doing, really examining all aspects of your financial life. Go to Use the ballpark retirement calcuator, which will help you see how all your retirement income will come together. It takes into account SS and pensions and other investments. So the point is your pension is just one part or a small part of the big picture of your retirement.

Thanks for taking my question. Could you share your thoughts about today's article, "In study, a surprising take on status of American Dream." What do you think is the take away of this article for young adults? I value your opinion and I am planning to share the article with my 2 teens.


Economic mobility hasn't changed in a half-century in America, economists declare

There's a link for the story for those who haven't read it but this stood out for me: "If you are growing up poor today, you appear to have the same odds of staying poor in adulthood that your grandparents did."

And this: The findings also suggest that who your parents are and how much they earn is more consequential for American youths today than ever before. That’s because the difference between the bottom and the top of the economic ladder has grown much more stark, but climbing the ladder hasn’t gotten any easier."

So when I read that I think of a few things. That we have to help the less advantaged improve their economic situation through education, training, financial classes, etc.

And that as parents we have to do all that we can to be good stewards over our money and teach our children the same. 

Normally, I would agree with your assessment of this situation. HOWEVER - at the moment, we are making huge transfers of wealth from young to old, and we seem to keep creating more and more programs to do that. It is no wonder that young people (even those in their 40s, who, presumably, have kids who need things) - need some help from their elders - since their elders are the ones with the money. It doesn't seem any of these transfers of wealth will be going away any time soon (even though, the very young, i.e., those in their 20s, can ill afford to be helping the elderly, given that they can hardly find jobs themselves). So - I would normally say - hey, those 'kids' need to be on their own. But when most people are paying 50% or more in taxes (don't kid yourself, if you added it all up - even just what you know about - most people are close to that - and there are plenty of hidden taxes in things you purchase as well) - it's not surprising that this is happening a lot.


Seniors Supporting Adult Children

Wow. I'm not really sure where to start. 

It is not true that the vast majority of Americans are paying 50 percent of their income in income taxes. And what vast transfer of weatlh? I suspect you are talking about Social Security perhaps or some other attack on social programs. If so, those programs don't transfer HUGE amts of wealth. 

The point of the findings is that folks in their retirement years are supporting adult children for a number of reasons, some of which those adults have been triflin with their money. Some have lost their jobs because of the economy, some other issues like a medical crisis. 

I look the findings a different way. We are all in this together. It's in all our best interest that we have a roboust economy with a full employment as we can get AND provide more financial literacy classes, programs, etc. to help people when they do make their own money, save and invest it so they don't have to rely on their retired parents. 

80 plus year old Mom paying $1,400. Maintenance on her Co-op..her SS is $1,800. She moved in with us, helped with down payment, and now pays no rent and has no expenses. Has her own space, in two family home and has her privacy. Has company when she wants and privacy when she wants and all her meals provided by us when she wants. Now what is wrong with that? We love being together, and she helped us and we helped her. She spends her SS on whatever she wants. More of us should do that!! you Michelle.


Seniors Supporting Adult Children

So you aren't in fact living off your mom. You are co-existing financially to the benefit of all. That's different than if she was digging into her money to support you. 

I think your way is going to increasing the way of the future, which was the way of the past. Why does everyone in the family need their own homes when many can't afford it?


Hi, Michelle -- love your column. As an elder law attorney, I'd like to point out an additional problem for seniors financially helping out adult children. If the senior needs to apply for Medicaid to pay for the cost of long-term care, the Medicaid agency may treat the payments as "disqualifying transfers" if they were made within five years of the senior being otherwise financially eligible to receive long-term care benefits. The burden will then be on the senior (or her family) to prove that the gifts were made for purposes other than to try to qualify for Medicaid. I tell my Massachusetts clients that if they need to carefully document any loans made to their children, there needs to be a modest amount of interest charged, the repayment period needs to be done over period shorter than their statistical life span and that the children actually have to pay the money back according to the terms of the note. Otherwise, the elder is just asking for trouble.


Seniors Supporting Adult Children

Good point. Thanks for your input. 

Big fan here! I thought of you while reading today's Post story on the former Gov. of Virginia and his wife. Unbelievable! What a bad example they are setting for the people of their state.

I've been thinking about that situatino as well. Writing about it for Sunday. What do others think about the case. Not whether they are guilty but the spending, the lifestyle and the example they were setting?

Michelle can you give strategies for building up credit scores. I am currently in the low 700's and would like to be higher

With scores in the low 700s you shouldn't have any trouble getting the best rates on loans. So really there isn't anything you "need" to do. The way to get good scores or higher scores is to pay your bills on time and pay off debt.

Most of my friends w/ kids who are not quite senoir are already blowing all of their pre retirement on their kids. And then we have to hear them cry about it. My response to them: If they are going to make $50/hour do you think they will help you out? That's sure does make them think.

I'm not against family helping family or parent helping adult children or adult children helping parents. The problem comes if you are enabling folks to continue bad financial habits. And certainly you can't or shouldn't give what you can't afford. Don't rob your retirement future to help others. Instead find other ways to help them. Move in together for example. 

Michelle, I agree with your principle's and the idea of the fast, but I also think this is a case where I wouldn't punish your son by not allowing him to get a gift to the only birthday party he is going to. Socially, it could make it really tough for him at that age and it is tough on the kid opening the presents to get a homemade gift. Instead, I would give a small, thoughtful gift like a pair of movie tickets to see the latest 3D movie (if there is one he is dying to see). That teaches the gift of time without punishing your son (or his friend with a January birthday-- we tend to get smaller presents due to Christmas anyway)

I understand your thinking and you are trying to be helpful. But you are not to give gifts during the fast. Period. It's only during the fast. And again, you can give without buying something. I'm a parent. I've been to a lot of birthday parties. The kids aren't keeping score. The parents usually are. The kids open the gifts so quickly they hardly acknowledge or know how has given what.

I've shown up without gifts because I ran out of time, forgot it at home, etc. Told the parents, they wave me off saying something, "don't give it a second thought." If there is the fear of embrassment, call the parent or parents, explain that you are on a fast and ask if it's okay that the gifts not be opened at the party. 

Look folks, we have got to get to the point where we can show up without having something to give if we don't have it to give or if we are on a higher mission like the 21 day financial fast.

Principles are just that if you don't practice them.

Not a question, just a comment. I'm past retirement age and still working. I have an almost 40 year old step-son who returned home 15 months ago after losing a job when his employer went bankrupt. He still hasn't found employment on a full time basis allowing him to return to supporting himself. His various costs (insurance, medical, etc.) are a significant burden to our household. I'm sure there are many families enduring similar or worse conditions. Job creation for the long-term unemployed is a key issue that must be addressed, if we are to return to being a prosperous country.

Great comment. It's all about context. 

I would suggest that son look for and take any job that will help with the expenses while he also continues to look for full time employment. Shovel snow, deliver pizzas at night, etc. Whatever it takes to bring in something. 

I wanted to share because it's so timely with your chat today: I just dipped into my Life Happens fund today as the HVAC suddenly wasn't working anymore. Fortunately, it was a quick and cheap fix but there's nothing like sub-zero temperatures to make one extra grateful for lifesaving savings! (And my heart always goes out to those who are in a similar situation but can't afford to get it fixed.)


And the life happens fund is different from an emergency fund. Use the life happens fund to pay for things like a broken HVAC so that you don't have to dip into your emergency fund, which is earmarked for a job loss or major disruption in your income. 

Hi, I have a nice, healthy amount saved for emergencies--roughly eight months of living expenses. Is it best to save all of it in a savings' account so that it is readily accessible? So frustrating with the low interest rates to see such miniscule growth.

Sorry. You've got to keep that money liquid mostly because you don't want to put any of it at risk because, well, it's your emergency fund. Don't focus on the interest rate. The point of this money isnt' to grow it but to have it available should you need it.

You often recommend paying off a mortgage if you can. I wonder if you could explain your thinking? Many financial advisors strongly urge people to keep the longest, biggest fixed-rate mortgage they can get for at least three reasons: 1/ Returns. If you have a low-interest mortgage, you can reasonably expect a greater return from money sensibly invested in stocks and bonds than you will pay in mortgage interest at today's rates, even without taking the tax deduction into account. 2/ Liquidity: If you need money in an emergency, it will be hard to borrow against a house, especially if the emergency is that you've lost your job and have no income. But you can pull money from your investments quickly if you need it. 3/ Leverage. If you have a paid-off house and over time it goes up 10% in value, your gain is 10% of your investment. If you have a 90% mortgage, the same dollar increase becomes a 100% gain. You can't beat that anywhere. If you have a big bucket of money in the bank, you can always use it to pay off your mortgage if a time comes when it seems smart, like late-life estate planning. But when you do pay off your mortgage, that cash is gone and you can't get it back. Why is it a good idea to tie up a large percentage of your assets in a house?

All sounds logical, if everything goes as you point out.

But it doesn't. Investments lose money. So what if the money you could have used to get rid of the biggest expense most people have, is lost in the market? If you lose your job and you have a paid for house AND savings, you are far better off than no job and a mortgage. The key is that you pay off your house and you build up savings, retirement fund, etc.

I'm so very disturbed by your reasoning and those of advisors, who by the way are biased because they want you to invest.

I have never, ever met anyone who paid off their house, had savings for retirement who regretted not having that monkey on their back. The best thing you can do for your retirement is to NOT drag a mortgage into it. 

So save for an emergency, life happens fund, retirement, college fund if you have kids AND work hard to pay off your mortgage at the same time. Make just one extra mortgage payment a year and you knock years off your mortgage.

Debt is not good. Debt is a drag. Get rid of it as fast as you can and save. 

That's the ticket to financial peace.

Our two sons both got full football scholarships to good universities as placekickers, a position we chose to mimimize the chance of serious injury. While neither came close to the NFL, both had great college experiences. They graduated, now have good jobs, and are finding that their football background helps open both personal and professional doors. We have an equally athletic daughter who is now a high school sophomore. Since we paid virtually nothing for her brothers' education, her college fund is pretty flush. But further help, of course, would be appreciated. In checking into this, we've learned that, despite Title 9, women's scholarships are hard to come by. Basketball is the obvious choice, but our daughter is probably too short. So we're thinking track and field? Soccer? Softball? Do you and/or any chatters have any thoughts on this? Our sons had a geat college experience, and we'd like the same for our daughter -- and our pocketbook. Thanks.

I would say since you have the money to pay for her college, let her figure out the sports she LIKES and go for any and every scholarship out there. What happened to playing sport for the fun of it or because you like it. Seriously, one of the reasons my daughter isn't playing in an AU basketball league was the unbelievable instensity of the games because so many parents were thinking like you. There was yelling from the parents, coaches, etc. So not fun. So scared the heck out of a kid who just wanted to play because she loves the game. 

Seems to me you are putting way too much pressure on yourself and your daugther. Again, go for the money if she's qualified and talented but you have the money. Be grateful for that.

Hi Michelle My mom died at Christmas (4 weeks ago) - this is just a reminder to everyone to have life insurance. She didn't. My parents didn't have any debt (no credit cards) and had great savings but after her medical bills were paid (about $70k that insurance didn't cover) and the cost of the funeral not much was left. For a very quick VERY basic funeral we still ended up spending almost $10k by the time everything was done. I didn't have life insurance either but after seeing just how much everything costs I can guaratnee I'll be getting some. Speaking on life insurance - do you have any inputs on which types are better or which companies? (term life versus whole life etc.)

I'm so sorry for your loss. And thank you for the testimony and reminder.

But I will point out they did have enough to cover all the expenses including the funeral. So you mom really didn't need life insurance unless your father is still alive or a spouse and/or she wanted to leave more money to her heirs. However, bet provisions were made for that until the medical bills. 

Life insurance is primarily income replacement for someone who is dependent on you. 

I don't give out company recommendations but I favor term life insurance. The expenses are lower and you can get more coverage for your money.

A few years ago, my employer changed the policy related to snow days. We used to get 4 paid days off each year to cover snow days and other office closings. But, they reorganized our leave, giving us fewer paid days off. Now we no longer have separate administrative, sick, and vacation leave. It is just paid leave and there are fewer hours than before. I seem to constantly be running out of paid leave. This winter, we had two closings and two late arrival days. Last year, we were closed for a power outage and had the flu strike hard. We were fortunate not to be impacted by the Government shutdown, but other employees in my company were not so fortunate. I don't have the option to work from home, so if I am sick or the office is closed, I don't get paid unless I have enough leave to cover the day. Now, I am at the point where another snow day will mean a day without pay. Already planned summer vacation is also at risk. Fingers are crossed that nobody in the office comes in sick. Why is it so hard to maintain income in the winter months when more people get sick and the weather causes problems?

What you describe is a sign of the times. It's hard out there for many workers.

So because it is what it is, I try to get people to build in savings to cover such things. As you budget for the rest of the year and next winter, knowing your company's policy about leave, put in some extra savings in case you have to take days without pay. Use the past years as a benchmark. Put that money in your emergency fund. And don't use it. Keep it rolling year to year even when you don't have unpaid days in case the next year you have more than the previous one.

I get both sides of the birthday present debate. On the one hand, your son's friend wants him there at the party. Suppose you couldn't afford a present and told the kid's parent. What would he/she say? Of course he/she would say "come anyway!" On the other hand, if you let people know that you're not bringing a gift because you're on a financial fast or otherwise trying to save money, I can see how that could be viewed as very selfish. I'd just do a homemade gift and not bring up the why or wherefore. A smart parent would use it to teach the birthday kid to just be grateful for what he or she is given and not question "why."

I liked everything you said except the "selfish" comment. If someone views your attempt to get your finances straight as selfish, they have a problem not you. You are not selfish to be trying to become a better stewart over your money. 

I would say a compassionate parent, a moneywise parent will understand your situation and commitment to the fast and say come and just enjoy the party. I would. No gifts are needed ever to come to any party I give. And no, I won't talk about you behind your back. I have everything I need. My kids have everything they need. 

I did that in 2009 and I somewhat regret it. The mortgage payments (the principal and interest portion) goes back into the market every month BUT there are some months that we..oops..spend it. The rationalization is "well, we would have sold some securities to cover that cost" but would we have done that? Are we spending more now that the mortgage is gone and the cash is much easier to spend or would we have spent less with the mortgage? Or would we have sold some securities and our spending is the same?

Ok, so you are saying keep debt so you won't overspend as a reason to not pay off a mortgage?

No, you get a grip on your spending and be grateful you aren't saddled with a mortgage. 

I've actually heard that the most available scholarships for girls are for Ice Hockey. But I still don't think that's a reason to have her strap on skates. She should be playing sports because she likes them, they give her confidence and teach her how to balance her time, not for potential scholarships.

Or not just for potential scholarships, I would add.

Since you ask for comments - Assuming that the allegations are true, I am stunned at the sense of entitlement they display. How many people have folks available to provide hefty "loans" and expensive gifts? They lived well beyond their means and instead of dealing, e.g., selling one of the investment properties, they appear to have jeopardized their futures to hold onto stuff. Sad.

Thanks for sharing.

I can understand the pressure on a public figure and his/her family to dress a certain way and have a certain outward appearance. There is a higher level of scrutiny on them and more expectations. In addition, more opportunity to need/use nicer pieces. I just think that there are budget-friendly ways to do it - even if it means renting a fancy dress for that gala/ball or going with a more affordable designer. I mean, even the FLOTUS re-wears things or accessorizes differently to get a different look. So it can be done without damaging the overall image.

Thanks. Good points.

I always look at and can't believe it's time to stop. 

Thank you for your comments, suggestions and questions.

I hope I helped and gave you something to think about. 

Until next week. 

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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