Color of Money Live

Mar 21, 2013

Join Washington Post nationally syndicated personal finance columnist Michelle Singletary on Thursday, March 21 at noon ET for an online discussion. Michelle will be available to offer personal finance advice on your money matters. If you can't make the live discussion, submit your questions early.

Little behind. Technical difficulties. But let's get started.

Michelle, do you know if interest rates for bank CD's will go up and when? Thanks.

Boy if I knew that, I would be independently weathly.

But as you may have read Fed is keeping rates low and with that follows continued low rates for deposit accounts.

You can look for the most competitive savings rates for CDs by going to


I'm in a situation that most people would want: $800,000 house with no mortgage, $250,000 in taxable brokerage account, $1,000,000 in retirement accounts, $200,000 in 529s (2 elementary school-aged kids), combined salaries of $250,000. We each contribute $17,500 to 401ks and $13,000 per year (total) into the 529s. And we invest $25,000 (or so) per year in the market. Why do I feel it's not enough and I need to save more?

Wow. Can you adopt me?

You might get slammed from folks on this chat, especially since many of them are or know folks who would love, love to be in your shoes. You note may seem so ungrateful.

But it might surprise folks that I understand where you fear is coming from or at least I can identitfy with it. As much as I have, I get scared it's not enough. And why wouldn't you feel fear. There is a constant drum beat of what it takes to live well in this country. 

But really, I need you to take a look at the numbers you just wrote. You are rich. But you are also rich not just based on those numbers. You have access to clean water. You can feed yourself and your kids. You have a home. You have a job. You have spouse. You have kids. You probably have good transportation. You no doubt can open your closet and choose among so much to wear. Your kids will be able to go to college. 

Take a few minutes today to add to that list. Count your blessings. I'm serious. Make a list.

Then, if you haven't or don't already, find a organziation or something to serve people less fortunate. That my friend will or should make you finally say "I have enough."

Hi Michelle- I'm new to your column and chat, sorry for this basic question. I like the idea of emergency and life happens. But how exactly are these set up? Are they separate and distinct bank accounts, or just one money pool that you mentally divvy up? Can I even have more than one account with the same bank?

You don't have to apologize for asking a basic question. No question is too basic if you truly don't know. 

So long time ago I came up with this system after working with so many people and finding that they were constantly dipping into their emergency fund...and then when a real emergency happend -- lost job for example -- they didn't have any emergency funds.

So the idea is to have your emergency money for the really BIG emergencies. I like to keep that money in a separate account. Away from my other money that I use monthly. My life happens fund is also in a separate account apart my my emergency money because I just like different pots for my money. It helps me see things clearly.

You can get a low or no-cost savings and checking account at the same institution if you like and keep the emergency fund and life happens fund in those two accounts. Savings would be for emergency fund and checking for the life happens fund since you will be dipping into the latter frequently because that's how it's designed. 

Hope that helps.

Hi Michelle: I know my issue is not "serious" compared to a lot of the pain and struggle you see every day, but I also know you will get me on this like no one else. When is it ever ok to blow money on something frivolous that is just for me? I know we can "afford" it -- we save a LOT, have no debt except a very low-rate mortgage, give to charity, etc. But I grew up poor, with a mom who managed to save a few pennies even when we were on Food Stamps (and who still drives a hoopty, even though she can afford a lot more). I am tremendously grateful to have come so far. But whenever I think of spending money on something frivolous for me, I can't bring myself to do it -- I can spend on the kids or my husband, but something that's just for me feels selfish and wasteful. My husband 100% supports me blowing money on just me -- I'm the only one who struggles. How do you know if/when it is ever ok to spend money on something frivolous completely for yourself?

You already know. You just outlined it for me. You:

-- Save a LOT

-- You have only a mortgage.. (I discourage saying things such as "no debt except.") Just say you have a mortgage :)

-- You give to charity

-- You are on the same page financially as you "boo" or for those not used to Baltimore slang, you honey, you baby, your husband.

So let go. 

I know it's hard. Like you I grew up poor with a grandmother who didn't spend on herself much at all. I get the pressure to use your money wisely always.

But antoher wise way to use your money when you are doing the right things with that money is to splurge. I do it. 

Okay my splurge is usuallya book on Kindle and even then I feel bad, but I force myself to do something for myself.

However, if this helps you have my permission to do something -- within financial reason -- for yourself within the next week. I mean it!

And I want you to report back to me next week in the chat. 

My husband left his government job almost a year ago with nothing else lined up. He's working part time to help me out with bills but we just got his Annual TSP in the mail the other day. There's some "change" in there (almost 40k). With him no longer with the government (and he doubts he ever wants to go back) what do we do with that money? We have a lot of debt but I know we can't pull that money out. Do we roll it over to something? Let it sit?

You could just leave it alone for now. Its probably in a good place unless you or your husband think you can invest it in a better way AND for less cost. Otherwise let the "change" be. But I put that in quotations because you know it's not change. That's a lot of dough where I come from.

Also, can I just pick a little. 

You said your husband is working to "help me out."

How about a language or thought change. You are in this together. He's not helping you out. He's contributing to your joint household. Right now you have to contribute more because you are working. But together your full-time pay and his part-time pay equals just pay for you and your household.

Just saying.

Hi Michelle, Thank you for taking my question. Can my husband and I purchase long term care insurance for his mother? Any tips on starting a conversation with her so it doesn't sound like we want to ship her off to a nursing home at the first sign of aging?

Your mother-in-law would have to qualify and give you permission to take ot the policy and then you can pay the premiums.  As for tip, just tell her you want to make sure she is well taken care of should she need long term care down the road. Also, AARP has some great information it its website about this type of conversation.

At what point in the life of a mortgage does it no longer make sense to refinance? I think I have about 4 years left on a 15 year mortgage. Since I am in the home stretch, I think that any savings from a lower interest rate would be lost from the fees. Also, I would hate the thought of extending it out any longer... even if I knew I would pay it off faster.

You are pretty smart. At this point you are probably paying a lot down on your principal and the fees to refinance might not make it worth it.

But if you aren't sure about whether it's worth to refinance, use the refinance calculator at

I appreciate your wisdom since mine is not clear these days. I recently lost a well paying position. I have about 8 years left on a mortgage that has a fairly hefty monthly payment. I was adding about $500 a month to pay it off early but now have stopped. I have no idea when I will get a new position but I have enough money in a special savings (not 401k or IRA) account for retirement to pay off my house and cover expenses for awhile. I take in a renter too so my monthly expenses without the mortgage would be very low. BUT, I worry that taking out that much money from what I had saved for retirement would be a bad thing to do if I don't get another high paying position for awhile. So, do you advise paying off the house and putting a hole in my retirement savings and hope to recoup it later or keep that money in the account until I absolutely need it? It bothers me greatly not to add to my retirment saving because of unemployment. I am single and in my early 50s.

For now, I wouldn't pay off the house until you get another job. You have the lump sum money to make the monthly payments and if you get a roommate you can even cut that down.

Keep the cash for now. And don't worry about not contributing to your retirement for now. Just work on getting back in a better financial position jobwise.

Could you provide some guidelines to estimate the amount of an emergency fund? I have heard some people to recommend 3 months of expenses, other 6 months. What expenses should be included in the calculation?

I start with your current monthly expenses and I mean everything. Add it all up:

-- Mortgage/rent

-- Any car payment or payments

-- Food, utilities, other transportation costs, insurance payments, cell phone, cable, etc. All that you spend on to run your house. 

Think about if you lost your job. What type of job is it? If you are a highly paid person might take a while to get a similar job at that same pay. Or if you are in an industry where it might be easier to find a job in a few month.

Now depending on that, use 3 months as a floor. You want to have at least three months saved. From there move to six months. Highly paid, aim for 12 months.

Also remember whatever you manage to save will be helpful in the event of an emergency.

Yesterday I saw Bernanke indicate at a press briefing that interest rates will stay near zero probably until 2015. He probably was talking about the bank interest rates but since they tend to affect other rates I doubt we'll see CDs go much higher and now they are a joke. Stock dividends are much higher than that.

What I said. You are right.

Hi Michelle- After having been in trouble with student loan repayments, I got everything sorted out and now have a good income, good credit score and very little debt (<$3000 in student loans @ 2.5% interest and <$7500 on my car at 0% interest). My question is where can I put my savings so that it's relatively liquid but gets a good return? I have my life happens/emergency fund in an interest checking account and the rest in a MMA getting next to nothing.

The savings for your emergency fund and life happens fund should be where it is and unfortuantely that means not earning much. But that's ok because it's supposed to be parked in something that doesn't have a lot of risk.

So sorry.

I expect to retire later this year with $500k+ in my employer's 401k -- that's from aggressive saving and a lot of luck, for which I am thankful. I will roll over to mutual fund IRAs, but I wonder if I should divide it between two or three companies (the big ones like Vanguard, Fidelity, TRowe Price). My investments will be a mix of conservative bond funds and some moderate risk stock funds, whether I keep the money all with one company or divide it. I'm inclined to put it all in one place for convenience, but worry if one company were to fail. Has that ever happened with a major mutual fund firm (I hope they are watched more closely than Madoff et al were)?

I can't say where to put your money but at this point you would benefit from meeting with a fee-only planner to help you figure out where to put the money.

After two years of hard work and sacrifices, I eliminated 95 percent of my credit card debt. I have a modest savings account (less than $2k). I have continued to contribute to my retirement accounts. While I wasn't planning to go crazy and revisit old spending habits, I was planning to add back in a few extras I had given up. Now I feel as if I am staring at yet another financial hill to climb. An honest mistake on my 2010 tax return has resulted in a $1,900 bill (paying in installments with IRS interest rates seems like a mistake), medical expenses not covered by my recently-tripled-premiums insurance plan are $700 (no payment plan option on bills less than $1,000) and my 11-year-old car is at the point of replacement (confirmed by a trustworthy mechanic and no public transportation options available in my rural area). My income has dropped due to increased insurance costs and taxes. Salary increases, if any, will be minimal this year. Should I get a second job? Drain the savings account? Use my emergency low rate credit card? I don't want to dip into retirement funds. I am burned out and frustrated. The thought of another year or so of "living slim" is depressing.

I'm so sorry about all that you are going through. YOu are not alone if that helps. 

Don't dip into the retirement money. Unless you are 59 1/2 you'll get hit pretty bad to taking it out.

I would use some of the savings to take care of the $700 in medical bills. Just get that off your money and back.

But keep the rest of the savings in case something else happens.

As for the car, if you are up to it yeah get another job to begin savings to at least come up with a good downpayment for a used car. But try to keep the hoopty for as long as you can.

Hi there, two of my teens are working and a friend mentioned that I could start funding an IRA for them. Do you recommend this, and if so, is a pre-tax or post -tax (roth?) better? Any advice appreciated!

I would, if you don't have their college fund, fullly fund, put any money toward that. Better use of the money in my opinion.

How can I estimate the cost of college? My daughter will start college in 2016. She is planning to go to UVA or William and Mary. We are Virginia residents. I estimate that by 2016 her 529 plan will be worth $40K. I am trying to estimate how much more money will be needed to cover the 4 years of college. Thanks.

Here are two calculators you can try

Or this one

Why do creditors penalize you for high balances even though you pay on time? No collections, 730 credit score, but you get denied. Makes no distinction from those who don't pay at all. Not fair.

Or perhaps they see that you are overextended and if anything, anything at all happens you will run into trouble.

You see it's not enough to just have a good credit score. Or even pay on time although that's very important.

The factors in the credit score are the only things lenders look at. They also take into account your income and other debts.

Hi Michelle, Well, I think my husband and I will be getting our furlough notices today. Of course, bad timing - a 3-year-old and another due in 5 weeks. BUT, because of your advice, we've planned, we've cut, we've re-arranged so I think we'll be able to manage, although we may have to re-start our emergency fund when it's all over. I'm scared, but thanks to you, I feel like we'll survive in the long run!

Thank you but really you did what it took to plan for your family and I bet making many changes.

So you get the pat on the back because you deserve it.

I'm so sorry you have been put in this situation but I'm proud of you for making it work.


Thanks for joining me today. I always enjoy this time we have together and hope I helped. 

If I didn't get to your question I'm so sorry. But as I always say, I keep the questions and try to answer as many as I can later in my print column or on other forums.

See you next week.

And If you don't already follow me on Twitter at @SingletaryM or connect with me on Facebook at

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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