This it the time of the year when I remember that I never gave friends' and families' kids graduation gifts. Although people love to give gift cards, I find that sending college students and the other kids some cash is appreciated. Also, some of them come back and say they saved the money for a critical time. Spending a gift card is easier it appears than spending cold hard cash is harder to let go. I also advise them to save the money for a rainy day.
People tend to think that when it comes to gifts, "it's the thought that counts." But research shows that gift recipients don't really consider how much thought gift givers put into the present--all that matters is how much the recipients wanted/needed the gift. So, if cash is what the new grads want or need most, it's probably a good bet. Also, research shows that gift cards frequently go unused!
If you could see me my hand is raised. I have so many gift cards I forget to use or lose before I use them. The problem is I put them away so that I can buy something that is meaningful and then forgot I put them away or where I put them!
Michelle -- Do you keep an archive of the books you've chosen for your Book Club? In the past, I know you've recommended books for young adults, but I didn't make note of them at the time. And I think my 18 year old nephew could use a primer as he starts out in the world :-) Thanks!
If you check the archives of my columns you will find the books I've recommended. I also have a list (although I need to update it) on my personal website michellesingletary.com.
One book I would recommend is "Get a Financial Life" by Beth Kobliner. It's geared toward young adults.
Hi. I am a single woman with no kids and no credit card but student loan debt. One particular loan is private and is 4,500 bucks at 13.125% and it annoys me to pay over 50 bucks a month in interest but it use to be higher and I've gotten it down to 4500 bucks. I have 2000 in savings which 1,000 is my Life Happens fund, should I start putting theo ther 1,000 and any other man I save towards it or build of my non existent emergency fund? :) Wait did I just answer my own question :
From a happiness perspective, research shows that nothing drags down our sense of well-being like debt! Savings are good for happiness, debt is bad for happiness--but the deadweight of debt is worse than the uplift of savings. So, I would recommend paying off the debt! Of course, this is just from a happiness perspetctive, and it's always important to consider economic issues like relative interest rates as well.
Do both. Pay down the debt aggressively and put some money away for an emergency. So you have $2,000. If your job is pretty secure (as secure as any job is now). I would stop contributing to savings. Keep the full $2,000 in saving but then throw any and all money you can find at the debt. Once you've gotten rid of the student loan debt, you can go back and build up your emergency fund (at least 3 to 6 months of living expenses). But make that a different account than the $2,000, which you should label as your life happens fund.
Hi Michelle. I'm a 20 something that works full time and lives at home with my parents. My mother is unemployed and my father is retired. Although I give them money each month and buy other things for the house, I am constantly expected to pay a bill at the last minute. These are bills my father said he would pay then at the last minute can't, despite these expenses being substantially lower than his monthly income. The shortage is simply due to poor money management. I am thankful to be able to help my parents and don't mind paying my share. But I can't save as much as I could and want to due to these last minute expenses and my fear is that I will never be able to move out with out them depending on me.
Oh you poor dear. It's a bad situation for sure. I would recommend the following:
1. Sit down with your parents and come up with a set amount you can pay every month for rent. Call it that. Rent. And pay that amount every month on time.
2. As part of your discussion for rent, also talk and agree on what other expenses you will/can fairly pay such as for food, utilities, etc. Determine your fair share. The thing is this will start to prepare you for the real world expenses you will have to pay.
3. Let them now after you've listed and agreed to in writing that's it. You can't do more because you are saving to eventually be on your own.
4. When and if you are asked to pay a bill outside of your agreement, poliitely and with much respect say you can't. And then don't!!!!
5. If you get the guilt trip or you can't stick to the agreement because you feel guilty even if they (your dad) doesn't guilt trip you, it's time to move up your move out date. And not just because you don't want to help them. In fact because you WILL be helping them to live within their means. They won't learn to do that if they can fall back on their adult child.
Money doesn't buy happiness, but it does buy security. Insecurity makes it hard to be happy. So......
This is a great insight. In some of our newest research, which involves analyzing data from thousands of Americans, we find that people with higher incomes don't report any greater *happiness* on a day-today basis. BUT they do report less sadness--and less pain.
How do we explain to our 6 and 8 year old children that money does not grow nn trees, or in ATM machines We've told them that Daddy works hard for our money, which his company puts in the bank. We use it for food, clothing shelter, gas and other everyday expenses. We also save a fair amount, for retirement, emergencies and their future college expenses. Thankfully there is still some left over for fun outings and the occasional treat, but expensive cell phones and other electronic gadgets are just not going to happen. We know other parents make different decisions, which is their right. But we're rising some pretty unhappy children at this point.
Man I so understand you. Although my kids are much older -- all teenagers -- I'm constantly explaining to them the limitations of what we can do financially. I'm also being compared to what other parents get their kids.
But remember you are the parent. You know what you can handle and what you want your kids to have. You know what they need. You know you need to save for their college, retirement, etc.
It's built in their DNA to ask for stuff.
It should be built in your DNA as a parent not to be a punk (not saying you are one). Don't be a punk parent.
As a woman just said last night in a financial class my husband and I teach for couples, "No is complete sentence."
Stay strong. You and your kids will be better off. And given the topic today much happier.
You can't "buy" happiness. But money is like healthiness--not having it causes a great deal of misery and occupies your mind all the time. When you have your health or enough money for basics, you just go on and live your life. What kind of person you are takes over.
I agree-the benefts of having a lot of money are much smaller than the emotional costs of being seriously strapped for cash. That said, whether you have a little money or a lot of it, research shows that you can actully buy some additional happiness on a given day by re-thinking how you spend that money. For example, in one experiment, we found that people were significantly happier at the end of the day when they spent $5 to benefit someone else rather than themselves.
I've been a hairstylist for 17 years ,my question is how can I become more money smart in building for the future?
Get educated. And by that I mean read, go to financiail seminars, meet with a financial adviser. Buy financial books. Get subscriptions to financial magazines. Get a subscription to Consumer Reports.
This money stuff has become quite complicated so you have to take continuing education courses to stay on top of it. It's much like being a hairstylist. Don't you have to take classes to stay on top of what's in your industry -- new techniques, etc. Same with your money. Get training. There are so many financial literacy programs,workshops in many communities these days. Take advantage of the programs. And if they aren't free find some that you have to pay for to build a smarter financial future.
...It's one that because of it's design has been stolen four times since I have owned it. (I am the original owner). Insurance is fixing (again!) and I always use the steering wheel lock bar, but that's just a deterrant. I guess the question is: At what point do you give up on a great older vehicle, built like a tank and running great, because of the icky feeling you get knowing someone else has taken it and who knows what they did with it after they took it?
I'd say stick with your current set of wheels. Remarkably, research shows that buying a newer, nicer car doesn't do much for our day-to-day happiness. So, try to put that icky feeling aside, and just focus on the value you get from your car@
Perhaps you need to invest in a more high-tech security system for the car, one that will shut off the engine and has a siren that can be heard in space.
I agree, not sure it's time to replace it. Also talk to local police to see what more you can do.
I found a gift card that I had been given in 2004 for $100. It said that it would expire in one year. But, I went into the store anyway, and they accepted it. So...don't give up on gift cards, no matter how old they are.
Not too long ago, Best Buy reported a gain of $43 million due to unredeemed gift cards. Merchants make a lot of money from unreedemed cards, so it's always worth asking them to accept your card even if it's expired!
Also there are new laws about gift cards so you have more protections. But your bottom line is right. With older cards still see if you can use it. This has happened to me a few times, especially for gift cards or certificates that didn't have an expiration date listed.
Your article is very timely! An elderly relative always carried the bare minimum insurance and categorically refused to go the doctor for anything that wasn't life or death. Well, now she has to. In addition, she can't handle complicated insurance forms. She doesn't even know what kind of Medicare she has, and what it does and doesn't cover, but we were able to find that out on the website. We are starting to take over financial stuff for her and are utterly clueless about the Medicare thing. However, we don't yet have power of attorney. I have found the Medicare website to be less than helpful for basic information. It assumes a basic level of information. Do you know where I can get a crash course in Medicare? If we can push her to change her Medicare to something more comprehensive, does the ACA ban on pre-existing conditions apply to this?
Whew. First, definitely work with your relative to establish who can help her with her affairs. Then call Medicare if you can't seem to figure out the information on the website, although I found it very helpful. Call 1-800-633-4227 or contact theState Health Insurance Assistance Program (SHIP), which provides help Medicare beneficiaries and their families or caregivers. Finally if your relative is eligible for Medicare she can't shop on the health care marketplace.
I met a high school student recently who was a very pretty girl, with very crooked teeth. At that moment, I was happy that my husband and I were able to afford braces for our sons. When I hear about the struggles one of my son's friends is having to pay for his college education, I am very glad that my husband and I are able to finance my sons' educations without them incurring debt. When I read earlier today that half of the children in the US will receive food stamps at some point in their lives, I am very happy that my sons were not in that group. Money may not buy happiness, but doing without is no fun either.
I couldn't agree more. Having a lot of money often fails to provide lots of happiness, but struggling to make ends meet while raising children can create a lot of stress. Also, our research shows that people get the most happiness from their money--whether they have a little or a lot of it--when they invest it in others. So, using your money to benefit your children is a good way to get the biggest happiness bang for your buck (my son is one year old and i just bought him his first tricycle for his birthday, which made me very happy!).
May I just add, I believe you can also find happiness by giving to folks who are less fortunate. If you can afford it and you see a need among your family and friends, help. My husband and I get great joy spending money on helping extended family and friends. We just sent money to a friend to help her with the costs of a cousin she's financially supporting.
Be grateful for what you have and then look around and see if you can help others achive that same financial peace.
Having enough money in the bank to cover unexpected emergencies makes me very happy and relieved!!
Agreed! Interestingly, genetics play a bigger role in happiness for people with more money, probably because having some savings provides people with a cushion that allows them to achieve the levels of happiness entwined in their DNA!
To the parent of the 6 and 8 year old - it gets easier. Mine are 8 and 10 and while we still get the "everybody at the slumber party had iPhones so why can't I get one" now only takes 10 No's when it used to take 20. For years, we explain things without using amount. We told them we work to make money to pay for things like the house, food, clothes, gas, electricity, water, savings, retirement, college, etc. When they ask for something, we tell them the money has already been allocated to something and then asked "would you like us to use less electricity and use the money elsehwere?" When they realize they have it pretty good now, they drop it.
Interestingly, research shows that even adults aren't good at recognizing "opportunity costs," how our choice to spend money on, say, an iPad today will make it harder for us to buy the other things we want. So, teaching this to children is a difficult, but very valuable lesson.
Love your way of saying no.
Hi Michelle, You passed along a question that Carolyn Hax had dealt with in her chat (or was it her column?). That gave me the idea to suggest a joint chat with her about matters of money and relationships or money and families. I for one would be really interested in reading what the two of you say together.
I really like that idea.
I'll bring it up with her.
First and foremost, everyone should be aggressively saving for retirement but I'm wondering what your thoughts are on whether people should contribute to a regular 401(k) or a Roth 401(k). I understand the tax implications (pay later vs pay now) but I think my income will be lower during retirement which should put me in a lower tax bracket. However, tax rates will probably be higher by the time I retire in 20 years. For now, I'm trying to split my funds equally between the two accounts. Any advice on another approach? thanks
I think you got it right. If you can contribute to a Roth, great. And many people should contribute to a 401 (k) because they get a match and they can contribute more than they can into a Roth. But if you can do both, you have some choices of how to pull your money out when you retire.
Where can we see your TV show?
Sad to say my TV One show has been off the air for a few years. But hey I welcome a campaign to get me back on :)
My wife and I have a problem a lot of people would like. Both retired with pensions. No mortgage, cars all paid for and 7 figures in the bank. Children all through college and paid for. Sole surviving parent is also very secure. Problem is we feel guilty whenever we spend money on almost anything except dining out. How can we break out of this and spend some? We spent years saving and now we can't stop.
Great question! And definitely a great problem to have! One thing that might help is to create a special bank account just for fun stuff--put an amount of money you feel comfortable with in that account, and then make youself use it for fun! I would start with buying more experiences for yourself and your wife--maybe not just dining out, but perhaps concerts and trips as well!
Again, I think giving, if you can, may also make you feel better about spending on yourself.
If you already give, remember why you saved. So that you could enjoy yourself in retirement. You worked for what you have so don't feel guilty spending it.
Hi, I had to file for bankruptcy 3 years ago. Since then I have been paying my bills on time, but when I check my credit score it's still low. Can you give me some advice on how I can improve my score. Thanks so much.
Don't feel discouraged. You are only three years from the barnkruptcy. Coming back from something like that takes time. And the best way to improve your scores is just what you are doing. Paying your bills on time. Top way. Best way.
So be patient. Better scores will come.
I'm a single woman planning to move into my first apartment without a roommate. I have around $1500 set aside for purchasing furniture, cookware, etc. Family have offered to give me some furniture, but I'm afraid it comes with emotional strings attached. What are your thoughts on spending the funds at a rent-to-own store, and then paying everything off with my tax return? The terms are 90 days same as cash.
So ask if the stuff comes with strings. And what strings would they come with? That the folks giving it get to sit on the couch they bought all night?
I would NOT do any rent to own. If you don't want to accept the offer of help and you don't have the cash now to buy what you want, wait until you do. I spend some time in my first place sitting on the floor. Made me appreciate more when I did get furniture.
To me those are two different question. Having money in the bank and in investments definitely brought me happiness, because I was able to retire in my mid-50's and know that I would be financially secure. My husband and I saved and invested, bought a modest home instead of a larger one, kept our cars for a long, long time, in order to make that happen. So it was "saving" money, not spending money, that helped bring happiness in the long term. That said, once I was secure, I bought myself a red convertible, which I still have (8 years old now). That made me happy too, and continues to make me happy every sunny day. I think it's ok to splurge, even on fairly big things, so long as you are not going into debt for them. (I paid cash for the car.)
Paying cash for things we want (but don't absolutely need) is a great strategy! Paying cash reins in our tendency to overspend--and also prevents the horrible "debt hangover" we get when the credit card or car payment bill shows up in the mail. It's also important to recognize that our little daily *spending* decisions affect our ability to achieve our *savings*goals, so these decisions are very much intertwined.
My almost 6 year-old Kindergartner has lost his fall coat twice. The first time, I looked the other way. But now I'm not sure what to do? Buy him yet another fall coat that he'll only wear this year. Or let him be cold? He does not get an allowance, but he does have money in his piggy bank (savings from grandparents). How can you teach financial responsibility to a Kindergartner?
Even teaching financial responsbility to college students is hard. So, i'd say buy the kid another coat (maybe taken the kiddo to a used clothing store so they're aware of the problem) and then work on basic financial lessons from there...
I agree. Kid has to have a coat. Also realize little people and well big people (teens) lose stuff. Ever check out the lost and found at school? I agree with Elizabeth that this time buy a warm but cheapest coat you can find. Try consignment store. And then just keep talking about being responsible. As much as you can with a 6-year-old. But I'll you this. My son once came home from camp without his shirt. I mean really. How do lose the shirt off your back?
Of course. I am now in my 6os and realize two things make me happy. Swimming in salt water and having a garden. Having a garden means being able to BUY a house with a decent size yard. In tis area swimming means being able to BUY a house with a HOA beach, Since I cannot afford this it means only having money will make me happy.
I would try thinking creatively about how you could engage in the activities that make you happy without having to spend so much on a house. For example, I wonder if your area might offer a community garden space, where people can rent their own garden plots at a relatively low cost...
Whenever my son sees something on TV or decides he wants something expensive - I tell him to put it on this birthday/Xmas list (he knows he can get everything on his list so he ends up priortizing as we get closer to his b-day or xmas. Or alternatively, I tell him to dip into his savings (allowance/previous cash gift) to buy (he ends up not wanted to deplete his savings)..
I think this is a great approach! This way, your son learns first-hand about opportunity costs, how we have to make real trade-offs to afford the things we want.
My husband and I have a rule. Our kids can't get anything they see on a television commerical.
Really. No is a powerful word. But more importantly we have to to as early as we can manage our children's expectation for stuff. A few years ago, my daughter put a lot of stuff on her Christmas list. But by the time she gave it to me, she had crossed off a lot of things. She said: "I just went ahead and did what I knew you would do."
I couldn't stop laughing.
And no, she didn't get the stuff.
I grew up in a housing project, with parents who were living pay check to pay check - but guess what I was a happy kid (with crooked teeths). After college and getting my first job, I got braces and twenty years later I am very happy and making a great salary. Money does not equal happiness in my case.
Our research shows that most people overestimate how much happier they would get as a result of becoming richer. But looks like you figured this out thru life experience!
I recently inherited a decent sum of money that will allow me to retire earlier than I had planned (I'm 70 now and thought I couldn't retire until I was at least 75). The level of relief I feel knowing that I can live a pretty good life style right now has me sleeping so much better at night. This is really the power of money!
Great to hear! Thanks so much for all the comments and questions. Signing off now--happy halloween everyone!