Color of Money Live (June 5, 2014)

Jun 05, 2014

Washington Post nationally syndicated personal finance columnist Michelle Singletary answered questions in an online discussion.

More from Michelle:

- Read Michelle's recent columns
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Should be a great chat today. Joining me is Zac Bissonnette, author of "Good Advice from Bad People." What's the worst advice you've seen from a so-called guru or expert who you found out didn't take his or her own recommendations?

Let's get started.


Michelle, Prayers and love to your family as your mourn the loss of your mother. With sympathy, Me and all of your online fans, Im sure!

Thank you so very much. The words of comfort by readers has been so wonderful.

Hi, Michelle! One of the best things abot buying my first home (yea!) is that I can have a cat. I adopted one from a rescue group for $100, which was fine. Her first post-adoption checkup cost $170. They discovered she needed her teeth cleaned to clear up a bad infection in her mouth. The pre-cleaning bloodwork and urinalysis cost another $170. The procedure itself cost $560! She has to go back in 2 weeks for a post-op exam which I figure will cost another$100 or so. While, thank goodness, I can easily afford this I must say it has me stunned. I had budgeted $50-60/month for food, litter and toys and maybe another $200-300/year for vet bills. I know there are charities that help low-income people pay their vet bills and now I understand why.

My oh my, am I on your street right now. My family BEGGED me to let them get a dog. I love animals and dogs and have 2 of my own. But I resisted. It was 4 again 1. I caved and been paying every since. I mean they become family and you want them to be in good health. One time my dog got sick from who knows what (probably a shoe he ate). Turns out he had some kind of infection. Took him to the vet and cost me something like $50. I was complaining to my husband and he said, "back in my day, we just sent the dog out to eat grass."

Really dude!

Got to budget a lot for your pet.

Really cool to be here. Michelle is one of the best-researched personal finance columnists out there--always getting the facts right while I roll my eyes at the gurus giving bad advice. :)

So folks, got a guest. He's waiting for your questions. He's got a great book about the bad advice out there. He also knows a lot about student loan debt.

Make him feel welcome. Send your questions in.

Hi Michelle! Please help me. My husband and I have approximately $20,000 in credit card debt and about $15,000 in family loans. Thank you lay-offs. I was out of work for almost a year and a half and what couldn't be paid for with unemployment, was paid for with credit. What kind of advice can you give regarding taking out a personal loan? Our credit is great, but I'm struggling to determine if this will help or hurt us in the long run. We are paying about $350 in credit cards per month already. I'm trying to lower our credit cards in hopes of eventually paying off the family loan. I have major anxiety over these money issues and I'm not sure where to go from here. The hubby and I don't make very much money and we've already put ourselves on a financial diet and made major changes. I fear that this might increase our monthly payments (for a short time) and make things even harder, but I don't know what else to do. Any advice would be appreciated! Thank you for all you do!

I'm so, so sorry for what you are going thu. I hear this story far too often.

So first, don't get any more debt is you can help it. The hole is already deep enough.

I would go to the folks who loaned you money and ask if they can hold off on collecting until you get your financial footing again. Be upfront and clear with them. You don't have it right now but you will honor your word. 

Then concentrate on the debt that can ruin your credit. Keep those payments going. Right now just make the mininum payment so you aren't overwhelmed. If you can get the lenders to work with you on a plan, great. But no more loans or credit cards use.

Right now you are in recovery mode, not get out of debt quick mode. Let yourself breathe a little until your income is increased.  

I'm looking for your advice on a debt paydown question. My husband thinks we should sell a rental home we own in order to pay off some credit card debt. I think we should hold onto the rental (which we've owned for 10+ years) as a retirement investment, and we should pay off the debt on our own over the next couple years. What's your take? We both feel strongly about this, but I am worried that we'll never get another investment like the rental home and don't want to lose it. Would love to get your advice because you have helped direct me before to a wise decision.

I actually want to answer this because I feel strongly about it: It depends on how much the credit card debt is, of course, but in general, I'm sympathetic to you.

If the rental property is generating cash flow each month, I don't think selling it is a great idea. You'll have significant transaction costs and, frankly, you may end up in credit card debt again for the same reasons you got into in the first place--only next time you won't have a rental property to sell to get out of it!

If there's some way you can cut back expenses etc. to pay off the credit card debt instead, I think that's a much better long-term plan.

Says Bissonnette, “All too often, America’s smiling, inspirational prophets turn out to be comically — and sometimes darkly — horrible at following their own leads.”

Do you agree?

Can you recommend any computer-based financial literacy learning programs for teens? Apparently our county public school system used to have a summer e-learning course on financial literacy for high schoolers but it's not offered any more. This topic is critical for teens to learn as they start out and get jobs, etc. Thank you!

Try some of these sites listed in a Post story:

360 Degrees of Financial Literacy: Offers general information on financial literary.

Federal Reserve Education: This site has four sections with instructional materials, interactive resources and other programs aimed at helping students understand the Federal Reserve, banking, the economy and personal finance. 

The Mint: For teenagers and for families and teachers to help teach children to be money smart.

Jump$tart: Curriculum-based site on financial responsibility, planning and money management, credit/debit, savings and investments. 

Hi Zac! My fiance is in law school, and it looks like he's going to be graduating with around $150K in debt (I know, I know). I make around $55k a year, and have about $80k in savings/investments/retirement. I have 0 debt, and we own a car outright. He's graduating this spring with a job offer (that will pay around $70k or so), and we're heading to the courthouse in favor of a fancy wedding. We're both in our late 20s, and my question is this: HOW do we go about paying off that massive loan? Living off one salary? Using our savings to wipe out 1/3rd of it? I'm just overwhelmed at the thought of it!

Ah. That's not an atypical amount of debt for a law school grad. So it's scary, I get that, but he has a job (so that's good).

I LOOOOOOOOOVE YOU FOR SKIPPING THE FANCY WEDDING!!!!!!!!!!!!!!! That is so awesome and paying off the debt will have a much more positive impact on your relationship than an expensive reception would. So: Awesome.


Yes: Living off one salary would be awesome and you both both earn good incomes so it sounds doable especially because I can sort of tell tht you are frugal.


Don't loot your retirement to pay off the debt--the costs of doing that will be prohibitive and the interest rate on the student loan probably makes it a wash anyway. . .

As for the savings component of that (money you don't have in a retirement plan): You could pay off some of the debt with that, but make sure you have something of an emergency cushion first. . . But the bulk of the debt paydown will come from being rigorous about keeping your expenses in check as your incomes hopefully rise but it sounds like you're on top of that. SO: I am less worried about you than I am about most peple with 6 figure debt loads.

How do you handle an older relative who is terrible w money, makes bad choices, does not make enough to live on and guilts the rest of us to her her out? We are afraid she will end up in the street.

Thank you.

And but the relative off -- with love.

Seriously, she doesn't have to do better because she has enablers. So stop enabling her. And yes, she may end up in the streets but then she will have to learn to pick herself up. Sometimes the best thing we can do for the people we love who are financially trifling is to let them fall. 

Going forward instead of giving her money, give her information -- financial books, go to financial seminar with her, etc. 

Remember this: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime"

I am current repaying loans through my consolidated loan at the Department of Education. I was told that my payment MUST be applied toward interest first. At this rate, I'm not going to ever pay these loans off before I'm dead. I don't understand why the rules for private vs. public loans are different.

This confuses people because it sounds weird but: In every loan your payment is applied to interest first because, if it weren't, the interest would accumulate and then you'd owe interest on that instead of owing interest on the principal--so it would all be exactly the same.

I could explain this better if I weren't tired, but the gist is this: Pay no attention to the "payments applied to interest first" thing.  It doesn't mean anything and that's how every loan--whether it's credit card/payday loan/mortgage/etc. Just pay off your loans as fast as you can. :)

I'm sorry to hear about the unexpected costs! One of my two cats has had some very expensive medical bills lately (we're talking over $1,000 this year alone--not including food and medicine). This is one reason why I save all I can!! If someone is interested in getting a pet, I highly recommend they look into fostering. Many organizations will cover the medical bills (some even cover food). This allows you to see what it will cost without paying for it. My 22-year-old brother has always wanted a dog, but just didn't understand how much pets truly cost. He is currently fostering a senior dog (it will likely be a "permanent foster," given the age of the dog). He pays for any toys he wants to get, but the food and medical bills are covered for him. It's a great way for him to understand what he can expect when he gets a dog of his own.

Interesting. Wish I had known about this. Because my kids after fostering would NOT have a dog. They want all the fun and leave the work to me. Now it's my dog. And I didn't want a dog because I have had THREE kids!


Michelle: My sympathy on the loss of your mother. Anyone with a dog or cat should ask the vet about Ora Vet. It is an application of an ointment? --not cheap but worth it--made approximately every 10 days to the teeth to keep tartar uncontrol. Using it regularly has meant our dog hasn't had to have a teeth cleaning in years. He just gets his teeth looked at during an annual checkup. I know the product exists for dogs but I don't know if it does for cats.

Thanks for the tip. I'll check it out myself.

In fact, have to go to the Vet today ;(

Michelle, my condolences for the death of your mother. I'm a big fan of yours and I appreciate how you use your own personal life-lessons to help your readers. PS I just paid off one student loan -- and have only $800-something to go on the second one. After that I will be debt-free, God willing.

Thank you. 

I've been the so much in my life and I always try to use even the awful things to help people, even the mistakes I've made.

And congrats on being almost debt free. It's a wonderful feeling. Let me know when you are all done. Love to give shout outs.

Hi Michelle! My in-laws are in a good financial position with government pensions, good health, and no debts. They don't trust the stock market, so all of their surplus finances (well over 100,000) are in regular bank accounts. I can't persuade them to place any of it in an index fund or a targeted-year fund or anything like that. Their view is that their money would be treated "differently" because they are minorities. If two people have the same type of fund investment, is it possible for one of them to be treated differently based on their backgound? I think this is impossible: every dollar in a fund is treated the same, regardless of the color of the person who owns it. If this is wrong, please set me straight. Thanks!

So what you are seeing is two people who don't want to risk their money. You are right that their dollars in a regular index fund isn't treated differently. 

What you may do is talk to them about inflation. That's the bigger risk, that their money can't buy tomorrow what it can today.

Maybe, you should pay for an hour or 2 with a fee-only financial planner who can look at their entire situation and make suggestions. It could be that they are okay with their good pensions, etc. 

Hi Michelle and Zac, A few years back you and Michelle chatted. My DD was entering the college rat race. Great SAT scores, essay, grades, everything. 10 college acceptances later with some being top college/universities, she decided to attend the best financial aid package with no loans that she could visual attending. Now debt free and entering her third year with no debt ahead of her, I want you to know that we heeded and listened to your advice. .

This just made my day! I'm taking the rest of the week off!!!!!!!!!!!!!!! :) :)  : ) <3 <3

Made my day too!

I have tried to emphasize to my kids that you always need to figure out what someone else stands to gain if you hand over your money to them. It never hurts to be skeptical about someone's agenda. A lot of the prophets are are wedded to an idea because it makes money for them, not you.

This is exactly right. My friend Sam Antar, a "retired" (i.e. convicted of a felony) white collar criminal now goes to college campuses and lectures about white collar crime to business school students. He always says: There are no good guys or bad guys--only people with agendas!

I am hearing that in order for students to get college loans the parents are going to need to sign and be obligated for the loan repayment. Is this true on certain loans.

This is true for nearly all private student loans--and it is NEVER true for federal student loans (except for Parent PLUS loans, which are just loans to the parents--not student loans with cosigners).

A good rule of thumb: If your kid is borrowing so much that he needs a cosigner, that's a hint that the lenders--who do this for a living--know that the debt is excessive and that he'll never be able to pay it back--which is why they need YOU, the parent, to sign up to ruin your life.

So: If you're being asked to cosign a student loan, it is a guarantee that the debt is excessive and that you need to reevaluate things--most likely your choice of college.

I co-sign everything Zac just said.

And I'll ad this. When you co-sign you are not a back up borrower. You are a borrower and they can and will come after you the same as the primary borrower. 

I got a note one time from a elderly, retired man who co-signed on his granddaughter's student loans $50,000. She didn't finish school for a host of reasons and left him with the debt.

Should I be going to those seminars that are advertised in my local paper? Or, how should I go about learning how to get Medicaid to pay for nursing home costs?

NO! A good rule of thumb is not to respond to advertisements for financial services stuff, ever. It's often a pitch for reverse mortgages/annuities/etc., no matter what the initial ad says. Seek out your own information/services.

This is not a question but an observation. I recently replaced my credit cards after losing my wallet. I pay them in full each month, but missed a payment on one of them. The original card was on automatic payment from my bank account; I neglected to set that up for the replacement card. Thanks to Discover Card, I get my FICO score each month. The missed payment reduced my credit score by 24 points! I'll never make that mistake again.

Yup, late or missed payments are the biggest slam to your credit scores. But call the company and explain the situation. They may take that missed payment off.

Zac- what advice do you have about considering having children? What's a good amount to have in savings. Thankfully my parents are retired and nearby so we will have help with childcare. Lots of advice out there on this topic but it varies!

Jean Chatzky once said about this: If most people's parents had waited until they were financially ready to have kids, most adults never would have been born.

I think I'm sympathetic to that. . . It's really such a personal thing that I think people have to decide for themselves.

If you can plan well, try to be as debt free as possible. Next, try to build up your emergency fund and life happens fund. Emergency -- 3 to 6 months

Life happens -- $500 to $2,000 depending on your lifestyle.

It's true that you can never really save enough. But you can get rid of somethings and habits to make financial room for the baby. For example, one of you may want to stay home longer than you might think. My husband and I saved so that I could stay home the first six months with each of our 3 kids.

After college I went directly to graduate school and accumulated about $75k in student loans (in addition to my $25k from undergrad). I took out a $24,600 private loan with variable 9.23% interest and the rest are federal loans (6.8% fixed). I worked retail all through graduate school and was able to pay off $5,600 by the time I finished school. After graduation, I refinanced my private loan to 6.5% variable. I have a great full-time job and continue to work retail a couple of nights a week to aggressively payoff the private loan (since it is variable). I make the regular monthly payments on this loan every month and all of my 2nd job wages also go to paying off this loan. Because my loan payments are so high, I'm not saving as much as I feel like I should (I do max out my company's 401(k) and save $125/month). Any advice on how I can (a) save more and (b) pay off my loans more quickly? Thank you! (Michelle, my sincerest regrets to you and your family over the loss of your mother)

There's no really easy answer to this. It sounds like you're doing your best but it will just take time.

Depending on your income, it may be worth looking into income-based repayment on the federal loans ( That might lower your minimum payments on the federal loans--and then you could use that extra money to pay off the private loan even more aggressively (You are right to be prioritizing that one).

I know it's depressing that you aren't able to save as much as you'd like but you should also view the debt paydown you're doing so well as part of building your net worth. Once those loans are paid off, the great discipline that's allowing you to pay those off quickly will also let you catch up on your retirement planning. :)

Thank you.

And I agree with Zac it takes time. But give yourself credit, you are doing great!

Hi Michelle and Zac - Maybe it's just me but I've been seeing more and more reports and articles about how owning a home is no longer the American Dream (and people should rent) simply because a house/townhouse/condo won't make you financially rich. Have you been seeing these reports as well? I understand that strictly from a numbers perspective a lot of money can be consumed by a down-payment, real estate markets can unexpectedly surge/bust, the IRS may remove the mortgage write-off, etc - - but there is more to it than that. There is peace of mind knowing that I won't have to find a new place to live due to an owner returning to town (or raising the rent), knowing that my kids will stay in the same school with friends who live nearby until I choose to move, knowing that something is fixed properly because I did it, etc. Home ownership isn't for everyone but simply turning it into a financial calculation is not right . I wonder if the same people look at having kids simply in terms of costs?

I totally agree with you.

I think what gets lost in this a lot is that owning a home actually offers a very good return if your monthly costs are lower than renting--which in most parts of the country they are right now, especially at the entry-level end of the market.

McMansions never were and never will be good investments. But I totally agree with you that the anti-homeownership chatter has gotten a little out of hand.


People ask me this all the time now. And my standard answer is I'm still a big proponent of home ownership.

But homeownership at the right time, meaning when you can afford it, meaning your payments aren't more than about 36% of your net take home pay.

At the same time, we do have to stop telling people that if they rent they are a financial failure. They are not. They are getting something for their money -- a roof over their heads and more flexibility.

So it all comes down to "it depends." 


For the person whose parents are all cash - some of it depends on their age. I too tried to persuade my mother to put some if her savings into a stock fund. I never persuaded her, and once she reached her mid-70s, I thought it made more sense for her to keep it in a savings account. It was familiar to her, felt secure, and neither of us were trying to "maximize" the financial returns. After her death, it ended up that the distribution of this account was MUCH simpler and the lack of hassle was worth the maybe $2,000 more she would have earned. (Not a large estate).

Thank you for your comments. You are right.

It depends on risk, what other finances the person has and what they are ultimately comfortable with.

Hello Michelle - thanks for taking my question. I'm headed back to graduate school. I know how you feel about saving in advance for school but unfortunately I didn't save (enough). However, if I were to cash one of my IRA and add in my savings, I'd get very close. Obviously I'd have to pay taxes and fees on it so I'd lose quite a bit in the transaction. After doing the calculations, it seems to me that it's better to take on the debt and leave that pot of money to grow since it has a higher rate of return than my loans will have interest. I'm in my late 20s. Thank you!!

A couple things: Keep in mind that when you do the IRA withdrawal, yes, you'll have to pay taxes--but that's really only giving back the tax deduction you got when you put the money in there. And when you eventually withdraw that money when you're older, you'll have to pay income taxes anyway. . . So yes: The penalty stinks, but it's not exactly a total loss. The only real penalty there is the 10% early withdrawal thin.

Also, your comment that it's better to "leave that pot of money to grow since it has a higher rate of return than my loans will have interest" worries me a little because it seems to be based on a rear view look at market returns over teh past few years which are, of course, not guaranteed to continue. There is absolutely no guarantee that the stock market will outperform the interest rate on your student loans in the future.

Co-signing Zac again.

Ditto. Ditto. Ditto.

People are forever saying I could earn more. Maybe. Maybe not. But you most definitely have to pay interest on debt.

I stick to go to school as debt free as possible. Always. 

I definitely agree about the bad advice gurus out there. My mother inherited some money and decided she would start going to seminars that one of these guys gave - I think his first name was Wade or Wayne. Can't recall now. She would not tell us about it before she left (it was in Chicago) but when I learned when she got back, it took about 10 minutes on the internet to learn that the guy was being investigated for fraud in at least a dozen states. There are good advisers out there - but you have to realize each of them has their own perspective that may or may not match up with your particular needs. So people just need to look around, read a lot, and figure out what it is they need.

Was it Wade Cook? He is in my book. He is a total scumbag. He is in federal prison at the moment, which is a great place for him.

Any reactions to this recent article?:

Good points made. It's another "it depends" and a lot of guessing. Read this folks!

What is your best single piece of financial advice for recent college graduates? I have one child graduating this year and a second graduating a couple years down the road. Neither will have student loans, fortunately.

I think the best piece of financial advice--and this is hardly original--is that things that will make you happiest aren't material.

It's to lame and hokey to say it, but really, I think most good financial decisions flow from that. Money is best used for providing security and freedom from worry. When we get distracted on using it to try to boost our image/self-esteem, that's when problems start.

My best piece of advice came from my grandmother Big Mama. She taught me to save money from every single paycheck I get starting with the very first one. I've followed that advice to this day. Saving to me isn't a chore, it's security.

A friend of mine says she's following Dave Ramsey. I've never had a debt problem, so I really don't know much about him. Does he give sound advice for people trying to get their finances together?

I'm a HUUUUGE Dave Ramsey fan. I know a lot of people knock him but I just don't agree at all. I think he's funny, almost always right (we disagree on relatively minor things--but if you listen to him about everything, you'll end up better than most people), and really inspiring to a lot of people.

I agree. I'm a fan too. You guys think I'm an anti-debt freak.

You should listen to him. 


Yes, that was the name.


Michelle- I wrote in last week about confronting my MOM about her overspending. I did it last Thusrday in fact- right after the chat- It went better than expected and i made sure to keep my frustration level in check and be respectful- after all she raised me and instilled the values i have in me now. In the end it had nothing to do with money at all. Her heart is still broken from the divorce and she spends to try to fill it. I never realized it. Never. Please accept my condolences on the loss of your mother, as i am sure she instilled what exists in you today that helps so many.


What a testimony. And I believe I said, you never really truly know what's behind people's spending issues -- until you ask.

Good for you! 

I'm so glad I could help. 

And thank you for your words of comfort about my mother. She didn't raise me -- her mother did -- but in reconnecting with her recently, I learned so much. And like you, I learned you never know what people are going the. In the end, I believe she did the best she knew how to do. 

Michelle - me too. 3 kids, begging for a dog, gave in. My whole bonus that year went to the dog. Loved the dog but who took her for more walks than anyone else? Not the hubby or kids! She's gone to doggy heaven now, but they keep asking when we'll get another one. The answer is never.


I'm right there with you sister.

Never. And I gave in during another time of grief, after the passing of my father-in-law who died in our home. We were taking care of him and that lost really hurt. So I gave in and got the dog.

We all love him but he's my dog. 

So folks, never, ever make such a decision after such a major life event. 

If this was engraved on our currency, it would make the world a better place.

It sure would be!

I think a key element is your stage of life. When I was younger, married, and had a child; I absolutely wanted to own a home for all the reasons listed above. Now, as an older widow, I'm thrilled to rent an apartment where I am not responsible for any of the maintenance to include mowing the grass and plowing the snow. When I first sold my home, I did feel some shame at being "only" a renter, but five years later, I'm confident that I made the best decision for me. BTW, I could go out and buy a reasonable home now with cash -- I just don't want to.

Thank you for your perspective!

How true. How true.

It made me so sad to read that they though their minority status would hurt their return. If you go with Michelle's advice, I would recommend finding someone of their race, may make it more comfortable for them. Just to caveat, I would never recommend bias on rase (or reverse bias) typically


Hi Michelle, Big fan of the chats! I’m a 35 year old guy with an annual salary of $125,000. I have a $400,000 condo I’ve owned for ten years with about $160,000 left on the mortgage (thanks to extra principal payments each month for the last four years). No car payments, student loans, or credit card debt. I have $250,000 in my 401(k) account and about $40,000 in savings, but no clue where I should put/invest the 40k. I’ve asked friends, family, etc. and have heard everything from stocks, to real estate, to gold, to a CD, to the roulette wheel. Any thoughts? Thanks so much.

Get thee to a financial planner. Let someone good go over everything and help you develop a long-term plan. That's what my husband and I did.

What a great chat today. So glad Zac could join me. So much wisdom from such a young guy!

Thank you all again for joining me today. 

If you still have a question I didn't get to, tweet me at @SingletaryM.

See you next time. 

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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Zac Bissonnette
Zac Bissonnette is the author of "Good Advice from Bad People"
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