Color of Money Live (July 17, 2014)

Jul 17, 2014

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

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So glad you could join me today. Let's get started.

Hi Michelle! My lovely boo and I are getting married soon. Small wedding, small party, GREAT honeymoon. Less than 7k for everything. However, we have student loan debt that we've been aggressively paying down - we'll have it paid off, even with the wedding, in a year. Can you please give me permission to have a wedding and honeymoon? :)


Had you asked before you planned the wedding even for what would consider the low, low sum of $7,000 I would have said pay off the debt first, then save up and have the wedding and honeymoon.

But I bet you've made the arrangement and put down the money for the honeymoon so go, enjoy.

However, when you get back get that monkey off your back! 

After paying off debt how do you set yourself up for continued success?

Great question.

Have a plan.

Have a financial mission.

For me, it's to pay off my house before I retire. It's saving for my retirement. It's saving to send my children to college debt free.

So whenever I'm tempted to overspend or spend on something I want or eat out too much or whatever, what brings me back to my senses is remembering those goals. 

How do you define success for you?

Define it and set specific goals for it.

Hi Michelle. I am laser-focused on obliterating my nearly $8K in credit card debt. Meanwhile, I've nearly maxed out what I can give to my 401K under federal contribution limits. I'm wondering if I should cut back on 401K contributions for the time being and instead use that money to pay off debt more quickly. (I still want to contribute enough to get company match.) I should note I'm 38, do not own a home and do not have dependents, so I am concerned about owing the IRS come tax time next year if I reduce my 401K contributions. Thanks for your input.

I'm more concerned with your $8,000 in debt.

I would pull back from putting money in the 401k to fast track that debt payoff. Once you do, you can catch up in making retirement payments especially given your age.

And if you are concerned about the tax situation, start now talking to a tax professional to see what else you can do to improve your tax situation.

As a longtime reader, I am very frugally minded. The only debt my husband and I have is our mortgage. But all of this budget-mindedness is acting as a roadblock to having kids. We panic - what if one of us losses our job? What if we don't have enough money for an unforeseen expense? My parents live locally and would be able to help with childcare, so we are fortunate to be avoiding huge childcare costs. But what advice do you have about not letting our typical frugal mindset drive us to anxiety? Any books or blogs you can suggest on the matter?

I suggest you do the math.

Look at your budget and see how much it would cost to have the baby, including the possibility that your parents may not watch the kid full-time or for as long as you like.

If you have room in your budget for a baby don't let fear rob you of having a baby.

Yes, there are a lot of what ifs. But you can't live in fear of them all. I'm frugal too and I had THREE kids. We did the math, could afford to handle the extra costs including putting them in daycare. I haven't regretted it ever -- well maybe now that they are all teenagers getting on my last nerve.

Save for the what ifs. Keep your expenses as low as you can. Plan. Get insurance. Shop well. See what I mean?

We've had our share of financial challenges and still we prevailed. We did so by sticking to frugal principles.  And you can do it too.

I've scheduled an auction of my parents' home and contents, less than a year after my father's death. His home is several hours away from mine, and I have little desire to keep it and leave a house empty until I can retire, when I don't plan to move there fulltime. However my heart is bugging me that I didn't wait until a year has elapsed before taking this step. My head is arguing that my heart will feel better when the anniversary comes and some other nice person is enjoying the house. (It was purchased in 2007 and then the kitchen was remodeled - the reserve price for the auction is less than half of what my folks invested in it.) Can you make my heart feel better about this?

Can I tell you a story?

My 84 year old father-in-law came to live with me and my family. After moving in we found out he had 4th stage lung cancer. He died in our home. 
Shortly after he passed away, I gave into my husband and kids desire to get a dog. I was grieving and was feeling life is too short to deny them something they want so bad.
should have waited.
In our home the rule is everyone has to be in agreement about a major decision like getting a dog. I was the lone holdout because I didn't want a dog. Love dogs. Had two of my own before I was married. Still I didn't want the responsibility. I knew I would be the one worrying about him the most, taking him to the vet,etc.
Sure enough, it's primarily me.
 I let my grief move me to do something before I was ready.
It sounds like you may be in the same place. 
If your heart is telling you to take more time before you sell the house, take the time. 

However, don't feel you have to stick to some arbitrary time.

Perhaps the solution is to seek some counseling to figure out if and when the time is right to sell.

We have been in our house for 10 years and have had foundation issues almost from the first year it was built. To their credit, the builder has taken responsibility and is doing a major repair that will involve not only what's under the house but much inside. As a result, we have to move out for a year. The builder will be reimbursing our expenses (rental house, utilities, moving). They tell us that reimbursing is best, as there will not be tax implications. But I'm wondering about credit score effects. Our bills will effectively double on paper while our income remains the same. So the ratio of bills to income will be way out of whack. Even though we'll get a check every month from the builder to cover everything except the original mortgage, it will still look as though our bills are our bills. Will this have a material effect on our credit scores? If so, is there anything we can do?

So if you are renting the home and the rent is being paid on time it won't affect your credit score.

The scores look at how much debt you have. You aren't increasing your debt by renting so you should not be worried.

Hi, MIchelle. My sister and I are co-owners of a life insurance policy that has a cash value. My sister wants to take some of the cash value and put it towards a downpayment on a home. She wants me to give her my half of the cash to use, too, and then I would get the money back when the insured dies. I am not worried about getting the money back, but I do not think she is in a good position to buy a home, and I don't want to facilitate it for her by essentially providing half of her downpayment. She has credit card debt (I don't know how much) and little savings (hence the need for the cash). How can I say no without seeming awful? I thought about suggesting she meet with a financial planner to get a neutral opinion on whether she is in a good position to buy a home. She has talked to a lender who, of course, says the CC debt is no problem. Thanks.

I see so many issues down the road in this strategy.

Don't do it.

You are essentially loaning her the money from your half. I don't believe in loans to family or anyone.

By saying no, you may help her to see she can't buy the home. And even if she doesn't see it your not going along may achieve the same result.

Follow your gut. Just say, "I love you but I don't do loans."

She may get mad or upset but it's your money.

Hi Michelle, In trying to track and increase the percentage of income I devote to saving and retirement. Would you count the principle part of a mortgage payment as savings?

No. I count saving money as saving.

You are paying down your mortgage as part of your payment  but that's not savings because if you lose your job and need money, you would have to sell or borrow against the house to get at that money.

If you retire and need money and want to stay in the home, you would have to sell or borrow against the house to get at the cash.


Michelle, do you think it's ok to slack off 401k contributions to divert cash elsewhere? I have been saving the IRS maximum (17,500 currently) for several years, plus max in my IRA. But I think I need to free up some cash flow as we look to buy a new home and move. My husband is too old not to contribute the maximum, but at 30 I have about $130k in my account. Can I back off for a little while (still enough to get my match of course) until we make sure we can cover all the bills?

If slacking off is the only way to find the money you need in the short term, I would pull back as long as it's not permanent. 

But I would also encourage you to look hard at your budget. Make sure you don't have other ways to find the savings.

Hello, Michelle: I am 62 and contemplating retirement in about three years. Financially, I am debt free with a healthy retirement portfolio, no outstanding debts, no mortgage and a pension (I'm one of your biggest cheerleaders). I have been putting off making a decision concerning LTCI, No children or close relatives (other than my husband, same age) to speak of, I feel irresponsible about having neglected LCTC. Given my financial situation, I can afford the premiums. Some of my friends tell me, "I'll cross that bridge when I get to it:", preferring to deplete their assessments to the point that they are eligible for Medicaid (rather unethical). Others claim that he premiums should go to investments while others worry that they may not live long enough to reap the benefits. Admittedly, the last two have crossed my mind. Your thoughts? Is it worthy? Thank you.

You are asking all the right questions. My husband and I are in the same boat. Good savings, etc. Could self insure for several years but then we would deplete our savings leaving nothing for our children.

And yes, you could stay healthy and not need the insurance. 

Or you could need it.

So we've decided to get a plan but not one with the most expensive benefits but one that would supplement what we have saved. This way, we can take the extra money and save that, adding it to our savings while also having some long term care coverage. 

I am a divorced woman, 60, 3 grown and independent adult children, no grandchildren. I have assets of about $1million total, including my house with small mortgage, 401K, other stocks, and savings. I have no will. I don't feel I have anything complicated in my financial life, so can I do a simple will without an attorney? What online site or computer program do you recommend for making a will? My brother in law died died suddenly this spring (with a will and trusts, etc, thankfully) but it makes me think more about such things. I always enjoy your column and sensible real-world advice.

If I were you, I would use an attorney. And I did use one to draw up the wills for me and my husband. While yes you can do it online you have a lot of assets in different pots that you should make sure everything is covered and done exactly as you wish. This isn't something you want to leave to a DIY program. 

What helped us: Having about 9 months of living expenses saved up. Aggressively saving for retirement--if one of us lost a job, the other could cut back to just the employer match and we'd free up $$ that way. The knowledge that you CAN raise kids fairly cheaply, even if most people don't. You don't need a minivan for your first kid (or second). Your kids can share a room. Birthday parties don't have to involve ponies.


Thanks for sharing.

Oh, the debt monkey will be GONE. My boo knows when I get a stricken look on my face about spending money, I'm thinking of WWMD - What Would Michelle Do:)



I wish you the best. 

And let me know when you get rid of the monkey.

Hi Michelle! A relative has a student loan that he has paid regularly for 8 years. Otherwise he didn't pay much attention to it, which was a bit unfortunate because it turns out it was interest-only for several years and actually reached negative amortization. It's a private loan. Last year, the payments switched to principal+interest. If he continues to pay the new amount regularly, this will get rid of the negative amortization situation and eventually be paid off...right? I used a bankrate calculator that seemed to indicate everything was back on track and it will be paid off in 13 or so years.

Wow. I would have your relative call the lender to figure out the best way to right this crazy situation so that he can attack that debt and get it done soon.

I'm not sure how the lender is handling the neg. amortization unless they are including it in the new payments.

Have him call. 

My grandmother died in January, 2012, and her daughters dragged their feet when it came to selling the house. 2013 rolled around, and they received a notice that the insurance company was dropping the homeowner's insurance because the house had been unoccupied for a year. A short fight with the insurer followed, which was resolved when the insurer was informed of how many family members insured their homes and autos with them and they WOULD lose all of that business if the policy wasn't reinstated. Nonetheless, it was a wake up call and the house was put on the market right away. How is that for incentive to sell?

Definitely an incentive to sell.

And you are right, you have to look at everything as you make these decisions.

Similar situation happened to us. My husband is fixing up and selling his dad's home but he was able to get insurance. It cost a bit more because the property doesn't have an occupant but still he was able to get insurance on the property.

Can I contribute several thoughts to the person who is selling the parents' home? 1) Make sure you have taken everything you want from the house--don't let the auctioneer tell you that some piece he thinks will bring big bucks has to be included in the auction if you have a sentimental attachment to it. I've seen people clear out houses in haste and regret what they got rid of. Better to hold on to too much initially and then get rid of items later if you choose. 2) A vacant house is a target for thieves and arsonists. Insurance for a vacant house goes through the roof. Would it make you feel better to realize that you're helping someone get a nice house rather than letting it possibly slide into disrepair or vandalism by waiting too long to sell it? And acknowledge that it's sad to see the house go--it's like experiencing another death.

Thanks for your thoughts.

At what age do you recommend getting LTCI or looking at it seriously? My husband and I are not even 40 yet, but I worry about health issues arising and increasing LTCI premiums as we age. We are currently both fit and healthy, but have family health histories that may come into play as we age (cholesterol, blood pressure).

Generally experts say start looking into between 50 and 60.

And I would agree. Yes you may face higher premiums later but you also face paying premiums longer. While you wait to hit that target just keep saving.

This might get in too late but... We did a variation on the theme where we used one of those calculators to estimate what it might cost and then prorated that amount over 9 months and saved that (and then saved more because it took longer to get pregnant then we thought). It turns out it was a huge overestimate and we used the money for the first kid, the second kid, and now it is savings.

Never too late for good input.


I'm so sorry if I didn't get to your question. But, as many of you know, I collect the leftovers (never want to waste anything) and often use them for columns.

Thank you for joining me today.

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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