Color of Money Live (August 7, 2014)

Aug 07, 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. I'm here to help as best I can with any money issues you may have. Or if you want to comment on some financial story or issue in the news, go right ahead. I welcome that too. 

Please note, Robert Dilenschneider, author of this month's Color of Money Book Club pick "The Critical First Years of Your Professional Life" can not make it today. He was going to join me to take your questions about starting out in your career. 

So it's just you and me. 

Let's get started.

Hi Michelle: Thanks for answering my question. I am going to receive an inheritance of around $30 K. I think the best way I can use this money is saving it for my children education. My daughter is a high school junior and my son is a freshman. I already have 529 plans for both of them. Should I put this money as a contribution to the 529 plans? Do you suggest an alternative option?

I need to know more before making a recommendation.

I would ask you the following:

-- Do you have any debt -- car loan, credit cards, etc. 

-- Do you have a good emergency fund (3 to six months of living expenses) and a life happens fund ($500 to a few thousand) for the things in life that happen?

-- Are you saving well for your own retirement?

If you don't have debt, saving well for your retirement and have an emergency fund, without knowing anything else I would say yes if you don't have enough saved for them to go to college without taking on debt.

Where's the most reputable place (or what's best resource) for learning about refiling taxes? Also how do I find an accountant for new woman-owned business?

So ask for references from your friends or other business owners for a recommendation for a good accountant. Be sure to look for one who is experience with helping file taxes for small businesses. Here's a link from the SBA on how to find an accountant

My daughter, a rising HS Senior, is not very academically oriented. She's quiet and detail oriented so a 9 month certicate in medical billing, like those advertised on TV ad nauseum, might be just the thing. However, evaluating these institutions is virtually impossible. They are supposed to tell you the percentage of entering students who graduate and the percentage of those who find jobs but most are pretty evasive. My daughter has talked to some students who says they're OK, without further elaboration.While they're a lot cheaper than conventional colleges, they are not inexpensive. A national chain shut down a few weeks ago leaving thousands of students up a creek without a paddle. And the hard sell is unbelievable. Once you walk through the door they do everything short of physically restraing you to prevent you from walking out without having signed anything. Do you have any suggestions to help us determine whether this is right for our daughter? Thanks very much. PS We have eliminated the one htat says you should become a medical assistant because of the "cute scrubs."

First, I LOVE that you didn't automatically think college was the route for your daughter. College is necessary for lots of people who want to be in a certain field but as you have done, you looked at your daughter to find what's right for her. So many kids waste time in college and money before they realize perhaps they could train for a skill.

So, I would contact companies that hire people who do medical billing. Find out where they get their folks and what schools those employees went to. In other words, go to the source/employer who might hire her. Call the HR departments and lay out just what you told me. Tell them you want to get the best and most appropriate training to help your daughter land a job. You should also talk to folks who hold a medial billing job. They may say she only needs to go to a community college, which by the way I would check local community colleges to see if they have a program that would give her similar training.

Hope this helps and good luck to your daughter. 

What are your recommendations on handling the "crabs in the barrel" mentality with your co-workers??

I wish I had more than an hour and this little box to answer this question. I made a lot of mistakes when I started out working. I was WAY to open and trusting. So I decided to just keep my head down and minimize a lot of the lunch talking, water cooler (when they had them), let's just gab settings. I made a rule not to gossip or listen to gossip. I stayed away from the most crabby folks in the office (and everyone knows who they are). 

I don't share what's happening with me -- even some of the good stuff -- because people will smile in your face but really be jealous of what you get.

Yes, you miss out on being "in the know" but it's worked for me lasting 20+ years at the Post!

What would you consider the most important topics to cover with HS students

Love this question

-- First get their parents involved. They learn money habits from their folks.

-- Shun debt. Teach them the dangers of debt. 

-- Good decision making steps. Really a lot of people get into financial trouble because they don't know how to make good financial decisions. They don't have steps they follow to see if something should be done, bought, etc.

-- Talk about getting rid of a sense of entitlement.

-- Show them the power of saving and while they are young.

Notice I didn't say show them how to buy stocks or invest, etc. Because in my experience what will stump most young adults is not saving and debt.

Hi Michelle, I just took an early retirement from my job after 26 years and received a decent buyout. My husband works full-time and since we just paid off the mortgage and have aggressively saved I don't have to go find something new and can pursue some artistic passions. My question is: I contributed about 6K to my work 401K before my retirement went through. Can i take part of the taxed lump sum buyout i received, and deposit it into an existing Fidelity 401K i have from years ago to max out my annual contribution? My husband maxes his out, but we want to make sure we don't miss out on the tax breaks for both of us since the buyout check bumped us into a higher bracket.. Thanks!!!

Check with the financial company. You may not be able to put in funds outside of a workplace contribution.

Also check with a tax person to see what you can to if you can't put the money in the 401k. You might do better down the road to fund a ROTH for example. 

Hi Michelle. As a young professional I was looking forward to hearing from Mr. Dilenschneider. I question for you would be: what financial advice would you give a young professional making a decent salary, yet still facing financial burdens such as large college loans, car payments, and living expenses? Thank you in advance.

So sorry he couldn't make it. I did a column recently about young adults with lots of student loans and first I would recommend if you can go live at home or with a relative who won't charge you rent. If you could do this for a few year, taking almost all of your take home pay to attack the debt, it would be gone in no time.

But if you don't have that option, I would:

-- Find the cheapest housing possible. Rent a room. Get multiple roommates so again you can throw at much of your pay at the large college loans.

-- Live like you are a student. Cut to the bone until you can get from under the debt. 

-- Don't use credit. With a car payment and student loans there isn't much you should be using a credit card for. No meals out, no vacations, not drinks out with the gang. Find free stuff. Do a staycation.

Now you might think, "This woman is crazy. I won't have any life."

I'm just asking that you live this way for a season, until you see light at the end of that debt tunnel. You can have fun. You just can't spend a lot of money doing it. Then when you break way from the debt -- all of it -- you can spend a little on the things you want. (By the way, try to save a little even $1,000 for a rainy day. Once you have a small cushion, throw all extra money at the debt).

Good luck. 

Hi Michelle, Thanks for your columns and chats. I can't tell you how much they have influenced my husband and I over the years. We're doing the 21-day financial fast right now, and it's inspired us to really look at how to give more to our church and other charities on a regular basis. We've set goals to try to save on groceries and a couple other areas, but overall our budget is well within or below the targets you list in the book for clothing, dining out, groceries, etc. We're at the point where we think the main wiggle room is in what we put into savings each month. We have an emergency account with 3 months' living expenses, a life happens fund with about $13,000 and an account where we've saved up what we need to buy a much-needed car with cash this fall. Right now we put away 12% of our gross towards retirement, $250/month towards our kids' college accounts, and $200/month towards building up/maintaining the life happens fund. I get panicky about cutting back on retirement or the life happens fund - ever since we became homeowners and parents it seems that life keeps happening! - but I hate to cut back on college either since I already know that what we are saving there isn't enough to send our kids to college debt-free. And yet I know that we are very blessed with our prosperity and really need to be giving more back. Any thoughts on where to find the money to give and/or how not to panic about saving less?


You are doing so much right. 

If you want to put giving first, you have to put it first. I do. My husband and I tithe 10 percent of our gross income and give generously to charities. We make it a priority. Then we live off the 88 percent left. And you know what? It's enough to do all that we need and want to do. We save for retirement, we save for the kids college fund, take vacations, etc. You have to trust that what's left after you give will be enough. And for you it appears it will be. Yes, you may have to pull a little back from some of the savings but you can make that up by examining your expenses and cutting out the things that really don't matter as much as your desire to give.

The 21 day fast will help you get there. 

Hi Michelle! At the end of the year I am getting about a 10k bonus. I am in the midst of grad school along with working, and I was wondering if you think that the bonus would best be spent going towards school or being put into my emergnecy fund, which took a huge hit when I bought a place this past winter and was cleaned out, cash wise. My first guess is that you would say use the cash for school, but I wonder if the fact that a pay raise after school would likely cover the cost of school. I am in a lower paying job right now and when I have my degree I will probably make $40k back in the first year, the cost of my degree. It's not a bird in the hand, shall we say, but it's not out of the question at all. What do you think?

If you are taking on debt to go to school, use the money to not take on more debt. If you've been paying as you go with cash, use the bonus to make sure you don't take on debt. 

Now I also think if you have NO emergency funds, you should take some of the $10,000 to have a cushion, even a small one.

Check out your local community colleges, too. The ones near me have the classes that you need to become a coder/biller, and they're really not very expensive. Look in their health service/sciences departments. if the CC has an "open house" or orientation, you and your daughter could go and probably get some more objective opinions on career options that might suit her.

Yup, as I also said. Check local community colleges.

Thanks for the contribution.

I love your answer Michelle, except that I would encourage the daughter to contact the HR departments and colleges herself. That will make more of an impression when she goes back to apply for those jobs, plus she can use the opportunity to ask other questions about the business, how to apply for jobs, etc.

Spot on. Great add on advice. Was thinking too much like a mom :) 

But you are right. The daughter should get involved in making the calls.

Dear Michelle, I have a paid-off 2010 car that I am trying to sell. I'm not having much luck with private buyers, and I'm still paying insurance on it so I would like to be rid of it. Should I just bite the bullet and sell it to a dealer? I don't want to get ripped off, but right now some money is better than no money plus paying insurance on a car I don't drive anymore. Right? Or should I wait? I've been trying to sell it for about a month now. Thanks.

Well, a month isn't that too long. But then only you know how long is too long.

I've found CarMax to be good (not an endorsement, just what I've done). Their offers aren't the highest or as much as you might get from a private buyer but may be more than what you get at a dealer. 

But also see what the a dealer may offer. Sometimes, to get rid of a headache, it's okay to take less. 

Hi Michelle - I just wanted to thank you for your advice over the years. Last week I made my final student loan payment! I owed about $200K in student loans when I graduated law school 9 years ago, and I wish I had paid it off sooner because I feel so free now! I was really inspired by your books and the talks you have given at FBCG and the financial fasts. So thanks you for encouragement and behind-kicking! I am now 35 years old and totally debt free except for mortgage debt! Hallelujah!

Now this puts a big smile on my face.

Love your testimony and so glad I could help!

If you've got a debt-free story share it. I love passing them along to others.

Michelle, I know you and many other churchgoers pay tithing, but when is it just too much or too unwise? My friend belongs to a church that requires 10 percent tithing as well as major donations of time and out-of-pocket expenses for church activities. She was just given a church job organizing activities for young people and was complaining about how much this will cost her. I asked her why she doesn't take the extra expenses out of her tithing, and she replied, "They take things away from you when you do that." I have since learned that in this church, if your tithing isn't current, you are barred from some important religious activities and gossiped about at church. She's working an unpaid second job for this church as well as giving them money she really can't afford. Now her car is dying and she's hoping for help from family and friends to repair it. She believes that God will bless her with help because she's such a devoted churchgoer. What would your advice to her be?

Ok, I don't everything because I can't but I feel uneasy about what's happening to your friend too.

I have run into people who are so compelled to give that they don't take care of their financial obligations. 

But having said that I have never come across someone who is broke because they tithe. What typically happens is they aren't managing their money well and think by giving everything will work out. However, you can do both tithe, give and be financially responsible. She needs help from a budgeting counselor. Encourage her to go to to talk to someone who can help her look at her entire financial situation. If she came to me I wouldn't discourage her from tithing but I would make her look at her other giving to see if it's more than she can afford and at the detriment of her other creditors. 


Hi Michelle- what financial advice would you give to people getting married as far as whether they should speak to a financial adviser/get a pre-nup, etc? We're in our late 20s/early 30s and the only debt is my $24k in student loans, which I can afford/and plan to pay off entirely within the next few months. We have around the same amount of money in savings/stocks/etc.

Oh man, you should read my upcoming column for Sunday. I address this very issues.

Before getting married I recommend every couple get premarital counseling that has a strong financial component to the program. You want to sort out a lot of things and make sure you have the same financial values. 

In addition to the counseling couldn't hurt to sit down with a financial adviser to come up with a long-term plan for when you do get married and merge your financial lives.

My husband has accepted a new position in a very rural area We are moving from the DC area, and so the difference in the housing markets is working in our favor...for now. We have been shocked at how much more affordable housing is in our new town, but we also recognize this is going to work against us when we eventually (likely in 5-7 years) move back to the DC area. We looked into renting, but there is really no rental market, so instead purchased a home that we can very easily afford on just his salary (I plan to work but it could take some time to find something since there isn't a big employment base in our new town). What we can't figure out is how to best prepare for our move back to a more expensive area. Should we be putting extra money towards principal on our mortgage, or should we be putting that same amount into savings or investments? We know we will need to accumulate a decent amount in order to put a hefty down down payment on our next home.

Congrats on the new job for your husband.

So I wouldn't put extra on the principal if you know you won't be staying very long. Instead, I would take all extra fund and build up a really good downpayment for a home when you move back to the DC area. I'm not sure I would invest the money because your window -- 5 to 7 years -- is short and you don't want to risk losing the money.

Just read your chat I missed on 31 July, and the question about doctors' office fees stuck out. Reserving my opinion on the trajectory of health care in this country, I'd like to share an observation. I studied OECD countries' health care systems and have lived in several of them. All of their systems are very different, but one characteristic stands out: at any level of socialized medicine, people with the extra money can pay for better health policies, more expedient care, and better expertise. There is always a market for it. I predict that the more we look to socialize medicine in the U.S., the more of these fees we will see - for those with the money to buy their way to the front of the line.

I think you are right.

Thanks for your insight.

What is the single, biggest "unwritten rule" at work that has helped you be successful?

I don't listen to the naysayers or people who doubt me or whisper doubts (that get back to me).

When I started my column for the Post, people said it was too simple. I wrote too much about getting out of debt. For some it wasn't sophisticated enough for The Washington Post. Mind you all comments from inside the building, not readers. 

I didn't listen. I followed my gut and have always tried to focus on what you the readers wanted. That meant not chasing the front page of the Post but explaining complicated financial issues in a way that people could understand. 

I also don't live for my job. My faith, family come first. Because of that work-related setbacks didn't tank my spirit. Might have slowed me down a bit but never made me bitter. 

I love what I do but it is a job. I define my success by the legacy I leave, the people I help. Having kind kids. Serving at my church, volunteering at prisons. And somehow all of that has also made me a success at work.

A church that gives consequences to not tithing and reduces access also makes me very uncomfortable. I personally would never belong to such a church snd you might encurage your friend to visit other churches.

I agree with you. Giving should be a cheerful thing not something to be punished for if you don't give enough.

I'm so very sorry if I didn't get to your question. Please know that I read them all later. And often I answer them in a column. 

Thank your for joining me today. And thanks for the advice help. Love this forum and appreciate your participation. I never take it for granted.

Take care. I'm off next week but back Aug. 21

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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