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Color of Money Live: How should we treat the poor?

Apr 27, 2017

Join Washington Post nationally syndicated personal finance columnist Michelle Singletary for an online discussion.

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So glad you could join me today. 

In addition to taking your usual questions about your money, I wanted to talk about the Color of Money Book Club pick for April. It was actually an essay, "Falling." 

The essay was written 2014 by a Post journalist who died last month. He had fallen into poverty by admittedly some bad financial decisions. We often talk about the poor as those folks over there. But how close are many of us to economic disaster? Are you a paycheck or two away from not being able to pay for a roof over your head? 

I'm also interested in your opinion about the major who said the poor are poor because they don't have a relationship with God

Let's talk about this issue and your views on the poor.

Read the article: Texas mayor blasted after she says lack of faith in God causes poverty

I'm in need of guidance for an appropriate amount for a cash college graduation gift. The context is i consider the student as a 'great niece' (daughter of a godchild). usually spend appx $50.00 on Christmas

How nice. First, follow your gut. What is it telling you is a good number? Seriously. 

I'm rather frugal as many of you know. But the moment I decide to give a gift, an amount usually comes to mind. Now, I may try to talk myself out of it cuz, well I'm cheap. However, my first thought is the right amount.

Now, might I offer a suggestion? If you can afford it and if your 'great niece' has any student debt, why not offer to make a loan payment for her. (Then make sure you send the payment straight to the lender). If she has a six month grace period, offer to give her an extra month (It'll be in Nov. and while she might not appreciate it now, she will come fall.).

Or if she doesn't have any debt, see if you can figure where the money is best used. 

That's because I'm practical. 

But in the end for a graduating college student cash is typically king. (Me, $50 would be good). 

Michelle, Hope you're having a great week. I recently ordered a gift for my wife. Something she specifically said she wanted, no guessing. It has arrived! Now I see it's 30% off.... a) Do I contact customer support about that b) buy it as lower price and return original order c) C'est la vie ? Thanks for your time.

Call the retailer customer service and see if they have a policy to give you the reduced sale price. They may offer a credit toward future merchandise or give you a credit on your credit card. Many have such deals if something is reduced soon after a purchase. 

If they don't and you can return and you have time, sure return and get the better deal. 

The dynamic is similar to another journalist you profiled on this general topic a few years ago, Neal Gabler...the author and critic who chose to spend money to live a lifestyle he and his family couldn't really afford. But they did, because until the money was gone, it seemed like a valid choice. Certainly many in poverty are there for factors over which they have zero control, and that includes many children born into cycles of poverty they unfortunately have to inherit. That wasn't the case with McPherson (or Gabler). Both made (mis) calculations about what they could afford, and the world disagreed with their math.

 

Read Michelle's latest column, which includes the essay here.

I hear you. They made very poor decisions. So the question is should we help people who find themselves poor because of poor decisions? 

Or do we let them be homeless, go without food, etc.?

Should we have a test to see who is worthy of our generosity? 

I ask because I wouldn't want to be put to that test? Would you? (And I mean the "you" who are on this chat.

I am self-employed and always within a month or two of not being able to keep a roof over my family's head. My goal is to save a six-month buffer fund, but never seem able to do it. Have cut expenses to the bone and trying to increase business through a marketing campaign. What should my first priority be: save or market?

You have to do both. And you may have to get a part-time job to make sure you have something coming in while you are building your business.

I get it. Lots of people want to own their business. But I find far too often, they keep trying too long to the point that they don't have a business but a hobby.

So yes, save what you can. And find ways to market that don't cost a lot. Social media for example is a powerful marketing machine.  

One thing that struck me about the essay is how well the author expressed his feeling of shame tied to his 'poverty.' In the US culture, we have a strong association between morality and wealth. Somehow, one has to explain why one is poor. While in other culture, there are respected social places for people who intentionally renounce wealth. This creates more of a space for people to deal with their changing circumstances. How might we change the attitudes here?

Attitudes first start with looking in the mirror. I'm very much a fiscal conservative meaning I do think people have to be financially responsible as best they can. I push and fuss all the time about the need to save and reduce spending and make smarter choices. 

But the reality is people make bad decisions, choices. They fail. Because they are human. So I also choose to help people who have fallen. And I try to do so with compassion. 

I loved McPherson's essay because he was quite upfront about all the really, really bad decisions he made. Still, I felt compassion for his plight. 

So change starts with you, then with talking and sharing with people around you, then your church or community work and then or at the same time policy, politicians. I fight and vote for programs that help the poor because it is the right thing to do -- pull others up. And in that pulling up, we help ourselves. The bigger the economic gap grows the more it costs all of us. 

I found it interesting to read that article. With the low retirement savings rate we have in the country and pensions starting to become a thing of the past as the boomers retire we may see a lot more people in similar situations to that one person.

True. But keep in mind he had money going into retirement. He just blew through the money rather than plan it out for years to come. 

However, many people don't have a retirement to speak of and as a result they can't afford to retire. 

I get it. Truly I do. There is a lot of pressure on people's paycheck with housing, transportation, food, etc. So many can't see a way to save.

Yet when I sit down with folks and look at their budgets they are making really poor decisions that prevent them from saving when they can -- spending too much on housing, cars, eating out, clothes, etc. 

We are judgmental and make it too hard on poor/middle class people. Yes, there are people who make bad choices but the consequences if you are poor/middle class are so excessive. I resent paying for rich people (reality TV stars who live lavish lives and deduct those expenses from their taxes) but not people who fell on hard times or are suffering. Every study re credit card debt has shown overwhelming majority is about inability to pay for medical expenses. Rant for the day.

Good rant for a good reason. Although not sure reality stars are getting away with deducting expenses that aren't legit. (Lots of stories about stars in tax trouble).

Still you point is well taken. Judge and be prepared to be judged!

I agree the tax code needs to be simplified. The AMT is completely ridiculous. I computed it BY HAND for my mother and still got different answers every time (and by the way, I hold a B.S. in Mathematics). As a relatively high-earner, I'm even game to pay a little more in taxes to make all the numbers work out. Removing the state/local/property tax deductibility has me a **little** worried, since we own multiple properties and that deduction IS part of the financial decision to do so. But my 401k? LEAVE IT ALONE. I have not spent 30 years building that up to $1M to have the government start chipping away at it prematurely. It makes my blood boil. I don't have a pension and I need that money for my retirement. And it makes me really angry that I might be "punished" for my "good financial behavior". It's a disgrace.

Although Trump's tax plan was just one page long there is concern that in the administration's proposal to eliminate many tax deductions, 401 (k) plans may be affected if people an no longer allowed to make pretax contributions.

Honestly, I don't think you have to worry on this. First, whatever you've contributed would likely be grandfathered in because that's usually how such things work. People already doing something or did something are grandfathered in. 

Further, there is already not enough people putting away enough money in retirement plans, that such a move would really take participation rates down. Many, many people would protest any mucking around with retirement plans -- me included!

Still Trump is unique in that he's breaking all kinds of molds. 

 

Your article on prepaid cards was appreciated. There's another problem with them. Companies use them for large rebates. A few years ago we bought a high efficiency furnace and had a rebate from Washington Gas of more than $300. In the past when we received rebates, they would be in the form of a check which we could return to the bank from which we had paid for the equipment. This time, however, we received a rewards card issued by American Express. We could not apply put the amount in the checking account and American Express is not accepted everywhere. The card had to be registered and since it came with my name on it, my spouse couldn't use it without worrying about providing an ID. I found that Giant would accept it and over a period of time, I used up the amount. Although I eventually got the amount of the rebate, it still makes me mad I had to spend the refund instead of putting it in the bank. I know it saved Washington Gas money by not issuing a check. I hate carrying around these prepaid cards and know that over the years I have undoubtedly lost money by now using some cards before they expired. As I understand it, under current law there is supposed to be no expiration date but the way the administration is going I wouldn't be surprised if the regulation got changed.


Read Michelle's column: Don’t let Congress block consumer protections for prepaid card users

I really feel you on this. Although the cards make it easier to give people money, you do have to keep track of them, etc. 

I now have a new rule. I used to keep the cards and wait to spend on something special. Now I just spend right away so I don't lose the card (even in my house). And you are right the law changed to give consumers more protection and removed the expiration dates, however you could still be charged inactivity fees after a certain period. 

There was just a hint in a Washington Post story from about a week ago, that Congress is thinking about Social Security reform again (to be fair, I haven't heard anything like that from the administration). As usual, there was a disclaimer about not impacting people who are within 15 years of retirement. I'm guessing that means within 15 years of their full Social Security retirement age. I must say, for the first time in a while I am REALLY looking forward to my next birthday, which is 67-15=52. It is August, so I think I'll make it before anything changing the system could get enacted. But it raises a big question. Why 15 years? If I were a year younger, I wouldn't be in a better situation to change my retirement planning to adjust to $3000 (approximately) less guaranteed money a month. I'm already saving close to $50,000 a year (401k, 401k catch up, employer match, Roth, Roth catch up, and savings outside retirement plans). How is life all that much more flexible for a 51 year old than a 52 year old?

With this Congress and this president any change could be 10 years or 15 year or even 20 years.

We just don't know. And that is the scary part.

So just keep doing what you are doing, which is saving as much as you can afford!

Hi Michelle - As a regular reader of your chat, I just wanted to share. My husband and I have been saving to retire early and move out of state in three years. We crunched the numbers, read the tea leaves as best as we could, and realized that we could save a significant amount of money by selling our house now and renting an apartment for the final three years (the rental rates here were 50% of what our mortgage payment is). After the house sold we took the equity and paid off 2 out of our 3 student loans, and are snowballing the payment on the final one so it will be gone before we leave. We're not quite debt free yet (still have that one student loan), but we're a lot closer than we were a few months ago and it feels great! Thanks for all of the advice you so generously give.

Wow! What a great plan. LOVE IT!

And what I love is that you didn't get stuck in a certain kind of thinking -- You must own a home to be financially secure!

You don't.

I'm reading through the lines that you have a good funded retirement so that you didn't "need" the equity from the home. Because if you didn't, I think you made some good choices. 

Congrats! 

We all struggle with something, be it financial,housing, health,educational issues, etc. What if we all approached the idea of generosity through a perspective of compassion instead of worthiness? Don't many of us think that "it couldn't happen to me", whatever the "it" is?

Amen!

Many people do think it couldn't happen to them. Man the comments and email I received from people boasting that they worked hard, didn't take anything from anyone, made all the right decisions, pulled themselves up by their own bootstrap, etc. so WHY should they feel sorry for people who do all the wrong things. 

Why indeed?

Because NO ONE. NO ONE makes it on their own. EVER. NEVER.

Somebody gave you a job over someone else. Someone spoke life into your life either directly or indirectly. 

I'm not where I am because I 1. Didn't let my poor background stand in my way. 2 Won a scholarship to college 3. Married well (He is a FINE and wonderful man) 4. Waited to have children after I married a great guy 5. Was smart enough or good enough to get a job at The Washington Post.

No, 1. My grandmother took me and my 4 siblings in when no one else would. She could have lived a much "richer" retirement had she not decided to take her own money to raise us. 2. I was blessed with a scholarship to go to college even though there were hundreds of other applicants just as worthy 3. My husband keeps me sane and my frugality in check 4. I recognize I wasn't a saint before I got married (ain't giving you no more details) 5. There were just as many good and smart candidates who could have been hired at the Post when I came along. But one editor gave me the opportunity to get in the door.

So yes, one wrong turn, one bad decision can put any of us in the path that can lead to poverty. 

I do not ever take for granted that I am not where I am because of just what I did. 

Dear Michelle, That was a stunning essay, and hits close to home for many people. The Atlantic had a similar article in May, 2016 about secret middle class shame: https://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/. I think we (our society) should be judicious in helping people who've run through their money, but no one should starve or be homeless. Justice tempered with mercy. Lack of financial education is the true culprit! If people realised how close they were to the abyss, they could plan better-- that's why your ministry is so important, and God bless you. Just my two cents.

And a two cents worth millions!

Thank you!

All of these stories, with Falling or the other journalist, suggests that financial knowledge amongst "well-educated" people is abysmal. The solution is to stop the damage before it's too late. Make financial planning more affordable and accessible, and have a world where banks don't lend more than the person can repay. (See student loans.) The latter will never come to pass, though; others profit from the poor decisions of individuals.

Oh how right you are!

You know, I think I've made sound financial decisions. I don't have a huge salary, but manage what I have well. I've got six month of expenses socked away and another account for expenses that inevitably crop up. On target for retirement, investing monthly, and a mortgage that's only 16% of my pay. My only other debt is modest student loans I'm over-paying to eliminate. Even so, I could have made better decisions in some areas. Saved more when I was younger, for example. All it would take for me to wind up poor would be a serious illness, like cancer, even with insurance.

Exactly. You get it! 

Good for you for doing so many things right. 

And good for you to recognize you could have done better and that life could have gone differently.

But instead of feeling smug and superior for being financially successful, I feel lucky and grateful and obliged to help others (happily!) who aren't as fortunate, or maybe even *gasp* made mistakes. I'd be a lot more miserable seeing someone who is hungry or homeless than seeing money leave my bank account to help them. And there are people who will not give a dime to anyone they have not first deemed worthy of their generosity, like in my family, and they call themselves Christians but I'm an agnostic/Buddhist. Go figure.

Yup, go figure. People who throw stones. . . Better get behind a barrier.

I read the essay when you first mentioned it. I think if we are honest with ourselves, it is everyone's worst nightmare as we get older. I think the Great Recession was hard for a lot of people, and some are still trying to play "catch up". Not everyone is gifted in finance. I know my husband and I were not, and I learned from you and others through the years about some of these things and now that we know better we do better.

Thank you for sharing.

I'm a former welfare mother, so I'm well aware of both the stigma and the result of poor choices. Some things were beyond my control and some were not. But you know, pretty much everybody makes poor choices at times. The main difference between me and others I knew was that they had families who bailed them out. And look at our two most recent GOP presidents: both bankrupted and had parents give them financial support. I agree people need to be responsible, but that can be limited (by education, intelligence, experience, etc.). Thank you for continuing to support programs to help those struggling with poverty. We just celebrated one of my favorite days of the year: tax day. I'm grateful that I make enough money to pay taxes (and have paid taxes for all but those few years I was on welfare). And while I don't agree with everything they go for, I'm happy to support our civic life.

Wow! Thank you for sharing your insight. And so glad you are in a better position now.

Your question is whether "we should have a test as to who receives our generosity." Fact is, we do: programs like Medicaid and SNAP/WIC and SEction 8 are means tested. Those who qualify and apply typically do get help. From McPherson's description, he qualified for several govt assistance programs. So the larger question is, what could he have done to prevent having to qualify in the first place?

I meant people suggested we have a morality test. If you made a bad decision, they feel you shouldn't get support. 

I think the mayor and I must have different Bibles. In mine, Jesus has a lot of compassion for the poor...I don't see the "oh well, what did you do to deserve it" passage. Another counterpoint...I'm an atheist and doing quite well financially. But then, I'm sure folks can find a mysterious reason God allows the Godless to succeed, too. Funny thing about religion...whatever you want it to explain or justify, you can find a reason.

I think Jesus does provide the perfect example of how to show compassion.

I think we ALL have a moral responsibility to help others, and I say this as an atheist. Charity is a key tenet in most all faiths and belief systems. Plus, there are plenty of Christians who are good people AND poor who deserve better, which makes her statement even more ignorant and hypocritical. Blaming poverty on a lack of faith (or, conversely, the presence of faith) is just ridiculous and misleading. While the mayor can think whatever she wants on a personal level, on a political level she should be working with people in her community -- both public and private groups -- to help improve things for all. I believe that so much of poverty has to do with institutional inequality, which she can directly help improve through her actions as an elected official. If she wants to share her faith, she should model it -- through generosity, kindness, and understanding -- rather than judging those less fortunate and/or those with different religions.

You said it!

Hello Michelle, My students have been sold and re-sold so many times that at this point, I do not know the date that I first started re-payment. I've tried to go through my bank to get statements of those transactions but they want to charge me $120 to access those records. My loan servicers are not being helpful! Help! I want to get these monsters under control but until I know the start dates I don't know what else to do. ThANK YOU!

Wow. I can't answer your question now without knowing more.

Because not sure why you need the start date? Are you trying to get into a loan forgiveness program, which would mean knowing how many payments you've made.

Can you email me at michelle.singletary@washpost.com. 

 

A very good friend of mine said it best several years ago, so I'm paraphrasing from memory. The Great American Dream or the driving culture of America is that if you work hard, you can prosper, no matter the circumstances you were born into. This distinguishes us from cultures with obvious caste systems. Somehow this amazing opportunity has been turned on its head and interpreted in common society to mean that if you are NOT prospering, it must be because you are not working hard. This vice versa is completely unfair and, more importantly, untrue. As far as blaming poverty on godlessness? I completely respect you, Michelle Singletary, as a wonderful person who follows the Christian religion. I respect the rights of all people to follow the religion (organized or personal - which includes atheism or "nonreligion") that is their own, personal truth. Historically speaking, more "bad" has been done in the name of religion than non-religion. I compare religion/God/Deity/Divine to a disco ball; up close you can only see your facet, reflecting whatever light is currently hitting it. That light can change, but because we're always up close in our own lives, we can never truly step back enough to see the big picture, that it's all part of the same thing - humanity's attempt to understand life and our purpose/place in it. If your facet is Christianity - great, follow Christ's example and live the best possible life you can. If your facet is atheism - great, live the best possible life you can. If your facet is Wicca - great, praise Goddess and live the best possible life you can. If your facet is Islam - great, praise Allah and live the best possible life you can. And accept each other.

I appreciate your thoughts. Good ones.

Jus one thing, great harm has been done with and without religion at the center. But really when evil it is done in the name of religion it is often because someone or some group is applying the religion is an evil way. 

I think we are giving the American government, local and federal, a big pass on their responsibility. There is not one state where a person making a minimum wage can afford a one-bedroom apartment. Companies and factories closing and leaving are not due to individuals' financial decision. Expensive healthcare we cannot control (except when, too often, people skip healthcare to afford food or rent). Erasure of services to help the poor (like legal services) keeps people trapped. If you are doing fine -- GREAT. but don't pat yourself on the back.

So, so true!

My brother has made many bad decisions over the past 5 years that have cost him and his family dearly. They are not in foreclosure and the bank refuses to take a late payment which they tried to send. His wife is in very poor health and he is addicted to opioids. I have paid bills to keep the electricity on and paid for oil to keep the heat on. Nothing changes the situation. My husband and other family members say no more. How do I watch this play out? heartbroken!

I've been where you are. You help the best you can. And sometimes you have to set back, let the person or even family fall. Because some people won't change until they have fallen. 

I am not always able to join your chats live, but always do enjoy reading them. With regards to tipping. I live in a state where there is no 'server' min wage. Which means *everyone* makes minimum wage (soon to go up to $15 an hour). Which means -- when we tip HERE we are paying people quite a bit of money. It seems many people are unaware of this law in the state, and still tip upwards of $20 for good service (caveat: service is many times poor in many restaurants because they cannot afford many servers, so there might be one or maybe two and you don't usually get good service when the server is making drinks, and cooking food and doing the serving). Most places *do* distribute the tips (in a larger place) to everyone who is working (even those who are washing the dishes). So, yes, everyone is 'in' on it. But when wages increase in a year or two -- it will be even harder to own a restaurant. We can hardly afford to eat out (at food carts!) now, so I can only imagine how much of a disaster the increase in wages will be for restaurants soon enough.

Thanks for keeping the conversation about tipping going. 

Just consider if you can afford it and you overtip, it's not a waste of money. You are being generous and that's a good thing.

What does one have to do to prevent this situation. Mr McPherson obviously had standard solid means - a 401(k), a pension, a good job. He was intelligent and says he just miscalculated. Did he look at his resources annually and continue to miscalculate? Did it just hit him suddenly that he was now "poor"? I am not being judgemental here, I am thinking I am pretty much ok for my upcoming retirement and I am just trying to make sure I don't make that same mistake. Barbara

Actually McPherson had some folks telling him he was headed in the wrong direction. But some folks won't listen. You do the best you can to inform and then you have to let people fall. 

And when they fall, be there to compassionate help them up.

Life happens and sometimes you lose from circumstances you can't control and sometimes it's bad decisions. I wish a financial literacy class was mandatory to graduate high school. Buying something on time? Multiply your monthly payments by the total time and see just how much that living room set is costing you. Short on cash? Those title loan places are legal loan sharks. Just making minimum credit card payments? You'll be paying until you hit the grave. Lots of people just don't understand cash flow.

Schools are doing there best. But financial literacy begins at home. 

We are picking up our new car tomorrow from the dealer. It is our first new car in 13 years, and only because the safety repairs exceeded the value of the vehicle. We also wanted some of the new safety technology features developed over the last decade We talked about financing, but decided to pay cash. Thank you for your wise counsel.

Cash for a car. 

Hallelujah!

How apt the title "Falling" was for his essay ... capturing all the uncertainty and confusion of his situation ... he did a great service by sharing with us the mistakes he had made. Thank you, Michelle, for bringing it to our attention so that we can hopefully plan better. It was good to see that he at least received some basic support from the DC government so the system worked in his case.

I appreciate your comments. And you are so on the money. What you got from it was exactly why I picked the essay.

I'm a (somewhat) practicing Catholic, so this is coming from someone who does feel like she has a relationship with her Creator, but I truly despise comments like those of the mayor. Religion has brought joy to many people, but it has also brought suffering to many, if you look at persecution based on religion, exclusion based on religion (and I'm not exempting the Catholic Church from any of this), etc. There are plenty of good, community-oriented, empathetic people in this world who are also agnostic or atheist, and there are obviously plenty of so-called religious people who are terrible people. Religion is a personal choice, and in my opinion it is no one else's business if someone has faith in a higher power or not. I certainly don't think it has anything to do with whether poor people remain poor.

Again, I think it's how people are practicing religion not the religion that is the problem.

What most struck me about Falling and other similar stories I've read is that they show that we cannot ever "solve the problem" of poverty. Decisions about whether to donate to charity (individual) or fund programs (state) to help the poor should be made on the basis of whether we want to help people now, not with the idea that it will result in not having poor people in the future. There's an infinite supply of people who will make bad choices and an infinite supply of misfortune.

I love your interpretation. I hadn't really thought of that.

Thank you! 

Yep, use them right away on gas or groceries -- you're probably going to incur those expenses anyway -- and those outlets usually take all forms of cards

Good point.

What a great conversation today. Thank you all for sharing and your thoughts on the McPherson essay.

I'm sorry if I didn't get to your question but as I say week after week, I read all your comments and questions. Keep reading the column or subscribe to my newsletters because you may see your question answered. Or come back next week and resubmit (If you come back and say I didn't get to your question the week before, I'll take it first).

Thanks again and enjoy your weekend. 

“Knowledge isn’t power. The right knowledge is power.”

Stay informed.

Sign up for Michelle Singletary’s free newsletters: "Your Retirement" on Mondays & "Personal Finance" on Thursdays http://wapo.st/personalfinance

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Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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