Color of Money Live: "Wealth happens intentionally"

Jun 01, 2017

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Got the flu but still here!

So what money issues do you have on your mind? 

And, as always, love to here your Thursday testimonies. Got out debt? Still digging but making progress? Avoided a big money blunder? I want to hear about it.

Let's get started. 

I've been successful at saving for college in a 529 for my two kids and in general for myself. College is coming soon and I am wondering if I have enough money in non-college savings to pay for a year or so, should I use that instead of the 529 money? The tax advantages of the 529 are so great that I'm thinking to leave that money in there as long as I can. I understand there is a 10% penalty if I never use that money for education expenses. An informal analysis that I did shows that as I long as I leave the money in the 529 at least 10 years, it is better to continue to grow the money tax free and take the penalty later. What do you think? Thanks.

I opened three 529 plans for my three kids. And although we have money in our regular budget to cover some college expenses the first go-to pot has always been the 529 money. That's why it's there. I'm a pot person. So I have a lot of pots for various expenses. But when it comes time to spend, I put if from the appropriate pot.

I would use the 529 money. Besides if you invested in an age-based portfolio, which I did, right now the money isn't really growing much because it's moved to more conservative investments the closer to the time to go to college. 

We have another pot earmarked for extra college spending that is invested for growth. Should we need the money and we will with out oldest about to go to graduate school, we pull from that pot. 

Use the 529 money.

Can you recommend a good place to start for setting a reasonable budget? We jointly make around $200,000, have about $18,000 in a savings account (depleted due to some expenses on the house and covering unpaid maternity leave), and about $200,000 in retirement funds. Our outstanding big items is his car ($18,000), my student loans ($23,000), and our mortgage (HAHAHAHAHA). Monthly expenses now includes $1500 a month for daycare for our 6 month old and we pay with cash for everything. We want to set up a 529 and will need to replace our AC unit sooner rather than later and maybe, just maybe, finally go on a honeymoon. I know we make more than enough to cover our bills and would like to aggressively pay them down and put money aside, but could use some guidance. And as an aside, our daughter came two months early and spent a significant period of time in the NICU. We are beyond blessed that we are not suffering from medical bills due to amazing insurance and Medicaid which kicks in to cover her stay (and only her stay). But as I see the total of the bills start to pile up and pushing $500,000, I feel for those who are terrified of the bills hitting their mailboxes. It also goes to show that life can happen at anytime and take you out at the knees no matter how prepared you are.

I have to say I'm surprised your child qualified for Medicaid with your income. Am I missing something?

Anyway, you've got some good savings pots. Why don't you try setting up a budget either through Quicken, which is what my husband and I use or at As far as how much for each budget item that's for you to decide. Keep your housing based on your net at about 36%. Childcare will be high because of the baby but that means cutting elsewhere if you need to find the money to start the college fund, which you should do ASAP. The sooner you start the more time you have for that money to grow. 

So you should have

-- Emergency fund, which I'll assume is the $18,000. Depending on the security of your job aim to have three to six months of living expenses. And considering you had to take extra time off for the baby you certainly now know how important that is.

-- Life Happens fund. If the $18,000 is all your savings shave a bit off and earmark it for this pot. It's for the things in life that happen like having to fix the AC unit. I would put about $5,000 of the $18,000 in this fund. 

-- Retirement. Sounds like you are on a good roll with that but be sure. Go to to run the retirement calculator.

-- Set up the 529 investment plan. Go to for more information on your state plan in case you get a state tax deduction. And don't go through a broker. You can just set it up directly and save money.

-- Be aggressive about paying off that student loan debt. No honeymoon just yet. Get that debt done and the car. Then you can take a trip. 

I wish you the best.

We have $4000 saved for the future that we shouldn't need anytime soon, since we have our emergency fund and life happens fund. We'd like to have it earn more than what our savings account is earning. Are there any specific places to look for good CD rates? Are online banks a safe place to invest in their CDs? Should we put all the money in one CD or stagger them? Or is there another investment option we should look at? Thanks so much!

If it were me, I might opt to put the money in a low-cost S&P 500 index fund. Since this isn't your emergency or life happens money you can invest the money. 

If you don't want to do that and continue with CDs go to to look for banks with the best CD rates. And if the online bank is FDIC insured it's safe. 

The informal analysis states "it is better to grow the money tax free and take the penalty later" has a big mistake. If the money is not used for education, the money grows tax-deferred - not tax-free. Assuming the tax rate now and later is the same, investing in a taxable account (without a 10% penalty at the end) and a tax-deferred account (with a 10% penalty at the end) will mean more value at the end for the taxable account. Use the 529 first and taxable account if more is needed.

You are right. A point I should have made. Since the money is already in the 529 plan just use it. Why take a 10 percent hit and pay income taxes if the money isn't used for college? Sounds like you will need all of it for college and may graduate school?

Because of scholarships my daughter had money leftover in her 529 plan. But we are using all of it to pay for her graduate school education. If there had been money left over we would have shifted it to her brother, who because of his autism, will need to take a few more years in school. 


We want too go to Australia in 2018. We will use our VISA charge card from an in-state (MD) FCU to pay upfront. I could use a local USA travel company or an International company (like Collette Travel). I vaguely remember seeing an article saying the rules governing claims for lack of service and consumer rights differ between local charge card service vs. international service (long distance). Please explain the difference in these charge card protection rules.

I'm afraid I do not know the rules for credit use with an Australian bank. I do know that the rules for American-issued credit cards are pretty good. If you don't get the service you pay for you can challenge the charges. The credit card company becomes your advocate. 


I was wondering if you use sinking funds for things like your vacation, Christmas, car insurance, things like that which are known expenses. Where do you keep the money, in your life happens fund? I have started doing this for some things and keep it in a regular savings account and wondered if there was a better place to put it?

So we have the emergency fund. Not touchable 

Life happens holds: Car repair money, vacation money, fix up the house money, etc. 

Insurance and household expenses are run through the main household checking and/or savings account. 

The only 'good' thing about daycare expenses is that they decrease as your child gets older. When her costs become, say, $1400/month, you now have $100 to put in a 529--or split it some say to both save for her 529 and pay down debt/beef up your savings.

Good point. Eventually that $1,000 plus is freed up unless you choose private school. If you go public, that's money that you could earmark for debt reduction and/or savings. 


I don't have any big claim this week, but after reading this chat a while back about how you and other chatters use every last drop of shampoo, lotion, etc., I recommitted to doing the same thing. I also went into my cabinet to find those little travel-size toiletries that I brought back from hotel trips, bought for trips, or were given as gifts. Except for toothpaste and sunscreen, I don't think I've had to buy any toiletries in at least four months. Those little bottles really add up, and it's like a mini spa, where I get to try different lotions and body washes every week!

I'm the queen of little lotion bottles!

Thanks for sharing. 

Any other penny pinching tips out there?

We are about 7 years from retirement and, according to our TIAA financial planner, are on track to a decent retirement income. We're currently putting about 25% of our gross income into 401k accounts and have been for the past 6 years, after many years of not being able to save much at all. As of 2 years ago, my employer also adds 12.5% to my 401K. However, we have accumulated heavy credit card debt in the last 5 years, mostly because of travel related to our children. We could pay off the credit cards from savings accounts that are not 401k accounts, but my husband is insistent that we not take funds out of our savings to do this. He sees this as needed discipline--we got ourselves into debt, we need to really cut down, suffer through and get ourselves out of debt, although it will take at least two years for us to zero out the credit cards, at our current rate of paying them off. I also think that he is worried about taking money out of savings because we have worked so hard to accumulate that money. Paying off the credit cards would make a significant dent in our savings accounts, but would not affect our 401k's. What advice can you offer us regarding this issue?

Let's start with this. I hate, hate, hate, hate, hate, hate, hate debt!

I don't want to carry it if I don't have to. 

So I'm siding with you. Plus has your husband considered the interest you are paying to hold onto that debt compared what the money is earning in a savings account? You may be actually losing money by NOT paying off the debt.

If you are disciplined enough to pay down the debt, why not save on the interest? Pay off the debt now and then take the payments you were sending off to the credit card lenders to build back up your savings account. 

I'm also concerned about your pattern of using the cards to the point that it takes you two years to pay them off. That's carrying too much debt pre or post retirement. Once you retire, you're on a fixed income. So practice now using the cards and paying in full every month.  You certainly don't want to have this kind of debt in retirement. 


How do you do this? Do you transfer the money from one child's account to another or just use the first child's account to pay the second child's expenses?

You would shift the money to the other child's account. The expenses paid have to match the beneficiary using the money. 

Hi Michelle, do you have any suggestions for how to budget together when there's not much time? I am the breadwinner while my husband stays home with our toddler. We're expecting a 2nd baby in the fall. I know we could be spending less, but he is mainly in control of the spending while I am mainly in control of bill paying, etc. I know we should be sitting down to look things over and add everything up etc. By the time we get the toddler to bed at night, there might be 1 hour of "spare" time before I need to get to bed for work, and I'd rather read or watch Netflix than sit around crunching numbers. I have YNAB but am not very compelled to use it because of the time factor. Is there an obvious answer I am missing? Thank you for what you do!!

Well really, seriously, the spending and bill paying have to be done in a coordinating way. It must! 

And trust me I get the tired thing. Three kids, a job, a ministry, friends, etc. 

But set a financial date night. Sounds like a weekend date is best. You could get up early Saturday morning perhaps. But you have to find the time to make sure you both are on the same page. If it helps get a friend, mom, dad or babysitter to watch the kids while you go off to do some budget talking. Once you get it down, you may not need to meet every week. 

And to manage the time so it's not too overwhelming come up with an agenda. For real. Set a time limit and stick to it. If there are leftover items put them on the agenda for the next time.

Wealth happens intentionally!

Hi Michelle, We just received the wonderful news that we have a baby on the way - still early but nonetheless we are on ! I make a decent amount of money and have a flexible work schedule and I would be able to take time off - also - no debt other than mortgage payments. My wife is a grad student who intends to take unpaid leave and will be staying at home for a couple of months before going back to work. I have no issues with the loss of her income - her payments were just savings and some extra principal into the mortgage. However, we are trying to figure out the costs for childcare when the baby is only a few months old. Ideally, we want a nanny, but paying the nanny will basically eat her entire income. Again - not a problem for a couple of years, but other than adding more money to my FSA, and having schedule work around, I don't see any options to save initially (not to mention 529s will also be up in the future) PS - I know I'm stressing out - which is why I'm asking early on !


How wonderful.

It's great that you are thinking about this early. 

The cost of child care varies depending on where you live an what type you want. I pretty much used a variety of care situation. I used in-home care, a nanny and eventually a day care center. The center was the most expensive for the infant. 

I actually shared the nanny with two other families in my neighborhood. 

So price out all the options. Then see what fits best in your budget and which you are most comfortable with. 

And I will say this. You might find that your wife staying home until the baby is six months or older can be an option if you tighten your budget. If her paycheck is going to be basically used for most of the care perhaps the best option is that she care for your child. The longer she can do this the less the cost because older child care is much less costly than infant care. 

I'd ask that question on the Post Travel Chat, which is Mondays at 2 pm. The folks there have a lot of experience with travel companies and best ways to protect yourself when you prepay. That said, I think the most important thing you can do is to contract with a well-known agency or even look into the airlines' travel businesses (such as United or Qantas). Also, I've been there a lot to visit family, and Australia is not that hard to figure out and get around without a travel agency. Maybe invest in a good guidebook and do this on your own.

Good suggestion. Thanks.

Just found out we're expecting, hooray... And I have NO IDEA what to do next! We had saved $5k from wedding gifts as a future baby fund so that's just sitting waiting. We're going to cancel cable and start funneling that into that baby account. Other than checking what insurance covers (I'll likely spend about $1,500 out of pocket before insurance kicks in because I have an HSA) and planning what we really need for a baby... what are the next best financial steps to take?

You are doing exactly what you should be doing. And trust me that $5,000 will go quickly if you are placing your child in daycare. I often tell couples at the early stage of pregnancy to practice paying for the baby now. 

Start carving out all the costs for the baby -- childcare, diapers, etc. -- by putting that money into the baby account. Then you get a real-life picture of how the baby impacts your monthly budget. Plus you have the added benefit of building up a cushion. So start acting now like you have the costs and see how hard or easy it is and then adjust your living expenses accordingly. 

Write down every PENNY you and your family spend for at least 3 months. Every single one. Divide them into functional areas (housing, food, child care, entertainment, commuting and other work expenses, etc.). The budget will write itself. You might not like it very much, but there is no way there isn't room for savings even with a gigantic mortgage and day care expenses. Well, there might be if the mortgage is really gigantic, but if that is the case, you may have bought way too much house even for your substantial income and need to downsize.

Good suggestion. Even if you do the spending diary for just a month, you'll get an idea of where you are spending. 

Also pull your bank statements (ATM card) and credit card statements for the last several months to identify spending habits. 

My husband and I got new phones - for the first time in four years. The company rep and I had a laugh about that! I asked if they could waive the shipping cost because I'd been a loyal customer and they were giving new customers free shipping. The rep said - you've been with us 11 years, I'm happy to waive shipping.

Yup, never hurts to ask! 


Maybe these are obvious, or oldies-but-goodies: -Eat produce in season. We're coming into season for all sorts of fruits and veg, and freshly picked (and quickly frozen) are just as healthful as fresh. Berries can be frozen on a cookie sheet, and then popped into a ziptop bag. Great for ice cream, and oatmeal in the winter. -Pets: I get that pets are a luxury, but they do enrich our lives. Low-cost vaccines are available at Petco (no, I don't work with them, or own stock). Sometimes counties/DC will have free clinics, but this is rare. Pet food-- Purina is an excellent company, with a long history of providing good, nutritionally balanced feeds. You don't need designer dog or cat food. Also, wet (canned food is mostly water, so you are paying a premium price for water. If you can get them to eat dry instead, it'll be better for their teeth (less tooth decay, since the food is not as sticky), and you will get more for your money. (Disclaimer: I am a vet). -Cut the cable. If you have internet not tied to your TV, you can subscribe to Netflix (or others) and watch exactly what you want, when you want. With the time not spent watching TV, you can play with your kids, get outside, read a book, and live YOUR life instead of passively watching someone else's. -Use your public library for books, books on tape, movies....and it's all free. My two cents

Love the oldies but goodies. 

And I have a dog! So.....

What's the best approach for changing your spending habits when you love eating out everyday for lunch?

I have people add up what they spend eating out for lunch. Look at what you spent the last month, two months, year.

It always, always surprises people how much they are spending.

If you have debt, think about the burden you can relieve by cutting out some or all of that eating out.

So look at the real numbers. Let them set in. Is this how you truly want to spend your hard-earned money? 

It also helps me to cut out eating out by creating financial goals. Anytime I go to spend money, I think about the goals I've set: Sending my kids to college debt free, paying off my home before I retire, paying cash for a vacation, etc.

Now if you are saving well, have an emergency fund, life happens fund not in debt, and eating out is your thing that's fine.

But if you aren't managing well in these areas eating out is ripe for the cutting. 

Michelle, I am a nervous wreck about the proposed budget and its affect on federal workers' retirement. I am a lawyer and have 14 years of service and picked the government because of its benefits. I know your husband also works for the government. Are you doing anything differently? Do you have any strategies or suggestions? I put the max in my TSP and IRA, and also have an emergency fund, and a life-happens fund. Thank you.

We have planned for years as if we both might lose our job. So we save a great deal of our earnings. We try to keep our expenses reasonable. 

Sounds like you are doing the same thing. Look most of us can't plan for the absolute worst. We only have so much income and savings. Do the best you can with what you have and chances are it's enough should there be cuts or no cost of living, etc. 

I would say don't worry but I'm a worrier. I'll just say this. If you've truly been a great money manager you will be okay. 

I wouldn't buy covfefe but I would buy this great one of Maxine Waters throwing shade! If you could ever bring yourself to spend $23 on a t-shirt I can totally see you wearing this too Michelle!

Read Michelle's newsletter: Would you buy a $21.99 ‘covfefe’ T-shirt?

I checked out the shirt. Love it. Still wouldn't pay $23 for it but it's certainly funny!

You equated a parent paying for a college education to a scholarship funding a child's education. That comparison just doesn't make sense. A parent paying for a college education means that the kid didn't really have to do a lot extra to get that money. A scholarship implies that he/she filled out an application, had something to offer, did something over and above and/or accomplished something. that is different than a parent writing a check. I'm not saying a 'parent writing a check' is a bad thing. My parents scrimped and saved every penny when we were growing up so three of us could go to college with no debt (of course, *much* more difficult these days!). They did everything they could, I can't even imagine how my mom did it (no, dad had no control over the money, my mother was well aware what a disaster that would be). I did know plenty of people who did not appreciate really what their parents had sacrificed in order to send them to college, though. I am just pointing out that the two ways of paying for college are very different.

I totally disagree. If you are paying as a parent you should expect the exact same effort as any scholarship. Yes, they may not need to fill out paperwork or write an essay but the work over the years in school has to still be there.

Your requirements start long before time to apply to college.

You require your kid to get good grades. If they slip, you get them to do tutoring or work/study harder. 

They have to be involved in the church or community or both, which means signing up for stuff and getting to the meetings, participating, contributing. 

They absolutely do earn the parent money. 

I just think it becomes another excuse to push loans on children who have no means as children to save for college.

Their skin in the game is to be in the game throughout their school years. Ask my kids what their No. 1 job is? 

And they will tell you, "To do well in school!"

Now does that mean all As. Maybe. But what we told them was to do the best you can. And if the best is truly a B or even a C then we are okay with that. If it's not, we expect better.

If they hadn't done their job well the road wouldn't repaying for college. It would be let's talk about your path. Maybe they work some years or pay for a few classes at community college to show they are now serious. 

The bottom line is you cans can show through their hard work they deserve your money as much as they might deserve a scholarship. 

Just want to say that I loved you comment, "Wealth happens intentionally!" My husband and I live below our means and don't spend money on things that are not important to us. People might scoff at our old cars, our skimpy cable plan or our non-iPhones, but we have saved enough money to do what we want to do, like pay for our kids' college education.

Thank you!

Why do you love eating out? Is it because you like the food? Because it gets you away from your desk? You can still do both of those! Yes, making enjoyable lunches that go beyond pb&j takes thinking - but in these days of the microwave you can enjoy leftovers from that delicious dinner two days ago! Alot time to plan your lunches. Do want you can about making them in advance. It's salad season. I make a fabulous salad for myself nearly every day with the costco size romaine lettuce with all sorts for goodies. Don't forget to add a treat - do you cookies? pickles? make sure you add a nice treat. And yes - make sure you get out! It'll be tough at first I'm sure, but you'll soon find yourself in the swing. And now is the best time of year to enjoy your homemade in-season veg quiche and in season fruit outside ... .

Really good points!

It's institutional medicaid that kicks in for people who are in the hospital for over 30 days. Tends to be for the critically ill and is not income dependent. It only covers expenses from the hospital stay and I had no idea the program existed until we were offered it. We actually debated because we had insurance but everyone told us to apply because we had no idea if there would be additional surgeries, etc. As I heard far far too many debating life saving surgeries for their infant because of money worries, I am glad it exists.

Thank you. Very informative. 

I want to go back to grad school in the next two years. Does starting a 529 make sense for me?

It might not because when investing you want to give yourself a few years for the market to go up and down. With your being so close to going you wouldn't want to risk any of the money. 


When I was starting out I never ate out for lunch. Now that I make more money I do so as an occasional treat (say twice a month). That way it feels like something special and doesn't take over my budget. I so concur about cutting cable. Remember, you can always subscribe again. I cut the cord back in 2013 and found I had more time as well as more money. I now have Life Happens, Emergency, Retirement ($550,000 in savings plus pension) and will have my mortgage paid off well before I retire. Therefore, my cable savings went into my travel budget - travel is my indulgence because it gives me so much pleasure.

I'm hearing from a lot of folks who cut the cable cord!

I'm so sorry if I didn't get to your question. But I read them all. And I already see some I want to make into a column.

Again, thanks for joining me today and see you back next week. 

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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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