Color of Money Live: "Sometimes people have to fall financially before they will get up."

Aug 10, 2017

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So glad you could join me today.

And it's just you and me.

So what's on your mind about your money?

And as always I'd love to hear your Thursday Testimonies. Tell me about how you got of debt or if any advice I gave worked. Inspire others.

So let's get started.

I'd love to hear from other people who have used this service, as part of their membership. What little I have heard is positive. We are going to start test driving cars next week. Positives? Negatives? Thank You!

Okay. Anybody bought a car through Costco?

I will just say, no matter where you buy the car, do your homework. When I purchase a car I come in with a folder an inch thick. In fact, one time the auto sales person asked if he could copy my research!

What are some good options for investing for a Roth IRA (less than $20,000) ? I am now retired and cannot contribute but Roth CD is getting a very tiny rate at the bank. thanks, Susan C.

I wish I could help but I can't give advice on specific investments. This is a question for a financial advisor. 

Because to answer you have to answer a lot of questions. 

1. What do you want to do with the money? Is it for rertirement?

2. How much time to have for the money to grow?

3. What other investments do you have?

The point is look at investment from a wholestic point of view. 

Regarding last week's conversation about the events leading up to the wedding. My personal pet peeve is how much of the financial burden for pre-wedding (and pre-baby) events falls on women! We're expected to shell out for so much more than the guys ever do: bridal showers, baby showers, hair/make-up for the wedding, etc. I don't have much sympathy for the groomsman asked to shell out for a wedding party, because he implies that it should be the bridesmaids spending that money, not him. I've already decided that when I get married, I'm not going to have a bridal party because I love my friends too much to spend their money! We can all celebrate and they can set their own budgets for travel, outfits, gifts, etc.

We had such a lively discussion last week about the costs of weddings to those in the party and attending.

Yes, it appears women pay more but with all the activities around weddings, I don't think guys are getting off that much easier. 

What do you guys think?

Hi Michelle, You are such a blessing to me -- and to my family! Thanks for your insight and authenticity! What should I do? My elderly mother in law is struggling to keep up with her finances, and doesn't want to admit it. I have online access to her accounts at two different banks, so I can see what she's up to, and over the past year I have had to call her to deposit money to cover a credit card payment that would have caused a checking account over draft. She has 7-8 accounts in three different banks, and seems to enjoy hiding her spending. Should my husband tell her it is time to hire a finance person to handle this (perhaps her tax accountant)? Should we walk away and pretend we don't know about these challenges? Should we stop looking and let her fail? Please just say what you think! When do we step in and when do we stay out of it? Thanks in advance!

Thank you for your kind comments. 

I see this all the time and more lately.

I have a saying that I use in situations like this. 

"Sometimes people have to fall before they will get up."

You see people often don't change until they have to. If you keep bailing your MIL out, she won't change her behavior because she doesn't have to. 

So let the accounts get overdrawn, bills not paid, people calling. 

Let her fall. 

Then, when she's really ready, help her up. Help her with education. Take her to a financial class. Send her to a nonprofit credit counseling agency (www.debtadvice.org). On the site she can make an appointment with a budget counseling who can also work with her about her spending. She may also need to go to Debtors Anonymous if she can't control her spending.

So be there when she falls. But you will help more by letting that happen. 

Right now you are enabling bad financial behavior and that's not good for you or her.

No question here really, but wanted to bring this to your attention, since my visceral reaction was "OMG, Michelle Singletary would have a conniption fit over this!" :-)

 

Read the article: Racked by her bad credit history, mom wonders whether to buy home in 17-year-old son’s name

Read Michelle's newsletter regarding the article: Should you use your child to get credit?

LOL!

I literally wrote my response to that column in my personal finance newsletter for today. (See link).

My head did nearly exploded!

I thought I had heard everything. 

 

Hi, I live in Portland, Oregon and my state is starting an IRA plan called OregonSaves. I work at a restaurant and earn about $35000 a year. I also have culinary school debt of $20000. When my employer offers OregonSaves in 2018, should I contribute money to it or should I focus on paying off my culinary school debt?

Hi. If your employer offers a match, put in enough to get the match.

If not, I would aggressively focus on the debt first and then invest. 

 

I just bought a new car via costco service. My overall impression is that a skilled and assertive negotiator could do better. That is not me, though, and I was satisfied with the approximately $2,000 knocked off the price of a $24000 car. You have to call Costco first, get a magic number, then go to the dealership without knowing the amount of the Costco discount. But only one dealership was offering the model I wanted via Costco pricing, and it wasn't all that close. If the model is popular, it may be more difficult to get a Costco price. And I STILL spent 5 hours at the dealer, I don't know how! But Costco was worth $2,000 plus half off a trunk liner! :-)

Thanks.

But folks, please become assertive. If you do your research and know hour budget, you CAN do this.

I once negotiated a car with a nursing baby! Told the guy what I wanted, how much I could afford,, etc.

He did that "Have to talk to my manager" thing. So I said, the the time this baby finishes nursing, if you are not back, I'm walking.

He was back. With a good deal. 

I suspect my child's ID has been used inappropriately, as said child is getting commercial mail children shouldn't be getting. I have found the info on Experian and Transunion's websites on how to request information on whether a credit history exists for said child, a copy of the credit report, if one exists, and how place a freeze on it. (We live in a state that allows this). But I can't find the same resources on Equifax' website. Suggestions? Also, if my suspicions are correct, can you share guidance on how to figure out who stole the ID, how the ID was used, and whether to pursue criminal or civil charges against that person? Should I file a police report once I have confirmed there has been any activity/use of the ID, even if I can't figure out who did it? What are the guidelines?

Google Equifax customer service. Try calling if you haven't already. And definitely file a police report.

I'm not sure you can find out who stole the identity. Often times it could be someone in the family with access to the information. 

Right now the important thing is to do what you can to prevent or stem any further identity theft issues.

I'm the chatter who chimed in with my catchphrase of "please stop spending my money." It's been my observation that, yes, women are expected to spend more on weddings than men do - showers, bachelorettes, dresses, the inevitable alterations (don't get me started on the bride who insisted we order our dresses nearly a year in advance, and in the meantime I lost a bunch of weight and had to splash out a fortune to get the dress taken in four sizes), hair and makeup, gifts, and on and on. I think in the wedding arms race, men are starting to catch up - destination bachelor parties spring to mind. I mean, really, not every groom has to fly to Miami to go to a steakhouse, nightclub, and strip joint. It's such a cliche at this point, and it's breaking the bank. I believe couples should have the wedding they want and can afford. If a fancy ballroom, top shelf liquor, and steaks for 400 people is in your dreams and your budget, have at it. But too many couples have the wedding they want by offloading those costs to other people - the designer bridesmaids dresses (paid for by bridesmaids), the romantic reception at the five star resort (comped because 25 of your nearest and dearest are paying $500 a night to stay there), the destination bachelor party (where your tab is picked up by your besties). It's nuts. Knock it off already. Signed, woman who told her bridesmaids to wear whatever they wanted in black, held her ceremony at a hotel with a very reasonable group rate, skipped the shower, and had a non-destination bachelorette where we drank champagne in a friend's apartment and had a total blast.

Amen!!!!

Here's the quote of the day so far: "Too many couples have the wedding they want by offloading those costs to other people."

We used it -- it's a great way to know you are getting a good price. But another dealer, who was not part of the Costco group, quoted us a similar price so it's not necessarily the "rock bottom" price. And we ended up getting an additional $500 off the Costco quoted price so again, it's not the final "rock bottom" price, but a great starting point.

Thanks for sharing.

I also bought my car after extensive research. I got the car I wanted for the price I wanted without a lot of hassle from the salesperson, who was actually pretty straightforward. Where I did get the hard sell was in finance, even though I had already arranged financing through my credit union at a super low rate (my FICO is 800+). The car maker offers on the model I wanted didn't match or reduce my already-approved interest rate (special offers are also readily available online) but the guy hammered away at me for more than a half an hour with different scenarios to finance with them, even straying into "negative equity" territory with the promise of super low payments for like six years. I was not expecting that. I didn't cave but I was pretty irked i had to go through it.

When I did get a car loan and it's been like 20 years since I have one, I went through the financing dance just to see what the dealer would offer. It wasn't wasted time.

I realized that had I not known my credit worthiness, the dealer would have tried to convince me I didn't have a good enough credit score. 

But to your point, make sure you've research every aspect of the deal, including the finance. And that means knowing where you stand credit wise.

I have purchased through Costco and the price was on par with USAA's car buying service. Dealing with internet sales rep was much easier and less stressful than just walking into a dealership.

Thanks.

This could help http://kidsafemaryland.org/for-parents/

Thanks for the link. Should help.

My dad took out a credit card in my sister's name when she was in college, and racked up a pretty hefty bill on it. She was able to pay it off in a few years, and repair her credit. However, the relationship between them was never repaired, because the trust was broken. She held him at arm's length for the rest of his life, only tolerating him in small doses for the sake of family harmony. Parents, don't do this. Seriously.

Oh, how sad. So, so sorry for your sister and your dad.

Me, I would have filed a police report and not paid the debt. 

You guy?

 

I am doing just fine financially. I make six figures in a stable government job, have no debt aside from a 15 year, $70K mortgage for my primary residence that I am paying $400 extra on every month, a fully funded TSP, an IRA, and a life happens fund to cover 9 months. My vehicle is 14 years old, and needs to be replaced. I am having so much difficulty justifying the cost of the new Honda SUV I want (average sale price right now is $42,000, compared to the $30,000 I paid in 2003). I am looking for a used one with low miles, but having difficulty finding one. How did you ever decide to buy a new vehicle?

This is such a great question. 

Because I so often talk about NOT spending.

I hate spending so I'm very challenged in this area.

But almost 12 years ago, I bought a new car. I wanted it becasue I wanted the new technology, etc. But most importantly I had the CASH to pay for it in full. And taking that money didn't deminish my savings for my kids college education, retirement, emergency fund, tithing, etc.

You can buy new if you want if you have the money and everything else about your financial picture is in order.

If you an afford it do it.

Hi Michelle! My husband and I are saving up to buy our first home, probably in the next six months to a year. In addition to a few other accounts, I have about $25,000 saved in my bank account for a down payment and will be adding $3,000 per month. I know that we need to keep this cash readily available, but it feels weird to have it sitting in an account doing nothing. I've been looking into online banks like Ally that will at least allow me to earn a few hundred dollars in interest as opposed to nothing. Do you have any thoughts on these types of accounts or any advice for me to keep in mind if I decide to move my money?

Since you need the money so soon, I would keep it safe and  find a FDIC bank, online or brick that offers the most for a deposit account. 

If the parent has always been diligent about managing their money and this is new behavior perhaps the parent is beginning to need assistance. My mother was always tenacious in balancing her checking accounts however as dementia set in she could not longer do this task and tended to donate money to every charity which sent her a request. We had to step in and assist in overseeing her donations and managing her accounts.

Good point. I didn't get the sense this was the case, but glad you pointed this out.

I'll echo what the other posters have said. I compared the Costco price to quotes I got through Autotrader, and the Costco price was slightly cheaper. I really can't negotiate (SORRY!), so it was a lifesaver for me.

No need to be sorry. But my job is still to push you guys out of your comfort zone. 

 

I see the light at the end of the tunnel. In your experience, setting aside all the rules of thumb and calculators of which there seem to be 1,000 with 1,000 different pieces of advice, in your experience working with people, how much do most couples you know who have retired actually have saved up? A few hundred thousand plus a pension? A million plus social security with no pension? What has the average couple saved before retiring?

In my experience? On average just a few hundred thousand. 

Most not much at all.

I bought a new car last summer and was able to negotiate a price at a non-Costco-participating dealership that was lower than the price at the Costco-participating dealership. The Costco-participating dealership clearly didn't want to honor the Costco pricing and was difficult to deal with. I let Costco know and they sincerely wanted feedback so that they could improve their program. So, I guess I'd recommend Costco with the caveat of keeping your options open.

Good point.

Any advice on not having a car loan

So if you are in a auto loan now, once you pay it off, keep paying the payment to yourself. Keep the money separate from your household account.

Then maintain and keep your car for YEARS and YEARS. Do that and in 10, 12, 15 years you will have the money to buy your next car with cash. 

If you go by events - then guys get off easier. There's generally at least one shower for the bride which includes a gift and might include travel. However, if the guys are having expensive destination bachelor parties and the ladies are not it can even out. Generally, though, the bride and groom pitch their bachelor and bachelorette etc at the same level so I'm going with it costing women more. It's also not just the $ but what we've started to call the 'mental load'. When my husband and I got married, we kept it pretty simple. We both had low-key dinner bachelor/bachelorette in-town. I didn't really want a shower, but knew my MIL would want to throw one - so we had a small shower at her house.

Thanks for your input!

It sounds like they haven't talked to her MIL about getting on outside financial help to streamline and have a proper budget. My instinct was to sit her down and say 'we see you are struggling with you financial logistics. We know someone who can help you set up a good system. How about we set up an appointment'. If she says no - then let her fail. But you seem to suggest skipping the one-time offer - I'm curious as to why you don't think it worthwhile to suggest getting help once.

Often I read behind the words. The person said they have access to the MIL accounts, which made me believe they have talked to her first, which is why they have access.

But if not, then of course a talk first is in order and offering to help her get help. 

Michelle, I'm middle aged, have good retirement saving, have at least 6 months emergency cash in the bank, and was planning on spending some other money for home repairs. However, my job is not as secure as it once was. I'm stealthily hunting for other gigs, but in the meantime, do I keep up my home repair plans? I've got one big thing scheduled that I've already put a deposit on, and if I don't do the other things before that, they might damage the new work when I eventually do it. My inclination is to hold my nerve, continue the work, and then rebuild savings since I'm already committed. Also, just not dwell on the job thing since it's out of my control, but that is difficult.

First, you are right if there isn't anything you can do about the job, why worry.

If your gut is right and often it is, then I would scale back spending just in case. Keep the one improvement already planned but err on the side of keeping your savings healthy. 

Good luck.

Hi Michelle, How did you plan financially for having kids? My husband and I want two - starting about a year from now. We are lucky enough to have pretty secure government jobs. We both contribute more than matching to our TSPs, and we own our home. We also contributed to a Roth until we hit the income limit. Aside from our mortgage, we don't have any debt. However, we spent most of our liquid savings on our house down payment and needed home renovations. We've rebuilt our emergency fund to $30k in the 14mo since then. But this all doesn't feel like we have enough on-hand....It feels like we're investing a lot into long-term future savings but don't have enough available for the short-term. Am I right? Should we be saving more in cash by dialing back on retirement savings/other investments for now, or by cutting back other life expenditures (we're pretty frugal but could be better) right now even though we're 1-2 years from kids? All I hear is that kids can cost "a ton" but I'm having trouble figuring out what that really means in terms of planning. What should we do to plan for the costs and how do we estimate what we'll need in the next couple years??

First, you are doing really well. You might not think $30,000 in emergency fund is a lot but is it A LOT. More than I see others have.

My husband and I planned for the kids by pretending we had childcare costs before the first kid came. We lived like we had daycare, diaper expenses, etc. 

Kids do costs a lot but with proper planning, scaling back where needed, you got this. 

Google from baby calculators so you have a realistic view of costs. And if you find things might be tight, sure you can dial back retirement a bit to build up short term some more.

But based on what you've told me.

Go forth and be fruitful :)

Michelle, Thank you so much for answering my question a couple weeks ago. I knew I had a plan, but having the confirmation that I was taking the right steps to get out of debt really reassured me. There is a whole lot of other crap to deal with, but my additional question is related to bonuses at work. I'm in sales, I get a quarterly bonus depending on my sales. My main question is what to do with it? The last two went to plane tickets to Switzerland for my sister's wedding, and travel while in Switzerland (and some debt). It should be noted my sister lives there and jumped through a million hoops to ensure I spent as little as possible including getting free housing for me while I was there, etc. Missing the wedding was non-negotiable and thanks to my sister I was able to bring my 2 year old, enjoy it, and spend very little beyond the plane tickets and rental car, gas and food. With my bonus, I never know exactly how much it is until 1-2 weeks before I get it. Should I use it to pay down debt knowing that eventually some of that debt will be split in the divorce so I'll end up paying more than my fair share? Or should I continue to build my emergency and life happens funds? Or split it somehow between the two. As a side note, it looks like my ex will be dragging out the divorce as much as possible, funded by his mother Thank you again for all your years of advice and for responding last week.

Right now since so much is still up in the air financially, I would err on the side of saving the money.

Once you are clear of the divorce and know all the debt your are left with, make sure you have a decent cash cushion and then put all the rest of the money toward the debt.

I haven't used Costco, but I have used a similar buying service. I think of the Costco quote as the lowest price I would get if not negotiating. Usually, there is only one dealer in the area that you can use. So once I pick my car, I find out the discount price and then try to negotiate on my own from other dealers. I have found that for very popular cars, the Costco-type price is usually better than what I can get on my own. For less popular ones, you can always beat it. Just tell them, you have a dealer that is offering X dollars and ask if they can beat it. Nothing like having a ace in your pocket. It makes you much more confident going it.

I agree, the more price leverage you have the better the deal. 

I once had actaully negotiated the price of a used car for my daughter. Doubled checked with an online service and saw I could have done better. Took the information to the dearler and the matched it. 

Boom!!!

Yes, me again. She HAS been quite good at her finances up until 2 years ago. Now it could be a combination of memory, stubborn attitude, or defiance....I just don't know if we should keep out of it or get involved. She really wants to be independent, but isn't doing a good job of it. Suggestions? Thanks for the extra comment, reader!

Get involved. Help. But then realize you can only help so much if she still is in her right mind. 

My mother handled all their finances. As her health declined and she physically couldn't use the computer anymore, I began doing their online banking with her by my side. His dementia has gotten worse and he doesn't even know how to use the computer any more! She passed away this spring and I now handle all his banking. We also removed everything of value out of his assisted living apartment after some clothing disappeared after my mother died. He gets frustrated and is always asking for cash. I know that's an independence thing but there's also a real fear, as readers have pointed out, that seniors get taken advantage of. We leave a little in his wallet, I have his credit cards and the well trusted home health aide knows where more cash is hidden if she needs it (and she leaves receipts and notes down to the penny). I feel bad that we can't trust Dad but deep down, I think he knows it's better this way.

So sorry for your loss.

Your dad is so fortunate to have you looking out for him. I think you are doing the right thing protecting him.

 

The chatter said: "new Honda SUV I want (average sale price right now is $42,000, compared to the $30,000 I paid in 2003)." According to one online inflation calculator I plugged it into $30K in 2003 dollars is $40,046.38. So it hasn't changed that much.

Wow. Love it. Research. 

When my brother got married, he jokingly called me cheap because I was the only person in the bridal party who didn't spend the night at the wedding hotel, a ten minute drive from my house. I told him if he would like to reimburse me the $400 I spent on the shower, I would be happy to spend the night in the hotel. He looked at me shocked, the shower was family only, at my parents, and I partially self catered it, how did it cost that much? Easy, there were 40 people (we have a huge, close family), I needed chair and table rentals, and food costs money. All the little costs of throwing a party add up. Btw, I'm also the poster from last week who is in the midst of wedding planning.

Love this discussion.

Well time's up. Thank you all who participated.

And I read all the leftovers questions. I promise. Some end up in my column or one of my newsletters, which I hope you subscribe to. 

Take care and see you 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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