Color of Money Live: "Discussing the economic impact of racism"

Aug 17, 2017

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So glad you could join me today. 

Is your head spinning from all the news?

Mine is.

So I weighed in on the clashes in Charlottesville and how racism has had a real economic impact for people of color. I hope you read both my column from Wednesday and today's newsletter. 

Share them both. And I'm happy to talk about them here.

And as always taking your testimonies and personal finance questions. 

Let's get started. 

I graduated from law school 9 years ago with about $100,000 in student loans despite getting some pretty generous scholarship money. I was fortunate to land a job with a high paying law firm so I put every penny of annual bonuses toward paying down the balance. When I left the firm after a few years I had made a huge dent and the monthly payments were quite low with an interest rate below 2%. Just recently my mother in law generously gave my wife and I cash gift. My first thought was to use it for a nice overseas trip, but my wife's cooler head prevailed and we used a good chunk of the gift to pay off the last $6,000 of my loan and the rest of the gift went toward paying down a modest home equity loan. So, after 9 years the student loans are GONE. It's a great feeling even if the actual monthly payments I was making weren't too bad.

Wow. You are my hero today!

A couple things I want to point out.

You maximized that high paying job rather than elevating your lifestyle!

You didn't want to keep that debt around like a pet.

You took a windfall and got that debt monkey off your back.

And you married a smart woman!

Hi, Michelle. Just a comment. Your column this morning motivated me to hunt down an article I read a while back. It might be another informative read on some of the roots of wealth inequality. I wouldn't doubt that you have shared it before!

 

Link: http://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america

 

Read Michelle's column from Wednesday: One of the costs of racism in American society


Read Michelle's newsletter:  The economic impact of racism

Thank you for the extra resource.

And can I be honest?

When people question that there was/is a legacy of economic racism, my blood boils. 

I just can't believe it when people say, "Well slavery is over, so get over it."

I will when the legacy doesn't impact us anymore. 

Rookie question here. When using retirement calculators, is the resulting amount of retirement needs based on one person or a couple? I've noticed that some calculators require inputting a total household income amount but only allow retirement account inputs for one person. Are there any standards inputs you'd recommend looking at when retirement planning?

Typically, the calculators are geared to helping you see if you -- singularly -- are on track. 

I'd use a calculator that looks at just your income. But if you are married have your spouse run the numbers too. 

I use the retirement Ballpark calculator at choosetosave.org

I loved it! I am white, so this was a real eye-opener. It makes me think that even today, with check-cashing and title-loan operations financially abusing poor (and often African-American) communities that the cycle continues. It strikes me that financial education is more important than ever, and for that community, a sensitivity to that racism is imperative.

You just made my day. 

As a columnist when your words can open eyes, it's a good day. Thank you for seeing what I see and have experienced. 

We won't fight racism by yelling at each other. We'll fight it by truly understanding the road we've each walked. 

I have been paying a monthly installment to buy my military service time into my federal pension. I'm almost done paying it off and I'd like to continue contributing that money to something else. Should I add it to my TSP (currently contribute 5%), split it between mine and my wife's TSP (also 5%), open a different account (we make too much for a Roth IRA though), or put it into our child's 529 plans? I guess I'm wondering what gives us the biggest bang for our buck?

If you're on track for retirement savings, I would opt to boost the college fund.

If you still need to put more on a monthly basis to retirement definitely do the TSP, good investment choices and the fees are super reasonable. 

Or do both. Boost TSP and 529.

Amen to your newsletter this morning. Have we also forgotten one of the greatest property grabs in our history - forcing California Japanese-Americans into internment camps, and white people snatching businesses/homes/cars etc.? There are none so blind as those who will not see.

This deserves another "Amen!"

A comment and a question. Financial racism is alive and well just by the concept of inheritance. My husband is descended from one of the largest slave-holding families in the South. That wealth has been handed down for generations to members of his extended family who think little about how they came into this money. It's disgusting, frankly. On a related note, we will be inheriting money (not from the former slave holding side of the family, thank goodness) soon. We will be talking to our accountant and (fee-only!) financial planner. Michelle, do you have any book recommendations on inheritance?

Thanks for sharing your story. But can I elevate your disgust to it's tragic.

I say that to say, the better way for them to see how the behavior of their heirs impacted black families is to share stories like the one I wrote. They won't hear us if we come at them with disgust. They will just double down. 

As for the book, I can't think of a good one concentrating on inheritance. 

Anyone have a recommendation?

Not a testimony but a revelation. I've always valued my own time over money, so getting out of debt for debt's sake never really resonated with me. For whatever reason a few weeks ago, I added up how much money I am using to service debt from my paychecks. Then I realized I could either work 30 hours per week at my current job instead of 40+ or take a job I really love at a 25% pay cut if I didn't have that debt. And this is as a single girl in Washington, DC! WOW!! I've now spent the past few weeks finding reasons to *not* spend money and instead putting it toward debt.

Hallelujah for your revelation!

Ding. Ding. Ding.

You got it!

"People used credit to buy stuff to fill up their homes, eat out more or take vacations" How much of this increase in credit debt is due to rising health care costs? Thanks!

 

Read Michelle's column: Consumer debt is at a record high. Haven’t we learned?

That's a good question. I'm not sure. But the point of my column was to address people who are living above their means. 

Hi Michelle -- LOVE your columns!! Two of my friends are getting married; they've been together for years and are in their late 30s, so instead of gifts, they are asking for charitable donations and have provided several options. I will make a gift, but I have one question.... do I include the amount of the gift in my card to them? Like, "A $x donation has been made in your honor to x charity"? Somehow listing the amount seems gauche but I am not sure of protocol. Are you? Thanks!

 

Read this column from Miss Manners: Taken Aback by Gift Requests

Can I just say I agree with Miss Manners about people basically telling you, "Don't buy me china give to this charity." Or any charity. 

While the intention is well meaning it just doesn't sit with me. How about come and enjoy our day. No gift is necessary.

But if they must, I would just say in the card, I made a donation to your charity or a charity in your name. 

Even if two families start off at the same point economically (i.e. my white family sharecroppers in Tennessee were the only non-African-Americans to be sharecroppers in that county in 1950), we still had an advantage because of educational opportunities and the color of our skin. Dr King started great work, we alive today-- black, white, or any race-- need to continue it. I am committed to being a Big Sister, and helping my Little Sister in any way I can--including financial education.

Exactly. You got it. 

 

 

Thanks for all the great and inspiring work you do, Michelle. My testimonial is that I am entering my mid-60's having paid off my mortgage and with more than sufficient retirement savings due to living beneath my means and an unexpected inheritance. So financially, everything is great. EXCEPT my computer was hacked - by someone in Nigeria! I hardly use it for anything more than managing photos and still it was hacked. I have anti-virus software on the computer and had no idea it was compromised but for the good folks at Dell, with whom I have a service agreement, who called me about an irregularity. What I learned is that I also need an anti-hacking software (they installed Webroot but I imagine there are others). So even though we think we may be doing all the right things, we are still vulnerable in our first world lives. There is a question in all of this - I am still concerned about any lasting damage from the hack. My financial group suggested I contact credit agencies to alert them. Do you have any resources that you can direct me to on who to call and what to say? Many thanks!

I'm so sorry you were hacked.

So the Federal Trade Commission has a lot of tips. Check at ftc.gov

Also,

1. Put a fraud alert on your credit files. It's one way to alert creditor that your information has been compromised.

2. On the FTC website read about credit freeze. If you are very worried put a freeze on your files which will lock them down from any credit offer.

3. Change ALL your passwords ASAP to ALL accounts from email to bank accounts.

4. Set up two-factor authentication on as many accounts as you can. This way your accounts can only be accessed on devices you trust, like your smartphone. 

5. Regularly pull your credit files from annualcreditreport.com You will have to stay diligent about checking your credit reports so you can spot anything funky. 

Hi Michelle: I submitted a question/issue a few weeks ago about a wedding shower. I wanted to update you that the couple finally came to their senses and it is now a bridal shower. In my view, calling it a wedding shower whereby the groomsmen have to contribute to a party they won't really be attending is...odd. Unfortunately, now the financial burden falls on the bridal party. Which, to me, saves me a few bucks but if I were in the bridal party, that would still make me feel uncomfortable. But, I think the general consensus from commenters from the past couple of weeks is that the wedding-industrial complex is crazy expensive and we need to question our fiscally irresponsible spending habits for weddings. Albeit, this NEEDS to be told to others who aren't reading your columns.... cheers.

Thanks for the update. And folks, I hope you've been following this discussion. And if not, how about this

1. Have your day but cut out a lot of stuff that will cost people money. Why can't you just have a shower at your house with some cake and Kool-aid (or water). If the point is to be with friends than be with friends and family. 

2. When planning stuff take into account what your people can afford. Stop spending their money!

3. As for the wedding, reception and even honeymoon, think about all the debt you may have and the freedom you could have sooner if you scaled back. 

Just saying.

Thank you! I am 46 and have $800,000 in retirement savings. I am now self-employed and max out on the individual 401K contribution of $53,000 per year. Most retirement calculators tell me I am not saving enough, which I found nuts. This calculator said I've saved enough as it is! I'll keep saving, but it's a relief to know I'm ok.

Shoot, based on the people I work with, you more than okay!

Yes, easy to use but assume some level of financial knowledge. I don't know what percent growth I expect in my retirement account nor, I imagine, do many others. Is there a conservative assumption (e.g., 1%, 5%). Ditto what percent of your income you need after retirement: What would be a reasonably conservative assumption?

I hear you.

Growth percentage: I use between 4 and 5 percent. That's very conservative but I rather go low than go too high and far short.

Percent of income: This is really asking how much do you expect to want to live on. So take what you are earning now and figure out how much can yo live with or without in retirement. Will you be spending the same and if so it's 100%. If your home is going to be paid off and you won't drag debt into retirement you could get away with 50% to 70% or even less

Michelle-- I keep seeing commercials for subject that present the product as a way to pay off debt upon death so that kids aren't stuck with it. I live in TX where credit card debt is paid by the estate and if no money--heirs are not forced to pay it. My parents live in Midwest and have everything set already so I'm not concerned about my situation. However, that falsehood continues to be presented in commercials. Also--many policies allow purchase starting at 45 years of age. That seems seems like a bad idea since that person could live (and pay) for the next thirty years or longer. A person in their 40s or 50s should consider a term life policy that will actually replace income / pay off a house.

I'm with you. When I hear them say your relatives can be stuck with your debt, I want to SCREAM! 

People we aware.

My home computer died Monday morning. It had turned itself off and refused to turn back on.I brought it to a tech center that will do a diagnostic for $40 If it is the power source that can be replaced for $50 to $70 plus labor, I will fix it. If it is something more expensive that can't be fixed without paying $200 to $300 or more, I will get a new one. I'll put it on a card for convenience, and pay it off before the cycle even closes (my own little quirk, I like seeing the bill arrive with a zero balance). Would I rather it hadn't happened that way? Sure. Am I now just that much more aware of how dependent I am on having everything at my fingertips at work and at home? Yup. Did I get a lot more paper sorting/tossing done the last few nights than I have in the previous weeks? Oh yes. But the money is there and that is one thing that hasn't kept me up at night. Maybe some other stuff in the news, but, not having to pay for a new computer.

I think you are referring to the "life happens fund?"

At any rate having a cash cushion certainly gives you peace of mind when stuff like this happens. 

People should be careful about calls from computer companies informing you that your computer's been hack--it may actually be the hacker trying to get more info from you. Senior citizens are particularly targeted in this scam. Do not share any personal info (SSN, credit card #s or passwords with anyone on the phone or online) unless you know exactly who you are dealing with!

Oh my goodness, you are right. 

I should have pointed that out. I thought the person said she did have a service contract with Dell. 

But maybe not. Maybe is was a scammer saying he or she was from Dell and saw something, which is the scam itself.

So poster and everyone else DO NOT let anyone calling take over your computer because they notices something funky. That is the scam.

If this is the case, take your computer to Geek Squad or someplace like that to check for anything wrong. 

I found when I was planning for retirement and using various calculators, they like to assume you will need a certain % of your current income. Your current income may have no relevance to what you will need. I never spent my whole income, maxing out 401K and other investments. So if I put my real income into the calculator, it overestimated by a lot how much income I would need in retirement.

Good point. 

Are you POSITIVE it was really Dell that called you?! That is a giant red flag for scammers. The company who built your computer has no way of knowing whether you've been hacked. I would take your computer to a local professional and have them run malware scans. It is much more likely that you have installed spyware which is actually stealing your information.

Exactly. Thanks for the lookout folks. 

 

Thinking that way is also a useful tool to discourage impulse buying. If we calculate our true hourly wage -- minus deductions, commuting expenses, etc. -- we can convert prices to hours. That shiny object on sale might seem like a bargain, but it might look a little different if I see myself paying for it with XX hours of my time.

That's how I look at it.

The custom of wedding gifts needs to be re-looked at. Why do people deserve a gift for getting married? Perhaps at one time it was to start them out establishing their household, but really, today if a couple needs you to buy them a toaster they are already in financial trouble. Financial gifts from Grandma and close family are fine, but why do I need to stock my co-worker's (for example) kitchen? When I go to wedding showers and see the loot, I think I'd like to get married again, just so I can upgrade my stuff. As you said, it should just be "Come, enjoy the day with us". Whew, got that off my chest. Thanks.

Glad you got it off your chest for you and me. 

I feel the same way, especially since people go into marriage having lived together FOR YEARS. Heck they often have their kids go down the aisle in front of them. 

I'd like to just celebrate your day with my presence not a demand for presents. 

Testimony: My daughter is 5 and participated in her camp's "Becoming An Entrepreneur" week. The kids sold their crafts to parents to earn money for a pizza party. Several of the other kids started saying they were rich because they have piggy banks or allowances. My daughter told them that she wasn't rich, but that she had everything she needed so she was lucky. She said my parents work hard and they like bargains. You can't imagine my pride!

Ahhh....

Michelle, Not a question, but a thank you for Wednesday's column and concisely explaining the far ranging impact of systematic racism. It needs to said, and it needs to be said again and again that it's not over, people shouldn't "get over" 400 years of abuse and oppression and that dynamic change in needed. I usually read you for your practical financial advice, but this was an incredibly important piece. Signed, a 41 year old white woman

Thank you! 

Great grandfather first. He was the son of the local town handyman and so he had skills and experience in his father's business. Great grandmother came over the next year. She was one of 13 kids in a family that owned a box factory. All the kids (including the girls) had experience in that factory in the manufacturing end and the business side. So, while they started out with very little, they had the education and business experience to do whatever the heck they wanted (except for being doctors or other professionals). Oh, and they moved to a neighborhood filled with people from the same area who had started a credit union so there was access to capital. Plus the shared experience of outsmarting the government so my great grandfather was able to avoid a mandatory 20 year stint in the Russian army. Anyone who thinks that kind of "starting with nothing" is the same as a post slavery experience of "starting with nothing" is missing a few essential marbles.

Amen. Amen. Amen!

Well said!!!!

Frankly, a colleague in my first year at a law firm told me to start putting money in my retirement account. I had loans and no family support and I wasn't sure I should do it, but I did it, and I've maxed out every year since. I think it can be very hard to start. My advice to anyone is to make sure you have SOMETHING taken out of your paycheck from the very first one, so that all you have to do is increase the amount as you get more financially balanced.

Good advice. 

For those who believe housing has always been fair for all races. Read about block-busting and redlining.

Yup!

"The Good Will" by Elizabeth ??? Gives a lot of insight among family members/second spouses,/properties, etc. I read it & purchased it for my parents (they didn't) -- but Mom has recently read it while working on her estate planning. It prompted her to make a list of questions to ask attorney, and her children, as she walked through this process with us.

I think you mean (cuz just looked it up) "Creating the Good Will" by Elizabeth Arnold?

I'll see if I can get it myself. 

Thanks.

 

 

Yes - just say your gift was a gift to the charity. The charity will most likely send them a card saying a gift was made in their name. No need to name a sum. I second MM and MS on this ... . By the way - when anyone asked us what we'd like for our wedding, we asked for experience gifts . We had swanky dinners - treated by friends so were able to enjoy their company. We had trips the theatre - all sorts of things, even a Caps game - first time any of us had been. All wonderful fun and amazing memories.

Love it.

Or, if I may, when asked, say, "I don't need anything but your company at my (fill in the blanks)."

Watch for the relief from most. 

*NOW* you can take those payments you were making and save up for that trip to europe -- knowing that the debt is gone. Congrats!!

Great idea!

Got a voicemail proporting to be from Pepco. A whole 'Becca from Pepco'. The number they left to call back was not Pepco and also different from the Caller ID. I e-mailed the info to Pepco and they said they are working with law enforcement. So be alert and always 1. make the call yourself before you give a number and 2. verify that number.

So right! Thanks.

We live in an affluent community and can afford to buy my 4 year old whatever we deem appropriate. For his last birthday, we asked parents to not bring a gift or consider a donation to a charity of their choice. Of the 20 ish kids that showed up for his party, only 2 did not bring gifts. It pains me, because he has so much more stuff than he can ever play with (we donated a lot of the gifts or re-gifted them). So it's as much on the attendees as the hosts.

Very true. People have a hard time thinking they can show up without a gift. 

But shoot, you tell me I don't have to and believe me and you, I don't. 

I have been a freelance graphic artist for over two decades. And, yes, I look at pretty much every purchase by how many hours it costs.

We all should.

Wish I could go on for another hour. But I have to finish up my Sunday column. I'm writing about people who get out of debt only to get right back into debt. Column based on a question I got right in this forum. 

So I do read everything you send on this chat. 

Thanks for joining me today and please come back next week. Tell your friends. 

And please, please read my columns and share them. We've got to help each other. 

Thanks. 

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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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