The Washington Post

Color of Money Live (October 13)

Oct 13, 2016

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

Send your money questions in early!

Read Michelle's recent columns

Looking forward to your questions and those Thursday Testimonies. 

Let's get started. 

Hello, I've been using your tips loosely over the years while raising my 2 children, but still find myself trying to get out of a financial whole. I have a LARGE student loan bill, fees from my son's school, 1credit card and 1low car payment. By living in the DC area and trying to manage all of the bills I found myself getting a second job during the holidays to cover everything. My question is more so for my future. What can I do to improve my financial outcome while being on a mid 50k salary and all but a few dollars to myself after paying all of the bills?

I see your situation all the time. 

It's hard in high-cost areas to make ends meet. 

But meet they have to. 

So I focused on your words. You said you are loosely following my advice.

That's tighten that up. Follow it all. Because if you don't, making more money won't help because you may raise your standard of living. 

Let's start with the credit card. Put it away.  I mean it. If you are carrying debt month to month, STOP. Take it out of your wallet. Put it in a bowl and freeze it. You've got to stop piling on that debt.

Next, I hope you are on one of the student loan programs that allows you to pay your student loans based on your household size and income. I know I talk all the time about getting rid of debt, but you need some breathing room. So it's ok to make the minimum payment until you get that room.

You've got to shave off some savings. Otherwise now that you aren't using credit you won't have a fall back plan. Start with whatever you can manage. 

Get into a financial class.  I run one from my church in PG County. It's free and open to all. IOr go to debtadvice.org and make an apt. with budget counselor. 

You can do this. 

Hello Michelle, I have several thousand in high interest debt from financial struggles years ago that I want to consolidate. My credit score took a dive then but is now in the mid 600s and my employment is steady. Would you please recommend how I should go about consolidating debt from 3 to 5 different accounts? Thank you, Robert W.

I don't like debt consolidation. Unless you can get a really, really, really low cost loan from your bank or credit union, don't call any of those "We-can-fix-your-debt" companies. 

Instead, line up your debts starting with the one with the lowest balance. Focus all your energy and extra funds on that top debt while making the minimum payment on the others. When you are done with that debt, move to the next. 

Part of this plan is to also have you suffer by cutting your budget, maybe getting a second job, roommate. If you suffer chances are you won't find yourself in this position again. 

Besides getting another loan won't help your credit score. It may cause it to go down further because you are taking on yet another debt.

I foreclosed on my home 2 years ago do to circumstances beyond my control. Is homeownership still the American dream? Life happens and who is to say you want to stay in 1 place for 30 years...

I still believe in homeownership. And for many, it's still the path to creating wealth down the road. 

But it's right when it's right. And it can be right for you again. If you don't want to own that's ok too. You can still build wealth. Where you might have gotten over the years some appreciation in a home, you just invest more. 

I am 36 years old with no savings of any kind and far in debt. I have a beautiful daughter who just turned 15 and who is now in the 10th grade. I owe everybody down to my mother. I only work part-time at the moment. Not a sufficient amount of income. Is my situation too late to get it together financially to retire early and be comfortable and still save for my daughter, so she won't struggle financially? I don't know what to do or where to begin to pick up the pieces. Not good with money management, especially when I don't have any money to manage. I know I need a better income, but besides that what else do I do from there? I have no financial plan other than trying to pay off my bills, and everyone else I owe.

You poor dear. So sorry for your struggles.

But it is NEVER too late. NEVER. 

Do you hear me?

Never. Never. Never.

Everyday you get up is chance to change your internal dialogue, which is that you aren't a good money manager. And to change your financial situation. You just have to make some hard choices. So here's what I need you to do (And notice I said need to want because if you want a change, you have to change)

-- Stop beating yourself up. Most people when they know better they do better. You may not have had a Big Mama like I did to teach me how to handle my money. I really do credit my grandmother, who raised me, for teaching me the core of what I know. 

-- So if you don't have or didn't have a Big Mama, get into a class or program that will teach you how to be a better money manager. I teach one locally. You are welcome to come. It's the first Sat. of the money at First Baptist Church of Glenarden in Md. We have a ton of fun learning about financial issues. Next month we'll talk about spending for the holiday season, which you won't be doing a lot of my dear until I get you to have a nice savings cushion. 

-- You might also go to debtadvice.org and make an apt with a credit/budget counselor.

-- Can you move if you don't already live with someone? Can you move in with your parents, mother, father, auntie, friend, who won't make you pay rent while you try to save and get out of debt. If they need rent, see if they will reduce it some to give you some breathing room. Or if you have a home with space, can you take in a roommate. I would suggest a woman since you have a daughter. (Remember I said it's never too late but you will have to move out of your comfort zone).

-- If you don't have anyone local you can move in with, can you move to a place where you can? You say you have a part-time job, which suggest you aren't tied to a job where you are now. 

-- Stop using any debt. If you have a credit card or cards put them away. 

-- Talk to your creditors and see if they can reduce what you owe while you try to get better employed and cut your expenses. 

-- Start talking to your daughter about college and what you can afford. At this point with three years to go, you may have to go to community college for two years to start. Do not. Do not. Do not, allow her or yourself to take out student loans. Because you have debt you can't pay now. And you know what? She will be okay. 

-- Adjust your expectations for you and your daughter. You may not be able to retire early. She may not be able to go to a 4-year university right away. And that's ok too. 

-- You still have time. You are young. At 35 you have decades before retirement. 

You can turn this around. Just do what I said. And let me know how else I may be able to help. 

Dear Michelle, Both my wife and i love/hate your column. We love the great info and analysis, but hate the truth - there seems to be no way to save for long-term care, not without risking every cent of the savings to insurance companies who can seemingly raise rates for however much they want, whenever they want -- assuming they're still in existence when you need the financial help. I'm hoping you'll address alternatives/solutions to this mess, but am grateful you've drawn attention to the problem. My wife and I are both 60 and are concerned about what we should do. best wishes,


Read Michelle's latest columns regarding long-term care:

One more chance to decide on federal long-term care insurance

Still not sure what to do with your federal long-term care insurance? Here’s some help.

I've got more long term care columns in me. But the best think you can do, if you decide not to get the insurance, is to save. And stay healthy, which reduces your chances of needing the care. 

Also, think about creating a long-term care plan. By that I mean, what would happen if you haven't saved enough? Are there adult children you can live with? Would you be okay selling your home to move with others and using the money to help with your care? Could you move to a lower cost area? 

The truth is much of the care given to seniors comes from their adult children or relatives. So start a family talk about the possibilities. 

So my financial advisor wants me to refi to a 30 year mortgage to free up more cash to invest. I just re-fied one year ago to a 15 year. I told him no. The 15 year is at 3%. The 30 year is at 3.65% plus roughly $4,500 in closing costs. Did I make a mistake? I am able to cover all my bills, no debt except the mortgage. I am 54 so will be 68 when mortgage is paid off - right when I want to retire. Please tell me I am doing the right thing! I contribute to my 401(K) at 10% but bumped it up to 11%. Will continue to bump it up every 3 months by 1%. I am single and do not want a mortgage going into retirement!

You did the right thing. And I might look for another planner. Because the advice just doesn't seemed to have been in your best interest.

 

I'm finding it hard to afford renting in DC. My rent has been very expensive the last 5 years. I moved to DC after graduating. I make 60k and think I should relocate down south to a cheaper area? My rent for my 1 bedroom is $1300 for something I don't even own.

I hear you. Rents in the DMV area are CRAZY. 

Before you move however, consider everything. Would you like the area? Could you find the same type of job or career advancement? 

If you stay, maybe think about getting a roommate or house sharing. 

Also, do me this favor if you decide to keep renting and alone. Don't think of rent as a waste of money. Sure you don't own it, but you are getting something for that money. A roof over your head. 

And trust me, we home owners aren't always jumping for joy. Heaters break. Floors need refinishing. Roof leaks. Yards need to be kept. See where I'm going. You put out a lot of money that renters don't keeping your property up. The grass is not always greener. 

I don't understand this almost obsession about knowing your credit score. Unless one is planning to take out a car loan or buy a house, the score doesn't mean much. Pay bills on time, don't overdue credit, etc. and the score will go up. I don't have a clue about our score. Your article on wills was good; however, what do you do with a relative by marriage who indicates items he/she would like to inherit?

On credit scores: I agree. People are obsessed because its how we are being measured. And people like to know where they stand. It's good to know but then let it go.

On wills and that relative: Smile and nod. And ignore. 

I am in such a funk and need one of your commonsense responses. We are looking for a house in the DC area, but are at the lower end of the market. We aren't picky. We have 20% down. We still have savings after that. But time after time, we get beat out of the offers (sometimes because people are waving inspections -- which we won't do). It's frustrating and feels like we did everything right and STILL can't get ahead. I know I should be grateful that we aren't in too big of a rush, have savings, etc, but after A LOT of offers it's just frustrating. How do I change my perspective, be grateful for what I have, and NOT do anything stupid or desperate?

Yup, don't do anything stupid. There's a house for you. Just be patient. Just be grateful. 

Keep in mind that people who rushed in last time when the market was crazy got burned and burned badly. 

You are doing the right thing. And worse comes to worse, you stop looking, focus on saving more so you have a better/higher offer when you are ready. 

Hi Michelle, I have about $4k in rolling credit card debt. It accrued from one time medical expenses. I found supplemental income which should pay off the debt in about 8 months. My second credit card, with no debt, sent some "balance transfer checks with zero interest for 12 months" to me. I've never used one before. After reading the fine print it seems like financially solid move to transfer the debt from 22% interest to 0% to help get the monkey off my back.For example, any transferred balance not paid off within the 12 months converts to a conventional balance. The conventional balance is charged the account's normal interest rate. Since I plan on paying it off before the promotional rate is over. And since the reason for the expense were one time occurrences, i.e. they shouldn't happen again, I having little trouble seeing the financial downside of using one of the transfer checks. What am I missing? Does my good credit and standing with my second bank afford me this generosity of what is essentially an interest free loan?

Double check that there isn't a transfer fee i.e.. you have to pay some fee based on the amount you are transferring.

If not, do it. But stay on track to pay it off in the 12 months and not a minute later.

My husband and I just paid cash for our wedding and are starting to figure out our budget for the future. We recently bought a house, make almost $200,000 combined plus his military retirement, have about $30,000 in savings (sell of condo), no credit card debt, one car at $17,000 and student loans at $25,000. We are both maxing out our 401(k) and I'm 5 months pregnant. Our goal is to put a $1000 or more away a month split between life happens and vacation fund, pay the mortgage bi weekly to shave off the principle and will focus on paying off the other debts as well. I will be taking unpaid leave for part of my maternity leave which is why I haven't pulled money out of savings to pay off the car or student loan debt. I hesitate to talk to a financial advisory as I feel like we both know what we want, the question is where to start. Any good forms, etc?

You've got a good start.

But I would take that $1,000 and target it all to paying off your debts. And there will be no vacation until you do.

You've got a good savings cushion with that $30,000 plus a sure thing pension. So get out of debt. NOW! 

When you finish with the $17,000 car loan and $25,000 student loans start saving for your child's college fund. 

If you like you can have a fee-only planner look over things. but don't think in your case you have to do that right now.

Right now I want you to focus on getting rid of that debt. 

Do think we will get a raise this year? I am 75 my wife 71.We have a modest retirement and a little increase would sure be nice

 

Read more: Social Security checks to get a tiny increase in 2017


A tiny raise is coming. 

But tiny!

Have you ever heard of a mortgage program called NACA? It's a no down payment, no MIP, no closing costs mortgage. I know. It sounds super sketchy. They're a HUD approved housing counseling agency and they've been around since 1988. I have a friend who recently got a mortgage through this program. She's an attorney and it seems to be legit. Another friend who is also an attorney is currently going through the process in another state. I know that you would not recommend a mortgage with no down payment, but I live in an area where housing prices are ridiculous and saving 20% is almost impossible because it would take far to long and in the meantime I'd be paying a ridiculous amount in rent (far more than I'd be paying on PITI). Because of my income, I'd be able to pay down a mortgage in a decent amount of time (likely in 15 years), but again it would take forever to pay what I'm paying in rent AND save 20%. I don't have the option of staying with family and saving. Thoughts?

I know about NACA. It's a legit way to get into a home.

But just make sure the home without that downpayment is very affordable. The mortgage/insurance/taxes shouldn't be more than 30 to 36 percent of your net income. That leaves room for you to save, pay other bills, etc.

I'm mid-50s, single, no kids. My only debts are a modest mortgage and modest car payment. After deducting those, my "estate" is about $200,000. A large portion of that is retirement accounts. While I realize I could easily outlive my money, I'm also at the age where I could just as easily go to the doctor and get one of those life-shortening diagnoses. My beneficiaries on my retirement accounts are up-to-date but I actually would like some of that money to go to charitable causes I support, as well my siblings and nephews. Plus, there are personal items that I would like to gift to others I'm close to, should they want them. Right now, I don't even have a will, so I need some guidance. Should I start with a lawyer? A financial planner? A comprehensive book? Do I rouse myself from my death bed to craft a hastily scrawled will that sets everyone to fussing about whether I really meant to leave that kind nurse my shares of Apple (which I do, indeed, currently own)?

Go see an estate attorney to get your will done. This week!

Then with that in place, sure you can talk to a planner. But given your concerns, do the will. 

Hi Michelle - I'm a 68 year old single female in Richmond, VA. I retired late last year (upon turning 67) and am living on SS only. I have $230K in a 401K (have not needed to withdraw anything yet), $30K in passbook savings (have used about $2K this year for major expenses), owe $85K on my condo @ 4.375% and pay extra on principal every month, no CC debt. When I first applied for SS, there was a misunderstanding between me and agent and I thought I'd be getting about $100 more than I am. Here's my question: I received a letter from an employment agency who is working with my last employer (major US Health insurer) asking if as a retiree, would I be interested in returning to work (possibly part-time?) I'm wondering if I should do it? Thank you!

Congrats on retiring. I'm so looking forward to an encore career. 

So if you could use the money and you would like to do the work, sure take the job. 

Having the funds would increase your savings, which I do think you should. You've got a nice nest egg but if you live another 20 or 30 years, which you could having more won't hurt. 

Besides, try the work and if you don't like it, quit. 

Remember: salaries are lower when you relocate. Cost of living is less.

Very true. 

The first time I bought a home, I looked at things for over a year and ... nothing. My Realtor called me in and said - let's re-group. We sat down and went over what I was looking for - after all, it had been a year. I found my condo within a month. My point: perhaps a re-focus with your realtor might help - even if just with the energy.

Love this suggestion. Thanks.

I can afford to pay twenty percent over my minimum payments.I that a good idea..ernest Schubert Manteca Can.

I advocate for getting out of debt as soon as you can. If you can, do it.

If you don't specify things, things won't happen the way you want. yes, it's rude to indicate what you would like...but if someone wants something and doesn't express it, and someone else gets it...who didn't care about said item, would that be what you want? We are all going to die and it is interesting what is sentimental to one person and not another. If you don't specify things, I can guarantee you that it will never work out how you think it should.

I see your point. But perhaps the conversation should be had in the contexts of drawing up a will. To do otherwise is sort of crass to me. 

How would you tackle a 100k student loan with very little income?

For many people, who are struggling financially, I tell them to take it slow and if the loans are federal loans look into Income Based Repayment. Payments are based on your household size and income. Pay the minimum until you get on steady financial footing. Then you can attack the debt more aggressively. 

If the loans are private, pay the minimum until you can increase your earnings. 

Don't put too much pressure on yourself. The debt is what it is...until you can put yourself in a better position. 

Thank you for joining me today. So sorry if I didn't get to your questions. I do try. 

But I read everything, and as many you know, I often turn your questions into columns. 

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 Thursday and Sunday and is carried in more than 120 newspapers.

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