Color of Money Live (December 14)

Dec 14, 2017

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

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Thank you for joining me today. Can't believe is already close to the end of 2017.

So in addition to your questions, tell me how your year has gone? What financial mistakes did you make? What financial successes have you had? 

We'll talk about it some this week and next. 

So let's get started.

The high dollar door prizes always seem to go to the friends of the owner. Plus there's the hassle/expense of finding a sitter. I'd much prefer a long lunch on Friday then we get sent home.

 

Read Michelle's column: Avoid the awkward office party. Employees prefer money.

Like you I'm not a fan of the office holiday party. I just hate small talk in a crowded room. It just feels like an obligation.

 

Michelle, thanks for all you do - I share your columns frequently and love this chat. Wanted to share my joy that my husband and I have CREATED and SIGNED our living wills and trust documents at last! After shepherding our parents through this process over the last few years, we've been putting it off for ourselves... and then my beloved brother died this summer, and we knew we had to finish the job. It is such a relief to know that our families know what our wishes are, which charity is getting all our money, where the safe deposit box is, and who our executors/trustees are. We certainly hope to live another 50 years or so, but just in case... our estate is set. Merry Christmas and Happy New Year!

What a great gift you just gave your family!

I always love hearing that people have taken care of business. Because so many don't. And then they leave behind a hot mess. 

Merry Christmas and Happy New Year to you too!

Michelle, As you probably know, the new proposed tax bill imposes limits on SALT deductions. Do you know whether DC/VA/MD permit pre-paying 2018 SALT in 2017, so that individuals can take advantage of the deduction while it's still available? Thanks for the advice!

Hi, I'm not sure if they permit pre-pays. And even if they do, not sure I would recommend pre-paying sales and local taxes that aren't due yet. Besides you know the way our govern't works there will be some caveat disallowing the deduction anyway. 

I'd love to see you or one of your terrific Post colleagues do an article about how the new federal tax law (once passed) will affect state/local taxes for those of us in DC, MD, and VA. For instance, in Maryland you cannot itemize on your state taxes unless you've itemized on your federal taxes. In my family's case, we will probably take the new, larger standard deduction on our federal filing, but that may disadvantage us when it comes to state taxes.

It's a good idea. I'll pass it along to our business editor.

Assuming the proposed tax plan becomes law, will it change the way rental properties are handled when doing my taxes? For example: Interest deduction, depreciation, other normal expenses.

There's a lot on the table but I haven't paid as much attention to how the tax overhaul impacts rentals. But rest assure, there are plenty of tax professionals who will be doing a lot of crash-course work to get up to speed on what's allowed and not allowed. 

Hi Ms. Michelle, I love your column! Any tips for maximizing my income in 2018? I'm still relatively young, and I wonder if you think it's better to focus on trying to get a raise where I currently am, or hopping. Do you tend to feel strongly one way or the other? (I know this is more like career advice, but it's also related to personal finance.) Thanks from Texas!

I love, love that as a young person you are on this chat. So absolutely I wanted to take your question.

Do it all.

1.  Work as hard as you can to get a raise. This means being the best at what you do on your job. Taking any training opportunities. Ask your boss how you can improve and then improve. 

2. Always keep open the possibility of hopping to another job. this means looking around and investigating other employment. Doesn't mean you have to go or even go on an interview. Just know what else is out there. Honestly, the times I got the best raises came when the Post thought some other publication was going to steal me away. I wasn't even actively looking. But I also kept my options open.

3. I believe it's always wise to have multiple streams of income or the possibility of multiple streams of income. So for example if you work as a copy editor, look around for freelance work to copy edit for other publications. If you are a teacher maybe you can do some tutoring. Whatever your gift and if it's allowed by your employers, figure out a way to make money on the side. A side hustle can come in handy should you ever get laid off.

1. I maxed out my Roth IRA contributions again this year. And I finished before the end of the year, so the money I had allocated every month became "play" money. 2. I enrolled in my employer's 401(k) late last year. And when I got a substantial raise, I immediately upped my contribution from 4% to 10%. Then I pushed myself even more and upped it to 12% before I got used to that increased take-home pay. 3. I got my mother's retirement accounts in order. We consolidated almost everything into one account, and I created several possible scenarios to show her how to maximize her combination of savings, Social Security (full retirement age versus waiting until 70), and her pension. Most importantly, she feels a lot better with less accounts to keep up with and having a game plan.

What a year!

Great work. I know I breathe better when my finances are in order. I've spend the last few weeks rearranging things and looking for cuts, etc. in preparation for the end of 2017 and the beginning of various financial goals in 2018.

Anybody else? 

What impact will the tax bill have on alimony payments? I itimize and with increased personal deduction would not cover amount of alimony payments

So I know a lot of you are wondering about what the impact of tax reform will have on your situation. I wish I had a short answer. But unfortunately I don't. The various studies of what the GOP is doing show some will get lower taxes, others won't.

And we still don't have the final version yet. I mean they are literally hashing it out right NOW. And they will pass without any hearings or a chance for us regular folks to digest what they've done.

So honestly, we have to wait and see. Then consult a tax professional or get updated tax software to figure out how it will all impact you.

And if you don't like what happens, let Congress know. 

I have a single-member LLC business (medical editing), which is considered a passthrough business, and I'm worried that the new proposed tax changes will increase my taxes because it sounds like a lot of deductions I take now may be eliminated. Couple that with the 50% increase in my health insurance premium next year, and I'm seriously considering closing my business and going back to the corporate world (ugh!). But since it seems that corporations will be getting a lot of benefits in the tax bill, I'm wondering if I should consider incorporating my business. Any advice?

Well, for now just wait. You don't have enough information to make a decision. You might even want to give it a year -- with a year's worth of income and expenses -- to see where you end up after a full year with the tax changes. And if you don't have one already, I would suggest you get a good tax professional who works with LLC businesses. 

I feel sick at the thought of the tax plan passing. When I think of what’s wrong in the world, it’s not high taxes. It’s underfunded public schools where teachers have to buy their own supplies and cafeterias have to feed hungry kids. It’s kids signing up for a lifetime of debt to attend college. It’s people resorting to go fund me campaigns to pay for their surgery or cancer treatment because they don’t have insurance, or their insurance is inadequate. It’s drug addiction. It’s people down on their luck turning to pay day lenders and getting even deeper in debt! Why do all these politicians who pretend to be righteous Christians treat their fellow Americans with such contempt?

Why? Because many don't walk in our shoes. They have GREAT healthcare. 

Why?

Because the folks who have their hear are the same folks who fund their campaigns. They don't represent the people. They represent the people with the checkbooks to keep them in office.

 

Michelle, a few weeks ago you did a segment on 401k millionaires. I just caught up on your chats and saw the discussion. I recently went over the $1 million 401k threshold. I’m now at around $1,025,000. I’m 43 years old. How’d I do it? I have maxed out every single year since I began working in my mid-20s and have had company matching to add to the mix (roughly $4500 a year in matching). In one your comments, you wondered about the income levels of people who had made it to 401k millionaire status. I’m a lawyer and thus have had a relatively high-paying 6-figure job since my mid-20s. I’ve always been diligent about saving as I grew up in a house with money insecurity. I never wanted to worry about having a roof over my kids’ heads or food on the table. I don’t need fancy but don’t ever want to worry about the basics like that. Logically I know I’m in decent shape financially, but I still worry all the time about whether it’s enough. I will save, save, save as long as I’m able.

Thank you for sharing. And you prove the slow and steady theory. And that living below your means is the way to become a millionaire. 

But even if you can't do what this person did, do what you can. My grandmother lived 20 years in retirement not being a millionaire. But she didn't carry debt or a mortgage into retirement. That's how she did it. 

 

I had a few big expenses come up this year. Some of them were unavoidable (think stuff like car payments) while others were more like treats (international vacation, and I've never left the country before). Although I'm a millennial, I save the majority of my paychecks and have five-digit savings. These unplanned expenses didn't put me in a tight spot, but I still wince at the size of what I had to put down. I do NOT plan on making a habit out of splurges like that. Also, although I was in no way affected by any natural disasters this year, the triple hurricane disasters compelled me to make a small stockpile similar to the 72-hour kits FEMA recommends, and shortly after I got that squared away, each one of my utilities failed in quick succession for brief but not unnoticeable periods. A day without water was not unbearable when I had set aside 20 gallons in the basement; a day without electricity was not unbearable when I had several battery packs and a full bookshelf on hand. Preparedness of this sort is also an investment.

Wow!

So proud of you. And you have inspired me to  get my emergency pack together! 

 

Hi Michelle. Currently, my husband and I itemize our deductions, gaining a lot from our mortgage, tithing, and high Maryland state income taxes. Am I right to be scared of the proposed bill?

I'm not sure "scared" is the right word. 

The fact is you may see an increase in your tax bill. I probably will, although I have enough in tithing alone to still make it worth itemizing. 

But honestly, if my tax bill went up by three or four figures, I'll be okay. I'll adjust. I'll cut back.

But better believe I'll be voting for folks who don't want a tax code that overly favors the uber rich. 

we aren't underfunding anything -- they aren't spending the money well. giving them more money will not fix that. The problem is when govt took over all of the things you are 'sick' about -- that meant PEOPLE forgot that they are *supposed to* HELP each other. That we don't need govt to do it. That that is the most inefficient way to do most anything, most of all 'helping' each other. And when people help each other, we build community -- which is what is severely lacking these days, knowing your neighbors and helping each other and creating a sense of community.

I hear you. But if you are suggesting we ONLY rely on "people" or nonprofits that won't work either. It's a combination of the two. 

We have the entitlement programs because there weren't enough "people" to help the people who needed sustainable  help. The government does a lot wrong. But it also does a lot right. We need a safety net because I for one don't want to rely on just the generosity of my neighbor who may decide I'd had enough and stop giving. 

And all this talk that the private sector does everything so much better is baloney. How many of us work for companies that waste money, have horrible managers, fire people to boost stock prices, have CEOS earning insane amounts of money, take way pension plans or change them so that the people who worked decades get so much less than promised, or can't see fit to let folks work from home or  fill-in the blank bad practice. 

We need government and private and nonprofits to create a society that is humane. 

The point of increasing the standard deduction so much is to NOT have people itemize -- to simplify the tax plan. It seems they aren't doing that enough, though, keeping in lots of things, but the point is that no one should really be itemizing because our tax code is out of control. People have been asking for that for a long time.

You make some good points. Tax code does need fixing. But the plan on the table overly favors corporations and seriously wealth people. And that's my major issue with it. 

for the spouse of the office worker, though, it's one of the only times I get to go out to somewhere fancy and dress up. Since usually I am in sweats or something similar.

Really?

So for 2018, I suggest you establish date night -- fancy and low key.

Totally works for me and my "boo." 

I just finished up as executor of my parent's estate, disbursing to two other siblings, and four minor heirs. One of my sisters wants to give her inheritance to her three children and combine in a single money market (for now). I've advised her that she should at least keep some of the inheritance for her and her husband's peace of mind and because that was the intention of Mom and Dad. She feels guilty that a previous inheritance for the kids was all placed in an extremely ill-advised real estate fund, which disappeared during the 2008 real estate bust. My sister and her husband work on an EU cattle farm, which is dependent on uncertain subsidies, and she has said many times in the past that their finances can be precarious. It's her life and decision of course, and she has wonderful children who would step up, I'm sure, but couldn't if the money was already spent for college, car, etc. Do you agree that the parent's should look after their own retirement security first? Do you have any further rationale for doing so? Thanks Michelle!

First, do what you can to provide good advice and then recognize grown folks will do what they want.

But I agree with you that parents need to make sure they are as strong as they can be financially. This in the long run helps the children. 

Many of you may have seen or heard this before but as parents or heads of households (for the single folk) think of your financial life as an oxygen mask. When you are flying the flight attendant says put your mask on first if you are traveling with a child -- or someone acting like a child. Why? Because if you are gasping for air you both might pass out. 

Breathe air into your financial security first. Have an emergency fund, life happens fund, save for retirement.

Then you save for the kids' college funds or set aside funds for them to buy a home one day, etc. As lovely as her kids are, they have no way of knowing now how financially secure they will be in the future. So they may not be in the position to take care of their parents. Or they may not want to once they have their own families.

So tell your sister that you asked a very wise person about the money and she said, put your your oxygen mask!

It's not just the state and local taxes. It also attacks high cost of living areas. It discourages home ownership where it is expensive. I would have assumed the real estate industry was against this, and I thought they were the strongest lobby in the country. Well, maybe second to the NRA.

It is an attack of blue states and the housing industry fought like a dog on the issue. 

I finally bit the bullet and have been meeting with a fee-only financial planner. I didn't want to spend the money, but at the first meeting (deposit required, applied to your bill if you choose them) I was blown away by the amount of information she said they could provide. It's a small firm, transparent about fees so I knew up front what I was getting into. She reviewed my finances (single, no kids, closer to retirement than not) for our second meeting and gave me a spread sheet that I would never have time to create. Probably won't finish up until later in January but I'm really looking forward to her recommendations and knowing there will be no pressure to buy a certain product. So thanks, Michelle, for your recommendations!

Good for you!

Good and fairly priced financial help can help you in the long ru.n

All this time I've been worry that the new tax bill will change the tax return that I have to file before April 15th. Please confirm - the current laws stay the same for filing 2017 taxes. All changes will affect 2018's taxes, to be paid by April 15, 2019, right?

There could be some changes that impact your return for 2017. 

In 2017 I inaugurated my first ever Frugal February, following a lot of the principles of your Financial Fast. I journaled what I spent and noted when I overspent out of stress, etc. My main success this year was paying off my car loan in two years instead of three. I scheduled automatic payments twice a month to aggressively pay it off. In planning for 2018 I am taking December and January to review my budget, given changes to my health insurance, a small merit pay raise, and increased cash flow (after the loan payoff). I look forward to implementing a new plan beginning in Frugal February 2018. Thank you and your chatters for all your guidance in 2017.

Wow. What a plan. Good for you.

And yup, love this community. We may disagree at times but the point of this chat forum is to talk about money, share ideas, tips and yes even vent. 

So if I haven't said it enough, thanks to all of you who come regularly. Thanks if you just joined. Thanks of you pass along what you read. Thanks for caring. 

As you pointed out this morning, the higher standard deduction will reduce the tax benefits of charitable giving for some people. For us, it looks like our charitable donations, mortgage interest, and property taxes will still be more than the standard deduction, but not by much. So I'm planning to double my donations this year to about $30,000 - that is, accelerate most of the donations I would have made in 2018 into 2017 - and then just take the standard deduction next year. After that, it might make sense to repeat that ever-other-year pattern. It's an option to consider for people who have sufficient savings. I also make our larger donations in the form of appreciated stock, which avoids future capital gains taxes.


Read Michelle's latest newsletter: Bad news for nonprofits: Will people still give or as much if they can’t get a tax deduction for their charitable giving?

Thank you for your generosity. And your commitment to still give.

but I have no idea how you do it. Just the regular stuff of dealing with the end of the year (health insurance open season, flexible spending accounts, 401(k) elections, Roth contributions, making sure this year's flexible spending is used up enough not to lose money, get docs ready for tax filing, clean up financial papers, get in-kind and monetary charitable gifts out the door, etc.) is almost too much to handle. If I were trying to make several more huge family meals (or travelling to them), buy presents for a lot of people and keep a tree in my house, I would be going nuts. And I would be spending way more than I do during the season anyway. Wasn't there a movement toward opting out of a lot of the traditions a few years ago? I haven't heard much about it. Seems were are in a wave of more is more this year. I hope you are all taking the time to enjoy it and that January is not an unpleasant surprise. That, at least, we can all control.

I hear you. It is a lot to deal with when it comes to our personal finances these days.

And there is always a movement to scale back. 

Just remember as it relates to spending during the holiday. It should be about your presence not the presents.

Michelle, I've been pretty responsible and very lucky with money over the years, and my only debt is a mortgage that I took out when I earned significantly less than I do now. I recently got a big promotion that involves more money and a lot of tax changes. I'm planning to find a financial adviser to talk me through some of this. I do have an account at Fidelity, and am eligible to talk with one of their advisers. I know I should find a fee only planner, but is there any advantage to going to see what Fidelity offers? Sort of a dry run?

Definitely see what they have to offer. Just keep your eyes on the fees. 

Hi. Love your weekly chats. So much good information. My wife and I have about 1.6 million in total savings (401k's, investments, savings, etc.) We are mortgage free. My wife is 55 and a retired teacher. She receives a pension of $4k per month. We also run a small business that nets us about $40k annually. I am an adjunct professor with a local university. I earn about $14k annually from that. I am 59 years old and I am leaving my job at the end of this year. We plan to continue the business for about the next 5 years and I will continue my teaching gig. We have healthcare that is deducted from the monthly pension. My question is do you believe we are in good enough shape financially that I do not need to find part-time work if I choose not to? Thank you!!

I would have to look at a lot more to give you a fair answer. I'd need to know more about all your expenses, what are your plans when you retire (Because some folks end up spending just as much traveling, eating out, etc.)

But with what you provided, I will tell you this. You are better off than the majority of folks whose budgets I have seen. 

 

I have a 17-yr old car that I paid over $5,000 on this year for repairs. It’s coming on 300K miles. I don’t believe it will last another year. I want to buy a new car but wonder if it’s best to do a low-cost loan through my TSP rather than get a higher interest loan at a dealership. The Feds are about to raise interest rates. Is there ever a good time or reason to get a TSP loan?

I would not do the TSP loan. Right now the market is doing really great. If you take out that money, you lose out on whatever gains the market still has coming.

If you've got a good credit score 700 + you'll still get a good rate on a car loan. And shop around. Try a credit union, which often has lower rates. Then use those quotes rates to get the dealer to match. Don't ever just go with the dealer rate without checking around. 

My sophomore has had well-paying summer jobs and internships for the past few years. He's a good money manager, and has managed to take pretty exotic trips with friends and buy himself expensive 'toys'. Yet he expects the parent ATM to cough up money for his cell phone, car insurance, clothes, etc. I have saved enough to cover my kids' undergrad college expenses, but how do I steer him towards paying his own way for everything else?

Stop giving him the money!

Here's the deal we have with our kids. We pay for tuition, fees, room and board. We do cover car insurance. And because they are on our cell plan it's not really that much $20 per phone).

But they use their summer earnings to cover everything else, gas, personal items, clothes and definitely any trips.

Want to go to the movie? Where's your money?

You have the power to kick them off your payroll. Do it.

 

Make sure you have guardians for your children. This came up with a friend who said to me - we just thought they'd go to Husband's parents (hers live abroad). Um no - the government gets involved and that means it gets complicated.

You are so right.

You can wait too long to buy a new car. I knew my car was slowly breaking down and I had to buy a new one. But I was waiting for a check to arrive first. Well, I waited too long and the car broke down on a busy interstate. Luckily no problems there, but I then felt hurried and rushed to buy a new one. I got the car I wanted (& used Costco, so I hope I wasn't too overcharged), but the lesson to me is to not wait for the car to break down that last time.

I think you did it just fine. You can't down when the last time is. So as it gets close get things ready.

 

If your presence involves a plane and/or hotels, even that can be expensive.

It can. So do what you can afford. 

Forgiveness please if you've already discussed it, but any thoughts on Bitcoin?

About to wrap things up. But please read my newsletter from Monday on bitcoins. 

And I'm writing about it again for my upcoming Sunday column. 

Have a great holiday, Michelle! Thanks for all you do! Love your column and chats!

Thank you. 

I'm so sorry if I didn't get to your question or comment. I read everything you send. Promise!

Some leftover questions end up in a column or the Thursday or Monday newsletter, which I hope you subscribe to. You can find the link right here on this chat page.

I have one more chat for 2017. So please join me next week. Let's rock out the year. 

 

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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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