Color of Money Live: When is it okay to take a break from work?

May 17, 2018

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

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Thanks for joining me today. 

Lots of questions so let's get started.

I have two kids that will be going to a private high school this fall. What is the best way to pay for it? Student loans or take money out of investments?

Are you really ready for my answer?

If you have to take out loans or tap retirement investments, you can't afford to send your kids to a private high school.

Now, if the investing are not tax advantaged and that's one o the reason's you've saved that way, sure tap the investments.

But otherwise, the fact that you can't figure out where the money is going to come from is probably a sign you are living above your means. 

And I say this fully aware of how important education is for our children. But if it were me and I had to borrow, they would be going to public school. 

Some people dismiss reported experiences of retail racism, and I think one of the reasons is that it's hard to prove the cause of any specific incident. I'm white. Have I had ever had a clerk be rude to me? Someone ask to check my receipt? A salesperson interrupt me as I was browsing quietly? Sure, those things happen to everyone sometimes. And some white people might dismiss claims of discrimination by pointing that out. But they happen a lot more to racial minorities - sometimes just as they happen to me, but sometimes because the store employee is biased. When it happens to me, I can shrug it off and be quite confident that it wasn't based on my appearance. When it happens to you, you have to deal with the possibility that it was racially motivated. I hope that other white people will keep that in mind.

Read Michelle's column: Shopping while black. African Americans continue to face retail racism.

Thank you!

Seriously, thank you for this.

Because the moment you mention racism, you're attacked by some many who say you're overreacting. 

It is hard to tell, which is why so many minorities let stuff go by. 

But it happens and it's so discouraging and demeaning. 

My 8 year old wrote me a poem this year titled "I Love You More Than Meatball Subs". He also declared that he loves me more than "fries of any size". It's good to be loved!

Read Michelle's column: Moms dish on the best and worst Mother’s Day gifts


Awww. That is so sweet. 

My kids took turns talking about me as a mom. Not a dry eye in the house! 

 

My great Mother's Day had nothing to do with money. I am 65 and recently bought a new grill. My 34 yo son came over on Sunday, with his dog, and we put it together (mostly he did). We grilled steaks, which I had bought, and had the best steaks ever. I don't need anything from him that he could buy, I have enough stuff. I really appreciate his help on things like this, and just hanging out with him.

Lovely story. Thanks for sharing. 

Gifts are nice but as I say all the time, it's about your presence not the presents. Or should be. 

Is it ever okay to take a break? I'm burned out with my federal job. The past couple of years have been hard and now I'm at a breaking point. Before even considering another job, I'd like to take a few months off and just do...nothing. Volunteer, maybe work part-time in a cafe or neighborhood shop. Work on my mental and physical health. 33, single, no spouse/kids/debt. My biggest expense is rent (+healthcare, if I don't have an employer-sponsored plan). I have more than 12 months' expenses saved (separate from $130k in retirement, which I have no plans to touch for several decades). Can I take some time off?

There are times it's okay to take a break. 

I get it. Truly.

Just make sure you've got what you need in case the reentry takes longer than you plan. 

Also, in lieu of a break, maybe you could talk to a therapist. 

Sometimes the break we need is professional help to work through issues we can't sort out by ourselves. Just another option. 

Also, could you take an extended leave of absence so that your job is held?

I just know the job market can be tough and don't want to compound any issues with a long unemployed stint. 

My Williams-Sonoma VISA was the first to offer to assume debt from my other cards, promising no interest (I think) and no obligation to pay off for a long time. Now I am seeing offers from other cards. What's the catch here? In what cases would you recommend someone take up Williams-Sonoma VISA's offer? Thank you.

A lot of credit companies offer balance transfers. Just make sure there are no fees that would make the deal not so good. 

And make sure you can pay off the transferred balance before the grace period is over. If you can't, the interest rates on these types of deals can be very high. 

A confession of sorts: Online shopping is brutal on my fun money. Just as I was looking to buy more lipsticks this morning, I saw a National Geographic image pop up on my social media. It was a woman in a third-world country standing in the shadow of an endless garbage dump. I don't know why this one image spoke so much to me, but I thought about the bubble wrap, the silly box filler, the little plastic sample tubes -- all the things that come with that impulse lipstick purchase. All that to say, if some of your readers need another incentive not to spend, this one worked for me.

Funny you should say this. Lately, I've been having trouble buying things for this very reason. I was just talking to my husband as we were declutter a space how ashamed I am all the stuff we have and the stuff we throw out. And I'm not talking about food. We produce so much that gets wasted. 

Our planet is suffering under our need to have more. 

Hi Michelle, I think i might be getting a hefty bonus, ($10k). Besides putting aside some to cover the inevitable tax hit, how do I allow myself to spend or not spend? I’m two payments away from ending my 2nd mortgage, we are on track to save for the kids college by high school graduation. All other bills are paid in full monthly. I want to buy some new furniture....but I’m also planning a divorce (guess I buried the lede) in the next 6 months. I guess I really feel like the bonus should go to the pit of money I’m saving to pay out my currently amenable husband when I keep the house. I just wanted permission to spend some, but now I’ve managed to talk myself out of it!

Yes, you did bury the lede. And I'm so sorry about the breakup of your marriage. 

As for the bonus. You wrote yourself to the right conclusion. You can't spend it on anything fun. So sorry.

What I would do?

Put the money in a saving account because if you do divorce you'll going to have some expenses

-- Divorce attorney

-- You may have to buy out your husband or he may be entitled to half the bonus

-- You will be living off just one income and that may be more of a financial shock than you plan

I would not pay off the last two 2nd mortgage payments or buy furniture or spend it -- until in six months you have financial clarity.

Also, about the house. Make sure you can afford it. For real. Often one spouse in a divorce tries to keep the home not realizing what a financial drain it can be on one salary. If the house will take up more than 36% of your take home pay, it's probably too much house for you. 

I work for a small community newspaper, my wife was a school teacher. we never made great money, but lived frugally and in recent years lived on one paycheck and saved the rest. Now my wife, 46, has burned out on teaching and is trying to decided what to do next. My job does not provide health insurance, and frankly, health care costs are killing us. We're on track to spend 20 percent of my pretax salary on health care costs. We have about 8 months of an emergency fund, but I'm loathe to touch that if I can avoid it. Is it selfish for me, now 51, to stay in journalism, a career that I love, when I might be able to get a better paying job with benefits?

I think you both need to sit down and discuss how to handle your jobs going forward. 

It's possible you can stay put and your wife move on to another position with benefits. 

But talk it all out. And you both have to be willing to make compromises for the greater good. However, you may find she doesn't want you to leave the work that you love, especially if you've been living mostly on her income and benefits.

She's got some great skills that could land her another job with benefits. Or you may find in looking around you can still work in journalism and get a job with benefits. 

Mostly, it's not selfish to want to have work that is meaningful to you. That makes you a better spouse. Happy wife/husband, happy life. 

Europe is getting real about reducing the insane amount of unnecessary plastic waste and we're not even starting the conversation yet. I cannot get over the fact that some places don't even have a 'for here' china mug and that the default is to go. When did we become a society that eats most of its food from and with disposable things? And as for Kuerigs - why don't people get the refillable one for home? The plastic waste from them is crazy.

You are so right. We really do need to have this conversation and fast. The stories or states shipping out their garbage is very concerning. 

Another white person who sees this as sadly self-evident. We white folk also have to stand up and call out racist behavior - 'it's just policy', 'no it isn't because you didn't do that to me'.

Right! 

And if you are the mother of a black male child, you heart sinks a lot when these stories come out. 

VW is buying back my 2014 Passat TDI this summer (for more than 200% of bluebook value). The car is completely paid off so I will be pocketing the whole amount. I have researched and decided on the replacement car I want and will be initiating the buying process soon. I plan on financing the car to get the best price (my credit score is 820+ so I should qualify for a low rate), but intend to pay off the loan early with the VW money. The only hitch is that I may be downsized from my job starting in January (I won't know until late November). Am I better off 1) paying off the car free and clear (once I get the money from VW) or should I 2) continue making monthly payments and hold onto that money (perhaps in a short term CD or other low risk investment) until I know what is happening with my job? I like the idea of having the car completely paid off, but am worried about not having a safety net to fall back on if I lose my job. I have no other debts, plenty of savings in retirement accounts (both work and personal), but only about $9000 in liquid assets (besides the car).

One thing, if you get laid off and have a auto loan, you'll have an auto loan. 

With or without a job, you probably need transportation. So if I were facing a possible job loss, I would not want to have any debt on my books.

By the way, you can get the best price without a loan. First of all, you don't need to tell the seller you are a cash customer. You should first negotiate the price of the car separate from the financing part. 

And from now until November, with no car payment, aggressively save to give you more cushion should you lose your job. You might even consider pulling back on retirement savings to create a very healthy emergency fund that could sustain you for six months or more. 

If you don't lose your job, you still have the money.

 

Thanks for the advice on the IRS calculator. I receive a bit more in my biweekly paycheck under the new tax bill and I’ve been saving every penny of it in fear that I would have to pay extra in taxes at the end of the year. According to the calculator, that will indeed be that case, so the money I’m saving will be put to good use. On the other hand, it won’t take up anywhere near all the money I’m saving, and in fact, the amount that I will save is significantly more than the tax refund I received for 2017.

Read Michelle's column: It’s not fun to do a ‘paycheck checkup’ — but do it anyway

So glad you did the paycheck checkup. 

Michelle, My husband is disabled and on SSDI. I'm still working and as part of my benefits, I have 6% of my salary transferred to a 401(k) - that's the max that the company will match, and about all I can afford. A series of medical crises with Hubby, and some "Life happens" home repairs, have left my Life Happens fund completely depleted and I've even cashed out an IRA CD that I had (I'm old enough to avoid penalties). I want badly to replenish my Life Happens fund, but the only real way I can see to do that is to back off on my 401(k) contributions for a while until I regain my comfortable balance, then return to the 6%. I'm driving a ten year old car (no payments), wearing nothing but thrift store clothing, and I get my haircut about four times a year. There's just not much fluff in our expenses, and since he's disabled I can't really take a second job. Your thoughts on my plan?

I think pulling back for a short time so that you have a cash cushion is okay. When there isn't enough, you have to make hard decisions. 

Because with a financial safety net, you'll have to dig into the retirement money anyway. 

 

A recent comment on your May 14 column got 34" likes" (copied in full below). The part that spoke to me is: " ...Any retirement discussion that omits health care is utterly incomplete..." This is exactly where me and my friends <65 yo are stuck. Many of us have no debt and reasonable savings but not enough to stomach $2000/mo just for health insurance for several years waiting for medicare to start. So do we just keep working to keep our employer health insurance? (so far yes) Is it hopeless to obtain even a high ($10,000) deductible that would then cover the huge costs in case of an accident or serious illness? snpiperpiolet commented: Any retirement discussion that omits health care is utterly incomplete. I am debt free and nearly have enough saved to retire but now that the ACA has been blown up, I have no choice but to wait till 65 so that I have medicare as a fallback plan. Except for people lucky enough to get coverage through their last employers, now it's cobra for 18 month plus medicare sine the ACA no longer is an option. Health care is the biggest single issue and has to be discussed.

You are right to be concerned. And I would also keep working to maintain health insurance. This is our life in America. 

If you are not eligible for a subsidy through ACA, it's a scary game out there. 

Very sad. 

Hello Michelle, My husband just received a workers compensation settlement. We need to safeguard this money for future medical bills, but we want it to grow too, if possible. What is the best way to do that? I also inherited over $100,000 in CDs. Should I roll those over into my 401K when they mature, or leave them as is? Should I invest any extra money in my 401K, or invest in other ways? We have too much money sitting in our checking account, but also worry since my husband can no longer work full-time at the salary he was making at the time of his injury. Thank you.

To roll money into the 401k, it would have to be pre-taxed money. 

But you can open an IRA outside the 401k. I would look for low cost growth index fund. 

As for the worker's comp, if you need it for medical bills the safest thing is to just park that money in the highest interest bearing deposit account you can find. You can search on bankrate.com.

You shouldn't invest money you need in 5 years of less. 

Don't forget a loan will have a few hundred dollar admin feel too

That's right. Thanks. 

Then there was the house inspector who had a neighbor of the house he was inspecting call the police on him because he had no right the be there. I bring that up because in this case the police (white man, black woman) were very firm with her - she was so out of hand and entitled. She was throwing her weight around with the officers too.

I saw that story too. Even after the man showed proof that he had a right to be there, the woman was still fussing. 

 

A friend was at a phone store and when the clerk asked a very attractive African American woman for her info, she gave him her name and phone #; friend saw another person in the store write that info down, went over, demanded the person (20s) turn over the paper, then gave it to the woman, saying "you can't be too careful, especially the way you look." Her response? "You mean because I'm black?" Not at all what he meant, and so much for a good deed.

I hear you. But you have to understand where the black customer was coming from too. If your friend explained to the woman the good deed, great. If she was still funky, your friend should still feel good at having done a good deed. And do it again. 

 

Another way where racism has long prevailed is the real estate industry. The so-called redlining of certain neighborhoods to discourage or flat out reject minorities from living in is an engrained part of our real estate history. I know others will give me grief for this but I am a huge proponent of the FHA program and other low- to no-downpayment mortgages/loans. It allows persons historically marginalized to at least have a chance with economic prosperity through homeownership. This country is about second third fourth or fifth chances! Let's try to give others a chance at that American dream..

Yes, lets.

There are great public schools everywhere - you can find them if you look! Your kids will not thank you if they have to take college loans or support you in your retirement because you spent that money on private school instead - and with most private schools there are a lot of rich kids, so your kids will want to spend more to "keep up." When I talk to friends in their 50s and 60s, one of their biggest financial regrets is that they paid for private school instead of saving and investing that money for college and retirement.

I'm with you on this. All the way!

When faced with paying for private secondary school or saving for college, college wins hands down. If you can't do both, do college. 

Michelle, I know your mantra is "debt free", and I usually concur. However, in this case, I would have to respectfully disagree. The person seems to have their finances in check, so I would recommend getting an auto loan. With the uncertainty in the job, cash flow is more important than paying off a low, or zero interest loan for something you need. Leave the cash you're planning to pay off the car in a savings account and use that to make the loan payment. If you lose your job, at least you have a fund that you can dip into in an emergency. The alternative is not having that cash, but a fully paid off car, in an emergency. Then you'd have to sell the car to get the cash, but still buy another cheaper car because you need transportation? Seems like have a car loan and some cash on hand is more prudent until you come into a more stable job situation.

I appreciate your point. But I'm still right.

Because, this person can still buy the car outright AND save to have the cushion needed in the event of a job loss. Just take the car payment for one. Then any other money he or she can get from the budget. 

Then he/she has the cash and NO loan. 

I want to put the pressure on the person to save like a crazy person from now until November. 

I was a long time federal employee and due to health/ midlife crisis reasons was ready to quit. Since I was mentally prepared to quit I figured asking for a six month sabbatical was a no lose proposition. They gave it to me and it was extremely clarifying. I wasn’t really much older either, only 38. You have to know your office but don’t wait to be so unhappy that you get poor reviews or get fired either.

Good point. Thanks for sharing.

What about doing a detail with another agency for 6 months or so? I'm not trying to talk you out of the break (I'm trying to do an extended leave myself in the next couple of years!), but I know there are lots of federal programs that offer that option and it could help you stave off the burnout without risking the job and benefits.

I should have thought of that too. Thanks. 

I know a lot of friends who took a detail and it really helped refresh them. One woman ended up being hired from her detail -- and into a much better situation!

For me, it was when I was shopping at the farmers market with a friend and she asked me to ask the salesperson for a napkin. She wasn't comfortable that such an innocuous request would be fulfilled from her - but knew it wouldn't be a problem if I asked. Heartbreaking. How many negative experiences do you have to have before you're uncomfortable asking a food vendor for a napkin - after making a purchase.

Wow! A lot of us practice defensive shopping. 

As some who has taken various breaks in my life without something set up later - I can tell you that not knowing when or where your next paycheck might be tends to ruin the break a little. See if you can do a sabbatical, suspend your job or take unpaid leave. It will improve the break to not see a dwindling bank account every month.

Thanks for sharing.

I really do understand when people have had enough. But given the situation (single, etc.) you only had you depend on. And many job markets are very tight. 

Plus the more you make the longer it can take to find another job. 

I love the suggestions to look at the break another way.

To the person thinking about taking a break from the workforce. When I was in my mid-30's, i did the same thing. Was in a very similar situation as the original poster. Saved like crazy, took off about 6 months (and in that time, pursed a side-gig that made a few bucks - spending money really). 10 years later I can report that I'm glad I did it and it helped. I'm in a better spot now (and back doing similar work). I will say that 're-entry' did take longer than I figured. So plan on starting the job search a bit sooner than you'd like or save more money to cover an extended out of work break.

Love all the help this person is getting. Lot's to think about.

The side gig is a good suggestion. 

My sister passed away sudddenly in January. Her 24 year old daughter, my niece, has substantial student loans that her mom took out. Is my niece required to pay back those student loans? She is still in school and will be for at least the next three years. Is there any program that can help her? Both her mom and dad passed away in the past three years and our family is trying to do everything possible to help her. Appreciate your addressing my question either online or offline. Thanks!

If the loans were federal backed loans, they would be discharged on the death of the parent. Private loans are a different matter. Depends on the terms of the loan. But if you niece didn't co-sign she should not be liable for those loans either.  

If she's going to need to be in school for another three years, as a family you may have to talk about her transferring to a more affordable school that wouldn't' require so much borrowing. Also talk to the financial aid office for whatever school she is attending to see if she's now eligible for more aid considering the health of both her parents. 

My charitable giving is pretty haphazard, in part, I’m embarrassed to admit, because I’m cheap and have a very hard time spending money. But, I believe in giving. (Please, no suggestions about donating time/volunteering. I’m seeking advice specifically about monetary donations.) Do you have any advice on setting up a plan and overcoming that anxiety I get when it comes time to actually send the donations?

Automatic payments always work for me. You set it up and can forget it. 

I heard this phrase on a radio ad, and it reminded me of something my boss once said. Although she made a good deal more than I did -- I think my salary was $75K and hers was $110K -- she and her spouse also owned a special-events business that they operated mostly on weekends, and when she told me about it she said "everyone needs a side business." At the time I thought she was just justifying her desire for a higher income, and I didn't need a side business because my salary and my wife's salary were (and are) more than enough to cover our needs. But now I'm wondering. Do you think everybody needs a side hustle?

I think if you have the time, you should have multiple streams of income. Because job security isn't what it used to be. 

Currently in a Brooks Brothers twin set (matching sweater and cardigan) and Talbots trousers that cost about $9 for the whole outfit from the thrift store. I figure it would be at least $100 on sale at those two stores and more like $200 if bought at the beginning of a season. I don't get shoes (weird foot size) or underwear at the thrift store, but when people insist on donating practically new clothes.....

Nobody has to know where you got your clothes. And buying thrift helps save the environment. 

I shared your opinion of inviting friends to celebrate and pay for their own meal, drinks, etc. with my daughter. She is having a birthday next week, and has made a few friends with gals at the gym that she takes a class with....so she has ordered a box of tacos to be delivered and a birthday cake to share with her friends. Not over the top -- but wants to have a celebration as no family lives in her city.

Love it. Because #guestsdontpay 

I'm so sorry if I didn't get to your question. Please know I read everything you send. And your question might end up in one of my columns. 

Or come back next week. 

Take care. 

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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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