Color of Money Live: Save a raise or pay down your debt

Jul 05, 2018

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

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Got back late from fireworks :) 

Forgive me.

Hi Michelle - Love the chats - you never fail to steer me right! I am getting a promotion at the end of the month and am unsure of what to do with the extra money. My Dad taught me that every promotion or step increase to increase your TSP contribution because you won't miss money you didn't have before. I've followed that so I'm at 7% (5% gets full gov't match). But this promotion I'm questioning that logic. I'm 25 and a part of Public Service Loan Forgiveness (2 years down, 8 to go) with about $30,000 in student loan debt. I've got about 4 months of living expenses saved and otherwise have no debt. Should I bump up that TSP contribution? Save it until I hit my 6 months of living expenses and an undetermined "life happens" fund? Pay more on my student loans?

Thanks for your kind words. 

For now, I would take the extra and boost your emergency fund and life happens fund if you have no other consumer debt? (Got a car, use the money to pay the loan down or off).

I didn't say add to student loan because you are in the forgiveness program. But keep in mind, this works if you stay in a job that will allow the forgiveness. If you think you may switch before the 10 years, I would pay down the loan.


It would appear that Navient does not take responsibility for their part of their business. Why do they try to shift the blame of possible illegal actions on their part ? To me, it looks like they want to distract attention away from their conduct. If everyone is doing something illegal, does that excuse one part from legal liability?


Read Michelle's column: How the lawsuits against student loan servicer Navient could affect you

Companies sued often don't take responsibility. Even in settlement agreements they say they don't agree or deny charges. 

But I did think it was important to point out the lawsuits against the student loan servicer is also a good time to talk about the amount of debt people are taking out for college. Yes, Navient may be doing some things wrong but let's also start with why they have such a high volume of student loans to service.

For the first time in over a decade, I accidentally missed a credit card payment. I was so mad at myself about it, and very annoyed at the late fee and interest I had to pay. BUT, I remembered that someone in this chat (either you or a wise chatter) said you could call your credit card company and ask for a reversal. The very nice Amex rep I spoke to noted that I had always paid my card on time, so he reversed both the fee and the interest charges and ensured me it wouldn't impact my credit score. Still kicking myself for missing the bill in the first place, but really happy I'm not out $80 for it. So just wanted to say a big thanks!!

It was me. And it was also readers. At various times in this chat, I've advocated for calling when something like this happens if you've been a great customer. Believe it or not, this has happened to me as well. Often it's around vacation time (like starting the chat late because you forgot it was noon because you're still on July 4th time). 

It happens. We are all human. But that's why being a good financial steward can help at times like this. So always, always, always call. It can't hurt. Plus, a recent 30-day late payment can really ding your credit score. 

Hi Michelle, I'm the person who wrote in a couple weeks ago about having a strong desire to travel while still paying down student loans. I don't quite have a Thursday testimonial to share yet, but I still had a bit of good news recently. I was potentially facing a layoff from my job and had been making over-payments on my student loans (where I could) while trying to build my savings in case of unemployment. However long-story short, I was not laid off! As far as my student loans go, I'm down to two loans totaling about $6,900 in total. Now with my job situation on a firmer footing, I'm looking forward to accelerating my timeline for getting those paid off while concurrently saving for a trip. I likely won't be able to travel before the end of the year so finding somewhere warm will likely be a factor when I am ready to celebrate : )

This is all the way a Thursday Testimony!

You still have a job.

You keep on point by paying down your loan.

All good.

Now, I might has said that you should have been stockpiling cash in case of a job loss but it's okay. Things turned out well. 

But just FYI, if you think you might lose your job, I recommend you stop aggressive debt pay down and save that money for necessities in case your job hunt goes on longer than expected. If you don't lose your job or you find one, you can take the cash you didn't use and go right back to paying off your debt.

Nonetheless, I'm proud of you. I would tweak you plan just a bit. Take ALL the money you are saving and throw it at the student loans to get it done faster. THEN take the extra cash you were saving for the debt and save for your well deserved trip. 

Hi Michelle ! I eagerly look for your column every week! I have a 529 for my daughter and combined with my mother in laws 529 we have almost enough to cover 4 years for college.. we may be hitting a slight shortfall in the final year, but my other daughter going to college would change our financial aid need.. hard to tell at this point.. We don’t have a lot of savings, how would you cover this last bit of shortfall? We are talking about $10k about

Great question. And I'm in a similar situation. We paid all four years of our oldest undergraduate degree no problem at all. We covered the first year of graduate school, including housing, no problem. She's now in her last year and we have enough to cover tuition and fees but then that's it. So we told her she had to commute for this last year.'s what I would recommend you consider. We could do this because in the decision of where the children go to college to we take into account whether there might be a shortfall. So they went to colleges close to home in the event they have to commute the last year or two. Same with my son, who is in a STEM majors at UMBC. He was first engineering and now math. But because of the hard course load and the fact that he's on the autism spectrum we know it will take about 5 years for him to finish college. We have enough to get him through the extra year but it might mean he has to commute rather than stay on campus as he has been for the last 2 years.

So if you suspect there will be a shortfall, please take that into consideration on where your daughter goes to college so that you don't have to borrow. And by the way, I have three kids in college now and it didn't change the financial aid situation. All they were offered was still loans. 

Taxes are changing for our 2018 returns I understand. What won't we be able to deduct this coming year?

Read Michelle's column: What to do right now to improve your 2018 tax return

Check out my column. And if you search for "tax changes 2018" you'll find a lot of information about what to expect. 


Why in the world are people so crazy obsessed with checking their credit scores? Once a year, fine. Once a month - what's with that? A few points up or down is just not going to change your life in any way.

Well, a lot rides on your credit score -- loan rates, insurance, etc. So I get it. But I check my frequently because a big drop can also be an indication of something funky happening such as identity theft. That's why I check my scores regularly. 

$80 for late fees and interest? Yuck. So, I seem to be in the space where credit cards are willing to "give you a month for free" because they will explicitly say nothing is due this month even if there is a balance. I HATE this. I don't want to know, whether they will charge a fee if I don't pay, I want to know the balance since I want to pay it off every month. The first few times I saw this on an Amex card statement, it was in an email which doesn't tell you what the balance is. You have to access their website to see if anything is due. Another reason to make them send you a paper bill. On paper, you don't have to remember that nothing due, doesn't mean no balance and could mean that if you don't pay, you will at least be accruing interest.

Actually, credit lenders do get something even when you pay in full. They charge merchants to allow us to use credit. But to your point, it's up to the borrowers to remember to pay. Yes, we should get bills but we also are responsible for knowing what we owe. And I actually like online statements and banking better. I have set up electronic alerts on all my accounts to let me know days before a bill is due that it's due. 

I got a new job/big raise recently and decided to max my 401k (no match with my employer). With that change, I redid the retirement calculators and they indicate that I'll end up with double what I'll need in retirement. This is considering my pension, ssn, roth IRA, etc. which bring my retirement contributions to close to 30% of my salary at 35 years old. I have a mortgage and a 2 y/o in daycare but no other debt (I don't count my student loans which are set for forgiveness in 2 years with very manageable payments). I have 6 months living expenses, emergency, etc. Is maxing the 401k too much? Is there some better/more flexible use of the $ than retirement?

If you think your calculations are correct, you could back off and put money in college fund for your 2 year-old. And I might also take some of the extra money and pay down the mortgage. Just remember one of your biggest expenses now and in retirement will be housing. Be great if you can go into retirement without any mortgage debt. 

Hi Michelle! A tip I got from my best friend several years ago. I had missed a couple of payments over the years and hated the fees. I now have automatic minumum payments scheduled for a couple of days before the due date. I do pay in full monthly, but if I am away (or sick, as I was all last winter) I don't get hit with any fees if I am a day or so late. Sort of an insurance policy.

Good tip. But take it further. You can actually set up the accounts to pay the current balance due in full. That's what I my husband and I do. The automatic debit pays the full bill. Now this means not charging more than your bank account can handle if you're going to set it up automatically. You don't have to overdraw your account because you went crazy on your card one month.  

to your son getting a math degree! Way back in the dark ages when I got my degree, everyone just asked if I was going to teach. And while that is a fine profession, it was never for me (ironically, I'm doing some tutoring and teaching while home with my kiddos). Anyway -- good luck to him! That's wonderful.

Funny you should say this. Because that's what he thought too. Engineering wasn't really working for him but he was worried about just getting a math major. He's got a real knack for numbers. But we did some research together along with his college counselor and there are A LOT of careers where math majors can excel. And, like you, my son doesn't want to teach. We are now looking for some internships for him. So if anyone has an idea, let me know. 

When Navient was my servicer, I used to receive credit card offers from them saying that I could use the points to pay off my balance. I thought it very irresponsible of them to market this way (to consumers with debt to potentially take on more debt). I'm so glad i paid down that debt and no longer deal with them.

Key point, you paid off the debt. 

And yup, companies have a self interest you have to be on guard about.

...that's how I found out that even after my (otherwise wonderful) credit union sold my mortgage to BB&T, they somehow reported me as delinquent since I wasn't sending them payment anymore. Sometimes departments don't talk to each other and it falls to us to get things sorted out.

Thanks for sharing! And WOW! I would have been so mad!!!

In the past you have talked about helping family members by opening your home. You have mentioned that you sit down with them and discuss finances, expectations etc. How often & how in depth do you get about finances? If you make suggestions/rules, is staying with you conditioned on following suggestions/rules? Please give me some examples as we are helping our grandson, his girlfriend & 8 month old (adorable!) baby girl while they finish college. Things are going well, but it's early in the game & we want to stay on a good track. Thanks for considering this. Enjoy & look forward to your columns & chats...

My husband decided long ago that we would help folks in our family. So we often have someone living with us. Just had a relative leave after about a year and half living with us. 

Here's what we do:

-- We have a meeting even before there's a decision about their moving in is made. For example, we were considering letting a relative who was released from prison move in with us to help him get back on his feet (And no, we were not worried about safety, etc.). But after the initial talk, he said some things that made us realize he was not going to stick to our rules and he was probably just using us. So we told him he could not move in with us. It turned out, we were right. He was just not mature enough to make better decisions and we 60+.

-- Once we make the decision to allow the person or family in my sister's case to move in, we talk and agree about the rules of the house, including the person has to show us EVERYTHING financially related. We have to see paychecks, banking information, debts, etc. I mean it. They have to be completely transparent. Because the goal is to also help them make better financial decisions by budgeting and coming up with a plan to pay off any debt they have. 

-- During the first six months, we meet once a week. After that, if the person is on track, it's about twice a month and then once a month. But there is always, always goals and a plan for when they can be out on their own. We give them time depending on the situation. For one person it took just under 2 years. Another about 3 years. We don't rush because that defeats the purpose. 

Finally, if they don't want to meet our terms (budget meetings, showing us everything), they don't move in. 

Our roof, our rules!

If they violate the rules, there's a discussion about correction. If they don't correct, they have to go. 

All talked about before one moving box is brought into our home.

Why did they use a non denial denial, by distracting the answer to the legal complaint

It's what companies do. I see this all the time in settlements.

I majored in Math (class of '81) and I ended up becoming a software engineer. The logic skills inherent/necessary to receiving a degree in Math transfer very well to the logic involved with the way computers work.

Thanks! I'll pass along to my son. 

Hi Michelle, at what point do you consider it is time to replace an old car with a new car? I ask because our 2005 Subaru is starting to require more frequent servicing. Another $1,200 today, and it has been about $3K a year for the past several just to make repairs - suspension, head lights, etc.

Sounds like you may be getting close to putting Betsy to rest. 

But my rule is as long as the car is still safe (I know. I know. New cars have a lot of newer safety measures) meaning good airbags, structure, etc. I'm holding on.

But when the repairs become very costly on a monthly basis and the breakdowns VERY frequent because repairs are unpredictable, it's time to get a new-to-me car with cash. And by very, I mean DO NOT stop on my more than three times where I'm stranded on the road. Then you are gone!

My husband and I have never budgeted our money. With two young kids it is becoming increasingly obvious that we need to get on top of our bad habits. We've been talking about a budget for two years and done nothing. I think part of it is denial because we don't want to buckle down. But, we need to. Where do we start? There's so much information out there that I just throw up my hands. The obvious thing is to start by looking at all our spending. But, what budget app is better? Any other tips for us? Besides reading this chat, of course :) Thank you for any help.

Do this. Take my 21 Day Financial Fast. You can search for it and get details. It's based on a book I wrote that will give you a push to get control. For 21 days you can't spend on anything that is not a necessity. What it will do is give you a starting point and show you how much money you waste.

In the book, you'll find a budget template. But really it's not a  budget app that will set you on the right road. It's your mind. It's how you think about money. It's setting goals that will help you quit bad habits. And, I LOVE budgeting. I don't find it restricts me. It tells me what I can do with the money I work hard to earn. A budget is your roadmap to prosperity for you and your kids. But first you have to be in the right mind frame for a budget to work.

Try the fast. And let me know how it's going and goes.

I would suggest looking into a career as an actuary for your son.

I saw that too. Going to look at it. Are there internships for that? Anyone?

I majored in math in the late 1970's (one of a handful of women at my university) and went to law school. Not that this is what interests your son, but there is a direct correlation between the logic of math and the logic of law.

Good to know.

Hi Michelle, long time reader - I have a slightly off topic question. I have a decent and somewhat stable job with benefits but am thinking about making a change for better career prospects. I have about 3 months of emergency funds, no debt (except a mortgage). My wife just graduated with a doctorate and will start a job soon, hopefully with which she can pay for daycare for our 6 month old - MIL has been helping with us for now. I may have an opportunity come up, but my primary concern is the relative lack of stability at a new place and having the finances covered given the fact that right now, I'm the sole breadwinner of the family. While the timing may not be the best, it is one of those chances that I may not land on for a while. If this does go thru and I get a competitive offer, I might make a change. How do you value financial stability over possibly risky? career moves?

This is tough and why having a very solid emergency fund is key. Keep building your fund to six months and maybe a year while you wait for the opportunity. Then run the numbers. Really look at your budget in case you have to cut back. Talk it over with your spouse. Then honestly, you make a decision that's financially sound but also good for your spirit. I don't believe in staying in a career that isn't for you just for the money.  

We have focused so much on saving enough and reducing debt that we never thought when to retire. Now that it is closer, I am more bewildered since I was always in a save mode. Right now our retirement health insurance costs will be staggering since I was planning on retiring before 65. I haven't wrapped my head around working longer for health insurance until Medicare kicks in. Drat!!! Any advice is appreciated.

My husband and I are right were you are. In pre-retirement planning mode and realizing like you a lot of things have to be in place. And insurance is a BIG one. We won't retire before 65  unless we have good insurance. 

Start by researching. AARP has a lot on its site. Read early retirement blogs. Do a budget that looks at retirement income, etc. 

I'm going to take your question and make it the point of my Monday Retirement newsletter. So look for more links, information in the next newsletter out on Monday. I'll have more time and space to address your question.

This means, please folks sign up for the newsletters (Personal Finance on Thursdays/Retirement on Mondays). There's a link on the chat page.

Hi Michelle, Long time fan here and I'm pretty sure you covered this in the past but I was looking for some advice and thought I'd get your thoughts. So we have a 2005 Subaru Forester that is paid off, only has about 80K miles, and has been reliable. However in the past 6 months we have had to repair it three times. The previous time was in early May and the starter and a ball joint had to be replaced, add in a few other items and the total jumped to $1,600. Yesterday our A/C went out and needs a new compressor at a cost of $1,400. We also had to replace the tires and one of the wheels earlier in the year, however tires kind of fall into the "have to do it for any car" category. So at what point do we replace the car rather than keep fixing the existing car? Last year we had to replace both headlights ($500 each) and we know we will need a new exhaust at some point ($1,000) since we had the exhaust pipe welded last summer as a short term fix. The car has never broken down on us, however it is starting to become several thousand a year in maintenance. What do you think? thanks, -craig

I think I answered your question already but you are where I am with my 2006 van. Just yesterday, some under whatever came off. My husband is saying put it to rest. But I'm trying to hold on for a bit longer. 

I look the repairs that can be planned vs. the total cost of getting a newer or new car. If the car is still safe and the repairs are far less on a monthly or yearly basis than paying $16,000, $20,000 or $30,000 for another vehicle, I'm making the repairs. 

But if you have the cash to upgrade and the repairs are becoming very costly and the car very unreliable, it may be time to say goodbye. 

NSA hires lots of student mathemeticians - they even have fellowships with scholarships. It's local, and there are lots of UMBC students/alumni working there.

I'll check this out. Thanks.

I posted a month or two ago that my credit score went down 2 points when one of my credit cards went from 1% of allowable credit utilized to 5% because of a vacation. Paid it off and now credit score is up 3 (from the down 2 number) So I guess this confirms a few things: Yes, even small and easily managed amounts lower your score while they are outstanding and that using your credit and paying it off improves the score a tiny bit. I wouldn't do it to try to repair a bad score. The net gain was one point.

Credit scores go up and down depending on so many factors. Key is always paying on time and paying off debt.

My son, 26, has asked me if it was a good idea to put his undergrad (he graduated in 2015) school loan into deferment. He has been paying $200/month and owes about $14,000. We are going to help him cash flow the masters. And he will be working parttime. Thoughts?

Do not put in deferment. That loan will just keep growing. If he can, he should keep paying his $200 and more. Also, unless he absolutely needs that masters right now, I would wait and pay off the undergraduate debt first. 

He might also consider working in nonprofits in the finance office - our sector needs and appreciate good CFO's, finance managers, controllers, and others who can understand math and have good pattern recognition skills. He can make a good living and also help others!

Good idea. Thank you.

Your son can go to the website to learn about becoming an actuary. The site is sponsored by the Society of Actuaries, which runs the exams necessary for certification as an actuary.

Appreciate the link. Thanks.

Thank you all for joining me today. I see your questions even if I didn't get a chance to answer it. But I read everything you send -- I promise. 

I'm already planning to address one question in the Monday retirement newsletter. 

So, if I didn't get to you please don't feel your time was wasted. Come back next week or keep looking out for my columns because your question might be answered there. 


P.S. I'm taking off next Thursday (court date) but back the following 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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