Color of Money Live (September 27)

Sep 27, 2018

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Thanks for joining me today. Lots of questions so let's get started.

Also, don't forget it's "Testimony Thursday" so I'm always looking for good stories about your money. Did you pay off some debt? Finally saved enough in your emergency fund? If so, I want to hear from you. 

Hi Michelle, I love your attitude and your work! Would you consider having a guest host who has experience giving financial advice to Americans living overseas? I used to live in DC and am now in Europe, and I am sure that there are many former Washingtonians scattered across the globe who still read the Post. (Or current DC-area residents who may one day work abroad.) There are lots of books out there, but I don’t know which to trust. And advisors are typically geared toward high earning “expats,” and priced accordingly. Some guidance on maintaining accounts in the US, knowing what to do about credit bureaus, preparing for retirement, being smart about filing taxes, etc would be really helpful. Thanks for all you do, Michelle. You’re a bright light in the world!

I have never been asked this or thought about the issue. Thanks for bringing it to my attention. 

Any folks out there with advice or know a good source?

Hi Michelle and Color of Money readers, I'm still in my 20s and really get a lot out of these chats! Looking back over your financial lives, what are some things that you wish you'd done differently/ sooner/ etc.? Thanks so much :)

I LOVE this question. So community let's help this young adult. Send your suggestions.

Mine: Don't be too risk adverse in saving for retirement. 

That was my biggest mistakes to this day. When I first starting investing in my company's 401 (k) plan I was scared to death of stocks so I mostly had bonds. I missed out on a lot of gains because of that. You have so much time ahead that you can take some risk. 

Michelle - Here is my Thursday Testimony. Tomorrow my husband and I are both retiring! Retiring debt-free at full SS retirement age, thanks to all your good advice. Paid down the debt. We accelerated payment on the mortgage, and paid it off in 18 years. Our cars are paid for, and relatively new. We have over $1 million in our 401Ks. We always lived at or below our means, which allowed us to send our kids to Catholic Schools and private colleges. Both kids have advanced degrees, which was paid for without loans. It is difficult today to wipe the smile off my face. Plan to start enjoying and travel the world. Michelle, what you encourage people to do is so important! Thank you from the bottom of my heart for all your good advice. People out there, listen to this Lady!

WOW!

I'm so very, very happy for you. Although I LOVE what I do here at the Post, I can't wait to retire or get free of so many deadlines. And to do it leaving behind debt and with a great retirement account is such a blessing.

I wish you the very best. And hey, please subscribe to my newsletters, especially the retirement one. I would love for you to share your retirement journey with readers. I open up the newsletter to comments from readers in retirement. 

Yesterday I got rear ended at a traffic light. I'm just fine. Thankfully the damage to my rear bumper looks minor and I'm taking it to the shop on Saturday. My car is in pretty good condition for its age and gets routine maintenance once a year. Aside from two speed-camera tickets my driving record is clean. I'm planning on calling my insurance today after work to take care of things. Do you have any advice, such as key phrases to use or good questions to ask? My hope is that I can communicate all the information necessary and come away from the call with a clear understanding of what I can expect in the future.

Actually you should be calling the insurance company for the driver who hit you. You shouldn't have to file anything with your carrier. 

Hi Michelle, I recently finished my master's degree at an excellent but pricey university. When I started my degree, I was determined not to be saddled with debt, and worked my butt off for two years-- three jobs in addition to classes. On graduation day, I walked the stage debt-free, something I am really proud of, since I paid my own way. However, I often get comments like "oh, you're going to be in debt forever!" or "good luck paying off those student loans!" People often perceive that I have made really poor life decision by going to grad school. However, I feel that saying anything would be rude or bragging, so I keep quiet. It almost seems as if being debt-free is a taboo, especially as a millenial. What do you think?

Read Michelle's column: How we sent our children to college debt-free

Brag. Brag. Brag.

Okay, maybe not exactly. But when people make comments like that use it as an opportunity to point out that not everyone makes the choice. 

They: "Oh, you're going to be in debt forever1"

You: "Oh, quite the contrary. I worked three jobs to make sure I didn't have debt. I'm so grateful I could do this without loans. I understand many people borrow but I just didn't want decades of debt."

You may be surprised at how many people may want to dig deeper into the specifics of how you did it and use the information to help themselves or family. 

Be bold. I tell everyone I can how my husband and I are sending all THREE of our children to college debt free. In fact, I wrote about it recently. I did it not to brag (I was joking at the beginning) but as a way to inspire new parents to start saving.

Not a question but just wanted to say I hope your recovery is going well! Thanks for all you do!

Thank you so much for your concern. For those who don't know, I fell and fractured my right ankle in two places. 

Still some pain but getting better. But boy do I have a better perspective on how hard it is to get around when you can't walk. I've learned a lot about myself and accepting help, which I'm very, very bad at doing. I'm shared some caregiving issues with my husband and kids (Please don't sigh when giving help. Makes me not want to ask again.)

 

I'm 61. If I collect social security next year but I still work, how does IRS calculate what I have to "pay back" to social security at tax time?

First, you should consult a tax professional to get a good sense of what you owe. But it's not a matter of what you have to pay back. If you work and earn above a certain amount your check is lowered depending on your earnings - $1 for every $2. That threshold is about $17,000 for 2018. This earnings limit goes away at full retirement meaning your benefit is not reduced. You can also get more information on the Social Security website.

 

I am the original poster who wrote about searching for unclaimed property. I am gratified that this was made the title of a Live column and also the subject of a follow up column. My wife did receive that check from the state of Texas a few days after the column appeared. Must have been good Color of Money mojo! I do want to note that both the unclaimed properties uncovered were under my wife's maiden name. I also identified money due my aunt (mother's sister), another aunt (father's sister) and some other people that I know. What I also want to mention today is direct deposit authorizations. I am receiving some settlements from an insurance company and I have elected to receive a check rather than the faster direct deposit. This one sentence in the Direct Deposit agreement is why. "(The insurance company) reserves the right to recover any credit entries made to my account in error..." So basically, it can take money OUT of my account without any notice to me. If the insurance company overpays me solely due to its negligence, it still can grab the cash out of my account electronically and immediately. The moral of the story is to read those boring authorizations and disclosures.

Thank you. Thank you. That column is one of the most read this year. So you have helped me help a lot of people. And two points to follow up.

1. Thanks for reminding people to read the fine print. I would have done just what you did.

2. Please be careful when going to the site unclaimed.or. A lot of people typed in .COM. That is not the right site and will try to charge you. 

Finally, your note shows that I really value input from people in this forum! 

You can't spend the same money twice. When I was in my 20's refinancing student loans to 25 years was a brand new thing. The original loans were 10 years and interest rates were high (I had a bunch at 12%, maybe higher). I hated it. So I got a tiny studio apartment, picked one indulgence (theater tickets for me because it was NY and you could see Off Off B'way for $10, but I took the subway and didn't eat out or go to a bar just because I was going "out"), and paid them off very aggressively. I had $70K of loans and an $80K salary to start. I paid them off in just under three years. My friends at the same firm who ate out and took cabs and went out for expensive drinks and bought tons of clothes or even those who overspent on gifts for family or taking care of pets couldn't figure out how I did it. But they were living like they had the salary we had. I wasn't. I was living like a school teacher (well, I had more dry cleaning bills than a school teacher, but our dress code was kind of strict) and paying off loans. I've had a lot more flexibility in my career choices because the loans were gone quickly.

Great advice. 

I was rear-ended earlier this year. My car had to be towed and it took over a week for the other insurance company to even come look at it. I did end up needing my insurance agent to strong-arm the other party's insurance a bit to get things moving. OP might want to talk to their agent but I agree with you that they should not be calling the 800 # on their insurance card yet.

Thank you. Good point. It's true that you may need to get your insurance company to make the other behave. BUT make sure they don't report it as something that goes against your account. 

Own it! It's definitely not rude or bragging to set them straight, assuming you don't convey that in your tone of course. My parents paid for my undergrad degree, my company paid for my graduate degree, and my husband paid for his undergrad degree much the same way you did your master's. It's such a relief to not have student loans over our heads, especially when many of our friends will be paying those off for a while. I think the way Michelle worded it was perfect. Congratulations on graduating, and on doing it with no debt!

Passing on. 

I wish I had set up a budget sooner. I didn't do it until my 30s when I took a big pay cut. I track every penny I spend and it's so helpful to see where my money is going. A budget doesn't mean you have to live like a miser. It is just a great tool for tracking finances, setting goals, living within your means, etc.

Budget is not a bad word!

I wish that we had started saving earlier for retirement. We spent a lot of time in grad school and short-term contract jobs without employer-sponsored retirement plans, but we could have set money aside ourselves in an index fund even if it wasn't tax-advantaged.

Time is money!

My husband and I bought our first house in '07 when we were 24 and 30. The one regret we have is that we didn't buy a duplex and didn't buy sooner. We could have initially lived in one unit in the duplex while renting the other. Instead of having to wait for the value of our single-family home to recover from the market crash so we could sell it in '17, we probably would have been able to move to our current community sooner and would likely still own the duplex as an investment property today.

I can see where you are coming from. But a caution. Buy what you can afford on the money you are making now. Don't buy too much thinking your income will increase.

And how much is too much. My rule. Your housing costs, including taxes and insurance shouldn't be more than about 36% of your net take home pay. 

Pay yourself first from every paycheck! Wish I had done this. If you only save what's 'left over', you'll never save enough.

This was hands down the one piece of advice from my grandmother that made all the difference in my ability to save and send my children to college debt-free and put money away for retirement. 

I just wanted to thank you for your article on multil-level marketing companies. I've seen more than one friend, generally a lower-income mom who wants to stay home with her kids or generate side income, get suckered into these things. None of them are making money. The one person I knew who had moderate success was really good at selling people on the idea of becoming "distributors" in order to get cheaper products so she had a very large down-line. I want to scream every time I get a friend request from someone just so they can push some weight loss scam or who suggests that overpriced essential oils are the answer to every ailment - or worse, safe to eat!

Read Michelle's newsletter from today: Why multilevel marketing won’t make you rich

Totally agree. Someone in my life recently tried to invite me to a party where they would sell sex toys. 

"No ma'am ," I said. 

Don't need or want any and not interested in selling any. If I did, definitely a private sort of thing. I do not need to bond with my girls over sex toys. Not a prude just don't want the pressure of another MLM!

Hi Michelle, our daughter will be completing a masters' degree in engineering in May 2019. She has no educational debt, and due to scholarships, jobs (during school years and summers), and prudent spending habits, she has not spent all of the money we had set aside for her education. We had expected her to be financially self-sufficient after college, but she has now decided she'd like to spend a year working with urban youth through City Year before she enters the job market. (She did similar volunteer work during college.) Do you think it is a bad idea for us to offer her some financial support during this year? If she is assigned to a site near us, she plans to live at home, but the stipend is very low and would not go far in most of the cities where City Year operates. Needless to say, we are proud of her for wanting to be engaged in this important work!

Wow! My husband and I are facing a similar situation, although we've gone through all the money for our eldest education. She's about to finish graduate school -- again no debt for her or us. She wants to spend a year at least working in a program for troubled young children. The monthly stipend is $600. 

We don't have any more education money but we've decided to supplement her stipend should she need it. We will still over her cell phone and car insurance. 

So few people can afford to do what your daughter wants to do or ours. I think if you have the money help her help others in need. After all to whom much is given much is required. 

Our daughter like yours is great with her money. She's an excellent saver and we want to support her efforts to to pubic service work. And we can afford it. 

I don't know what state the OP lives in. but in Massachusetts we have no-fault insurance. You always report any accident to your own insurance company, and then they go after the other party's insurance company.

Thanks for sharing.

Hi - I read that chat about unclaimed money and found 2 listed for me in Virginia. I followed the instructions, mailed in the material they required (proof of old addresses, SSN), and just received a check from the Commonwealth of Virginia for $230 this week. I'm still not sure what it was for - maybe an old security deposit - but nothing like found money! Thank you to the chatter who told us about that website. I also found some money for my mom, but not sure if she has done anything with that yet.

Takes a village.

Super great for the poster who worked 3 jobs! However, can we be careful about expecting people to have to do that just to get the education they need?? It's unrealistic for most people- 3 full time jobs in a day would be 24 hours. It's frustrating to hear people hate on millennials for not being able to work an unrealistic amount for minimum wage to graduate debt free. Forget about it if you are trying to work, get your degree, AND raise children... My dad is constantly ragging on young people for not being able to get through college without debt, not understanding that a minimum wage job is not going to be enough to get you through most universities debt free, even if you are working more than 1 job.

I was careful. And so was the poster.

We certainly don't expect people to work for 24 hours.

However, don't miss the overall point, which is STOP before taking this debt. Wait if you have to. Stay at home. Go to community college. For graduate school, work and save. Or maybe not go at all. So many people "think" they need an advanced degree to make more money and they end up in a lot of debt and no real extra money, especially when you consider for 10, 15 or 20 years they have to use that "extra" money to pay off student loans. 

First, Michelle is correct the claim will go through the other driver's insurance - hope you got all their information. Secondly, make sure an adjuster really checks out your car. I was rear-ended on Rt270 in slow moving traffic and just looking at the car you would have said it's the rear bumper. Nope, there were things underneath that had been damaged but not visible unless you (meaning the adjuster) knew what to look for.

Good point. Thanks.

I loved your column about MLM. In fact, was just complaining about this yesterday. I'm 25, don't have a ton of friends with children yet, but I can only imagine it gets worse as more people I know become parents and seek flexible work situations. One distant college friend messaged me last month after she heard of my engagement. She was super excited to hear this, but only because she wanted to offer her protein shake and workout plan to help me lose weight to "get ready" for my wedding. Thank you, but I never mentioned the desire to lose weight before my wedding, and I think I'm ready for marriage no matter what pants size I am. Talk about insulting! I also think it's just a predatory way to trick struggling people (e.g. parents who have children with health issues, who need employment flexibility perhaps more than others, recently divorced, etc.) into thinking they've found a solution to their financial problems.

Right there with you!

1. Ditto what Michelle said: Throw money at an IRA and/or 401k in stocks. Max out your IRA if you can and put enough towards your 401k to get the max employer match. 2. Travel. Seriously. Do as many dream trips as you can. Go to all those places you've always wanted to see. Don't wait and don't plan to go at some vague time in the future. Travel will get more and more difficult, if not impossible, and more expensive, the older you get and the more responsibilities you have. Don't waste your 20s hoarding every penny for later. (but obviously don't go broke or into debt to do it!)

I can cosign this. . . as long as you save for the travel and not at the expense of having an emergency fund, life happens fund and retirement savings. 

I lived in China for a a few years. The things that worked best for me were automation and preparation! Basically, preset meetings and financial actions. For example, I was able to return to the US once or twice a year. During that time, I would schedule advance meetings with my tax guy, my IRA guy, and revisit my savings goals. Sorry if this seems like a super obvious answer, but automation and preparation did a great job. :) Your credit score will probably suffer a bit (since you may not be using credit cards.) I don't use credit, so it actually made more sense for me to freeze my accounts during my years abroad. Hope this helps!

Thanks for sharing.

In my 20s, I wish I'd been more assertive in my social life. No, that restaurant is not in my budget, no, I won't split the check equally when I had a sandwich and iced tea and you had four courses and cocktails, hey, let's go to this free event instead of a bar. Your 20s is when you're out on the town the most, and the expenses can really add up.

No is your friend!

50 year old white guy here, divorced, 2 kids. Biggest regret? Living off credit cards to purchase crap we absolutely thought we must have but really didn't need (in hindsight) and having spent 2 decades to dig out of that hole, post divorce, post college for kids. Second? Not saving for retirement. And when I did, stupidly (PALM SMACK TO FOREHEAD HARD HERE) cashing it in to buy a car. So now having to play catch up. Summary: live below your means. Save for retirement.

Thank you for sharing this!

You can talk to your insurance co. but DO NOT file a claim with them! When they ask if you want to start a claim, that sounds like the next step, but say No and file with the other driver's company.

Good.

If you're pretty healthy, and your medical costs are pretty low, think about switching to a high-deductible health plan with an HSA. If you can afford to pay out of pocket for infrequent meds and doctors' visits, your HSA is a super tax-advantaged way to save money. Hang onto your documentation of what you do spend out of pocket because you can get an HSA reimbursement for that at any time in the future with no penalty. I wish I had had this option in my 20s because my medical expenses are a lot higher now.....

Thanks.

Well, I have all the same advice: Save. Budget. Keep close track of your spending for a while so you can see where you spend, and then think about whether you really want to be spending $X on Y. Then keep on keeping track. Pay off debt. There's no secret to it. The thing that messes people up is not that they don't know what to do but that they don't do it. They give in to the temptation to spend more than they have. Deliver yourself from temptation.

Amen.

I usually post longer but got to finish my Sunday column. Get those FAFSAs done folks. 

Thank you so much for today. Love this forum and how helpful folks are. 

I read everything so if I didn't get to your comment or question your work was not in vain. I hear you!

Take care and see you 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 Wednesday and Sunday and is carried in more than 120 newspapers.

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