Color of Money Live: Getting a large refund year after year? You're making a mistake.

Jan 31, 2019

Send in your questions to Washington Post nationally syndicated personal finance columnist Michelle Singletary.

This week, Michelle is joined by Michele Cagan — a CPA, author, and financial mentor.

“Knowledge isn’t power. The right knowledge is power.”

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Thanks for joining me today. I was away getting some much needed vacation time. I had a blast. Went on a jazz cruise. And yes, for my regulars I can splurge!

But it's back to the cold and a topic that makes a lot of people anxious -- budgeting. 

Today's guest is Michele Cagan, a CPA whose book "Budgeting 101" was the Color of Money Book Club pick for Jan. 

So pick her brain about your budgeting issues. 

And of course it's Testimony Thursday. Love to hear your positive financial stories.

Let's get started. 

Is saving with the government via a tax refund poor cash flow management?

Read more: Tax season opened this week. Pack your patience.

Yes, especially if the refund is more than $500. That money could be better used building savings, investing, paying down debt, or freeing up room in a tight budget. And if you're worried about spending it, set up an automatic savings plan for the extra amount you get in every paycheck.

I agree with the other Michele. If you are getting a large refund year after year (I've talked to people who get several thousand dollars back every year) you are giving your money to Uncle Sam to hold with no interest. Why?

It makes no sense if you are deep in debt or when an emergency comes you have to borrow because you don't have an emergency fund. 

If you are not sure or worried about getting your withholdings right meet with a tax professional who can help you get more of your money in your paycheck during the year. 

What is the best way to budget for an upcoming expense? For example, I've had surgery and have lost a lot of weight and am still losing. None of my clothes fit, and I'm just wearing my dresses baggy for now. But, eventually, I'll even out and stop losing and will need basically a whole new wardrobe. I've already planned to buy a whole lot less than I own now. But what is the best way to put aside money now for that future expense? Set up a separate checking account (seems odd for a one-time expense), get a Visa gift card and put a set amount on it every month until I need it (but the fees), put cash in an envelope (but that makes it hard to use online if I need to, other ideas? I have it in my mint budget as a monthly amount to remind me, but I'd still like some tangible way to separate the money. Thank you!

I'm a big fan of pre-saving for purchases. You can set up an interest-earning savings account (online accounts usually offer the highest rates) and put that money to work for you while you're saving it.

Here's where having a "Life Happens Fund" comes in. It's different from your emergency fund, which you only tap if you lose your job or politicians lose their minds and shutdown the gov't. 

The life happens fund is just for expenses like you cite. You stash money in this account for irregular expenses or unexpected costs like auto repairs. Money flows in and out of this account. Set up a goal like $500 to maybe $2,500. So your new wardrobe expenses would go into this account. Build it up until you need the new clothes. Once you've spent the money then build the account back up for other things in life that aren't dire --  jazz cruise, home improvements, etc. 

I made my last car payment today! I say "small" victory because the monthly payment wasn't much, and we could've afforded to pay it off sooner (but chose not to because we weren't getting hit with interest rates and decided we'd rather have that money in savings every month). But regardless, it's finished, and that gives us an extra few dollars to save every month. Perfect timing, too--we're expecting our first child this summer.

Wow. A child and no car payment. Congrats!

You haven't mentioned it lately. But please be extra-careful on the frozen pavement, etc.

You are so sweet to ask. It's better. Still not 100%. And the cold is not helping -- at all! Very sore but still I'm so grateful to be able to walk even if I groan when I take a step. Also, still no heels, which I actually don't miss. Hate heels!

My mom wants to start giving small amounts of money (I'm guessing $30-50 a month) to our 18 month old grandson (her great grandson) on a regular basis. She is concerned that his parents will use the money for their own purposes and doesn't want that to happen. I want to honor her wishes and am not sure how to help her do that. Any suggestions that don't involve spending hundreds of dollars to set up some account?

Related: The perfect baby gift? A small donation to a college fund.

That's so generous! She can set up a custodial account for the baby and name herself (or someone other than a parent) as the custodian. Only the named custodian will be able to access the account before the child turns 18. There's usually no cost to setting up a kid's savings account.

Read the link. One way to leave a legacy is help a kid go to college without debt. Great grandmother can name the child as a beneficiary and maintain ownership of the 529 account. 

I work as a school bus driver, and my salary varies from week to week, and work about 30 hours a week, sometimes less. If I don't work, I don't get paid, whether it's due to school being out, bad weather, a strike, or even a holiday, etc. Approximately, two months out of the year, there is no work because school is out. So how does one budget in a situation such as this?

That's a tricky situation, because it's a little harder to plan for, but budgeting for variable income can work. To start, figure out your income highs and lows for the past year or two - the amount you actually got paid. Then total up your absolute-necessity expenses. If your lowest income covers those expenses, put any extra you get for into savings until you've saved up at least enough to cover your necessary expenses for a month. With that cash cushion in place, you can start giving yourself a steady paycheck. This way, you'll be using money you already have to pay next month's expenses, and you won't get caught short no when your paycheck comes in lower than expected.

Hi Michelle, I have been working on my 2018 taxes and my husband and I owe a lot of money. We even owe on our Maryland taxes, when previously we've always gotten refunds. I have gone over everything with a fine-toothed comb but I'm stumped. Are there tax accountants who will go through an already completed return instead of starting from scratch? Preferably with me sitting beside, observing and asking questions? And I also want a meeting with a financial planner - are there tax accountants who are that as well, or are those going to be separate people? Thanks for any help!

Related: Counting on a tax refund next year? Double-check your withholdings now.

A lot of people are in this situation this year, because the new tax law changed so many things (and even some accountants don't have a great handle on it yet). There are absolutely accountants who will do that with you, and many accountants can also help with financial planning. Find someone you are comfortable with, who answers every question, and gets a good understanding of where you are now financially and where you want to be. 

FYI, I'm a CPA in Maryland and would be happy to help you.

As my guest Michele Cagan mentions you can absolutely meet with a tax professional and get some guidance. Be clear you want to be walked through everything. Ask around for recommendations and interview a few. You set the parameters for the consultation. 

I did my taxes last night and thankfully we're getting almost 5k back due to spending over $25k just in medical. You advised me NOT to prepay for my IVF treatment however I did anyways and that's why we're getting this refund. (we paid cash for it). We do have some cc debt so what's the best plan on attacking that? PS. Had I not repayed the IVF we would have ended up owing money.

Yes, I remember the discussion. If I recall you weren't sure you would need the treatments. But in any case you did what I tell folks all the time. You looked at your individual situation, weighed the advice and made a choice right for you. That's all that I want for you and anyone else who joins this forum. For what it's worth, my husband and I ignored very sound advice from a financial planner. We decided to stay more aggressive in equities than our planner thought we should). That was 10 years ago and because we ignored his advice our portfolios soared. Our planner wasn't wrong. He was looking out for our best interest. We just wanted to take a little bit more risk because we had been WAY too conservative in previous years.

Anyway, I'm glad this worked out for you tax wise. 

If you don't have a decent emergency fund, I suggest you start there before using all the money to pay off the credit card debt. Put away a least a thousand or two. Then take the rest and pay down on the debt. 

What percentage rate of monthly income should Retired Seniors who are single w/o owning a home pay under the new tax law?

That's a really tricky question - and one I've been talking about with my mom. It will be easier to answer after this tax season is over.

Also, the answer really depends a lot on your unique financial situation. You can get an idea by using the free withholding calculator on the IRS website. It will let you know how much to send in estimated taxes. 


For all that have been directly and indirectly impacted, contact your employer's EAP. Often they offer financial planning advice and guidance. Most importantly, EAPs can offer a safe place to vent and work thru this disaster. We were impacted but it was one paycheck for a two-income family. I find myself still angry and upset. I did things to help out but I saw people working and not getting paid, Secret Service agents who protect the presidents and the contractors who won't get back pay have been purposely hurt. I heard that roughly 1 million contractors were impacted plus the 800,000 federal employees. Wow!!! Almost 2 million employees not counting their families. So yes, I am calling EAP. I need some help. I need to work out mentally that 2 million people were used as cannon fodder and my spouse was one of them, plus the numerous family and friends who were harmed. I couldn't help everyone and each one was deserving of help.

Thank you for sharing and suggesting people seek help. My husband was impacted and I'm angry too. We were okay but stressed me out and we had the savings. I know it was awful for people who didn't have any financial reserves. And there's still the threat of another shutdown!

I spent an hour on the phone just waiting to talk to someone at Block because though I bought the app in November, I didn't download the actual software. And the link they sent expired. After more time (computer issues on their end), we eventually got sorted. So, minor victory there. I entered most of the important data, and I am getting a pretty big refund. Yeah! I guess... but there's that zero interest loan I gave the gummint. I did run through the IRSs calculator after the tax bill passed, so I have the number of deductions they say I should have. My situation isn't that complicated, so I'm not sure why my case is so inaccurate. So how do I calculate my deductions when the IRS calculator doesn't cut it?

This year was very confusing for the IRS. They've barely begun to dig into the new tax law, and tax season is already upon them. For tax year 2018, the withholding didn't really match up with the new law, and a lot of people either over- or under-withheld. For 2019, you can decrease your withholding to keep more of your money throughout the year by increasing your deductions. 

Hi Michelle. I started doing my taxes and noticed the removal of personal exemptions. How did I miss this news?! And why aren't more people outraged? I don't understand how taking this away will help anyone with two or more kids, right? Am I missing something?

That change has been really frustrating to a lot of people. But at the same time, the increased standard deduction and child credits seem to make up for those lost exemptions for most taxpayers. 

We've been reporting on the tax changes but like many things people don't start paying attention until that "thing" impact them. In this case when folks start filing out their returns. So the news was out there. 

Because people are just doing their returns you may start to see more outrage as some realize they didn't pay enough and now owe taxes after probably getting refunds for years. 

And the Republicans, which pushed through the tax changes, say you should be thrilled that even tho the personal exemption was taken away higher standard deductions should put you in a better tax situation. Of course that remains to be seen. But we'll know by April 15. 

just wondered but as a general rule, if you would have as much in retirement as you have while working on a monthly basis, are you good to go? Hope so.

Typically, most people need about 75-85% of their working income available to cover their regular expenses in retirement. That said, it never hurts to have more in case of unexpected medical bills, market downturns, or other unforeseeable events that could seriously eat into your nest egg.

I’ve had a Roth IRA for about 12 years that is invested in various mutual funds (through a financial advisor). The return over the 12 years has been about 2.65%. I see a 5-year Roth IRA CD pays around 3.10% and a shorter term CD pays 2.70-2.85%. I’d like to move the IRA to a CD not only for a bit of higher rate, but to save on the financial advisor fee and to avoid market volatility. But are there tax ramifications for selling off the mutual funds to create a cash account to fund the CD? I’m 58 years old and retired, but I do not need this money anytime soon.

Honestly, that's a pretty low return - and I hope it's net of any fund and advisor fees. Money that you don't need for at least 5 years can be in riskier/higher return investments than a CD. Without knowing what your portfolio looks like, it's hard to give the right advice. But I'd say moving your money into a broad market low or no-cost index fund or ETF would be a better choice than a CD. 

As for the tax part, as long as everything stays inside the IRA there's no tax consequence now.

I did see the news of the increase in the standard deduction, but when I itemize, I get that deduction up to 30K. So either way, I'm itemizing. With my family of four, I see it as a HUGE loss as now I'm taxed on nearly 25K more than I was last year. UGH.

Tell your congressional leaders. Those who voted for the changes swore almost everyone would be better off. 

Set up a 529 -- the BEST present

I agree!

You could start selling off your old clothing to raise money for new clothes! You can take them to consignment stores or use one of the online clothing sales websites like Poshmark to sell directly to buyers.

Good idea.

Great suggestion to the bus. My main income is from book royalties which come twice a year. The amount is always completely unknown. The idea of budgeting and then paying myself is a great solution. Thanks

Glad we could help in bringing clarity to folks with irregular income. I find the key is to set up the base savings as soon as you can. And it requires A LOT of discipline in the months were you earn more. When you get the larger checks sweep the "extra" money into what I call the "sweep savings account." Then you pull from this account in the lower-earning months to cover your expenses.  But it means doing your best to keep your expenses consistent so you don't fall short. 

Dear Michelle, What are you thoughts on an adult child billing the parent's estate for serving as the executor? Estate of about $300K, three adult kids (all in good finances themselves). Executor works full-time. Will hire CPA to do taxes and will use parent's lawyer for probate, but has to spend time closing down all accounts, selling property, etc. What rate can executor use if they do bill the estate? Thanks.

Many states have stipulations on how much executor/personal representative can earn managing an estate.  So please consult an attorney or your state law.

But I will caution, talk it out with the other heirs. Although it may be your right you don't want any hard feelings. My husband is the personal representative for his father's estate. It's been a very nasty battle. (Can't say more because don't want to be sued!). He decided to not take a fee even though he's entitled to one. And he's been in dragged into court numerous times. He just didn't want another battle. 

Can you aim me at a good withholding calculator? The ones I've found, even the IRS, really don't cover situations well. I do my own taxes with H&RBlock software, so don't have a CPA on call. Thanks

For tax year 2018, all of the withholding calculators were out of whack because of the new tax law. This year's should be more accurate and have the kinks worked out. And since most just base theirs on the IRS calculator, that's really the best one to use - once they fix it to reflect the new law, that is.

In the mean time, you can make adjustments based on your refund (or the amount you have to pay) this year. If you got a huge refund, decrease your withholding; if you had to pay, increase it. You can change your withholding at any time during the year, and as many times as you want, so you're not locked in.

Afternoon Michelle & Michele - I have an airline credit card with a limit of $14,900. I initially got it for the rewards (ended up getting a free flight from the sign-up bonus) but now I'm finding it not as useful as my usual travel rewards credit card, and since it has an annual fee I want to cancel it. I am also an authorized user on a card of my parent's with a $15,000 limit. Although they pay off their balance in full every month, they usually get close to 25% usage every month, dragging my credit score down. Will my score take a big hit if I close two accounts that account for over half of my available credit? Is it worth it to keep myself on my parents account for the extra available credit despite their "high" spending? For a frame of reference, I have a 775+ credit score (though it'll swing 25 points based on my parent's spending), and I use less than 8% of my available credit on any one card in a month.

First, good for you! It's great that you're being so proactive about your credit score and credit usage. When you cancel the cards, your score may take a small, temporary hit, but it should rebound within a month.

I agree with Michele. With such a high score you can probably afford to close the cards you don't want as long as you aren't carrying a balance month-to-month on any other cards. As for the parent card just have them remove you as an authorize user.

My son received his undergraduate degree 2 years ago. Due to personal issues, he is not pursuing a job in his field; rather, he is working for an excellent company but still, it is a blue collar/retail job. Which means hardly any paid time off and a lower hourly rate. He lives out of state and is (mostly) self supporting, although we pay his car insurance. My educated guess is he has enough savings to cover his monthly expenses for about 3 months. He will have a review soon at work, with probably a very modest hourly raise. My husband and I are torn - he is 24 and just starting out and has dealt with some mental health issues, and we know some parents help pay for bigger ticket items like car insurance. But we also feel if he has to cover all his expenses then that reality would that spur him to look for a better paying job (although, the concern is does this come at a cost to his mental health). Our thought was that we'd ask him to contribute $50 a month toward car insurance for the next year, so he can get in the habit of including this in his budget. We'd appreciate any advice!

You may be surprised at my answer. I think you are doing the right thing giving support to a child with some challenges. And I think you should talk to him about how much of the insurance he can handle. It may be $50 or even $100.

Sounds like he's tracking nicely to be fully responsible for his expenses so if you can afford to continue helping him I see no problem in that. Yes, he might be able to be more aggressive in getting a better job but if he's stable having had some mental health issues you don't want the stress of starting another job set him back.

The good thing is you can take this slow. Again if you can afford to help him. 

As the parent of a teenager and two 20 somethings, my husband and I are committed to helping them ease into adulthood. We are still covering expenses and don't mind doing so as long as the kids are productive, during their best and we can afford to help. 

Good luck!

How do you stick to a budget, once you've created one?

You make the budget stick to you. Budgets have to reflect how you live and what you want. If you're having a hard time following a specific budget, it may not be right for you. 

If you're asking how to you make yourself stop spending money on things you don't need, that takes time to get used to if you haven't done it before. Start by putting up spending barriers wherever you can, to make it harder to spend money. For example, get rid of things like Apple Pay  or Amazon Prime (at least until you're spending money the way you want to). Delete your saved credit card info from every website you shop on - typing in the card number gives you extra time to think about what you're buying. And try to shop for necessities (like groceries) with a list and cash instead of credit cards so you don't end up buying more than you meant to.

For the past 3-4 years, I've used a CPA for taxes. I was married then (divorced now) and owned my own business and he had disability income, social security income, military retirement income.. i was confusing. Anyway, this is the first year I am doing my own taxes in 15 years. Is there any reason to think I can't do it myself with TurboTax? Nothing too complex but I am in the top 3% of earners and worried about being audited. Any advice?

You can do it! Even if you did get audited (which is much more rare than most people think), it's easier to deal with the IRS than you'd think. Most of the time it's just done on paper, and it's usually about honest mistakes - which tax software helps avoid. And if, by chance, you do get called in (seriously unlikely), you can always bring a CPA with you then.

Welcome back, Michelle! Earlier this month you asked what we could have done better in 2018, and I must admit I fell $1700 short of my saving goal for the year. Then the shutdown came, and I thankfully had enough in my emergency fund but when it looked like no end was in sight, I was wishing I had that extra 1700! This chat is timely, as I think I need a budget for 2019 to make sure I stay on goal!

Glad this is helping.

"Tell your congressional leaders. Those who voted for the changes swore almost everyone would be better off. " Remember, you have a lot of DC residents here. We didn't vote for them, they won't take our calls or emails, yet they have screwed us over along with the rest of you.

Very true. And I'm so sorry you don't have full representation. 

I have an additional question. How do I go about finding a trusted financial planner? I recently completed my doctorate and my post-doctoral fellowship. Currently, I'm a contractor with irregular income, so I cannot afford much and have not started saving for retirement. I would like to talk to someone to plan my finances and discuss saving for my retirement... Any tips for finding someone to assist me in this process? Thank you so much!

This sounds like you just need a consultation to get things rolling, rather than someone to handle your finances. Look for someone with a CFP or CPA certification to start. Make sure you know their hourly fee up front so there are no surprises. And if they make you feel even the tiniest bit uncomfortable or unheard, leave. 

FYI, that is something I'd be happy to help you with.

My husband unexpectedly came into some money. After putting enough aside to cover the estimated taxes, we will be able to pay off our credit card debt and have about $5,000 left over. We're wondering if we should bolster our meager emergency fund, put it towards our student loans (we are both pursuing PSLF forgiveness), or whether an IRA would make sense (we are in our early 30s and contribute substantially to our workplace retirement plans but have limited additional retirement savings). Any advice would be appreciated.

With so many glitches in the PSLF forgiveness system, I'd pay down the student loan debt, or at least a big chunk of it. Maybe put about 3/5 toward the debt, and split the rest between beefing up your emergency savings and funding a Roth IRA.

Michelle, I've just lost my job. I have about six months salary in the bank and will have about three months worth of severance, and my spouse is still working (she brings in about a third of our income). If I get another job quickly it won't make a huge difference to our budget, so we don't feel the need to make radical changes this week. But there's always the possibility it will take me a while longer. Do you have any advice about "quick" budgeting steps to take (e.g. no more date nights) that won't mean drastic changes, or advice about when we really do have to cut to the bone? Thanks.

Related: When unemployment looms: What to do before and after losing your job

I'm so sorry to hear that - it's really tough. For right now, cutting back in easy places (like canceling cable if you really mostly use Netflix), canceling gym memberships you don't use, and other autopilot expenses like that will add money to your budget without affecting your life. The next step after than would be cutting back on "wants," like date nights, take out, vacations, and things like that. 

If you get to a point where money is tight - and I really hope that doesn't happen - it may be easier to find ways to bring in more money than to cut back on already bare bones expenses. 

When you lose your job it's hard to cut back right away. But you should so that you prepare yourself if it takes longer to find another job. 

And hoard cash. If you're on an aggressive debt reduction plan, put it on hold. For now only make the minimum payments so that you can stockpile cash.

Really comb through your budget to cut every non essential expense. If you find work soon then you can add back things. 

Good luck with the job search.

I've long done my own taxes, using TurboTax. For the last while we've been in Alaska, with no state income tax. This year I took up residence in Michigan, so will have state tax there, and have earned income in North Carolina, meaning I'll have to file a non-resident return there. Any special surprises I should be watching out for?

One surprise - Turbo Tax charges extra for multiple state filing, so be ready for that. 

As long as you've been paying withholding tax or making estimated tax payments in Michigan, you shouldn't have any big issues.

our accountant is retiring. so for the first time in ten years we are both retired s0 doing our own taxes should not be impossible. any suggestions on tax program to buy?

Before you buy software, see if you qualify for free tax software by checking on the IRS website. Most of the big-name programs are pretty similar, so it depends on which you like best. They all offer some level of support, including talking with a person. With H&R Block, you can go into one of their branches and talk with someone face to face (though I think they charge a small fee for that - not sure). 

Personally, I use Turbo Tax.

I have a 0% loan for some furniture that I could pay off with my tax return, but am considering putting that tax return in savings and just making the minimum payments for the next 18 months b/c my wife is due with our 2nd kid soon and will be out of work. We will have to dip into our savings for at least 3 months after kiddo #2 comes and while our savings are in the 3-6 month threshold, an extra $2k in savings gives me a warm and fuzzy feeling. What do you say Michelle?

As long as you know for sure you can pay off the furniture in 18 months, sure keep the savings because you may need the money in case your wife or you decides you need more time home with the baby. 

But it's a reminder that sometimes it's not a no-brainer to take those 0% offers. Many people expect they can pay if off before the offer expires but then life -- or a baby -- happens. 

Hi Michelle! I wrote in a few months ago about how to get back on track after having our baby. My husband and I had a hard look at our budget and found $1100, ELEVEN HUNDRED in our budget. We were shocked to say the least. We thought we'd find a few hundred. We know have a monthly money date once the baby goes to bed, at the end of the month to review our spending for the month, talk about what we did well, what we need to work on, and our goals for the next month. The only debt right now we have is our mortgage, but we have a lot of goals that once felt unreachable. So being purposeful about what to do with this "found" money and knowing those goals are actually attainable if we cut out the mindless spending, has been a huge relief.

So proud of you!!!!

Just wanted to make a comment. For those persons and companies that have shown us / me empathy, compassion, understanding, and support during these very stressful and unanticipated times during the furlough -- kudos and many, many thanks... For those that have not and kept it 'business as usual' -- I assure you, I will not be working with you and / or your company in the near future. Thankfully, these have been few and far between, but definitely noted on the "NOT" list. Thanks

Related: Affected by the shutdown? Give your bank a call to see if it can help.

Yup. I agree with you.

Hi, Due to the loss of our home to disaster, acquiring our necessities and medical bills, debt is now a major factor in our budget. What percentage of our take home pay should be allotted to pay it off? Thanks, Kim

Kim, I'm so sorry to hear about your troubles, and hope things are going better now. To get out from under that debt - especially if it's high interest credit card debt - throw everything you can at it every month. That may tighten your budget right now, but it will greatly benefit your overall financial picture. You'll pay less interest over monthly and over time, and that's a win for your family finances.

How do you monitor expenses within a month? Do you recalculate the budget each month?

The easiest way to monitor your expenses within a month is by using an app like Mint or YNAB. Your budget is a framework for your spending, and it needs to be flexible, especially for expenses that may change from month to month like gas and food. Your fixed expenses will be the same every month, which makes them much easier to track. 

I work with one of the women profiled in this article. It is truly tragic. Parents, one of the best gifts you can give your children is the opportunity to graduate from college loan-free!

Related: How we sent our children to college debt-free

Totally agree. We stopped at three kids because that's all we could afford! 

How do I know when i have enough to 'retire' and give up that regular paycheck?

It's sort of impossible to "know" for sure, but a good rule of thumb is that you have enough to cover 85% of your pre-retirement income until you're 85 years old. That includes any money your investments/savings are generating, and would continue to generate over that time.

My husband was laid off in December 2017 after 32 years with a major federal contractor with only 8 weeks of severance. In April he decided to start his own consulting firm and has been working pretty much full time. Thankfully we had savings so we were going to be ok for awhile. Now he has a consulting gig that will keep him working for the next three years right up to retirement. He is earning 50% more and working 50% less than his old job. We know we are very lucky.

When one door closes often another is open. Glad it worked out for you and your husband.

I'm expecting a considerable sum of cash from the sale of my property. I haven't quite figured out what to do with it. Before I dip into it and spend it on something unplanned, would it be prudent to open an index fund account and let the money sit there until I'm ready to use it. I haven't handled this much money in all of my life so I'm a bit overwhelmed. I am quite risk averse, but wanted a better and safer return on my money than a savings account.

Congratulations on your windfall! A quick note: investing your money isn't safer than savings, but the earnings potential is much higher with investing. For short term, investing may not make sense because your money wouldn't have enough time to recover from a downturn. If you think you'll be invested for at least a year, a no-fee broad market index fund is a good idea - but remember it could lose value. Maybe split your money between an online savings account (they almost always offer higher rates) and an investment account (as long as you plan to leave the money there for at least a year). 

Thank you, Michelle! We are able to afford helping him and are happy to do so. He works hard, 40 hours a week, and pays off his credit card in full every month, so I like your advice to take it slow to help these young adults ease their way into adulthood. :-)

Glad to help. Parenting and the help doesn't stop when they turn 18. As long as your young adult is doing his or her best, I think it's okay to be there for financial support. 

I was part of the most recent government shutdown and wanted to say THANK YOU for being the voice in the back of my mind for the last few years that encouraged me to be prepared for situations just like this. I am very thankful to have gotten through relatively unscathed, thanks exclusively to my savings. I started reading your work after just graduating and starting my first salaried job and as much as I wanted to splurge, you convinced me that beyond my emergency fund I needed a Life Happens fund, something I had never heard of before. Ironically, I left that job for a “more secure” government job and was tempted to spend down some of my emergency fund because I was so sure that I was living with less risk now. On the day of my first missed paycheck, I had to take my beloved pet to an emergency vet visit and my car wouldn’t start. Thanks to my Life Happens fund, I didn’t have to hesitate about taking my pup to the vet or getting my car repaired. When I missed a second paycheck, I was blessedly still able to cover my rent and bills from my emergency fund. I will never again second guess the money I’ve saved, and now that I’ve received backpay, I’ve replenshed both funds immediately! Thank you for all the encouragement the last few years! Wouldn’t have done it without you.

Great place to end the chat today. I so appreciate your feedback. I know a lot of people living paycheck to paycheck don't earn a lot so it's hard to save but glad that you had the resources and took steps to prepare for a time when your income was disrupted. 

I pushed. But you acted. Good for you!

Got to run but thank you all for joining me today. And thanks to Michele Cagan and all her budgeting advice.

I'm so sorry if we didn't get to your question but I read everything. I may address your question in an upcoming column or please 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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Michele Cagan
Michele Cagan is a CPA, author, and financial mentor. With more than 20 years of experience, she offers unique insights into personal financial planning, from breaking out of debt and minimizing taxes, to maximizing income and building wealth.
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