Color of Money Live: 'Be bold enough to live your financial truth'

Jun 27, 2019

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

This week, Michelle is joined by Jean Chatzky who is the finance editor for NBC's Today show. Chatzky is the author of Women with Money, which is the book club selection this month.

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

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Read & share Michelle Singletary’s Color of Money Column on Wednesdays and Sundays: https://wapo.st/michelle-singletary

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So glad you could join me today. And I have a great guest.

Jean Chatzky of HerMoney.com and financial expert for NBC's Today Show has joined me to talk about her new book "Women with Money." 

Jean's brilliant about this money stuff so ask away.

And, as always, love your Thursday Testimonies. 

Let's get started. 

My company just started offering a Roth 401k in addition to the traditional 401k. I already participate in the 401k, plus I max out my Roth IRA contributions. Is it worth signing up for the Roth 401k too?

It may be -- it can be very useful to have both a pre-tax and post-tax bucket of money in retirement.  In general, the more you think your tax rate will be higher later -- either because you'll be earning more or you think that tax rates will just rise -- the more it make sense to put money in a Roth.  That's why Roths are generally advantageous for younger people.  Good luck!

We were blindsided by our taxes last year so I need to find a good CPA. I asked around, but no one I know uses a CPA! How do I find a reputable CPA with fair pricing?

I think many people were! Try the AICPA -- that's the association of CPAs.  They can often lead you in the right direction.  Or, look for an Enrolled Agent.  They're personal tax specialists who often have experience working for the IRS in the past.  And there's a National Association of Enrolled Agents, too. 

I have a Life Happens/Emergency Fund, it's about 35% of my annual salary. I have one account for both. Is there a reason to separate them and what would the breakdown look like? I've taken your advice to heart over the years: I have no debt and bought my now 9 year-old car with cash and plan to run it into the ground. Thanks for looking out for all of us!

I love pots but if the one pot for emergency fund and life happens fund is working for you no need to change. I often recommend separate accounts for people who might be tempted to spend when they shouldn't and having their emergency fund off into an account they don't use often helps put a stop to tapping it. 

My sister is 60 and not in good health. She may be about to lose her job and wants me to help her see if she can retire. I will suggest she find a fee-only financial planner, but want to help her get her papers in order before then. What questions can I ask that will help her? What documentation will she need for the planner?

 That's really nice of you to help her!  To get organized, she'll need to be able to ballpark what she'll have coming in today and in the future -- as well as what she'll need in the future.  She'll need her Social Security statement (which she can get online), brokerage account statements, bank account statements on the assets and income side.  And on the outflows side, she should look at what her current expenses look like -- including whether or not she still has a mortgage, what her healthcare expenses look like (covered vs. not), etc.  Basically, you want the planner to see what money she has to work with and how to make that amount of money last as long as she does.  Lots of luck!

Jean is so right. And to help organize all the information help her prepare a net worth statement, which is a list of all her assets and all her liabilities. This one on sheet you can see everything. Start with the assets -- what she was in her bank accounts (saving and checking), retirement accounts as Jean mentioned, value of a home is he has one, value of her car, household items, etc. Then on the liability side, mortgage, any home equity loan, credit card debt, retirement loan, etc. 

Then she should prepare what I call the "debt dash." List all her debts. I like started with the smallest debt. Include current amount, interest rates and monthly payment. 

Just be sure she has a good command of all her numbers which will help the meeting go quicker and reduce the cost if there is an hourly fee. 

There are always critics about why write a money book just for women. So can you address why it was important for you to write "Women with Money?"

I hear those critics too -- but I've been in many rooms with just women and many with women and men.  And what I can tell you was that in the women-only rooms, women feel much freer to talk, to ask their questions, to really get at the financial issues that are on their minds.  It's more open and more honest and they receive the information more fully -- it makes more of an impact.  I wanted to capture that experience in my book.

 

I've never been tempted to buy bitcoin, but if I had, the recent price surge would have made me even more skeptical: Remember, if the price of an asset goes up, that makes it a worse investment than if it hadn't gone up. For stocks, there's often a good reason for a price increase, such as information about unexpectedly high profits or a new product. But for bitcoin, a surge in price is just speculation, so a higher price suggests to me a higher probability of future losses.

 

Read Michelle's column: I don’t care how high the price for bitcoin gets, it’s still too risky for the average investor

Exactly. Getting in now means coming in high like buying retail and not waiting for the sale. 

Michelle thank you for doing what you do. My husband and I have always worked at budgeting and paying our debt off early. Three of four student loans down and a little bit of a car payment left. We also have a healthy life happens fund and emergency fund and have been contributing well to our retirement funds. We had an unexpected event happen and are looking at getting a fair chunk of change. Not quit your jobs chunk of change, but definitely will have early financial freedom chunk of change. We want to find a financial advisor who can help us manage this all. I've screened a number of people I found on the NAPFA website using their list of questions and some of my own (thank you for mentioning them often) and we want to do second meetings with two of them. Are there questions you recommend asking to help figure out which one is the right fit?

 

Read Michelle's column: It’s still crucial to budget, even when your money meets your needs

I'm sure Michelle will weigh in on this as well -- but my questions include how much this relationship will cost you per year (in dollars so you can compare apples to apples), how long they've been practicing (I like 5 years), are they a fiduciary (yes, please).  Then my litmus test is do they listen more than they talk.  They need to get a grip in that first meeting on your goals, your wishes, your fears.  If they're selling they're not for me -- and I'd expect not for you

Jean pretty much covered all the questions I would ask too. I'll add this. If they come with some prepared plan that is not the person for you. Also, ask if they have to work in your "best interest." That's key, meaning that have to really work to make sure what they recommend suits you and not just be "suitable." 

Why should we all -- not just women -- ask ourselves: What Do I Want from My Money?

Why start there as you do in the book? 

Because we all work really hard for our money and all too often just go through life using it...unconsciously.  In my mind money is a limited resource.  We'll all be best off if we are making conscious choices about what we want our money to do for us and then using our resources to make that happen.  So, I always start there.

Michelle, I'm middle aged, likely 15-20 years from retirement. I have a nice, large house that I like and can easily afford in a good neighborhood close to work. But every now and again, I think about how much easier a smaller condo would be. And it would save me so much money on a monthly basis. But then I look at the overall costs, and realize it will take me about 5 years to recoup the transaction costs (transfer taxes, real estate fees, moving fees, etc), even with the reduced mortgage. SO how does one go about trying to figure out how to make a decision like this?

I'd look at this in a few ways...and hope Michelle will weigh in too.  First, from a strictly financial perspective.  If you move, would you stay in the new place longer than 5 years?  If so, then that's one in the yes column.  Second, from a life perspective.  You say you like your nice large house and your neighborhood -- but that it would be easier to downsize.  Can you get more specific.  What would be different if you downsized? Would your commute be the same? Would it be better? Would you have more free time because you didn't have to take care of the lawn or the housework?  On the flip side, would you miss entertaining in that big house? Would guests have to stay in an AirBnb? A legal pad analysis can be great.  Finally, there's an opportunity cost perspective? If you didn't have the big expensive house what would you be able to do that you aren't doing now?  Good luck!

Great questions from Jean. One thing to also consider. How well can you age in the bigger home? Right now I'm wishing we had a home with a first-floor bedroom. And my husband and I are considering if we should move to something that would be more manageable as we age. Just keep that in mind as well. 

I bought a home two years ago with a fixed rate at 4.675%. Rate are clearly better now, but is it worth waiting to see if they continue to drop?

I don't believe in timing interest rates just like I don't believe in trying to time the market.  If the current rates make it worth a refi I'd do it, knowing that mortgage rates often move ahead of the market anyway.  If it's the Fed's next move that you're waiting for, it's already priced in. 

Also consider you can reduce the interest you pay not just through a refinance if that's the primary reason you want to do want. You can make principal payments and reduce the length of your loan accomplishing the same thing as a refi and not incur the expense fo refinancing. 

Re last week's chat about weddings, having a fun, attractive wedding/reception and spending wisely, are not mutually exclusive. I was my sister's maid of honor, and she didn't have money for it from our parents, nor much of her own. Luckily, she can sew, and made her own beautiful wedding gown. She had her bridesmaids pick dresses from a wedding shop, but, whatever they wanted as long as it was a certain color. She bought silk flowers on sale at various craft stores and made her own arrangements and bouquets. I used Craigslist and found a recent graduate with a photography degree who was looking for jobs to build up his portfolio. He took incredible photos for next to nothing, used them on his new website, and it now charging MUCH more for his services. On Craigslist I also found a woman in WV (we live in MD in the DC area) who baked cakes, and wanted to enter the wedding market. For $100 total, she made a separate trip here to bring samples; baked a three layer cake with each layer a different flavor (it was delicious); and delivered the cake to the wedding venue. For wedding favors I scoured Ebay and found beautifully packaged flower seed packets that were personalized with the bride and groom's names. A friend who used to be a professional party DJ handled the reception music, using a sound system borrowed from a friend who was an audiophile. Not everyone's experience is going to be identical, but, everyone will have their own set of desires, contacts, and skills, that they can call on. It's a matter of whether or not you're willing to put the effort into what you want, instead of paying someone else more for it.

Read Michelle's column: Your maid of honor is not made of cash

Wow! Sounds like you could be a wedding planner. 

I am appalled that the bachelor/bachelorette parties of yore have turned into out of town trips over multiple days, etc. This is part of the wedding-industrial complex that has mushroomed, particularly in recent years. I am glad I was married before all this got out of hand. (and get off my lawn!)

Look, if you and your people can afford these trips have at it. But the reality is many who go don't really have the money. They are going along to get along. But the power to say "no" rest with you. Be bold enough to live your financial truth. If you can't afford to be in a wedding or trace around to all the parties, just say with love, "No."

In the book you have a chapter called "Getting Paid What You're Worth . . Plus Tax."

Where do women go wrong in getting paid what they are worth? 

I just interviewed a woman for my podcast who -- again -- pointed out the fact that women don't even apply for jobs where we don't believe we have every single criteria the employer is requesting.  Men, on the other hand, are not shy about throwing their hat in the ring when they feel they're somewhat qualified.  In other words, we hold ourselves back when we do this.  Simultaneously, women are much less likely to negotiate for salary at all.  Do your homework.  Figure out what the job is worth.  Then ask for a number on the high side of that range -- and do so unapologetically!  PS: Michelle was a guest on my podcast recently.  You can hear her here: https://www.hermoney.com/borrow/credit-scores/hermoney-podcast-achieving-the-perfect-credit-score-when-2-personal-finance-experts-walk-into-a-booth-episode-124/

What a great answer. There were times in my career that I initially hesitated to ask for what I thought I was worth. But each time I got over that fear, I got what I asked for. 

Michelle thanks for saying that about making principal payments instead of refinancing! I am three more years till I pay off my 30 year mortgage... I will have paid it off in 9 years, by making additional principal payments each month!

That is wonderful!!!! My husband and I make monthly principal payments because we want so bad to get this monkey off our backs. There were times early in our careers and with young children we could only make an occasional principal payment. But now, with the monthly we are knocking off that debt and it feels good. Still have about 8 years to go but I want to try and get it to four. I HATE debt. So believe you and me when we pay it off you will hear me SCREAM! 

I urge you to stay in your well-compensated job rather than taking a substantial pay cut to spend an extra ninety minutes a day with your daughter. By the time she is all or 12, if she is like most tweens, she won't want to spend any time with you unless you are taking her to a friend's house! And, it may be difficult for you to even find a job in your local community, as you may be considered "overqualified." I worked crazy hours with a 50 mile round trip commute to DC for 30 years, and one of the jobs required extensive travel, so I first suggest that you look carefully in how you are spending the time that you do have with your daughter. We ate dinner by candlelight in the dining room virtually every night. That made every night special and we would linger after dinner to talk. Or, if I really had to get moving, I'd invite her to sit on the countertop while I loaded the dishwasher. In other words, be present when you are together. Secondly, life is long. Sending our daughter to private school from 7th grade through college; having her graduate with no student debt; hosting a relatively expensive wedding; providing a substantial amount toward the down payment on their first house; and, providing generously for our grandchildren's' education and future all required money. And, certainly don't discount the value of a comfortable retirement income. Please consider more than just your and your daughter's current emotions.

You offer some good advice and reasoning behind keeping a job. But I disagree that it's clear cut that the mother doesn't move into a job that gives her more time with her kid.

It's more than just the 90 minutes. It's about being more present and not tired from a long commute or job that sucks the life out of you. 

Plus, you can never get back those early years when they do love being under you. If I had to do it over, I would have been a stay at home mom. And by the way it's the teens years that you really need to be present because that's when things really get scary for them. I'm so very fortunate to be able to work from home so I was here when they got home from school. I knew where they were because I knew exactly how long it took to walk from the bus stop to home. I was here when their friends were hear and could listen in to spot trouble. 

Time with your kids -- any amount -- is well worth it if you can manage to live on less, still save, etc. 

I have never understood why some people think that they may have the same or higher tax rate in retirement. Even with a pension, social security and 401K withdrawls, my retirement income will be still be only 2/3 of my full salary. So for my case, I will be in a much lower tax bracket in retirement (12% instead of 22%).

Some people save so well that they will actually replace their entire salaries in retirement.  Others are just convinced tax rates will continue to go up, up, up! 

I actually get your point. Here's the thing. Don't stress so much over ROTH, IRA vs. 401 (k), etc. The point is to save. And really the IRS will get their money on the front end or back. Now, certainly try to minimize your tax hit but for us ROTH didn't make sense because we needed more of our money now to save for our kids' college funds. We figured we will pretty much be in the same tax bracket in retirement as we are now. So we opted to shelter more money now when we needed it more. 

The decision should be individual but whatever you do don't be paralyzed about what to do that you don't do anything or not enough. 

More a reminder to your readers rather than a question - I’m on the phone with my HR benefits department now because I noticed I am getting shorted on my pretax benefit for transportation reimbursements. The vendor that operates our program has been unresponsive and our HR benefits department put me in a constant loop insisting that I had to wait to talk to the vendor (which won’t respond to emails or phone calls, and whose hotline says operators are constantly busy and then disconnects you). I insisted on escalating the issue and speaking to someone in our HR department. Now they are working on it but are also confused and no one is sure why I can’t access funds I am supposed to have. We will work this out, but remember to check your pay stubs and reimbursements and deductions!

And credit card statements...and social security statements...and everything else.  I am always surprised by people who trust the system to take care of their money without making mistakes.  Mistakes happen.  You can get them remedied, but it's up to you to pay enough attention to notice them!  Thanks for the reminder!!

My husband likes his job and since we get health insurance through him, he plans on working until 65 when we will be on Medicare (a little over 10 years from now). My job is fine, but I would like to cut down my hours, and financially we'll be able to do that in the next year or so. My question is, if I'm thinking of early retirement, does your book address the questions (financial, and other) to help me plan for retirement. Or is it better for me to retire closer to when my husband retires?

Boy oh boy -- are you smart to realize this is not a financial question.  At least, it's not solely a financial question.  My husband retired from his job of almost 20 years about a year ago and is working part time.  I'm still going full time (he'd argue I work more than that) and it's been a big shift in our life.  All good, but definitely a shift.  I think you both need to talk about what life will look like day to day if you're retired and he's not.  How will things change?  How will you both feel about that?  Financially it sounds like you're set, but you're really smart to explore the other stuff too. 

I just wanted to say that I really enjoyed the book, and love that it is geared to women - we are different then men, it's nice to have a personal finance book geared towards us. Although I have been running my family's household for over twenty years (I love budgeting and my hubbie doesn't), I still found a lot of good material that made me reevaluate where our spending is going.

Thank you so much!! I'm glad you found it helpful!

I would also argue it's a good book for men. It's helpful to understand our fears, frustrations, etc. 

My late husband had a work relationship with a financial advisor that i continued after his death. Now, over 10 years down the road, I realize that this was not good for my financial health. All he did was push annuities. What he should have done was push me to buy a house rather than pay rent. At the time, I was in shock (it was sudden) and I was in the stuck phase of inertia. Now, I worry about running out of money before I do.

It is not too late for you to find a financial advisor that YOU like and trust and who you feel actually HEARS you.  I think we need to be able to be as open and honest with our advisors as we are with our gynecologists.  And I expect the same from them.  Don't give up/1

Yes, please don't give up. And if the annuities aren't overpriced you'll at least have some steady income from them. Also, it's not true that you "should" have bought a home. I tell people all the time you are not a financial failure if you rent. Renting has its advantages. Besides talk to anyone with a home and they will likely admit it can be a money pit. 

 

I have been a SAHM most of my adult life, and will not accumulate enough SS credits to get any benefits. If my husband dies before me, will I receive the benefits he would have gotten? Does it make a difference whether he dies before or after he starts drawing SS benefits?

Hi -- I know this worry.  Have heard it many times before.  You'll be eligible for 100% of his benefits -- and it doesn't make a difference whether he dies before or after he starts.  It's more a matter of your age.  You can start as early as age 60.  

Just to add, if you've been married to the person for 10 years and you divorce and don't remarry you are still entitled to Social Security off your ex-spouse's work record. 

Is there an online video lecture series specifically aimed at women who do not have a financial background, but are well educated, to quickly learned how to invest on stocks, etc.?

Hi -- I don't have an online lecture series, but we do publish a lot of content at my website, HerMoney.com that answers these questions specifically.  I hope you'll check it out! 

And of course at the Post we have a wealth of information about investing. Just search our database.

If a retiree is lucky enough to have a decent pension and not rely too heavily on an IRA, how does that affect the split between stocks and bonds on the IRA? Most advice seems to be centered on those who rely heavily on the IRA during retirement.

Lucky is right! The pension is guaranteed money so it represents money that you don't have to take investment risk in order to get.  The more you have (and the more of your monthly nut that money covers) the less you have to stretch for returns in your investment portfolio and the safer (i.e. less stocks, more bonds) a stance you can opt for.  That said, look very carefully and what your growing needs for income are likely to be particularly in the latter years of retirement when healthcare costs and long-term care costs tend to escalate.  You need growth and inflation protection to cover you for those.

We received an inheritance where the cost basis is reset as of the date our family member died. So basically, we do not owe tax on this money. We'd like to talk to someone to help us plan how to use this money but are unsure where to start. Our mortgage balance is about $40K, and we owe about $40K in other loans. I'm thinking we should pay all that off and then talk to some kind of advisor. Any advice is appreciated.

I'd talk to the advisor before you pay off your mortgage and other loans.  There may be moves that make more sense.  And once you repay that money, there's no getting it back.  But be careful that you're talking to a holistic financial advisor -- someone who will look at your whole financial picture including your long-term goals, housing, taxes, educational plans, AND retirement rather than just retirement.  I know Michelle recommends finding someone through NAPFA.  That's a great source.

I agree with Jean. Look at your entire financial picture before paying off any debts. BUT ... if you are on track for retirement or other goals like sending kids to college debt-free, you know I'm ALL in in getting as many debt monkeys off your back. For me, especially when it comes to a mortgage, the biggest expense you probably have is housing. So if you can go into retirement reducing that expense to just taxes and insurance you can manage your retirement income better. You don't want to be house rich and cash poor but don't drag a mortgage into retirement if you don't have to. 

What is the best way to draw down retirement funds from both taxable and non taxable accounts ? Taxable represents about 60 % 401(k) and IRAs represent abut 40 % of total retirement assets.

Entering retirement is one of those times I feel like an appointment with a financial advisor is a MUST.  That's because the question of withdrawing money in retirement -- and making it last -- is just as important, and some people might say even more complicated, than saving for retirement in the first place.  Even if you don't want someone on the permanent payroll, seeing someone for a check up of sorts makes all the sense in the world.

I've often read guidance that you should save 20% of your income, but is the 20% just for cash savings? We have a 6 month emergency fund and a life happens fund but don't contribute monthly. We do max out both of our 401k accounts, I have a second retirement account, we max out our daughter's 529 plan, and we both contribute to our companies' stock purchase plans. Is that enough or should we make it a point to find the 10 or 20% in our budget to save more cash each month?

In my book, that 20% includes everything: Retirement, 529 and emergencies.   That said, no matter how much you're saving sometimes life happens so I always feel that in the years where you're flush enough to put away a little extra, it's a good idea -- because then in the years when you can't hit that 20% you won't feel bad about it. 

Wow. You are doing better than most. For me the target is different for everyone. Rather than percentage target look at your needs. If you have fairly secure jobs you six months of emergency money could be just enough. However, if you are a highly compensated individual and it might take you longer to find a job to replace that high income you might need 12 to 18 months of living expenses in your emergency fund. If you have a junker of a car on it's last leg, your life happens fund might need to have enough to buy another car. Make sure you are on track with saving for retirement. When you say you are maxing our the college fund does that mean you have enough to pay cash for college with not loans? That figure isn't a percentage is a check on where your can will go. For us, it was state schools all the way baby. That's all we could afford to save for AND continue to save well for retirement. You see, aim for real numbers to know if you're saving enough. But if you are, I agree with Jean. Stock pile it in the life happens fund.  

So after I've set aside an emergency fund and life happens fund, where am I supposed to keep the rest of my savings? I max out a Roth IRA every year (not eligible for a 401k). I'm a grad student and have pretty decent extra savings from a job before grad school (~20k), at least for my age and peers! I know I'll have expenses in the future, probably 5+ years from now - maybe a wedding, house down payment, moving/relocation expenses, potentially childcare costs. I know this is the best kind of problem to have.

The answer depends on when you expect you'll need the money.  If you'll need it around 5 years I'd keep it liquid and safe -- i.e. in a high interest rate savings account.  Look at Bankrate.com for a list of the best paying accounts on a regular basis.  If your window is more than 5 years, I'd feel comfortable investing that money because if the market does dip you should have sufficient time to recover.    That you can do with a brokerage account, just not a tax-advantaged one.   My last question: Do you have an HSA (health savings account?). If so, making sure you fully fund that is a good move as well.

I was told many years ago by a financial adviser, "that most people are forced into retirement." Health was the number one reason. It could be yours or a family member. The next reason was age discrimination after a job loss. I still remember this and it did move me to save more. Do you think it is still true that most people are forced to retire.

I wrote a column for AARP on "surprise" retirement -- and found a study that said 2/3 of people retire when they're not planning on it.  It was much higher than I thought it would be.

I'm at the age now where lots of my friends are about 10 years from retirement. Many won't make it because they are being forced out of their jobs for health and age discrimination we believe. 

If you are the bride or someone who is organizing the events and they are destination or expensive please be clear about costs and make it easy for others in the wedding party to say 'sorry I'll have to give that a miss'. There are so many tales on wedding websites where the MOH sends out an itinerary and budget a week in advance with hundreds of dollars of add on trips etc.

YES! And then be understanding about the fact that your friends have different financial priorities, responsibilities and lives than yours.  We've got an article on HerMoney.com about how to take a pass -- nicely -- on a wedding invite: https://www.hermoney.com/connect/marriage/3455-how-to-say-no-to-a-wedding-invitation/

I always ask upfront what will this cost me. Some folks get funky about it. Don't care. My money!

Michelle --

Thanks so much for inviting me to be a part of today's chat and for picking Women With Money as this month's selection.  Your audience is so great!  And to those of you who participated thank you!!  

Loved having you Jean. You are one of my favorite financial experts!

Well this is a wrap. Thanks for joining me today. I won't be having a chat next Thursday July 4th. Enjoy your holiday and see you the week after. 

In This Chat
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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Jean Chatzky
Jean Chatzky launched HerMoney Media and HerMoney.com in 2018. The award-winning financial editor of NBC Today, Jean has also appeared on Oprah, MSNBC, CNN, The View, The Talk and many others.
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