Color of Money (June 25)

Jun 25, 2020

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

Did you know: "Knowledge isn't power. The right knowledge is power." So, stay informed.

Want more advice from Michelle Singletary? Sign up for her newsletter on retirement, delivered every Monday.

Read & share Michelle Singletary’s Color of Money Column.

Follow Michelle Singletary on Twitter (@SingletaryM) and Facebook.

So glad you could join me today. So what do you think of the news that 1 million dead people got stimulus money totalling $1.4 billion? 

And, as always, would like to hear about your positive Thursday Testimonies. 

Let's get started. 

We own our home. No mortgage. Done!!! 30 years later, it's over. Now we have more money to help others in this time.

Debt free is freedom. As you you're finding, freedom to help others. Bravo!

steps on your toes! But really, one of the people interviewed talked about allocating 15% of your budget for travel? 15%!!! Even if that is just take home for people in typical salaried positions (after taxes, after retirement savings, after health insurance and flex spending account money) that seems high. Not that you can't do it every once in a while. I had a blow out vacation 5 years ago and I'm due for another one, though I'm glad I wasn't too far along in the imagining/planning stages as it seems that Europe will be off limits for a while, but I allocate about 8% of my after "everything" budget and that has to cover Thanksgiving, gifts, clothes, theater tickets, etc. not just vacations. I will occasionally reduce my other savings (nothing tax advantaged, just the above and beyond maxing out 401k and Roth parts) for a real treat, like the time I bought living room furniture, but not on a yearly basis. By the way, I'm not living miserable, I just prioritize savings since I got a bit of a late start getting serious about retirement.

All good points but if someone has done all that they should - save for emergencies, on track for retirement, no debt, will pay off mortgage by retirement -- than I'm not mad at allocating 15% of their budget for something that matters to them. BUT..and there has to be a but, all their finances have to be in order otherwise, yes, it's reckless to spend that much for a vacation. 

The supply chains in NJ seem to have resolved so that my parents can order groceries and other supplies for delivery so that I don't have to mail them toilet paper (et al) anymore. I was delighted to do it when it was needed to keep them out of the shops (they have way too many risk factors), but mailing bulky things can get expensive. At least it was supporting the post office.....

Yes, I'm relieved some things are getting back to normal. But the number of covid-19 cases are trending up again. This is so hard, right? We want and need people to go back to work but at what cost will they have later? Their lives? 

I'm single with no children and 63 years old. I do not have a will but I'm working on it and in the process have counted up to 26 passwords so far for various accounts. What is the best way to let my heirs have access but still maintain security?

I'm so glad you are getting to the task of doing a will. So for background for those who may have missed past chats, the "death book" is a guide to help whomever will be handling your estate. You create a book, or electronic document that tells them where to find your will, your important financial papers, birth certificate, marriage certificate, life insurance information, etc. Included in this "book" should be your passwords so they can access on-line information. The good thing is you don't have to give your passwords to anybody while alive. You can just tell them where to find the death book or electronic file (you may want to have both) in case you become incapacitated or when you die. Tell them you have the information but you don't have to share it with them yet. 

Hi Michelle, I love your chat and Prosperity Partners. How do I set up a Family fund, qualifications, requirements, etc? You have mentioned it several times. I would like to start one for my family. Thanks

A family fund is a bank account where you put money to help family and friends. We have one at our credit union. It's the account where we pull money to help folks out. It's pretty full now so we haven't had to make regular contributions but if you are trying to build up a fund -- after you are sure you have taken care of your own financial situation (emergency fund for yourself, saving enough for your own retirement, kids college fund) you can designate a certain amount out of your budget to build up a family fund. Start with maybe $25 a month, etc. 

Now, before you start handing out any money develop your own guidelines of the financial help you will give. Think of it like nonprofits who have giving guidelines. Some nonprofits only give for educational endeavors, some to feed the hungry, etc. As an example, here's what our giving guidelines include

- We will help with college expenses -- tuition, room and board, books. 

- We have helped with downpayment for a home

- If you get laid off or experience a disruption in income by no fault of your own, we will help as best we can. For example, when my sister lost her job during the Great Recession we had enough in our family fund to cover her car loan for a year. 

- We will not be financial enablers. So if you are bad with your money and won't seek help to get better, we will not fund poor decision-making. 

Once you come up with your guidelines, share them with your friends and family. Be firm. But also be willing to give grace at times. Yes, your brother or sister are bad with money but perhaps he or she has lost a job because of covid-19, you might use the family fund to buy groceries for them or help with rent. (By the way, in such cases buy the food or give a grocery store gift card and pay rental office directly). 

Just keep this in mind. To whom much is given, much is required. That's the vision statement for the family fund. 

By the way, my mom would love to talk to you about how she got started and maintains it, Michelle. She read your columns in the Globe when they lived in Massachusetts.

I would love to talk to your mom. Please have her email me at colorofmoney@washpost.com 

This is another reason to use a password manager. Instead of making all your passwords (often scores) available to someone, they just need the one password to access your password manager. The manager also updates your passwords when you change them, so you don't have to keep revising your list.

Good idea. My husband uses one. I'm still on the fence because I'm super paranoid that one database would have access to all my passwords and what if that database gets hacked? 

I’ve recently moved my father into assisted living. The cost far exceeds his ability to pay, and I am making up the difference until such time as I can get him into a Medicaid room (they have a 2 year private pay waiting period and only 5 rooms are Medicaid). He also has about $3k in credit card bills. I have his financial POA. I have been trying to get the CC company to give me information on his account and finally received a year’s worth of statements yesterday. While his account had been closed for fraud, I didn’t see anything too suspicious. I called the cc company to discuss options. They offered me a 5 year payment program at 6% which is $62/mo. I know I am not personally liable for his debt, and he is practically judgment proof at this point, but I’m wondering what you would recommend. He’s never going to use that card again, has no other assets other than a car that I’m planning to sell, has no savings, and lives on SS and a small annuity. I’m trying to do the right thing by him, but I’m unsure if their offer is the best way to go.

I know this is so hard and thank goodness your dad has you to help. I would keep pushing the credit card company for a cash settlement. Once you sell the car, offer whatever you get to settle the debt. Personally, since you are already supplementing the assisted living facility bill, I would not make this a priority and would not obligate your father for the $62 a month for five years. As many of you know, I believe that people should pay their debts. Truly. But your father is not in the position to do this and if it's unlikely the credit card company will win anything in court you have the upper hand. If the lender sells the debt they won't get much for it so a cash offer would be fair. Yes, you have the power of attorney (POA) but you are not obligated to do more than try to manage his affairs and not take on his debts. 

Michelle....hi. Where so you stand on the issues of cash vs. cashless? This came up recently when someone said they only used Venmo to pay for stuff, and therefore couldn't reimburse a friend who doesn't use Venmo or PayPal. This person said they hadn't used cash since Covid19. I do charge almost everything these days, but still keep cash around. Thank you. And stay safe!

First of all, what? They can't pay someone back because they don't handle cash? You better give me my money!

Okay, had to get that out of the way.

I think you have to be open to do both - cash and cashless. I do both. The majority of my payments are electronic. And I give an older relative a monthly stipend to help with her medication co-pays. Took some time but got her used to getting it electronically. This helps me tremendously because I don't have to send her cash or write a check. 

I also often put people on cash diet when their spending is out of control. I do this through the 21-day financial fast I created. (There's a book about it). So for three weeks they can only use cash -- no credit or debit card. Why? Because if you go to the grocery store with just $10 in cash and you only need milk and eggs you will only get milk and eggs. If you have a debit card with say $50 in your account, you are likely to overspend because you have that room in your bank account.

Just be careful when handing cash these days. Wash your hands before and after. 

A commentator says that while we're hearing about stimulus payments to the dead, as many as 35 million living people who are entitled to payments haven't gotten them yet. Maybe we should be hearing more about that.

I don't know if the 35 million still waiting is accurate but you are right that millions of people are still waiting to get their stimulus payments. And I have been writing about that since the payments were authorized by Congress. 

The nice thing about password managers is it will also make up a password for you. Random string of digits, letters, symbols, which is far more secure than anything someone makes up on their own. While there's always a chance it could get hacked, it's unlikely given the vast security measures they use. My husband works in a field that responds to cyber security threats and from his point of view, a password manager which creates secure passwords coupled with two-factor authentication of passwords is the best you can do right now! We use LastPass, if anyone needs a recommendation. There is a free option and a subscription (we pay as it has more options for family sharing passwords, notes, etc.). It also has a 2 factor authenticator.

Thanks for sharing. Okay, I guess I should look into it. But definitely use the two-factor authentication. I have that for all my accounts. But that makes me super paranoid about losing my phone! YIKES! There should be a special place in hades for hackers! 

We use an address book for ours. This reminds me I need to get a new one and update them as as we have had this one for years

Just make sure you secure the address book!

Hi Michelle, I hope you and your family are staying safe. We had an unexpected $7k home renovation project which has snowballed into a 6-figure project where we need to fix our roof and maybe some other structural issues and were trying to figure out how to pay for all the repairs. We could do things piecemeal over the next few years but it doesn’t make sense to fix part of the roof and then the rest in a year or two since it’s about 20 years old. We can pay for probably about half out of savings but are afraid of using up our whole savings in this environment even though our jobs seem secure (knock wood). We've only owned our home for three years but have 80% LTV and credit scores above 800 and we’ve paid off everything except our mortgage, which we pay extra on each month. We're doing our research on home equity loan vs HELOC but have found that many financial institutions are not offering home equity loans during the pandemic. We’re starting to run the numbers but I admit that the amount of work that needs to be done is overwhelming me and would appreciate any advice you have on how to determine what type of loan is best. Thank you for all you do.

First, one of the only reasons I advise people to use home equity is for "necessary" home improvements. And my necessary I mean improvements that if not done will make things far worse and damage the home. The roof is a necessary improvement. 

So make a list of the things you absolutely "need" to have done. Spend the cash -- without draining your emergency fund too much -- for those repairs.

If the "needs" list is long, priorities what has to be fixed first. Use the cash on that. Then look into a line of credit or home equity loan if you can get it. Shop around and include credit unions. 

I would not borrow or go into debt for cosmetic improvements. Make a list of those improvements. Save for each one and as you save up the money go down the list. 

But if your heirs need to access your accounts, either directly or with a password manager, will they also need your phone? Some accounts will confirm by sending you an email with a response code, and you could give somebody else access to your email. But some will only send a text or make an electronic call. Then what?

So, you would also have the code for your phone in the death book. You should also have an email to send a code should the phone fail or a primary email fail. Also, many sites give you an opportunity to send a code to multiple numbers and/or multiple emails. So when I sign on to one bank account, I'm asked where I want the code to go. If you are handling someone's affairs when prompted you wouldn't put in the phone if you don't have it or can access it, you would elect an email account. And that information should be in your death book. 

I saw Venmo at the farmers market as a way to pay. What is it?

How do I ensure my mailed tax return will deduct my payment from my bank account by July 15?

The IRS is starting up more operations. As long as you have proof that you mailed the return on time you are good. The agency doesn't have to take the money out of your account by July 15 for it to be deemed on time. You just have to prove you sent your return and payment by July 15.

And by the way, if you haven't filed and you owe best thing is to file electronically. This is particularly true if you are due a refund. The IRS is extremely backlogged in processing any paper returns. 

Michelle, I'm like you on the risks of a password manager. Maybe you should do an article on them, and address the things that would make you less paranoid. It would probably do some good for a lot of us.

My colleague Geoffrey A. Fowler got you covered on this already. 

Read: Password managers have a security flaw. But you should still use one.

 

30000 left 3 yrs more. 7.89 %. Pay it off or keep cash in savings bcuz keep $ in stocks?

Wow, that's a crazy high interest rate. Run the numbers. With just three years to go you should be mostly paying principal right now.

Figure out how much more you would pay in interest over the three years. Then look at what interest you are getting on your cash - which is probably not much at all. 

But if I had that much in savings and was on track for retirement, I would still have adequate emergency fund, etc. I wouldn't hang on to the mortgage. 

I wonder if the relatively new homeowner facing six-figure structural repairs got a home inspection before they bought. Everybody needs to do maintenance and upkeep, but major structural problems didn't happen overnight.

True. But I suspect except for the roof most is cosmetic? 

So we're basically back in April, with the epicenters moving west and south. Excellent job.

Right!

Get out of stocks and into what?

I can't possibly answer your question for a number or reasons.

-- I don't know your income.

-- Don't know your risk tolerance.

-- Don't know how much you have saved.

-- Don't know your health situation.

I will say this, even at 74 you may have another 20 years to live. So your money has to keep pace with inflation. This might mean having some equities (stocks) in your retirement account. This is a situation where getting help from someone -- fee-only financial planner-- would be good because the professional can look at your entire financial situation to make an informed recommendation. 

My password manager is a hard copy little black address book that lives next to my computer. I live alone so I'm not too concerned about hard copy theft, and I at least don't have to worry about it being hacked.

Not a bad idea. But my sister had her passwords in some little book. She lost it. And when she found it, there were passwords written, then crossed out, etc. She thought she had been hacked and I was helping her reset a lot of passwords. 

I'm (she/her) in my mid-30s. I was using the current economic situation as a kick to get a financial plan in order to make sure going forward I'm making the right decisions. I used your NAPFA and fee-only advice in the past and found a couple of people I did interviews with. They seem to offer two scenarios: 1) one-time financial plan or 2) managing assets at a recurring rate. What I was looking for is someone I could establish a relationship now and meet with on an annual basis to discuss how the current plan is going (maybe with an annual payment that's less than the one-time fee, maybe hourly or whatever). I'm not sure if this exists or not so I'm not sure if my expectations are too high. My husband pointed out that they often meet with people with more complicated scenarios (owning a business, closer to retirement, college planning, etc.) and that maybe we are too simple of a case to match well (own a house, one 401k, no kids). So I guess I wanted your advice on what to do next: 1) change my expectations or 2) keep searching.

Keep searching for what you want. The first planner we had was horrible. The fee for assets under management were too high for where we were and he didn't help much at all. Fired him. Second planner -- a woman I might add -- changed our financial life. She was commissioned. But the master plan she came up for his set us up for where we are now, which is GREAT. She left client advising and went into management. The point is keep searching for the service you want. Make a proposal. Or pay for a master financial plan. And then work with the planner for a hourly fee once a year or every few years as a check-up. 

That $62 a month is likely shifting the debt to you from your dad. Believe me, they know that your dad is judgement proof and want you to take on that debt. Reject that offer firmly. And talk to the assisted living people about the proceeds of the car. They may have a lien on it or the contract for moving in may have obligated the funds to pay for him. Your dad may literally have no assets for the credit card company to get to pay off that debt.

Good points. And yes, do not under any circumstances obligate yourself for any of his debt payments. You may have done this already for the assisted living facility but definitely don't do this for the credit card debt. 

I'm nervous about my 401K, I lost a ton. Now I'll probably have to work for another seven years to recoop and acrue gains to retire comfortably. Should I keep increasing my percentage in my 401K?

Unless you cash out of the 401k or moved funds to say money market, etc. you haven't lost money. It is a paper los right now. From March until two weeks ago my 401k was down about 30%. It's nearly back to where it was even with the lates down days. Rather than watch the daily or weekly ups and downs, look at how you are investing for retirement overall. This should dictate whether you need to increase your percentage. But if you can increase do it no matter what. Retirement is expensive and most people just don't have enough anyway. 

None of us knows how much time we have here, my mom died young, and from that I realized I needed to live my life in a way that takes advantage of my health and good fortune now while also preparing for the future. I budget for all categories and save approximately 40% of my take home after tax salary every year as well as maxing out my 403b. The other 60% is my budget and 12% went to vacation last year as the designations I selected (Socotra and Seychelles are both expensive). I go on big trips every year as that fills my soul in a way that other actives do not.

As I said, as long as you are on track for major financial points, use your money the way that makes you happy. 

That whole thing was rushed through without thought to who needs it. In my case, we didn't think we were eligible (and luckily don't need it since both of us are still working full time), but we got a letter saying we received $495 via direct deposit. But here's the thing, it never arrived in our bank account! We had planned to donate any stimulus we received (and still plan to), but can't find any sign it arrived. Any suggestions what to do then? And I promise we're not dead!

I wrote a column about how to track the money.

Didn’t get your stimulus payment? Here’s how to find it.

So sorry I have to sign off now. Please know that I read everything you send. Often I'll answer your questions in a column. Or please come back next week. You can also email me at colorofmoney@washpost.com.

Thank you for joining me today. Please take care. 

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.

Read recent columns
Subscribe to Michelle's newsletter
Color of Money Q&A Archive
Recent Chats
  • Next: