Color of Money Live

Aug 13, 2020

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

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What a week. Unemployment aid that isn't. 

The surge of illegal "sou-sou" pyramid schemes and the ugly responses I've been getting from people who think this is a legal way to make money. 

Market up and down.

Let's talk about it all. 

And please, I need some good news. Send me your Thursday Testimonies. 

Let's get started.

Michelle, I'm sorry to read all the negative comments that some people decided to post about you in your story bringing to light the illegal sou-sou pyramid schemes. Just know that the voices criticizing you are doing so out of fear. Fear that by educating their victims against these scams, you are shutting them down. Hopefully, the law will find them, too.

I have to admit I expected push back but did not think I would be called the n-word. And one reader thinking I was White said I was putting my knee on the necks of blacks. 

If you missed the columns, please read and share 

Illegal pyramid schemes are on the rise during the pandemic

Some Black promoters of illegal pyramid schemes are using the Black Lives Matter movement to justify ‘sou-sou’ scams

Three years after I researched Fee-only Financial Planners, I'm finally taking the leap to get some help getting things organized! The irony of needing some significant cash in hand in order to get some help isn't lost on me. Now on to the advice from what I've discovered while getting ready for my first meeting and from helping a friend with her mom's, who is suffering from rapidly progressing dementia, finances. Go through and check that all of your accounts, credit cards, student loans, social security administration etc, all have up to date email addresses and phone numbers. My friend's mom retired 8 years ago. Almost all of her accounts have her previous work number and a land line as the contact info. Accounts can't send validation text messages to land lines. All of my accounts are for my personal email and cell number, but some go to an old email account and some to my current. It makes getting logged back in more difficult when I don't know if something is going to yahoo or gmail. She/her, Sterling VA

Good for you for investing in your financial future by getting professional help.

And you are right on the money about the account checkups. My husband and I did this and realized he had forgot to put me down as a beneficiary for his workplace retirement account. I would be as a default but without the designation, I would have had to go through a lot of hoops. 

 

Is it better to pay the $30 fee to pay college costs over a three-month period, or should you pay it all upfront? I have the money, but it will drain my bank account. I am on time with all my other payments and not worried. I keep thinking that $10/payment to split a payment in three for three months doesn’t seem worth it for me to keep 2/3 of my money in the bank.

I had to laugh at this because my husband is always fussing that I'm obsessed with avoiding any kind of fees. And I am. If the money is there and you have to spend it anyway not matter what, why just give the school $30. That's money for supplies or you could even donate it to one of the scholarships at the school. 

When the stimulus money arrived, I was fortunate enough not to need it (getting a retirement pension which covers expenses). So I donated it . . . half to my local food bank, half to a political campaign that's important to me. Felt wonderful to give it away.

Good for you. We need more like you!

as tax attorney formerly in private practice, let me emphasize it. There is very little chance that private employers will take advantage of the executive memo allowing them to not withhold payroll taxes on employees making less than $104,000 a year. They will also "deposit" it as that just means putting it in their bank account. They might not remit it all to the IRS, but with interest rates where they are and the tiny possibility of the transmission system to the IRS going wonky at the end of the year, they shouldn't. Employers are responsible for sending that half of the payroll taxes to the IRS. Their computer systems are not set up to make exceptions for certain employees. They have contracts with payroll processors that probably charge them an arm and a leg for making changes to the regular procedures. And, if hey decide to let an employee go, they will have to withhold the whole amount from the last paycheck, which is not a good look when you have an employee who needs every penny of that last paycheck. And if a bill making the delay into a permanent cut doesn't happen, they will have to withhold the whole amount from the last paycheck of the year. Not a winner with employees trying to scrape together Christmas in a pandemic. So, unless your employer is actually the federal government (the president might order his cabinet officials to implement it) or a company whose owners are very, very ideologically aligned with the President, you are not going to see that money. Which is good, because paying it back, even interest free, won't be fun.

Thank you for sharing this. I can't really say what I think of this particular executive order or the one about extending unemployment benefits.  I've promised my husband to stop cussing. 

If a person had $5000 they wanted to grow, where would you suggest that they put this money at now? Stockmarket? Savings? Business collaboration?? I'm open to some risk but not trying to lose it all.

Good question but I'd need to know more.

-- Do you have any debt?

-- Are you on track for saving for retirement?

-- Got kids? 

-- How's your emergency fund looking? 

-- Is your job stable? If not the question about emergency fund would be expanded to how much do you have saved? Enough to live off for six months? A year? 

 

We eat at home more, and we've been a lot better about making sure we use stuff in the freezer in pantry (way less food waste in the last few months); everyone including the kids has more time to help with household chores and repairs (with a little prodding) so money saved there too; we've learned to appreciate what we have (plenty of movies already bought and books we already own - so that can cover a lot of entertainment); we've learned we can live without the expensive gyms (walks and runs, early in the morning in hot weather) help with that too; we aren't driving so much so no need for new or expensive cars; and the clothing budget is way reduced as well. So much uncertainty and difficulties, but these are good silver linings

There is a lot of economic misery in the covid-related recession but it's good to hear that many people are doing okay and in fact taking the opportunity to do better. 

Thank you for sharing this. 

Hi Michelle, Love the chats! Thank you for the great advice! Last week, you advised the couple with the excellent finances to pay off their mortgage. What about tax implications? Doesn’t it make sense to be able to write off some of the mortgage interest? I’ve been thinking about going back to 2019 turbo tax to see what happens if I take away a mortgage. I’m asking because we have rental properties. If we refinance our home, we could pay off one mortgage and maybe both for the rentals. Does your answer change if the mortgage we pay off is for a property that we rent out? Thank you!!

My answer rarely changes when it comes to getting rid of debt.

And that tax deduction doesn't come close to the interest you're paying. It's a deduction not a credit so you still pay more in interest than the benefit of the deduction.

If you had a zero mortgage, sure you may pay more in taxes but the tax break doesn't zero out the interest you still owe. 

And there's the piece of mind especially with rental properties. What if you were a landlord right now with tenants who have lost their jobs because of the pandemic. They can't pay you rent. But you still have a mortgage. No mortgage you can give these good tenants a break during this very tough time. 

Read this column about a landlord who took just this approach. He has worked to pay off his rental mortgages so that he can be kind in times like this.

If you lost your job, this is the landlord you’d be lucky to have

I mean, it’s small, but we paid off a credit card this week before the 0% interest promotional period lapsed. Thanks to the 0% interest period on federal student loans, we’ve been able to knock out 1% of our balance by making our usual payments. We’re better off than we were before, even if the interest is going back to 7% in a month. We also got some durable medical equipment successfully covered by our insurance- might sound small, but the bill for this thing would have been a grand and change, and I’m glad we found the right people to work with. And I’m most happy about the home warranty that I renewed a few months ago- thanks to that, we got a major plumbing repair covered, and our property insurance is going to kick in for replacing the wall they had to tear out. It’s nothing like “we paid off our mortgage!” exciting, but successes don’t always have to be.

This is so not small. Every debt extinguished is a major victory. And good for you for being able to keep up those student loan payments. And one good thing about the executive order is the student loan interest break was extended until the end of the year. 

Reading your columns, even the legal version of Sou-Sou doesn't make much sense. If you have the wherewithal to give $200 a week for ten weeks to a group fund and get back $2000 at some point during the ten weeks, couldn't you just set aside $200 a week yourself and cut out the middle man? Without worrying about whether the people who got their money at the beginning will pay theirs back once they got it?

Well, you are right and it's what I would do. But many people who have participated in the legal/traditional version say being part of the group forces them to save and it creates accountability. I wouldn't do it but I can see how it may help others. But as you point out there is some risk to pooling your money with others. You have no protection like you would in a FDIC institution. Plus, I really don't want to be responsible for making sure people put up their share. So much can happen -- they lose their job, unexpected bills, etc. Too much pressure for me. 

Shame Shame Singletary! Draining her accounts to save $30 bucks means that she has no emergency fund! What if a week later, the car needs a $1000 repair and now that has to go on an expensive credit card? There is an advantage to spaced out smaller payments that you know you can handle while still saving.

What are you talking about? I believe the person says this is money that was earmarked for college. She/he has to pay the college bill anyway. I don't believe this was the emergency money. 

We saved $500 on our home owners insurance with a better water coverage. We are in Florida so that is a plus!

I really do love these types of testimonies too. I'm always double checking insurance, services, etc. to see where I can save. 

Thanks for your extremely clear and very understandable information on these. You made it easy to figure out if the plan is okay or illegal. Thanks for spreading good information, and shame on those who take you to task. Follow the money . . . they undoubtedly stand to lose when others get smart and don't buy into their schemes.

Exactly. Sure people in the beginning get money that's how these schemes work. Makes others believe they can win too. And even if you get paid eventually someone down the line will lose money and that's just wrong. It's selfish. 

You answered the angry responses to one of your pyramid scheme columns in a way that deserves to be repeated here: "... And I see a lot of folks trying to justify the illegal practice as uplifting the black community. What is being pitched does NOT do that AT ALL. It's a greedy grab by many people who see a return for themselves. I get that many people are persuaded by the message that these schemes are building black wealth but they are co-oping a simple savings practice (traditional sou-sou) that does not involve profiting off people down the line who WILL lose their hard earned money to folks how get in early. If you truly want to build black wealth save and help send a student to college. Support legitimate black businesses. Help pay off your mama's house. Look for people who need their rent paid because they are laid off. Teach people how to manage the money they have. The attraction for these pyramids, which are illegal, is that participants get a large profit off via money put in from people who also are hoping to get a big payday, too. That's not building anything. That's shifting money up to people who you have no idea will use your money. "

That was a good comeback. Thanks for pulling it for me!

Sometimes people don't understand the basic math that makes pyramid schemes a fraud. In short, every member has to sign up two (or more) other members, who each have to sign up more, etc. It doesn't take long to run out of relatives, friends, neighbors, churchgoers etc. And then everybody loses.

Right!

But they see green and aren't thinking about people coming behind them. It's not sustainable. Ever. 

My MIL wants to put my husband on her bank account. What are the pitfalls and is there a way to do it without being responsible for her bills. She is in her 90s and is very fiscally responsible but we want to make sure we do it right.

Putting your husband on her bank account doesn't automatically make him responsible for her bills unless you mean she wants help managing your money. It could be your MIL just wants to be sure money in her bank account goes directly to your husband upon her death. But talk it out. Ask what she expects. But unless you co-sign on a bill simply being on the bank account does not mean you have to pay the bills.  

I retired in 2018 and left my money in my company’s 457 is there a timeline to move the money? How do I choose an IRA to move it to? I’m 64.

If you are happy with the financial company manning the 457 and you are pleased with the returns and the fees are reasonable there's no reason to move the money. I plan to keep my 401(k) funds in my company plan when I retire. The fees are low and the investment options are great. 

You will however have to take required distributions at 72. 

It is a good thing that man is fine.

Lol! Good thing indeed. 

Your eloquent responses to the negative Sou Sou article comments just fired up your reader base even more. We chatters have your back and know the tenants of being part of your Squad: debt is evil, help not harm others, and if something is too good to be true - IT IS. My tiny Thursday testimony? We signed up to pay an additional $50/month on our mortgage principal. Every bit counts!

I love that "Singletary Squad." That's a real thing? 

Wow! 

Michelle, I had a weird start to my day last Saturday. When I got up that morning, there was an e-mail from my REI-branded Mastercard (through U.S. Bank) notifying me about a $50 purchase at a "men's and women's clothing store" during the night by someone named Znhvkpewja Zwdhacfsf. By the time I got into my account online the charge had been credited back and my current balance was at $0. I decided to call the card customer service anyway just to see what was going on. The U.S. Bank rep assumed that someone was checking the card to see if it was valid by making a "small" charge - though I would argue that $50 isn't exactly small - and it went through they'd cancel the charge and then use the card to make a much larger charge (e.g., buy a laptop). So the rep cancelled the card and they'll be sending me a new one. The weird thing is that the credit card in question hadn't left the house - it's just used for REI and the last purchase was for a hat I ordered off the REI website last December. I didn't see anything about an REI data breach online, though on an REI customer chat area someone had written back in May about weird charges on their card that were quickly cancelled. Thankfully I have notifications on all my credit cards (and bank accounts) to ping me of any charges (or withdrawals). I have $5 or $10 minimums on the alerts, though I wonder if I should lower that to whatever the minimum amount they allow. Without the alert on my card, I might never have known anything had happened until a bill arrived in a month, and who knows what big-ticket item the fraudster might have tried to charge next.

Something similar happened to me, which I wrote about. It could be that your card number was compromised in any number of data breaches that have happened recently. 

I had my alerts set at $50 too. But now it's a penny. I get a lot of dings on my phone but better safe than sorry. 

Read: Security alerts on credit cards work. Just be sure to set them at the lowest amount possible.

 

To those asking why someone would even use a legal/traditional Sousou-- traditional Sousous (one name for Rotating Savings and Credit Associations) are primarily used in many parts of the world where citizens do not have access to traditional lending or banking institutions (often called the "unbanked"). Since most Americans do have access to a bank or credit union, that usually is the primary vehicle used to store savings. Unfortunately, many impoverished people all over the world do not that have option, and will pool together community resources in this way for accountability and safety purposes. Hearing about the need for Sousous makes me thankful that most Americans are fortunate to have access to financial institutions, frustrated that every person in the world does, and outraged that people are manipulating the community-driven intention of Sousous into a pyramid scheme. (For reference, I am an international development student who is very passionate about this topic!)

You are right but I was addressing sou-sous here in the states where people do have access to banks. 

Nonetheless thanks for pointing this out. 

Does the person want you to be able to write checks? If not, then making the account ITF - in trust for - on the ownership will transfer the money to you outside of probate. My grandmother did this with her accounts.

My grandmother put me down as payable upon death. 

Just talk to your MIL to get a clear idea of her expectations. 

I am planning on trying to conceive artificially in a little less than a year, so that means getting all my financial ducks in a row. I started looking at daycares simply to get an idea of what it could cost and I nearly had a panic attack. In my town in the South, infant care is $800 a month - something I know I can't afford. I make too much for state subsidies and very few places offer income-based rates. So my question is, how does anyone afford childcare as a single parent? Is there some secret to finding quality without going into debt?

I wish I have several more hours to talk about this. Many single parents and married parents face this issue. They often rob Peter to pay for daycare. Meaning, they can't save, or put money in a retirement fund. They use credit to make up for the lack of enough income coming in. 

I'm always very reluctant to weigh in on this issue because it's hard to tell folks they can't afford a child. But you could look for daycare in someone's home, which is less expensive than a center. At one point I got with some neighbors and we shared the cost of a in-home child care person. 

Although the cost of infant care doesn't last for long, maybe you could hold off trying until you can save enough to find affordable, safe care for the baby. 

My sister was on my mom's bank account when mom died. This made paying for the cremation, the co-payments of the hospital, the copies of the death certificates, the umpteen items one has to do upon a death so, so much easier. You have control at the time of death. When someone dies, a power of attorney becomes invalid and so there is no other way to access funds. It is a very sensible and forward-thinking plan. It also makes things easier when everyone is upset

Yes!

For the most part, we are weathering the financial side of this fiasco fine, as both my husband and I are knowledge workers and can telework. He is considered essential by his employer while I am in an essential industry. My husband works in a grant-funded research lab under the umbrella of a mid-sized private university. Starting the next month or so, the university will be STOPPING its 403b contributions for at least a year. This is significant -- 10% of his salary. While not a short-term impact, it will impact us in retirement. F/53/NoVA

I'm so sorry. That's a hard hit. 

I have savings in the budget, but this year I have been even more cautious and just about doubled my savings. Then we found we needed a new refrigerator / freezer. It turned out we had enough to get the new unit and still have significant savings. (Not wealth, but significant) and with cash to pay we could find the best savings in the mid prices. So we got exactly what we have wanted. Savings are always good.

That emergency fund can be a savings grace. Thanks for the testimony.

Hi. Yesterday I saw an extra deposit from social security in my checking account. We don’t get our SS payments until later in month. No emails or notifications on soc sec website. Any idea what this is?

Could this payment in fact be your stimulus money from the Cares Act? 

Hi Michelle, your chats are no longer showing up in your https://www.washingtonpost.com/people/michelle-singletary/ page. This is not true of the Hax, Weingarten, or Petri's 'people' pages. Not a huge deal, really, but it is my default way of accessing the chat.

Hi, this is Yu, Michelle's producer. Thanks for flagging this! I took a look at Michelle's page and this should be fixed now. 

Wondering about the effect of having credit cards approved that we're no longer using. For example, we took out a store credit card when we did a large renovation project so that we could get zero interest. Paid it off within the required time period to avoid interest. Now, if I don't need the credit, should I cancel the card? What does that do to our credit rating?

Good question. If you don't carry any credit card debt -- on any cards -- you can cancel if you like. Or just keep it on the books. Often people are told that if they cancel a credit card the history is removed from their credit reports. Not necessarily true. Good credit history can stay on your report for up to 10 years or more. 

 

Mum has dementia, and it was helpful she put me on her account so I didn't have to go through any hoops when I started paying her bills - and now her care home - from her account. It wouldn't have been the end of the world, but there was so much going on it made a difference.

Thanks for this perspective. And so sorry about your mom.

I live in Texas and I'm aggressively hunting for full-time employment but will be interviewed later this week for a parttime role at my alma mater. $20 at 19 hours per week reading admissions applications. My total State benefit is $521. Would it make sense for me to take this remote PT job? Will I be able to keep both my unemployment income (I believe it would be reduced by a percentage) and health and dental insurance?

Check with your state about how your unemployment benefits may be impacted but the part-time work. But me, I would go for a job that is permanent since unemployment eventually runs out. 

For the purpose of getting interest-free financing, we have acquired several credit cards which we are no longer using. For example, to finance a kitchen remodel, we took out a Lowes card, then paid off the balance during the promotional period. My question is: Does having several cards with large but unused credit available harm our credit rating? Should we close out the accounts we are no longer using? If so, do we close several of them at once, or space it out over time? Our credit is excellent, and I'd like to keep it so. Thanks for your expertise!

You may see a small dip in your score but it should bounce right back. The key is don't close them if you have outstanding balances on any other credit card. But if you are paying off your cards every month and don't want these open accounts on your credit reports, sure close them. 

Hi Michelle! If I have $1000 extra a month, no debt except mortgage, and full emergency and life happens funds, how do I choose between: retirement (currently contributing 11%), college funds, next car fund, and church donations (currently at 3%)? What comes first for you when you can't do it all?

For me, and this is personal, first would be tithing at 10% if that's what you believe. 

Otherwise, I would boost college fund if you are behind. 

I was supposed to go to Italy this fall thanks to being one of the top sales reps at my company in 2019, and planned on extending a weekend to visit my sister and two nieces in England. The only out of pocket cost would have been the plane ticket from Italy to England. Thanks to COVID, my company has cancelled the trip. What they are doing instead is cash. Enough cash that I will pay off my car loan!! That just leaves student debt and a mortgage and I'm aggressively paying that off. Now I just need to win the trip for 2020 so I can see my family in Europe :-)

Wow. This is just wonderful. Hope you win the trip too. 

Hi Michelle, I did (really) well selling my house near a big city and moving to an area where houses cost a lot less. I own my new home and have about $260k mortgage on my house. I have no other debt (thanks to you!) and about $50k emergency funds. I fully fund my 401(k) each year, and I feel like my job is pretty secure. I don't know what to do with the proceeds from my old house (about $200k). Should I invest it or pay down my mortgage? Or do a bit of both? My concern is that my new house won't appreciate the way my old house did. But I'm single and if something happened to me or my job I could lose my house if I couldn't pay my mortgage.

If all else is covered -- retirement, emergency fund, life happens fund -- and it appears to be from what you say, me, I'm getting rid of that mortgage as fast as I can.

The only caveat is that you do plan on living in the home a long time.  

Michelle thanks for what you do! I am divorced, middle aged, and getting married again. I’m a believer in mostly combining finances which is our plan. I was blessed to receive an inheritance that enabled me to buy a home mortgage-free that will be for me and my boo. However my family thinks the house should only be in my name, at least initially. They feel like it’s “family” money and if something were to happen to me in the first several years of our marriage that the money should eventually return to my family and not go to my future spouse whenever the house would then be sold. We are older and kids are not in the picture. On the one hand, I see their point; the money was the product of decades of hard work by my parents and I have other siblings/nieces and nephews. On the other hand, I feel sort of crappy saying this house is mine alone and you’re just living in it. My fiancé, however, would still be the beneficiary on other financial assets and life insurance. I can’t help but wonder if my sense of wanting to protect myself financially because of my prior divorce is also in play. What Would Michelle Do?

What did I do? I had a condo and a disable brother who I was caring for financially. But any and all decision about it and caring for my brother was a joint decision.

Ignore the family. This is your wife, your partner in everything you have. Once you got the inheritance alone, it was your money. And when you get married, it becomes part of your marital assets. Now, you could discuss it with your wife and she may agree that it's okay to leave some money to family. But I believe when you get married you become one - what is hers is yours and what is yours is hers. 

Michelle, thank you for your reporting on the stimulus funds. My elder mom finally got hers last week - via a check in the mail. I was trying not to stress, knowing that it was coming. Like another writer, my spouse's employer just cut contributions to retirement account. Just as we had our yearly meeting with our rep, who told us that we're "in great shape." I'd love a column about the income limits for Roth IRA. Now we have to figure out how to contribute more of our own $$ to retirement but are just about at that limit. THANKS!

So glad she got the check. 

Michelle, Have you ever heard of this one? A couple of weeks ago, I had a $1 credit submitted to my Discover card, which I use all the time but keep track of the balance down to the penny. I got an email on a Saturday morning about this credit, and immediately knew something was up. But my email inbox was also inundated with about 75-100 messages from sign ups to online newsletters/messages, etc. I figure that this was an attempt to get me to miss the notice from Discover, but since I watch things closely and actually read all of my emails, the Discover notice didn't get past me. I had the credit card immediately cancelled, and no other charges got through. When I called Discover, the customer service agent thought it was an odd amount to submit for a credit to my account and didn't understand that it was fraud, but she did agree to pass it on to their security department. Just wanted to pass this along in case anyone else has a similar experience. --She/her, 51, Central VA

I have heard of such small charges. It's a way for fraudsters to see if the card is good and if you will miss the charge. Also, I hope you changed your email password. That's a sign it's been compromised too. 

Thank you for joining me today. Just FYI, taking some time off next week. But please join back here on Aug. 27. 

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. Her award-winning column is also carried in more than 120 newspapers. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges.

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