How do we manage? Mortgage, savings,monthly bills and fun stuff, like going out, date nights, etc.?
In a word budget. You have to have a plan for your money, which is what a budget is.
I have a saying: "Every penny ought to have a purpose."
So you manage by sitting down and making sure what's coming is more than enough for your expenses. If you find it isn't then you have to cut back or earn more money.
How do I repair my credit without getting credit cards? Unwisely, I've cancelled all my cc and I really don't want any. What are my options and how long will it take to go from a score of 503 to something respectable without getting cc?
First of all if you opened those accounts some time ago that history is still postively impacting your credit scores. Just the history. If you closed the accounts with debt on them, closing the accounts could have brought your scores down. But what is done is done.
Now going forward the best way to improve your credit scores is to PAY YOUR BILLS ON TIME.
Not yelling at you. Just wanted to highlight that loudly.
You don't need to get any credit, just pay your bills on time, as agreed every month.
Good Afternoon Michelle, I would like to know what is your background, education, etc., if you will?
I don't know where the economy is going. I read the same reports you do and no one can say for sure. It's still bad. Looks like it's getting better but we are still in trouble.
As for my background you can read my full bio at www.michellesingletary.com
Hello, I currently do not pay tithes to my church. My bad habits in the past have eaten away at my finances and I won't have enough to pay bills and pay my honest tithes. I give offerings, but not my tithe. Should I try tithing?
You are clearly a person of faith. So have faith in yourself.
You can tithe. But that probably means giving up something.
Do this. Add up all the extra things you pay for that you really don't need such as cell phone, cable, eating out, movies, etc. If you want to tithe couldn't you scale back or give up those things?
I helped a single mother with limited income figure out how she could tithe. She did and it's amazing how her financial life has turned around.
It's all about faith.
Hello, My husband's grandmother has Alzheimer's and lives in South Carolina. He hasn't seen her since we were married eight years ago. I would like for him to visit her and for her to see her grandchildren. They've never met her. I've cancelled our trip to Disney because I think time is of the essence here. Should I plan to make the trip to S.C. our summer vacation? Or should I seperate the two occasions?
You could make the South Carolina trip part of the family vacation. It's a great state with lots of vacation stuff you can do. Hey there's Hilton Head, a lovely place to vacation. So if you plan well I think you could visit grandma and leave time to relax and vacation, saving money since you wouldn't take another trip.
Hi, Michelle. I'm 52, single, and have a safe, well-paying job. For the past few years I have been helping out my older brother, who had a stroke and had no health insurance. Now he has remarried and has health insurance through his wife. Although he's a good worker, his carpentry business has been affected by the economic downturn so he is still struggling. My problem is that his wife, who makes good money, spends it all on herself and her children. Her daughter just had a fantabulous wedding, and they each had a $500 "spa weekend" the weekend before the wedding. Am I wrong to think that she, rather than I, should be helping out my brother? I'm careful with my money and resent her splurging on things I would not get for myself, while I help support her husband.
You are not wrong. He has a wife. She has the means, so you can now stop playing (for good reason in the past) his wife/mother.
Pull back and enjoy your own hard earnings.
If you do then you won't be concerned about how they or the wife spends their money.
This may be a repeat, since I'm new to text chats. But in attempting to improve his credit score (which wasn't really bad), my son paid off a $184 emergency room fee from 2005 that showed up on his report. We thought our insurance had paid this, since he was in college at the time and we NEVER received a bill, in his name or ours. Anyway, instead of helping, his credit score DROPPED 80 points because of the "delinquent debt." Any way to fix this bit of ridiculousness?
I'm not sure what happened but paying off that debt should have dropped his scored. Perhaps the hospital or collection agency mistakenly reported the payment as a new delinquency. Compare the newer crredit reports with an older version to make sure they didn't move the date of the last bad information. If they did report it as an error to the credit bureaus.
Also, are you sure you son has been paying the rest of his bills on time? Late payments have a huge impact on scores.
Yay, we did it! Paid off our mortgage earlier this week, slightly more than 7 years early. Whooo-eeee! We had the goal in mind to pay it off early ever since we bought the house, all those years ago, and kept nibbling away at it. Finally when it got down to less than $10,000, it was easy to just write that final check. It's a good feeling to go into retirement without that monkey on our back. Your advice helped me to keep after it, despite a low interest rate on the mortgage. We were earning even less than that on our savings, so it wasn't a very tough decision to finally just write the check already and be done with it. Hope that others can take encouragement from our success, too. Now, about that t-shirt....what do I have to do?
Oh, wish I could give you BIG HUG.
No more monkey mortgage debt. Love it!
Please, please write to me so you can be my featured Debt Defeater. I'll be celebrating one in two week.
For those not in the know, each Debt Defeater gets a free tee-shirt that says, "I'm a Debt Defeater. Send your story to firstname.lastname@example.org
I'm hoping the shirts become the next big thing to get!
Thank you again, Ms. Singletary for raising the issue of debt bondage to get a college education in the U.S. Please don't stop hollering on this issue -- I believe we are headed to third world status if we rob so much of the future earnings of our youth to get them through college. It will be another lost generation whose promise remains unfulfilled due to our stupidity.
I'm at the end of Gen X, but I work with mostly Baby Boomer women. We're all career women here, also mostly mothers, partners. There's a definite generational gap with those of us that are younger because they don't understand how we can telework. I'm productive, I'm doing the same amount of work. But I do some of it at home while putting in the laundry or dinner or taking an hour to go to the pediatrician. My children aren't home while I work, I'm not taking away from work. I'm not going to work until 10pm just because I'm home, either. There's an image associated to being tied to the office for 8-10 hours per day. What I think they don't understand (or want to) is that the younger employees coming in don't expect us to be in the physical office that much. They want to be able to reach us and as long as they have a cell number, email and text, they feel supported. My work day is defined by being productive within set hours of the day and being professional. How that happens is largely open. I find myself being cautious about how I go about it, knowing that it will be judged, though. I'm not operating outside of the rules, but outside of expectations.
Today's e-letter: Do Gen-Y workers want to work as hard as their mothers?
Telecommuting helped save me. When I had trouble with my first pregnancy I began to work from home. Been doing that every since, more than 16 years.
And you know what, I get more work done from home than I ever did in the office. I think it can work for a great deal more people. Some not so much if they aren't disciplined. But I agree with you that we have to let go of old traditional ways of working.
I know some people have to be in the office but think of the money and time we can save if more people worked from home.
I'm almost finished paying for my car - hooray - and will be debt free except for my mortgage in a few months. This will give me an extra $1000+ a month. I'm getting married in a year or so but I also feel as if my retirement and emergency funds need a boost...any thoughts? Thanks for all you do!
Trust your feelings after checking for sure.
If you think you need to boost your retirement and emergency fund you probably do.
Michelle, I love your columns. In the last 12 months I have turned a negative net worth into almost $50,000 of retirement savings, investments, cash savings and other assets. Thank you! But I love progress and I have a hard time working a game plan with results so far away. Right now I make a modest DC salary of just under $60k. I have no debt. None! I max my 401k at $16.5k, I make regular Roth contributions to total $5k, and save between $500 and $1000 per month. I celebrated my difficult but disciplined frugal choices by taking my parents on a wonderful vacation last month. It was a great feeling to be able to do that for and with them. My next goal is to purchase a home. But with the assured rise of interest costs and the (wise) need to have 20% down, this feels impossible! I have about $10k in cash savings now, but realistically I am going to need $80-100k to put down living in this area! It overwhelms me to think about it. And I would need more than that to ensure ample cash on hand for emergencies, repairs, etc. Do you think buying a foreclosure is asking for a disaster? I am only a couple of years from turning 30 and feel like I am falling behind on my goal of owning a home before the big birthday. Finding a higher paying job might be the answer, but that seems unlikely in these shaky economic times. Any words of encouragement or advice would be sincerely appreciated.
Wow. Slow your roll.
Almost 30 and doing what you're doing.
I could use more like you.
Please stay the course. Don't rush it. You can get that home. Maybe not before your 30th but who set that goal anyway?
As for a foreclosed property. Some are in good shape others not. Find a good real estate agent and just see what's out there. Not to buy yet but to gauge who much you really need.
You are doing great. Don't mess up a good thing by putting undue pressure on yourself.
I am somewhat young..almost 30. Do you have any tips or strategies on how to manage or maxamize my 401K investment? I have heard several things, but I wanted to know what would be best for me.
One thing I tell young folks is save first. If you want to max out your 401 (k) and do that first before your budget is eaten up with other expenses. I do all my saving even before I pay my mortgage. That way I reduce my living standards to to match what's left after I save.
What are your thoughts about renting out a room in your house for extra money? Do you have any suggested resources for doing this? People are crazy and it makes me nervous b/c I'm a single female, but I'm trying to increase my savings and pay off debt. My family thinks I'm nuts and that it's a "desperate" thing to so and keeps questioning me if I'm "okay"? I am okay, but it's frustrating when other people don't understand your financial goals.
In this economy lots of people are doing the crazy thing of getting a roommate. It's not crazy. It's smart.
Now you do want to be careful about who you rent to. Ask for references. Do a credit check. Get recommendations from friends and family of someone who also needs a roommate situation.
I helped a single mom find a roommate situation. It worked out just fine.
Be sure to do a rental agreement.
I've been making triple payments on my condo mortgage and, if I keep it up, will have it paid off next summer which is 19 years early. But after reading that home values will not recover to pre-foreclosure/housing/depression crisis price levels for 5-10 years, is it worth paying it off so early if I sell it in the next 2-3 years?
If you are sure you are going to sell in a few years, than no doesn't make sense to make extra payments.
But if you're staying put for a long time, get that mortgage monkey off your back. The fact is the value of the home will only matter if you need to refinance or sell.
I missed my first cc payment ever this month, misread the date, then the baby got sick, etc. It was paid in full 2 days late. The $25 late fee and $25 in interest (first cc interest payment ever) makes me very mad at myself. I use online bill pay and have now set up an autopay to meet at least the minimum in case something happens in the future. How long does this negative mark on my credit report last?
First, call the credit card company. Have them look at your payment history. Explain what happened. You might be surprised. They may remove that late payment date and might forgive teh late fees.
If not, I won't lie. A new late payment isn't good for your credit history. But the good thing about credit scores is it's constantly updating so if you return to your old habits you shouldn't suffer too much creditwise.
And FYI, if you've been a good customer they might not have reported you late to the bureaus. They have still have charged you but might not have reported the late payment since you made it so quickly. Check and see.
Hi Michelle -- A few weeks ago when I asked about financial advice for my parents, you recommended I look at nfcc.org. I did, and it certainly looks like their members could provide the advice my parents need. But I would like to "pre-screen" a few agencies in their area by phone to find the best fit for them -- I know they will not go unless I make them an appointment and pay for it. What questions should I be asking, from a distance, to see if this is the right fit? Basically, my parents seem to have burned through retirement income and are now at risk of foreclosure. I need someone who can help them think through and understand their options and make good decisions moving forward. Thanks!
Find out if they have appointments in person. That is probably going to be best for your parents. See if you can talk to a counselor and find out what help they can offer. Ask about the training of their counselors.
You might also contact a HUD-backed housing counselor to help with the possible foreclosure issue. The counselor could see if your parents are eligible for a loan modification. Go to www.makinghomeaffordable.gov
Good luck and let me know what happens.
No questions, just support for your statements in the newsletter. I learned too late that despite all the nostalgia with the college experience, I needed to learn how to get a job/career. Not that you need to study specific fields, you can study what you like, but you need to learn how to turn that into something feasible. Unless you're independently wealthy and still then... Also, I used my intership from 15 years ago to help get my current position. They're important. Again, make the most of them or any paying job. My sister in law had two interships. She didn't learn how to be a professional; didn't network with them. They wouldn't even consider her for interviewing after graduation, whereas her peers were "sure things" for a full time position. You can't afford delayed adulthood if you're becoming (tens of ) thousands in debt.
I thought I did everything right--I had a six-month emergency fund and a $10,000 "life happens" fund. I drove an old car and lived frugally in a small condo. I got laid off, got unemployment, and nearly depleted both funds but got a job at roughly the same salary I had before several months later. I started Monday. Haven't been paid yet. Today, I hit a deer with my car. I'm OK--the deer and car are not. It's a 15-year-old Saturn with 200,000 miles on it. I was intending to drive the Saturn until it literally fell apart, and I guess it's there now. Between what I have on hand and the likely nominal insurance proceeds, I'll probably have about $3,000 to put toward a car. Looking at the used car listings, I don't think I'll be able to get anything even close to decent. (I'm OK driving my own hoopty, since I know its problems, but I don't want to buy someone else's.) I'm at a loss as to what to do...will anyone give me a car loan with a long gap in my employment? I was saving the $10,000 to get another car but had to use it when unemployed. I can't get to my new job via public transit. Help!
Check around and see if anyone you know, knows a good and trusted mechanic. Then have that person help you look at used cars at that $3,000 range. I bought a car for about $1,800 and while it eventually gave me trouble I did have some good months with it until I could afford to move up.
There are other hoopty cars out there you could get to bridge the time until you can upgrade. Just will take some work.
I too agree. Too many kids these days just go to college because they don't know what they want to do with their lives. You should go to college if you have a field that you are interested in, or a passion for learning about. The kids who go to college with no real interest in their major, take a degree in something that they don't care about, party half the time, often end up just as directionless in 4 years and end up boomeranged back into their parents basement and get the same hourly jobs that they could have gotten now without costing $80-150K. Taking a year off, to work, find a goal and look for direction is better than just wandering aimlessly in college. I've seen many a kid take a year off, try out a few things, work a job or two to find out what (s)he DOESN'T want to do and then starts out a year later with a lot more direction.
And can I get an Amen?
If I have deffered my student loans due to unemployment, will that affect my credit score?
If the lender allowed it and it wasn't just you deffering without permission, shouldn't hurt your credit scores.
Hope you find something soon!
I had the same thing happen to me during a move and lost track of the cc due date. I called the company and explained my situation and since it had never happened before, they removed the late charge and interest. They said it was a one-time only thing so please call and ask now!
That's what I said.
But thanks for the backup.
If someone plans to sell their main residence in a few years I would not advise making ANY extra payments on a mortgage let alone pay it off. That money would better serve someone in other long term investments, that way it is working harder longer.
I believe that is what I said.
Like Michelle said, definitely do a background check and a rental agreement. But also (1) require a deposit and (2) make sure the rental agreement spells out how utility costs are going to be shared. I have a friend who sublets out a room and has been badly burned. Even if you find a noncrazy person with whom you'll feel safe enough, you could still find yourself fighting over who uses more water, then being stiffed their share of the bills when they move out without paying. Always remember that you are not just a cohabitant but also a landlord -- you have to be OK with asserting your legal rights (up to and including eviction) if it becomes necessary to do so.
Good points. Always get everything in writing. My nephew lived with me for about a year. Made him sign a rental agreement. He thought his rent covered food!
The foolish, foolish kid.
All worked out. Spelled everything out including him having company over. He's doing great now with his own home.
For the late CC payment poster - Michelle is right, as always. I was late on a mortgage payment once because of misdelivered mail. I called the lender at the same time that I made an emergency electronic payment, and because of my excellent payment history - never late on any type of bill - they forgave everything and ensured it did not show up as a late payment.
But it also shows how paying on time can help when you do slip up.
Some tips to the youngster considering buying a foreclosure. Do not even consider buying a foreclosure if you are NOT handy. Foreclosures often have hidden problems due to the former owners not taking care of the property. Many problems will not show up to a regular inspector and will just "pop up" later. Many are sold "as is" and you have no recourse if an event happens after you purchase the property. Unless you are planning to do renovation work, you have to be careful or foreclosures can cost a lot in hidden later costs. If you decide to purchase a foreclosure, make sure to bring your own inspector in addition to evaluate the property instead of just relying on the home inspector assigned by the bank. If you need a good referral for a home inspector, call your insurance agent (your home owner or rental insurance agent or even your car insurance agent, since most companies do both home and vehicle insurance) and ask them for a reliable contractor that works for them. Many of these contractors will do a home inspection tour with you. When I built my new home, I put in the contract that I would be allowed to bring my own inspector. We had one visit prior to drywall going up and one final visit. My inspector cost me $65 per pop and was the best $130 I spent since he found a couple of things in the walk throughs that the home builder could fix easily during construction, but would have been difficult for us to fix post construction. Foreclosures are not too good an idea for the inexperienced.
Thanks. Good information.
Michelle - I love your chats and have learned so much and I finally have a question for you! I have 1 month of my salary saved for a super emergency and almost $2k in another savings account for day to day needs (a car repair, etc.). I don't own a home, so luckily don't have to save for those expenses, and my car is paid off; however I do have a lot of debt from bad credit card decisions. I put every spare penny toward that debt and if I continue to do so will have it all paid off (and we're talking over 10K) by next August. My question is, should I be less ambitious in paying off that debt to build my savings??
I think you are right on track. You have some savings, which is good otherwise you end up using debt if you have a financial emergency.
So just keep putting every spare penny toward the debt.
I just found out recently that my mother has $30,000+ of credit card debt. She recently went through a serious illness and has always had an unreliable income stream (she's a visual artist, so she has an annual average, but it comes in fits and starts). I'm not sure where, how, or if I can start helping her address the debt. I'm uncomfortable loaning her money, given our finances (fine, but not a lot of wiggle room) and a comment she made recently after someone told her to use a home equity loan to pay off the debt that she would "just run the debt up again if it were available." Any advice? Or should I visit Carolyn Hax or Ask Amy instead? Thanks.
Have your mom go to www.debtadvice.org.
There she can find a non-profit credit counselor to help her get a handle on this debt. She could get budgeting help or see if they have a debt repayment plan.
And I'm proud that your mother saw the folly of a home equity loan. She knows herself. Because that is exactly what a lot of people do.
If you offer money, you are right that it shouldn't be a loan.
But before you do that if at all, help her find a good credit counselor to help herself dig out of this debt mess.
Michelle, like the woman you said you helped figure out a way to tithe, you seem to help people on a personal level to figure out their finances and get themselves back on track. Can you be hired or can you recommend someone who will sit down with a person and try to figure out how to budget/manage?
I can't be hired. Don't want to. I help people through a minsitry at my church. I've helped people with six-figure incomes and people in jail (I volunteer to go to prisons to conduct financial literacy classes).
If you want one-on-one help check around your community, with your church to see if they have a similar program (basic budgeting, workshops,etc.) or go to www.debtadvice.org.
CALL THEM ASAP. And be really, really nice. I have, in the past, missed CC payments a couple of times, both entirely my fault (once because I just forgot about the bill, once because I forgot I hadn't yet set up autopay on that card). But I have a very good payment history, and each time they not only didn't report me, but credited back the late fee and interest, which I didn't expect (and it's not like I'm a big money maker for them because I always pay in full -- as long as I remember to pay!). Give it a shot!
Again, another testimony.
So this one is it.
We know it works.
In all honesty, whether you have this one ding on your credit report isn't a big deal. As long as it is ONLY one ding. When we bought our current house I pulled my annual credit report and was worried about something like that a single missed payment about 3 years earlier. The mortgage company told me essentially that single blips don't bother them, but patterns. So be diligent about getting back on track to not miss any more and you'll be fine.
Good point. But the a late payment can bring down your scores. However, if the lender is doing a good job they will look at your entire history and price your loan accordingly.
No question. Just wanted to thank you for your no-nonsense voice of reason in this chat. So helpful to be reminded of the personal financial basics on a regular basis! :-)
Ah, thank you so very much!
I went to college without knowing what I wanted to study. You don't have to know what you want to do when you start. There is nothing wrong with exploring your options while taking courses that fill your general graduation requirements. I ended up with a degree in computer science as a result. You have to want to find something and be willing to work hard.
And that's the key. You had a plan. Take the basic courses but still look for what you want to do.
Not all students do that. They arrive at or near graduation with no real skills to do anything wasting money along the way.
Michelle, do you personally know any "May 21sters" and are they managing their finances any differently than anyone else?
Don't know any.
Me, I plan for the worst and expect the best.
My parents are in their mid-80s and have been mortgage-free for over 20 years. Their health is not that great and my siblings and I are considering all options that would finance their looming long-term care needs. What are your thoughts on reverse mortgage as an option to cover their future health and living expenses? Thanks.
I think the loans are very expensive. For some it may work but I tell folks to be very careful and know what they are doing.
I really encourage you to go to www.hud.gov and read up on reverse mortgages. AARP has posts about it as well. In fact there was a bit of news about reverse mortgages recently.
People know I hate debt. This is still debt but I can see how for some it might make sense.