Color of Money Live

Jul 12, 2012

Join The Washington Post nationally syndicated personal finance columnist Michelle Singletary Thurs. July 12 at noon ET. Singletary will be discussing her June Color of Money Book Club selection, "No One Ever Told Us That: Money and Life Letters to My Grandchildren" by John D. Spooner, a Boston based investment advisor. Spooner will be Singletary's guest and available to take your questions about his book. During the chat, Singletary will also be available to answer your personal finance questions. Here are links to Michelle's latest columns and e-letter:

Consumer Financial Protection Bureau got off to a good start in its inaugural year

Today's E-letter

Michelle's column on Spooner's book

So glad to be back chating with all of you. I love the forum and getting a chance to hear your concerns.

Joining me today is of course John D. Spooner, the author of my June pick for The Color of Money Book Club. He can answer questions about his book, "No One Ever Told Us That: Money and Life Letters to My Grandchildren," and take your questions about investing. 

So let's get started. 

My husband was a big proponent of having a healthy five-figure "life happens" fund in a savings account - healthier than I would have kept it. Earlier this week, we found out we had to replace our entire HVAC system in the house we bought last year, immediately, because of a cracked heat exchanger and other major issues. Because of the "life happens" fund, we were able to pull the entire amount out of our savings, instead of financing it through the contractor or putting it on a credit card. This will save us thousands of dollars in interest, and my husband gets to say, "I told you so!" Just a reminder that homeowners, in particular, need a large "life happens" fund!

Thought I start off with a testimony.

Love, love the "life happens" fund. The idea or should I same name for the fund was something I came up with years go. So instead of pulling from your emergency fund you set up a separate "life happens" fund to take care of the things in life that happen.

Anyway, good for you. And thanks for the testimoney.

Michelle, My husband and I rent an apartment in DC. We are thinking if we should buy a condo instead. We have educational debt but we will be able to pay it off in about 4-5 years. Should we wait until then? It's our only debt.

If it were me, I would wait. And since you asked me, I say wait and pay off the debt. 

You don't say how much but if it will take that long I guess it's a lot. So don't acquire more debt until you get that debt monkey off your back. And I'm not telling you anything I didn't do. I've purchased three homes, first as a 22 year old and two later after I got married. Each time we bought with no other debt on the books.

Hi--I was raised by a single mom, who worked sooooo hard to provide us with a good life. All 4 of us went to college, for example. Growing up, we had what we needed, definitely very little we wanted. I'm trying to instill the same values in my 11 year old--to be grateful she has what she needs, and to work for what she wants. It's hard, and peer pressure is rearing its head. I'm a single mom now too, since my husband died. I make a very good 6+ figure living, but I don't spend on designer labels, fancy haircuts, etc. I try to model that when I want something (like a recent kitchen remodel), I save for it, and get the best prices on everything. Help?

I don't think you have to worry so much. You are doing the most important thing for your kid to show her how to be a good money manager. You are modeling good behavior, and you are talking to her. Just stay firm. Stick to your financial values. It's hard but it will be worth her rolling eyes and whining in the end.

Hi,Michelle. I miss your video chats! You are so perky and encouraging,much more so thanyou a re able to be in print. What happened?

Oh my, how sweet. I loved doing the video chats. So here's what happened.

I got a great gig to do personal finance segments for the new but now cancelled ABC show "The Revolution." I had to travel a lot to New York and so something had to give. So I dropped the video chats.

But alas the show got canned. So I may start them again. Not sure. Still have a lot on my plate -- the two columns in the Post that run Wed. and Sunday (syndicated across the country) the weekly eleter, this text chat and being a mom, wife and director of a financial ministry at my church.


Hi Michelle I'm at a huge loss and need some sort of direction. My parents were good with money growing up but I made the hard mistake of getting credit cards with the thought I'd pay them off. I've tried and I am still trying. My husband and I are on 1 income since he left his job (no unemployment coming in). I just did a full spreadsheet of my expenses and right now owe a little over 30k just in cc debt. I am shocked and embarassed at the same time (please don't flame me hard!) but also motivated to do something about it. I've cut up ALL the cards. I managed to get a 2nd job to make the ends meet so we don't have to dip into savings. At this point I'm only making minimum payments on all cards (but no late payments etc). Is this really the best thing to do at this point until he gets another job? In savings we have a total of 15k which I don't want to touch. Everything really is cc debt, vehicles are paid off and we have a mortgage. As hard as this has been I've been ok at getting all payments in on time. I don't see the light at the end of the tunnel but I'm hoping to soon.

First, I wouldn't flame you. I so fuss but before the fact. There's no point in me beating you up. You are doing a great job of that yourself. So that's my first piece of advice. Don't be so hard on yourself. You know what you did was bad. But life happens. We make bad decisions. Forgive yourself for it. Learn from it, which you already seem to be doing. I was going to tell you to cut up, shred, run over the cards but you've taken care of that too. Good for you. 

So as you see the hard part comes now. And your situation is worst because of the loss job.

I would continue doing what you are doing just making the minimum payments until your husband gets another job and your financial situaiton stablizes. You may need that $15,000 for your necessities if your husband is unemployed long-term.

But once things do stablize, list your credit card debt starting with the one with the lowest balance. Pay as much money on that debt while making minimum payments on the other credit cards. When you finish with that debt move down to the next one with the lowest debt and so on. 

You can get through this. You are on the right track. There will be light at the end of that tunnel. Not now but there will be.

John is having some technical difficulties but will be joining the chat soon. In the meantime, I'm getting to your questions. But send some for him too.

Hi Michelle. I imagine that you advocate for keeping track of how much money you spend, correct? If so, how do you suggest going about it? Thanks!

A budget.

A budget that you keep checking and rechecking.

I'm working with a few couples and all were having trouble tracking expenses and sticking to a budget. So I put them on the envelope system. When they get paid they take out in cash money for gas, groceries, personal expenses, etc. (They pay mortgage an big debts online). They put the money in the envelopes and when it's gone, it's gone. It has really helped them track what they are spending.

If you are more advanced and not having a problem with that Quicken or a similar software is good. Many banks have good programs to track your expenses. There is to help as well. And of course the old paper  and pen (or pencil).

Really it's just about looking at what you bring in and spend less than that.

Hi Can you give some general guidelines on percentage to contribute to 401k and a ROTH IRA? My job recently added a ROTH IRA option. I already contribute 10% of my pay to a 401k and I'm trying to decide what I should contribute to the ROTH. BTW, my employer matches up to 3%.

Really I can't tell you that. I would need to know so much more about your finances -- what do you expect from Social Security, any other savings, how old you are, children, married, etc.

But the investment company that runs your 401 (k) is the place to start. Hopefully they have a portal that you can use online or in person to talk to someone to help guide you in what percentage makes sense for you. You might also consider sitting down with a financial adviser who can look over your entire financial picture and come up with a good percentage. I do like putting money in a ROTH because the returns aren't taxed.

Good Afternoon! I read in yesterday's Post that interest rates are at an all time low. I currently have a mortgage at 5.25% and rates are now at 3.75%. Refinancing would lower my monthly payment by approximately $200. What's a good rule of thumb for deciding to refinance?

In general..less is more for you.. And even better long term, in my opinion,if you could put the same amount monthly in that you’re paying just keeps reducing the debt and building your equity..But this is a general comment since I wonderful to be debt free someday.

You should also look at the numbers. How much would it cost you to refiance and how long would it take for you to recoup that money at a $200 a month savings. Also consider if you plan to be in the home long-term. If not refinancing may not pay off in the end.

I'm grateful to have a "good problem", but I'm not sure how to fix it. Thanks to an increase in salary at the end of last year, I have over $20K sitting in a savings account. I also have approximately $8K in student loan debt (no other debt), $2K in an IRA with no other retirement account, and am considering purchasing a used car with cash since I currently have no vehicle. I'm 30 years old and feel that my job is stable for at least the next several years, but because this is the first time I've managed to save such a large amount of money, I am afraid to spend down my "safety net" and instead let it sit in my savings account earning under $1 in interest every month. What should I do instead? Please help!

wherever possible contribute to your IRA annually..and whack away a bit on the loan your young age, have faith that tough times eventually lead to good ones..own, in my opinion, a few of the great global brand companies with rock solid financial strength and a dividend flow that can rise in time..Or..equity income mutual funds.


-- You have a good job.

-- You don't thinkg that good job is going away.

-- You have not other debt than the $8,000 in student loans.

-- Paying off the studnent loan debt would still leave you with $12,000 in savings. Most Americans don't even have $1,000 saved in case an emergency happens.

I would:

-- Immediately, after this chat is over call and find out the exact payoff of the student loan and pay it off.

-- Separate the savings into two accounts, an emergency fund and a "life happens" fund. Put about $2,000 to $3,000 in the life happens fund. Then with the rest see how much would add up to at a minmum three months of living expenses. If you have enough for that, take the rest and start a fund for your car, which you've already indicated you will pay for with cash (GOOD FOR YOU). So depending on the car you want, you may need to save some more money.

-- Then build up the savings again.

You are right. Great problem to have!

Spouse and I purchased a small home that we could afford last summer with the intention of expanding it to fit our family once I was gainfully employed. And I am (and have been now for a year). Banks are telling us that though we would qualify to purchase a new home at X dollars, we cannot take out a construction loan to expand (and increase the value) of our current home - which would be less than X dollars - unless we come to the table with what amounts to half of the amount we would need for this construction. What am I missing here? I don't want to move or use us our savings/emergency funds but we're cramped and out of ideas. Thank you for any insight.

this may be an unusual answer..but my book looks for unusual : All Life is Relationships, paramount rule.. I would comb your friendship list, your college classmate list, flip out a Facebook your networks from the past to see who may have influence at any bank..if your job is secure, and your character good..make sure you see in person anyone in a lkending position.. Eyeballing, not virtual is more likely to get you help and common sense.

We are three years into a 30 year fixed rate mortgage with a 4.9% APR. Lately my credit union has been advertising 30 year fixed rate mortgages with APRs as low as 3.643%. Both my wife and I have credit scores around 800 and I assume we would qualify for the low rate or at least close to it. My question is whether it is really worth going through the process to refinance right now since we are only three years in and think we are likely to need a housing upgrade in the next 3-5 years?

See  my earlier answer to a similar question. Do the math. You already know you might move so you may be right that the cost of refinancing isn't worth it since you may move in three to five years.

I am hoping to get a buyout and retire from the Federal government at the end of August. I have a savings account (about 3 months' income), life happens fund and lots of other savings to supplement my government annuity. I'm wondering how much I need to keep in my savings account after I retire. Obviously I will have no job to lose and if Federal retirement goes away I'll have far bigger problems than I can handle no matter how much I have saved (as will we all). What do you think?

Well.. I believe that getting to the sleeping point each night is three months expenses in the bank, even at tiny interest, gives a cushion  ..or a pillow ( in the sleep sense) to your financial life.

Hi Michelle, I have a $70K equity line of credit that is maxed out with no other debt (except mortgage). I have just been paying interst on it. Should I turn line into a loan and begin to pay off monthly? Thanks!

Not sure why you can't pay more than the interest on the line of credit. You know a line of credit is still borrowed money -- a loan.

Call the bank find out what you need to pay on the line of credit to start making headway to paying it off. The only reason to keep the line is if you want to use it again as you pay it down.

Either way, you can pay more than interest and you should to get his monkey off your back.

Hi, my daughter is just one years old (we won't have another kid) but with all the stories about how expensive colleges are, I want to start saving ASAP for college. The only debt we have is our home. We could start saving money each month now, OR we could switch to a 15-year mortgage so that when she's getting ready to start college, we'll have eliminated a huge monthly payment thus paying for college would be feasible. Our emergency and "life happens" are quite healthy as well.

You are in a good position to start a 529 college savings plan. Go to to find out more information about 529 plans. I wouldn't wait to start saving if you can do it now. 

Do you think it is a bad idea to close on a house/property with a fiance when the wedding date is scheduled and all is moving smoothly? It seems hard to transition to marriage and home ownership together when we do not already live together. I don't like the idea of merging accounts etc before or moving in together ahead of the wedding, but if the perfect house comes along I do not want to miss the opportunity. Thoughts?

hmmm.. worst case, you own the house yourself..and in this real estate climate you would probably not be overpaying.. Part of me says..hmm, marriage is a very difficult journey unless you have a great sense of humor and a eternally patient..optimism doesn’t hurt either..What ever happened to “ We love each other..and we’ll work everything else out ? “

Wait until you get married. I've seen weddings called off weeks before the day.

Wait until you are officially one.

I paid cash for the car that I currently have, and it's been good to me for 8 years. However, it's in need of serious repairs that are too costly for a car of this age (it's a 1999 Honda Accord). This is my second Accord. I got 235,000 miles from my first one. I hate debt more than anyone, and I will drive it until it stops (that could happen any minute now). I don't shop much, and I am generally a frugal person. I just bought a new laptop last week to replace one I've had for 6 years. I still have quite a bit of student loan debt (from medical school), and sadly, it will not be paid off before my car stops. I just cannot bring myself to commit to a longterm car payment, especially after not having one for over 13 years. If I buy, plan to buy a used car anyway (never owned a new one). I recently started looking at short-term lease options (i.e., taking over someone else's lease for up to 2 years). What are your thoughts on this? Dealers seem to ask for a longer commitment, so they look less favorable.

 I don’t want this to sound flip..but , if you’re a doctor, have some faith in your future earning abilities and don’t overthink everything and overcomplicate..this not my area of expertise..but be a little good to yourself occasionally..if it were me, Id probably buy a good used car,..borrow the money and, as time went on ..accelerate the payments to pay it off early..particularly if you’re going to drive it for 200,000 miles.

I understand your situation. But I'm not a fan of leasing. Nope not at all. So can't say I would tell you do that.

I would use whatever savings you have to buy the best used car you can find. Because really after two years or three years of a lease you will be right back where you are now. That's not you based on the background. 

Hi Michelle, my husband and I are expecting our first child in September. What would you recommend should be on our to-do list? I always like to be prepared but now I find myself in disbelief that we could be parents in just over 2 months! Thanks so much for all of your advice and guidance.

First congrats!

I have three -- two teenagers. 

So what should be on your to do list:

-- Try to get as much sleep as possible NOW.

-- Spend a lot of time with your boo NOW.

-- Read the books you've been planning to read NOW.

-- Talk to as many friends as you can NOW.

Cuz once the baby comes, it's all about the baby as it should be.

Seriously, I'm assuming you are asking as it relates to money.

So really look at the numbers and figure out what you are going to be spending and how you will handle it. Will you need daycare and if so, how much, how will it impact your budget. Can you afford to start a college fund. If so look at 529 plans (go to for more information), check with your life insurance agent to see how much more life insurance you both may need. And most important don't feel like you have to buy a lot of things for the baby. Talk to other new parents and see what were the essential things they really, truly needed.

And again congrats!

John, I read your book and really liked the advice you gave about dress clothes for young men and women when they are doing interviews/newly out of college. Very helpful as I have a son in that age group. Also loved the idea for giving high quality personalized note cards for a college graduation present.

Thanks for the kind sidebar of the book that I had no idea about..every day I get notes and even letters from people, with lovely comments..and they loved actually writing with a pen.. You never know in life.

Last year as the first time that I've ever had to pay taxes. I'm assuming that this is due to my house being turned into a rental once I got married and moved into my husband's house. What things do I need to change in my finances so that I'm not hit with a huge bill next year?

Really the best person to answer this is a tax professional. And asking the question now is just when you should ask it.

Michelle, every week I respectfully ask if you or the chat producers can include a link to your articles so that we can read your articles in advance before the chat and discuss the topics during the chat. Sometimes, a link gets posted at the beginning of the chat, sometimes, not at all. You have an intro "ABOUT THE HOSTS" right here that includes links to your archived chats, why can't you put a link to your articles there? It makes it so much easier to participate in this chat if you make your stories accessible to your readers. Thank you.

Sorry for the inconvenience.  We've added links to the columns and the e-letter to the intro text.  Hope that helps!

I thought we had handled this but I see clearly now what you mean. You want the links not on the side but right then in the info about the chats. 

I'll do my best to make that happen next time. 

An elementary question: How does one go about running the numbers to see if refinancing would be beneficial?

It's a good question.

Here's a link to a calculaor on to help you figure out will you save by refinancing your mortgage.

I live in Temple Hills and bought a home in December 2011. I keep receiving information from my mortage service company suggesting that I pay my mortage twice a month (direct deposit or directly fm my checking account) rather than once a month. They say it would same me approx 6 years of interest over the life of my 30 year loan. Is this something I should consider?

If they are going to charge you to do this, no.

You can do the same thing by just making one extra mortgage payment a year.

So sorry. We have to wrap up now. Great participation. Good questions. Hope John and I helped.

As always thanks for joining me today. See you back here real soon.

And be financially safe.

In This Chat
Michelle Singletary
Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday 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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