Color of Money Live

Sep 13, 2012

Join The Washington Post nationally syndicated personal finance columnist Michelle Singletary Thurs. September 13th at noon ET. Singletary will be discussing her August Color of Money Book Club pick, "Dear Kate: Reflections on Risk and Rewards After the Storm" by Brad Fortier, a certified financial planner. Fortier 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.

Case history in bad behavior

Recognizing the sacrifices of grandparents

Michelle's column on Fortier's book

I'm so glad you can join me today and my guest Brad Fortier, whose book was my Aug. Color of Money Book Club selection. Brad is happy to answer your questions about his book "Dear Kate" but he's also Certified Financial Planner so feel free to pick him brain about basic investment stuff too.

Let's get started.

I understand you have to evacuate during Hurricane Isaac. Did that bring back bad memories from Katrina? How did you cope and were you ready this time -- financially?

We made out fine.  I have found very little use for the past so the only thing I hold on to from it is the wisdom gained from prior experiences.  In this way it doesn't bring up memories.  What I ultimately learned from Katrina was that I was already prepared in more ways than I knew.  Storms, both in nature and in life, come and go.  There are lessons to be learned form each.  I have found that if we accept the storms as they are and don't fight them the little things like money tend to fall into place.

thanks for your question

Hello Michelle! I love your chats, and wish they were every week so I can read your wonderful financial guidance more often! I'm doing okay financially, though I've attempted the 21 day fast a couple times, unsuccessfully. I am currently trying to pay off my remaining student loans, which amount to about $15,800. I am paying much more than the minimum, around $600 per month, trying to get rid of them within two years. I currently have about $17,200 in savings. I try to put $500 in per month. With that much in savings, should I start throwing more money at my loans instead of putting more into the savings account? I could probably pay the loans off even faster if I could give up more things like going out for food and entertainment, but since I'm already putting so much towards the loans and savings I keep telling mysefl it's okay, I can live a little. I also have wondered if it would be wise to just take the money in savings and pay of the loans completely, which would only leave me with around $1,500 in savings. My only other debt is a mortgage, I hold no credit card debt and my car is paid off. What do you think I should do? Thank you so much!

think this was more for, Michelle but I'll try and share thoughts.  Answers to questions like this are often subjective in nature  They involve philosophical views on things like debt and how to best manage it.  With savings rates so low you are likely putting yourself at an arbitrage disadvantage since the interest you are paying on the loan is costing you more than you are earning in your savings.  You liekly have found emotional value in the security provided by having a "savings" which is OK.  a more efficient approach to achieve both your emotional and financial ends is to consider taking out a low cost line of credit on your home to act as an emergency fund to provide the emotional security of access to low interest cash.  use the savings account to pay down the debt...then use the monthly cash flow savings to reinvigorate your true savings account.  good luck

Thanks for the kind words and I am thinking about increasing the number of chats soon!

Brad makes some great points. 

But I were you, I would dump a lot of the savings you've got stashed on that student loan debt. You could hit your mark of getting that monkey off your back a lot sooner and I know you will breathe easier.

How about a compromise? Figure out what it cost to run your household for a month -- keep that in savings as your emergency fund and take the rest of the savings and pay down the student loan debt. That way you have a nice cushion and make a huge dent in the debt.

OR if you're really bold and want to just be FREE pay off the student loans. Then over the next six months cut all the extra spending plus take the $600 you were paying on the student loan debt and aggressively build back up your savings. Sounds like you have a secure job, no other major debt except the house so you should be okay with faith.

So take the leap of faith and get that monkey off your back. Then tell me about it next chat. I bet you will be crazy happy.

I am single and in my mid 30's and considering going back to grad school. I know that I want to go back to school and am trying to figure out how to go from working full time to being a student. I do not have a lot of money saved at the moment. What advice do you have on ways to start thinking about financing this?

lots to consider here.  first if you are certain that the additional education is a prerequisite to achieving your new career then we have to find a way to make it work.  obviously you will be making a sacrifice to pull this off since it will require balancing time between earning a wage and completing your studies.  no great advice here other than to say that someone once said she who has a why can bear any how.  make sure you aren't just falling prey to the illusion that more education always equals more success.

Love Brad's answer. 

Really work thu the numbers. Will the money you pay for grad school really pay off -- if that is the primary reason you are going back to get a financial boost in your career?

And why do you have to quit work? Go part-time. And pay as you go. Don't take out loans.

There are so many great part-time grad programs now. Look around.

I worked full time and got my masters in business part time. So did my husband. He was not about to quit his job (we had one kid and another on the way when he decided to get his masters in business too. 

I worked full time and took a few classes in the evening, weekends, etc. I was fortunate that my job reimbursed me for grad school but we (me and hubby) had to pay for part of his grad school and it came out of savings.

You can do this. It might take longer but it can and has been done and without debt.

Honestly, I just don't trust investing not with what's happening in the markets all the time and what's going on in Europe. Why should I invest? It just seems like the little people can't win.

alot of people feel the way you do.  myself included sometimes.  all we know is that this attitude has cost more people money over time than any other.  like it or not all we have is the system we have.  trust is something that ails our society today.  we can either choose to live life with fear of or faith in our future.  i have opted for the latter but very much understand how people get stuck in the former.  stay the course...this too shall pass

Hi I have a good problem and am not sure what to do. All those years where the banks wouldn't look at you unless you had $10,000 in terms of CDs, etc. Now I have more than $10,000 in my savings, and while the banks like this, they can't really help me. I would love to find a way to grow this safely in the next year or so. Is there an option I may not realize exists, or am I stuck in a virtually no-interest savings account?

tough question to answer that will require you to reflect deeper.  i would need you to define words like safe for me.  is a cd safe?  yes it isnt volatile so in this sense it is "safe".  but there is this misunderstood thing called inflation.  the costs of things you are going to spend your $10,000 on are always rising so if the interest you earn does rise equally as fast you are actually losing money in real terms.  words like "safe" get more people in trouble financially than you think.  over long periods of time stocks are not risky- they are volatile-and volatility exposes certain investors to certain types of risk.  watch the use of words when it comes to managing your money.  consider finding a financial planner in your area that bills hourly.  they will guide you in a coast effective manner.  hope this helps.

Brad, How did you get over the fear you had of not being able to adequately provide for my family. So many people are out of work or not getting raises that isn't the fear they have legit? How can they have financial hope when the economy is still so bad?

by realizing that what i am really supposed to offer my family is far deeper than money.  wealth comes and goes in this highly volatile and unstable world.  peace, presence, compassion, and love - these are the rarist of commodities but the easiest to give because everyone possesses them.  money is merely a distraction that has relative importance in this world - money is not absolutely important.

We give a portion of our income to our church. This year, we have a one-time substantial increase in income; we've increased this year's contribution accordingly. Since we're in a higher tax bracket this year, do you feel it would be proper to give our 2013 contribution in 2012? A deduction taken this year would result in a much larger tax reduction than if taken next year. Thank you for your thoughts.

your plan sounds reasonable...make sure you are giving more than money...the world needs more love and compassion and less tax planning

I am being offered a chance to 'buy time' so that I can be vested into the Virginia retirement system before they apparently gut the replacement plan. The primary difference, from what I can tell so far, is the annuity would change from a 'high 3' average to a 'high 5' average. Is it worth the monetary investment to put several thousand dollars into this? Or, do you know of , or have, calculators that would help me in this decision?

this requires a specialist to help you answer.  do you have a local credit union?  if so many of them have financial planners who specialize in your unique situation.  find a local adviser willing to work you through this in exchange for establishing a longer term fee based relationship when you retire.  get help!

Hi Michelle, I submitted a question a couple weeks ago, but the chat was cancelled. I just wanted to say thank you for your tough love approach to debt! After eight years of minimum payments that barely touched the principle, I made a pledge to pay off my remaining student loan balance of almost $30k in 18 months or less. It took me 20, but I am very proud to say I am now debt free!!! It was a good lesson for me both emotionally, and financially, and I really learned the importance of budgeting, and assessing the difference between wants vs. needs! Thanks so much for your support!

Oh I'm so proud of you. Tearing up right now.

I just love this type of testimony. I hope the earlier poster asking about paying off his or her student loan is still reading!

Free at last. Free at last.

What a wonderful feeling.

Thank you so much for sharing your story. Now go and preach to others!

Is there a particular lesson from the book that you could share with those of us who have felt the economic downturn and are looking for pointers to manage our retirement accounts and personal finances?

seek out wise counsel.  we cannot control the world around us.  the economy is unstable, the future is uncertain, the markets are volatile.  you cannot control any of this but you can control how you choose to live your life and spend each day.  the one thing we all know for sure is within the next 80 or so years everyone on this chat will have vanished from this earth.  grave yards are filled with all the worry and anxiety of lives past.  tune out the noise, get out of your comfort zone and try new things, eat and live healthy, love endlessly and spend time with people who you care about.  by all means stop following the markets, the economy, and the talking heads on tv telling you that the sky is isn't

As they say in my church, preach brother preach!

You and other experts keep using the word "risk" but just what does that mean? And how do you overcome being scared of losing your hard earned money to "risk" it in the markets that are so volatile.

risk and volatility are two very different things.  understand what they are.  investor behavior determines investment results.  good advisers dont manage money - we manage people

With so many investment professionals doing wrong things, not looking out for the interest of their clients how can we trust them? Are there any signs to look for that the financial planner you've hired isn't looking out for your best interest?

there is an old saying that the line between good and evil doesn't go around me and through you it cuts through us all.  people who aproach life from a place of abundance tend to give more than they take.  the people you are referring to have a void they are trying to fill inside and they often think money is going to fill it.  they see people as a means to an end.  they are often transactional in nature.  they sell products not services.  there are alot of good people in my business trying to make our industry better.  ask friends who they use, hire fee only advisers so you can exit the relationship if it breaks down without costs, and follow your heart

Does it ever make sense to roll closing costs into a refinanced mortgage? This seems to be what the lenders recommend. However, I always take what lenders recommend with a grain of salt. We planned to pay out of savings. It will dip our emergency fund a little bit below six mos' expenses, but we should be able to build that back up.

another one of those subjective answers.  financial experts often try and provide simple calculations to answer such questions but to truly know what is best requires forecasting your future behavior.  there is no right answer and your long term financial success will not rest on the outcome of this consideration, but on how whether or not you ultimately make enough sacrifices in life to sustain the lifestlye you demand.  how you choose to define things like risk and what things are discretional and non discretional, etc...

I'm about to become unemployed, and I'd like to try to have enough saved for a year (or more) if no income, just in case. I'm young and single, with no debt or mortgage, and pretty solid retirement accounts. How much would you recommend saving while I still can? I do have a emergency fund, but I'd like to increase it.

why a year?  calculate how much your desired lifestlye costs for a year and save that much.  

I think you are about right in your calculation to have enough saved to cover your expenses for a year. But as Brad said, don't stop there if you can save more. I've seen many people go unemployed for 18 months to 2 years. Save as much as you can and if you get another job sooner nothing lost.

We dipped our toe into the stock market in 1981 and have lived through each and every major move since then. We never panicked and each time we came out better than before. I regard the ups and downs of our accounts as funny money. You don't have a loss until you sell. We have some stock we have had for more than 25 years. The dividends are much more than the interest on CDs. Each year we look at the losers--we haven't had that many--and sell them using the loss against the gains in other stocks. We don't begrudge our broker for his commission.

well put

I just have to ask: what's the alternative? I've heard a ton of complaints lately -- Social Security/Medicare won't be there for me, the market is rigged, savings accounts pay so little, etc. But what's your alternative? Not save, not invest, and live on the street because you have no assets? Chase some hyped-up foreign-currency trade or private investment that promises you 100% return in 90 days? Yes, there are many many many things wrong with our system. But it's the only one we have. And it's still the best shot that 99% of us have at some degree of financial security when we get too old to work.

every choice in life exposes us to risk.  i tell kate to consider which ones to take - don't delude yourself into believing that risks are avoidable. great comment

You make some great points. And you are right. What's the alternative? Remember what Brad said about inflation. The key is to try and beat inflation with investments that won't keep you up at night in worry. But if you take care of other parts of your financial life -- shun debt, build up savings and pay off your house before you retire, you'll be okay.

I'm posting these two columns in advance of a question I'm about to answer so you have some background.

Hi Michelle -- I noticed that you have had several columns lately about enabling/supporting, and I wonder where you draw the line to tell between the two. A few weeks ago, you suggested that it was ok/good for a son to keep supporting his parents, who were unable to retire themselves because they kept spending money on their daughter. Then this week, you seemed to say that it was ok/good for a daughter to stop supporting her brother/parents who kept making bad decisions. I actually did "get" the bigger theme behind your advice -- that the son shouldn't feel like a chump for providing support, and that the daughter shouldn't feel holier-than-thou for doing the same. But the responses raised in my head the question about how you draw the line between supporting and enabling? I especially worry about the son in that earlier post: he was clearly so loving and wanting to do the right thing by his parents, who need his financial support -- but they were then taking that support and spending it on someone else instead of themselves. I worry that he has learned from his family that you support others even at your own expense (which the parents are clearly doing, sacrificing their own retirement for their daughter), and that he will now expect/be expected to put his own needs on the back-burner out of love and obligation to the rest of his family. Is there a point at which he can/should ask about whether the sister really needs the money? Or when he can say, hey, I love you guys, but I have to save for my own retirement/home/etc., so I won't be moving back in with you?

This is  very, very thoughtful question. You weren't alone in wondering about my advice to the son. But there are really two different situations. In the first case, the son is helping out his parents, he wasn't "giving" or "loaning" them money that they then took and gave to his sister who he thought was not a good money manager. He was taking them to dinner, on vacation and helping elevate their lives. His money was spent on his parents because he wanted to help. He wanted to be generous. The parents took their money or resources and helped their other child. The son is not a sucker because he desired in his heart to help the people who raised him so well. And as I said in that column he may not be privvy to struggles his sister was having.Perhaps the parents were using his example to help out their 20-something daughter as she starts her adult life. From the facts I had it didn't seem to be that the parents were completely reckless with their money, just struggling like so many others. But I did suggest he help them save more while still being generous.

As for the other story, the sister/daughter was enabling really bad behavior. She knew her brother and parents weren't doing the right thing with their money and loaned them money anyway and then complained about their behavior. I saw that differently than a son wanting to treat his parents to some things. 

Hi, Michelle, I get your answers about paying off student loan debt but my husband disagrees. He thinks I should keep making the monthly payment since the interest rate is low (3 percent). We can easily pay the entire loan off out of savings but since it's "our money" I can't make that decision just by myself. How do we work past this impasse?

ask him if he would be willing to loan a friend money at .3% so he can go invest it in a cd at the bank paying 3%.  when he replies "no way  why cant i just take the $1 and invest it in the CD"  have the loan payoff form ready for him to sign

I agree with Brad. Or have him read the post from the person who is now freed from that burden. Perhaps that will change his mind. 

I was interested in hearing an answer to the question about rolling in closing costs on a refi...but you never answered the question. Maybe not everything is a simple "yes" or "no" but you could at least give an answer. I think it's a good idea myself to roll in. Between the two of you, all we've gotten is platitudes and sermons and no actual answers.

i can explain it to you, but i cannot help you understand the answer.  too many variables to give you a firm yes or no.  i choose to roll them in because i can control how those dollars that i am retaining control over are going to be invested.

Just becasue you don't like our answers doesn't mean we haven't answered the questions. The point is some financial questions take more than the little time and space we have in this chat forum. 

When you roll in the money you are paying interest over a very long time on that money. Now if you're not going to stay in the house for very long that might make sense. I tend not to pile any more expenses onto a mortgage than I have to.

For the person with $10,000  sitting in a bank or CD, the measily interest you're gaining will hurt in the long term (probably 1 percent or less). Therefore, you should go to a financial advisor to seek advice. My advice would be to open an online trading account (Scottrade/ E-trade/ TD, etc) and purchase a low-cost index fund. Look for Vanguard S&P 500, or something along those lines. Historically, in the 5 - 10 years time range, these funds have returned good rates (above 5%). Furthermore, the money is completely liquid, you can re-invest the interest and dividends (to not pay taxes on it), and offer a good hedge against inflation. I've recently started doing this last year, and my thought now is that I should've done it earlier.

the respondent assumes he knows how the questioner would behave when jim cramer is screaming at her via the today show to sell everything as the s&p drops 40%.  if she feels confident in her ability to overcome this i would agree with your thoughts.  given that dalbar has just released a study that shows over the last 30 years the s&p has averaged 9% while the average investor has earned 3%, i have my doubts that your counsel can be offered generically.

Hi Michelle, A good while ago, you advised me regarding paying off of our car loan and other financial matters. I'm pleased to say that the car loan is now paid off and that the money is now going to help me go back to school part-time so that I don't need to incur any debt. I've also increased my monthly 403b investment, and we have sizeable chunks saved in our life happens and emergency funds. It's helped that we purchased a very modest home and that my husband finally got promoted to full-time last year after several years of only part-time work. It's been a long road, and while we were lucky that our only debt was our car (and now our mortgage), it's nice to now be able to financially move onto the next milestone! Thanks for offering such solid and straight-forward advice.

This is just wonderful. A few key things you said:

-- You took my advice. Actual active not just preaching (sorry had to get that in). Seriously often people ask for advice but don't take it or argue with it. You asked me. I have a point of view. You are grown. Take it or leave it but preachy or not, platitudes or not the underlining advice is there. Do your homework. Do the math. Look at the upside and the downside. Hate debt enough to want it gone, gone, gone.

-- Be Patient for what you "want."

-- Live not within your means but below your means.

Good for you!

After seeing so many people sending in their "I've paid off my debts", it's finally my turn! Going from $40,000 of high interest credit card debts, I'm down to my last thousand to pay off! Can't tell you what a HUGE relief this is. It's been hard, but I did it! Thanks, Michelle!

You get a few woots.




I have been in my home for 14 years and last refinanced it 5 or 6 years ago to a 15 year mortgage. I have less than 10 years left until it is paid off. I know that I should be able to get a better rate but don't know if it is worth the effort. I don't want to increase the number of years remaining on my mortgate and I constantly feel that I live too far from work. Either I need to find a job closer to home or a home closer to my job. However, the idea of moving and knowing that would mean buying something more expensive than my current home which would extend the mortage back to 15, 20, or even 30 years. I need someone to give me the nudge that I need to make a decision and do something.

one of the culprits to true financial planning is individuals today tend to live more and more complicated lives.  this lifestyle choice makes it almost impossible to keep up with all of the what if simulations needed to properly answer these types of questions.  you are pondering emotional and financial concepts all in one thought process.  simplify your life, my grandmother lives in the home she was born in yet my average friend has moved over 5 times since we have left college.  you're challenge maybe isn't that you are stuck on a calculation - perhaps you're making your life more complicated than it needs to be.  this is often the case for me anyway

Hello, Can you give provide some insight on the emotional side of money. I have never really been good with managing my finances and now I am in my 40's and still find myself in the same place. Still living paycheck to paycheck. I feel like a get a good start, budgeting, looking closely at what I have and what I need, but can never make it stick. I am ready/need to try again, where should I begin?

you know what they say about insanity - doing the same thing over again and expecting different results.  you have already overcome the hardest part - you have acknowledged that your unconscious behavioral patterns have gotten you where you want to be.  besfore gps - whenever i took the family on vacation an realized I was lost I always stopped and asked for directions.  find an hourly planner that can get you staretd with a low cost investment plan.  vanguard, roth ira's, enroll in monthly auto invest programs.  make a plan, step out of your comfort zone

Try going to and siting down (not on the phone or online) but actually sitting down with a credit counselor to help you get on a financial plan and budget. 

Thanks so much to all who joined me today. I appreciate your input even your frustrations when we can't give you a yes or no. I take it all in and use it to become better at what I do even when I push back.

Thanks to Brad. Love his outlook on life and finances.

Take care 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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