Color of Money Live

Sep 30, 2010

Need advice about how to handle your personal finances? Whether the struggle is saving for retirement, organizing your bank files, or talking about money responsibility with your spouse or loved one, Post personal finance columnist Michelle Singletary offers her advice and answers your questions. She will be joined by Willie Jolley, the author of "Turn Setbacks into Greenbacks: 7 Secrets for Going Up in Down Times," this month's Color of Money Book Club selection.

I looked up and it was after noon already. So sorry for the delay. Let's get started.

Michelle: When I first read Ms. Hart's comment that "My husband and I joked for years that we thought we were well beyond the hot-dogs-and-beans era of our lives. But quite frankly, it's starting to knock on our door and ring true that that might be where we're headed again," I thought she was a person who had really been socked by the recession. But then when I read that she is an employed professional, with an employed husband and two kids in private school I felt a strong sense of disgust that she would have, without any justification, presented herself as someone truly hurting. And then when I read her comments about thinking that President Obama had some kind of magic wand he could wave to fix everything, I became really disgusted. Can anyone, man or woman, who has achieved a position of professional authority possibly be so naive about the way the real world works?

I hear you and I initally thought the same thing. But after talking with Hart, I understand her frustration. She's worried about what could happen to her. She's concerned that the value of her home has dropped drastically. The thing is Hart understands and many of you do that most of us are just a paycheck or two away from financial ruin. Even people who have saved well have realized the 2007 recession was deep and it hurt bad. She does stand for a lot of people who are doing okay but are worried. Heck I'm worried. I'm a good saver. I'm cheap but if I lost my job and couldn't find another one for a year or more, I would be in trouble. And let's not even talk about the lost of health care.

So don't be too hard on her.

Hi Michelle, Here it is in a nutshell. I owe $8000 in student loans, $5000 to Mastercard, and have not funded an emergency fund. No car payments. I make 100K a year (so blessed!). Should I stop saving in my IRA (9%) and for kids college to get rid of the debt and beef up my savings then go back to IRA and college savings?

Have you really looked at your budget? Maybe, just maybe you can start attacking that debt without cutting your retirement savings. But if not, of things are tight even with a six-figure salary (and in the DC area or other large cities that's possible) then yes cut back for now. I would concentrate on both saving some cash and paying down the debt. Start with the credti card as far as the debt. Then move on to the $8,000 in student loans. And if you really cut back and I mean really cut back you can knock out that debt in less than two years. Then boost your retirement savings and begin saving for the kids' college funds.

I just got out of a marriage. I am 52 years old. I have a condo to live in worth $150,000 and an IRA worth $85,000. My annual income is $45,000. My mortgage costs $1500/mth, other expenses $1500. How canI retire at 62? I am an esthetician and have no degree. Thanks.

You may not be able to retire. But if you are healthy and you like you work, why retire?

If Iwere you I would spend the next whatever years paying off my mortgage and getting rid of the biggest debt in my budget.

Hold on folks Willie will be answering questions in just a bit. Just a little technical difficulties. In the meantime, I'm taking non book club questions.

Hi Michelle, Love your columns! My husband and I are considering refinancing, and are deciding between a 15-year (slightly lower interest rate) and 30-year (more flexibility in payments). Our plan right now is to pay it off in 15 years either way (but you know about "best laid plans.") We are 48 years old and have three kids in private high schools (ouch) and college is looming! Which mortgage do you recommend? Thank you!

Me, I would go for the 30-year-old to keep the flexibility. You and still pay it off early and act like it's a 15-year mortgage. But I also want to caution you about doing that at the risk of taking student loan debt for the kids or letting them take on debt. For now I would take the extra money you have to put on the mortgage and save it for college or boost the college funds. Then when the kids are out of school and hopefully with no debt, you can go back to aggressively getting rid of the mortgage. That's what my husband and I are doing.

If there's is anyone left doubting Michelle's promotion of this concept, here's a real life example: Took my car in last Friday for what I thought might be $100 of work. Nope, it needed $800 worth of repairs (I trust my mechanic). Transferred the money from "life happens", paid the bill and picked up my car that night. I wasn't happy about it, but there was no damage to the monthly budget, no added charge to the credit card (which is paid in full every month) and a solid car that will get me through the winter and beyond. TIme to start adding back to it....

Amen. Amen. Got to love that Life Happens Fund.

And don't be upset about having to dip into it. That is what it's there for. So now you see why I say you need another fund in addition to the emergency fund. If you had to dip in the emergency fund you would feel less financially secure. But with the Life Happens fund, you dip, build it up again, dip again, etc. It's how it works.

Anyway congrats on listening to a very wise woman!

My spouse's and my combined finances are in what most people would consider great shape. On the eve of purchasing a house - which we are financially prepared to do and as emotionally ready as we'll ever be - I'm finding all the little buckets that money needs to go to overwhelming. I've made budget spreadsheets ad nauseum, but I can't plan for the entire future (How many kids will we have? Where will they go to college? What will our future 529 contributions need to be? etc.). How do I make my internal control freak come to peace with financial uncertainty, especially after the big financial cushion known as our down payment gets spent?

The #1 point I write about in the book for getting past the economic uncertainties is DO NOT PANIC!   Whatever you do, it is critically important that you remain calm and collected and think through the issues that face you.  In 1929 there was a Stock Market crash and people panicked  and jumped off of buildings, not realizing that the market would come back bigger and better. In terms of you situation I would suggest that you do not panic and think through the process and be grateful. From what I see you are doing the right things and I believe you are on the right track, no matter how many children you are blessed with and how many other situations occur. Enjoy the process!

How do we decide whether to pay down our mortgage or invest the money? We are in are early 60's and have a fixed rate of 4.4 on the balance of our mortgage. We'd like to pay it off before retirement, but will also owe more income tax without that mortgage deduction. Is there a valid calculation or is it really just a matter of comfort level?

I'm not sure how far you are in your mortgage but if you are close to payin it off than you are getting less of a tax savings in that deduction than you think. But really le'ts look at this another way.

Let's say your mortgage interest payments were $1 a year (trying to keep this very simple).

And let's say you are in the 25 percent tax bracket. For that $1 in mortgage interest and the benefit of the deduction you get back 25 cents.

But if you had to pay taxes without that particular deduction, you would pay 25 cents in taxes but you get to keep 75 cents of your money (because you won't have a mortgage and interest to pay if you paid off your mortgage.

Which is better to pay 25 cents or keep 75 cents?

Stop worrying about that tax deduction and get rid of the biggest expense in your budget -- your mortgage. You will save a lot of money in interest and have some peace of mind that in retirement you don't have a mortgage.

I have a friend whose husband has been unemployed for over a year. She is struggling to make the mortgage payment with only one income. They applied for a loan modification about a year ago. It still hasn't happened. In the meantime, they have not missed a single payment. Do you think the reason why they are not getting the loan modification processed and completed is because they haven't been delinquent yet?

Yup. Why would the mortgage company want to modify when she's paying on time.

BUT that doesn't mean I'm saying she should stop. Tell your friend to contact a HUD-approved housing counselor to see if she can get some help in getting the lender to respond to her application. Please tell your friend it will be hard to get help from the counselor and the lender -- because both are overwhelemed -- but keep trying. I really wish I had more to offer but I don't. There are just so many people in her position right now.

We're in the same boat as those refinancing with the 3 kids in high school, though our kids are elementary aged, about 7 to 10 years away from college. How does that change your answer about paying down the mortgage, since we have more time? If we continue pay down our mortgage as aggressively as we have, we'll have it paid off in 6 years. We are putting some money aside for the kids, but there's only about enough to pay for about 2 years at a public university at current rates. Should we try to stuff more money into those 529s? (We're contributing the maximum into retirement, & have Roth IRAs.) We're in our mid-40s.

Because the kids are not that far off from needing the college money (7 years come fast) I would concentrate on the college funds. The problem is in six years you pay off the mortgage you will be facing tuition a year later.

Now if you are sure you can take the money you were paying on the mortgage and put it away for the remaining college years you could stay on track to pay off the mortgage -- but that's barring any disruption in income, etc. And at that point when you are closer to sending them to school and need the money you shouldn't be aggressively  investing the money because you won't have a lot of time to weather whatever the market may be doing at the time.

If it were me, I might split the different. Still aggressively pay down on the mortgage but take some of that money and boost savings to 529 plans.

But there is some damage to the monthly budget, right? I mean, after I pull money from my life happens, I should put it back. So good for me that I didn't have to use credit, but sigh, our budgets still take a hit.

True, for a little while you will have to allot money from the budget to build the life happens back up but still better than using credit or pulling from emergency fund. And it's only for a little while until you get that pot back up.

I recently attended your excellent lecture on how we need to learn to spend on necessities and not on items we don't need. Then you sold me your book. Is your book a necessity or a luxury?

First thanks for the kind words.

And is school a necessity or luxury? How about a financial class you pay for that helps you become a better steward over your money?

What about the money you may spend to hire a good financial planner to help you make sure you are doing what you should with your money?

You sometimes have to spend money to get the information you need to become better.

Funny how people can spend money on cable or eating out or junk food or untold number of shoes or clothes or whatever, but then bulk or complain about paying for something that can actually help them.

So in my book (pun intended) buying information that will in the long run save you money and a lot of  financial heartache is a necessity.

Michelle, I'm a college professor who has been at this for just over 20 years. I have a personal observation that may add a reason for the mountain of debt people are carrying these days. I have noticed that the great majority of students are running on part time jobs and part time school because they have no other means of funding their education. When I ask about any support from their parents, they say that they were told at high school graduation, "You are on your own." This is way different from what I observed 2 decades ago. Most students had their education funded by parents or other relatives; and were somehow able to attend university full-time and finish in 4 years. They worked summers, but very little during the academic year. This makes a huge difference in a student's ability to focus on the academic work and succeed. It is discouraging to see sleep- and concentration-deprived students. Any comments or recommendations to young parents?

Thank you so much for your observations.

I agree totally. I believe as a parent of THREE that it is my responsibility to give my kids the best start in life. I mean I brought them into this world where for many people a college education is their ticket to at least a middle income life. So why would I say to my child : "Kiddo you are on your own."

Besides putting them on their own will result in just what you are seeing -- and these adults coming back home.

I want to run naked thu my house again.

So I'm gladly saving for them to go to college.


Hi Michelle, I'm a 19 year old sophomore in college studying psychology and business. My question is: What measures can I take to ensure that I will be financially independent by age 45 with an annual passive income of $60,000? Is the only way to reach this goal to own a business/real estate and other assets?

I would recommend you always develop multiple streams of income, investing, owning a small business, or using your intellectual capital to make additional money (whatever you know is of value and you can share it with others for a fee).  Whatever you do I recommend you always think of creative ways to create income streams. My mom was a school teacher, but always had a roomer in the basement, and also sold world book encylopedia as an additional income, which helped to pay the bills and also helped put my brother and I through college after my dad passed. 

Hi Michelle--I'm a really good steward of my funds, but find myself in a quandary. I'd like to refinance my home loan from an ARM to a fixed-rate. Because my property is more than $100k under water, it looks like I'll have to come up with a substantial amount to pay down the loan and get within 97% of LTV that the lender will refinance. This means I'll have to go to my emergency cash and life happens combined to come up with the funds, which will be about 3/4ths of what I have saved. I'm really stressing about this, but can't refinance otherwise. Is this what you envision when you think emergency funds? I'll have a little left over after this, but certainly not the years' worth of savings I had accumulated. Any advice on whether I'm thinking the right way here? Should I just pay up and let it go or find a second job?

Do you really need to refinance now?

I would wait. If your ARM resets soon you may actually  be paying less depending on what index your ARM is tied to. In this economy I wouldn't bring that much money to the table.

I've known for months that I would be laid off before the end of the year. So I thought about what I would do, and I started studying for some computer certifications, since NO ONE is hiring in my current field. My last day of work is tomorrow, and I should be ready to take the 1st certification test in a week or so. I think everybody (even if you think your job is 100% secure), should have a Plan B. Oh, and everybody should have that emergency fund that you tell them about every week. Thanks for all your smart advice.

I think you are wise to have a Plan B and a Rainy Day Fund!  There is an old song that states, "Momma may have, and Daddy May have, but God Bless the child who has his own!" I think that your certification studies give you more options and give you a leg up on the competition, and in these challenging times every little bit helps!  Bravo!  Keep working on you and working on your dreams!

Ditto what Willie said.

I have a plan b, c, d and e.


Hi Michelle, I REALLY want to take advantage of the low rates and refinance our mortgage and HELOC-together--about $150K of debt. But our financial guy says the closing costs are more than what we'd save every month, since we're only planning to stay in our house 2-3 more years. But we'd be saving almost $300 per month if we refinanced. Do closing costs really make that much of a difference, if the costs are only $1-2K more than what we'd save over a 2 or 3 year period?

Listen to your guy. He's right.

If you are planning to move soon doesn't sound as if it's worth it. Can't you cut your budget to find the money you want to save?

Think cell phone, premium cable, eating out, etc.

I bet I could find the money :)

I'm the $800 car repair woman: for the other poster, to build it back up, I plan on allocating a little of the money that I already save each month to put back in the Life Happens envelope. I don't think of it as a hit to my budget. That money was going to be saved anyway (might be $100 this month, $50 next month); it'll just go in two different places. Both places, in effect, pay ME!

Love you repair woman :)


Michelle, In the last week, I've been getting strange messages on my home phone and strange text messages. The text messages are solicitations for debt consolidatation. All from different phone numbers, but the same message. The calls to my home are from at least 4 different moving companies. From what I gather, someone is moving from Manassas to Florida, and has gone online for quote information for this move, inputting my phone number. But the messages are for a "Jo-Jo Jimbo," not exactly a common name. Both numbers have been on the do not call list for several years. My brother thinks someone has gotten my info. Should I be worried about idenitity theft and what can I do? I have one open credit card and 2 open debit/bank cards. Should I be proactive and disable the credit card and ask for new bank cards? I'm really worried. Thanks.

Pull your credit report right away. Pull all three. If you haven't gotten your free reports in the last 12 months, now is the time. Go to

If you already have gotten the free reports, order new ones by going to

You are right to be concerned.

Michelle: I am hoping to retire in about 2 years. I own a townhouse and would like to redo my 25 year old kitchen both for my enjoyment and resale value in the future (right now it's hideous). I've gotten an estimate of $30,000 to $35,000 and am so perplexed about the way to finance it that I've put it off for three years. Should I take out a home equity loan, refinance house, or withdraw from 401(k)?  House is worth about $350,000 with $120,000 in equity; 401(k) worth $162,000; I have a couple of CD's and $15,000 in savings. What do you think?

I would not borrow. I would save.

Or slow down the rehab. Do a little every year based on what you've saved. If you are heading into retirement, don't take on more debt. In fact, I like to see that you have no mortgage at all.

But we're always adding to it - since we're always taking from it. So it should be part of your budget anyway. Right? I mean, it couldn't be that so many months go by that there's no car bill, or the furnace needs something, or the hot water heater explodes, or whatever. I am constantly putting money into this 'short term' savings. I pull it out when I need it, but I never stop putting money into it.

Good point. Now there is a time I don't need to add to it because I keep a hefty amount in there. But for example, just did a major project at my house so my Life Happens is way below what I want it to be. So I'm boosting it up again.

It's a constant thing that needs to be fed. But at times you can take a break.

How to do I make myself believe that cable is a luxury and not a necessity? We are a tv watching family, but every month I see a $200 bill for cable, wireless and phone my stomach cringes. I've tried calling my provider to discuss lowering the payment, but I can't seem to find a plan with significant savings and trying to find that information on their websites is near impossible. I feel stuck -- like I have to totally cut it off or suck it up and pay the big bucks.

Or just cut back.

Think about this:

You kid has a cap and gown on and is walking across the state to get his or her degree. You are so proud. All the family is there. You jump for joy.

Six months later kids comes back and shows you the student loan debts that are now due.

At that time will you be glad you watched all that extra TV or talked all that extra time on the cell phones?

Watch less. Talk Less.


Hello Willie Jolley, How can you make the right choice when you often use your money to calm down your loneliness and sadness???? I tried to change but I failed. My health isn't good neither...what do I have to do to change that?

I understand how we often drown ourselves with "stuff" to feel better because we are lonely or sad. We go shopping and buy "stuff" we don't need, we go out and eat "stuff" that is not good for us, and the process continues. I have found that when I started to change my inputs, I changed my outputs. I started reading and listening to encouraging and uplifting materials. I started to volunteer my time and help others who wer in more challenging siutations, and I started write goals and work on achieving those goals, and when I did I stopped focusing on the "stuff!" I recommend you start each day reading or listening to something positive and uplifting and start writing your goals and working on them, and finally look for places and people you and help, and I believe you will see that you will have a change in focus and a change in the "stuff" you struggle with. I hope this helps. Feel free to email me and let me know how you are doing.

Hi Michelle. My husband (who is a teacher) and I are about to redo our budget for the upcoming school year. Each of us gets a third paycheck twice a year. What do you suggest doing with these? (We create the budget based on two paychecks, so after tithing, it's free money!) We have only mortgage debt, but have full life happens and emergencies funds. Thoughts?

Only have a mortgage?

You mean you are only a slave to that lender?

If you don't have kids and you are saving well for your retirement and you have an emergency fund AND life happens fund, then attack that "only morgage."

Go for being debt-free with that "free" money.

As we saw in the most recent years, some of these kids with college degrees are still having to move back. So be prepared.


Got like three robes but still want the rugrats off on their own. Nothing like walking out of your bathroom or running to get a snack without worrying you will traumatize a child.


What is the best way to purchase furniture? We are going to give our dresser to our twins. It is large, well-made and they need the room. Our plan is to purchase two chest o' drawers for our bedroom. I don't want Wal-Mart quality. I want real, well-made, quality furniture. I don't want to turn to store financing. (Horrible interest rates!), but the cash for the full amount is lacking. Hints? Ideas? Thank You Michelle.


Buy some baskets and keep the clothes in there until yo can pay cash for the good stuff.

I don't think there's a problem for a 'child' to pay his/her own way through school. (yes, I'm saving for my kid's educations, but still). As a college prof - it's all well and good for you to 'know' the best way for people to raise their kids, but just keep your mouth closed. Those kids who are working part time or more to get through college - are learning valuable things OUTSIDE of the classroom. They are relying on themselves, and will be able to get through any tough time, even if they can't find a job when they graduate. (Um, they WILL be able to find a job, because they've proven they will do what it takes to achieve their goals. Jeez.)

In my earlier book, A Setback Is A Setup For A Comeback, there is a quote that I shared that always gotten lots of responses from readers, J Williard Marriott said, "The best timber does not grow with ease, the stronger the wind, the stronger the trees!"  It is wonderful when as child is able to go to school full time and not have to worry about the bills but history shows lots of examples of people who struggle through the academic process, but in the struggle they grow muscles and skills that will be of great help in the later struggles of life. Another example I often share from my book is the fact that when babies are infacts they crawl and one day they stand for the first time. What is the next thing they do?  They usually fall down, and we parents encourage them to get back up and come to us.  They try and usually fall again. Some times they fall on their backsides, but sometimes they fall on their faces, and we allow them to do it, because we know that if they struggle to learn to walk, they will one day run!   They students are being prepared to run!!! 

I hear what you are both saying but if you can help your kid with one of the largest expenses in their life, do it.

I mean, really, they can still work holidays and summers to get work experience and life experience.

If I went by your theory --- make them suffer to grow -- then no kid should get a college scholarship. I mean how will they learn to be responsible if their school is paid for.

Well, they will. They will because you teach them to. I got a full ride to college -- FULL -- including books, room board. And I worked my butt off. I took a part-time job because I still needed money. My grandmother raised me right, to work hard even when I've been given something.

So all those parents thinking they are doing their kid a favor my not lifting a penny to help if they can are not helping. You are just helping them to be debtors.

Go to antique stores! Used 'older' furniture is built SO MUCH better than ANYTHING today. Just a thought...

Good thought.

Love your idea on savings. I'm actually saving for a new car (mine is 10 years old), but know that I want to pay cash for it. So next year I'll start saving $10k a year to put towards my car and hope within 3 years to have the $30k to buy my new car. It may seem like a long time, but knowing I won't have a car note is so freeing! Thanks for all the great advice.

You are so welcome. And I learned this from my grandmother, Big Mama.

When I did have car notes, I paid them off early. Then I kept making a car payment to myself. So when I wanted the last cars I bought I could pay cash.

And it helped that I keep my cars for 10 years or more.

I have a "life happens" fund for the car and the house. My contributions to the funds are an actual line item in my budget. $200 to the car fund, and $200 to the house fund. When the house fund hits a comfortable amount, I put the $200 into savings, and if I use house fund money, it rebuilds on it's own. I keep putting into the car fund no matter what. If I don't have a lot of repairs, I have a pretty sweet down payment for the next vehicle. The bottom line is, you can budget for the 'life happens' stuff, it's just that you don't spend it every month.

Good plan.

What's the most common (hidden) drain on people's finances? We're pretty good savers (once we cut the dining out budget), but wondering whether there are specific areas we should look into to try to reap more savings.

Eating out is a good place to start on saving money, and then I always encourage people to look at ways they can save more by negotiating things other than cars and homes. In my book, I interviewed author Michael Soon Lee, who shared with me that people in America usually only negotiate on homes and cars, while people in other cultures negotiate on just about everything!  Be willing to ask for a better price or more for the same money. One thing is sure, if you do not A-S-K, you will not G-E-T! :-)

Well, that's it for today. Sorry if I didn't get to your question. But thanks for joining me today and thanks for your comments.


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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Willie Jolley
Jolley is the author of "Turn Setbacks into Greenbacks: 7 Secrets for Going Up in Down Times," this month's Color of Money Book Club selection.
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