Color of Money Live

Dec 01, 2011

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 on Thursday, December 1st at 12 p.m. ET. My guest will be Clark Howard, author of "Clark Howard's Living Large in Lean Times: 250-Plus Ways to Buy Smarter, Spend Smarter and Save Money." This is my November Color of Money book club pick.

So sorry for the short delay. Was finishing up my live video chat. Hope you watched. If no watch later.

So let's get started.

Don't forget that today joining me is

Clark Howard. He's awesome. He'll answer your questions too and talk about his book, my Nov pick for the Color of Money Book Club.

Hi Michelle,my fiance and I are looking for a good resource to help us plan our our financial life together before tying the knot. We're having trouble finding a class or book without a religious focus and just want a good workbook or something to help us decide how much to allocate to a joint account, how to set budgets together, etc.

There are a number of books you can read. There is my book of course, "Your Money and Your Man." There's several sections on how to merge your money.

There is "Couples and Money: A Couples' Guide Updated for the New Millennium" and "First Comes Love, Then Comes Money: A Couple's Guide to Financial Communication." You can find all the books on

I hope someone can learn from my mistake. We bought term life insurance policies but only got a 10-year term. During that time, I experienced health problems that made me virtually uninsurable. Although I still have that policy it now costs me about five times the original price and it will go up every year. If you are young and have a family get the most insurance you can afford for the longest term you can. If I could find a time machine I'd go back and slap my younger self upside the head for not getting a 20-year term.

The most important thing: I hope your health improves.  As to the life insurance, you are so right to buy the term period for which you need to protect your survivors.  If it makes you feel any better, 5 times the cost is still alot cheaper than whole life for similar coverage levels.

For many years, I set the regular car payments and mortgage payments up from the minimum to the nearest hundred. It just made things easier for me to remember and be able to update my check book. At some point in the past year, I decided to try that with some of my other bills. Instead of writing a check to the electric company for $73.28, I would write a check for $75. It seems to make the math much easier for me when balancing my checkbook. But my question is if there are any potential problems that I may not realize with this approach. Paying an extra $20 this month isn't going to break the bank and I assume that next months bill would be that much less so in the long run it will average out.

There is nothing bad about rounding up.  In fact there is alot to like about it as a form of forced savings.  Since you are doing such small round-ups you don't need to worry much about a business going bust with your money.

One thing I would add about the mortgage. Be sure to alert your lender or mortgage servicer that the extra money every month should be put toward the principal.

My husband's friend appears to be a very successful fund manager. He recently left his corporate job and is managing funds for high net-worth individuals along with some non-profits. My husband would like to turn over our retirement accounts to him. I'm strongly against that. The odds of a company like Fidelity or TIAA-CREF running a ponzi scheme big enough to endanger our life savings are near zero. Not so with an individual. What's your opinion?

Your husband should know his wife is always right.  If your husband really, really wants to try out having his friend manage money, give the friend only a small portion of the money, no more than 10%.  

Oh I couldn't agree more. Tell you huband you have one word for him "Madoff."

Many of his "friends" thought he was doing good by them. Let Madoff be a lesson to us all. The friend might be honest, but you just never know.

My son is aiming to get in the Air Force Academy or go ROTC. This may or may not happen, but if it does, would funding his college tuition be better under a 401 (k) in my name in case he does get college paid for? I understand that I can withdraw from my 401 (k) for my child's college tuition. Is it difficult to get the 529 funds back if they are not used.

You are really on to something.  However, the best course would be to fund a Roth account for up to $5000 per year.  You can leave it alone for retirement if you don't need it for your child's education, but if you do, you can withdraw your contributions, not the earnings, tax and penalty free at any time for any reason.  For your situation a Roth totally trumps a 529.

Michelle My husband and I are going down to one income at the end of the month - we just found out yesterday my husband is being laid off end of December (great Christmas gift huh?). We have three months of mortgage payments saved. With my income I can make the mortgage payments and bills with LITTLE left (about $100 which would need to include food, gas, etc.). We have about $11,000 in credit card debt and about $3,000 left in vehicle loan. Would you wipe out savings to pay off the credit ccard debt or take some of savings to pay off vehicle loan or do nothing and only cover the minum's until he can get a new job which no idea how long that will take. I can say I didn't prepare for this. I just paid off my car early  so that's one less bill but I'm scared and confused and don't know where to go or how to do this.

This is Clark answering.  I am really sorry to hear about your husband's layoff.  You are in a better position than most in that your one income will let you get by.  Don't use your savings to wipe out debt even if it is carrying a much higher rate of interest as you need the flexibility of cash for unknowns while your husband searches for a new job.  Losing a job is never fun, but the prospects for finding jobs are much better than the last few years.  Good luck.

I agree with Clark. At this point you need to reserve your cash. The job market is hard and no telling how long it will take your husband to find a job. So just pay the mimimun on everything.

Good luck.

My wife and I have a combined income of $160,000 a year. Does that mean our life happens fund should have $80,000 in it to cover six months worth of expenses?

I am so excited for you that you are such a focused saver.  As I said in the prior question, your income just barely qualifies you for a Roth account and I would put the first $10000 of your rainy day money each year into a Roth.  ($5000 each).  That way you can have access to your contributions tax and penalty free, but if you don't have the rainy day you increase your long term savings for retirement.

So I generally tell people to have two types of cash savings accounts

1. An emergency fund with six months of expenses (mortgage, gas, car payments, etc.)

2. A life Happens Fund. This is different from the emergency because the funds in this account will be used to pay for things in life you don't always plan for such as car repairs. Or you can stash your vacation funds or home improvement savings in this fund. At a minium I would have $1,000 in this fund.


This is a first for me. One of our cars was badly damaged last night, and since it was practically a hooptie anyway (smile), I'm sure it will be totalled rather than fixed. Most importantly, everyone is fine. So what are your recommended next steps-- is there anything we should be prepared for beyond working through our insurance company?

Glad no one was hurt.  If you have an old, old car you should not have full coverage on it anyway.  Since it sounds like you do, be prepared with research as to the actual market value of your car.  Insurance companies usually make a first offer when a car is totaled of around 70 cents on the dollar.  You can come up with a value estimate by checking used car values at, and

The good news is that car quality today is fantastic.  Check out Consumer Reports April 2011 issue to find the most reliable new or used cars.  

have you see more colleges do not teach what is need for the working world

I hadn't seen this site before. Looks interesting. Anyone else seen it? Got an opinion about it?

Our life insurance salesman is trying to convince us to buy "whole life." I figure if he wants to sell it that badly, we probably shouldn't but it. Is my instinct wrong?

Follow your instincts.  Level term life insurance is the right choice for almost all except those who earn in excess of $375,000 per year.  Term just pays a death benefit.  It has no savings or investment option.  It is cheap to buy and very flexible.  You buy for the number of years you want to insure.  People usually buy for 10, 20 or 30 year periods.  You can easily comparison shop on the web.

 I am interested in setting up a college fund for my eight year old niece. Her parents are having money troubles and don't have a college fund started for her. I figure every little bit helps, especially since it has 10 years to build. What would be the best way to do this? Can I do a 529 if I am not the child's guardian? It would not be a large amount put in each month, and the money is hers--I would not be using it. Thanks!

If I were you I would open a 529 plan. You can go to and find out a lot of information. For example, you don't have to be the child's guardian to open an account. And you remain the account holder. So if say your niece's parents get their act together and save for her to go to college you could transfer the funds to another relative. And depending on the state where you live, you could get a state tax break.

For a variety of reasons (primarily, my husband's disability makes our current house very unfriendly and we are not in a very good school district for when our daughter enters school) , we need a different house. We've now interviewed two real estate agents and their ssessment of our home's value is $60,000 difference! We'll interview a couple more but how in the heck do you find the right agent in this economy?

Keep looking and really settle for someone who fits with you, that you think you will like working with. Valuing a house is not an exact science. Some agents might be too conservative trying and others more realistic trying to price it to move. You could pick an agent. List the house for what you think it's worth based on what other homes are going for and see what happens. But keep in mind housing prices have dropped so you may have to go with the agent who is really trying to be realistic about what you can get. That way your house won't just sit on the market for months.

I think a lot of people who lose their jobs might not realize they are almost always entitled to unemployment insurance. Your employer won't tell you this because their premium goes up when you apply. Oh well. It won't pay all your bills but is helpful.

Good advice.  There is no shame in taking unemployment.  It is an insurance program and you have a right to use it.  Don't delay if you do lose your job.

What makes your book different from so many other personal finance books on the market?

I tried to make Living Large in Lean Times as approachable as I could.  I start with easy steps to get control of your wallet that you can put in place in just days.  As the reader gains confidence and a sense of control, I take you through more and more steps to own your wallet instead of it owning you.  This is my 9th book and I hope that I have learned how to make my advice easier to digest.  If you really want to save money, buy my book used.

Books are expensive and libraries are a great way to get the info without having to buy so many books.

Love libraries and recommend people get books from there all the time. But sometimes you want your resources and should have them as part of your home library. So you can mark pages, highlight passages that give you inspiration and turn back to them whenever you want. If you have the money buying books is a good investment I think. And I'm not just saying that because I've written three books (still trying to catch up to Clark). I just know that I pull books from my shelves all the time to reread or point something out to someone.

Clark and Michelle--two of my favorite personal finance experts on one chat--Christmas has come early! Hoping one of you can help with an issue I've been struggling with. My wife is a school teacher and was fairly limited in the 403b options available to her when she signed up for the retirement plan. The advisor sold us on a variable annuity and we've since come to realize the high cost of investing that way. We've shifted her contributions to a ROTH 401 (k) and other vehicles with lower fees. My question has to do with the funds remaining in the variable annuity. There is a penalty for withdrawing those funds earlier than seven years from the date of contribution, starting with a 7 percent penalty in year one, dropping by 1 percent each year. She started contributing about six years and stopped last year. I'd like to rollover those funds into an IRA, but am trying to figure out when and how to do that. Should we wait until we can rollever with no penalty?

You end the pain of the junky variable annuity slowly.  Each year transfer out only the portion not subject to early withdrawal penalty.  I despise variable annuities because the fees they carry are outrageous.   Over time you can steadily move to low cost options such as Vanguard, T. Rowe Price and Fidelity.

At what point can or should a wife demand that her husband take any job at all to help with household expenses? My job is sufficient to meet the bills, but he has been using credit cards for three months and now wants me to pay his monthly bills. His skills are in a particular area and he refuses to look for work in any other field- says it's beneath him. He is looking for work in his field, but so far nothing. I'm getting scared.

I am really sorry.  Your situation can tear at the fabric of your marriage.  Please don't shame him in your frustration, but you are so right.  He should put the credit cards away and take any job.  My late father used to say that life was 99 rounds and sometimes you get knocked to the canvas.  He should feel better just bringing in a paycheck and not get hooked on false pride.  

I couldn't agree more. And your tactic in converying your feelings are very important. Try as best you can without nagging and guilt tripping your husband to rely your fears and that you are at the point where he needs to look at another plan. Be loving. Be sweet. And I'm a wee bit concerned about the his bills, my bills thing. As you are finding out it's all under one roof -- bills, frustrating, debt. All one.

What's wrong with buying whole life insurance? Why do you say it's not good for most people? And why the $375,000 cut off?

I am so glad you asked.  Nobody ever does.  For most people the cost of buying sufficient life insurance to provide for their survivors in the event of an untimely death is out of the question when it comes to whole life.  However, level term insurance costs so little that most anybody can afford the very low premiums.  Why $375,000.  That is the point that someone reaches maximum tax brackets.  That individual should have enough income to support the premiums for necessary levels of coverage and will benefit from the tax advantaged nature of whole life.

Your responses are pretty sad and uninformed. There are many many ways to find out if a asset manager is legit. First, find out if they(a) self clear, HUGE red flag (b) who performs their audits. Madoff self cleared and has some fraud accounting firm performing his audits. Have you wondered why so few institutions(people who hire consultants to fine managers)got ripped off?!?!?

Actually there were professional money managers who put money with Madoff. And I don't believe we said don't go with an independent but I wouldn't put all my money with one person running their own operation. Most investors barely know how to invest so to ask people to be able to make sure the paperwork they are getting is legit from someone like a Madoff is asking too much. 

Should I paid more than $5,000 dollars to fix my 10 years old van or buy a new van which will cost none in repair for three years??

As a general rule an older vehicle is worth fixing if the repairs are less than the remaining value of the vehicle.   You should feel great that your van is 10 years old.  That means you have been driving nearly "free" for several years as the value declines very little as a car/truck or van gets past its sixth year.  

We went through this and battled forever to get a decent price. They give you the lowest number possible and dig in their heels. Every company, they find is low regardless of what comps I found. In Virginia, you can call the State Corporation Commission Bureau of Insurance for help when you feel you arne't being treated right. I nearly had a breakdown dealing with those monsters.

But at least you tried. You did the right thing trying to fight the low estimate.

I have $12,000 of credit card debt. I would like to know whether to reapy the credit card debt or keep saving? I am very worried about the economy and struggle with two options: paying the debt faster (up to $1000 a month )or building up some saving. I have no saving for the moment (no emergency , no three to six months worth of living expenses). I have about $1500 month to allocate to savings or debt repayment.

If you think your job is fairly secure for now. Put away at least $2,000. Then for the next year take that extra $1,500 and pay off the credit card debt. You see you have to have some savings otherwise is an expense comes up you turn to debt. But if you think you won't lose your job, you can put off loading up on the emergency fund to get rid of the debt. Then when you take ALL that money and pile it into an emergency fund and life happens fund.

A 529 plan will allow you to take out the full amount of any scholarship received (and this includes the cost to attend the academy) without penalty. My husband is a West Point Grad and we have researched this in case our daughter wants to follow in his footsteps.

Thank your husband for her service to our country for me.  You are right, but if someone has not fully contributed to a Roth, they are missing superior flexibility.  As a Roth can serve double duty tax free and a 529 only single duty.

Where can I go to learn the basics about life insurance? I need to get some but have no idea where to begin and where to learn the differences between life, term, etc. Also, any ideas for where to buy from? thanks!

The website has a great guide to the basics of buying life insurance.  You can easily shop on line for term insurance, not so much for other forms like whole life or variable life.  Those who are USAA members should check with USAA for term life quotes.

I looked at as you asked for our opinions. I decided not to go to colleges and just go to work. What's the point of going to college for four years and learn nothing except poetry, ideology and parties?

Well I wouldn't go that far. Plenty of people learn great skills to get great jobs. But I have been questioning this idea that college isn't necessarily meant to help people get a job. That's just silly to me. Why would pay all that money to graduate without any skills to get a job?

Appears to favor liberal arts education, which is fine if that's what you want. I'd argue that in our high tech world, the IT managers should focus on math and science (with core classes in writing, etc.) and the english teachers should take Elizabethan Literature. I prefer a specialized techinical education, not a liberal arts education. Luckily, we have a choice.

True. I just get very concerned when I ask college students what they plan to do with their liberal arts education. Many just shrug their shoulders. But then they come out with all this debt and no idea of what kind of job or income they will get to pay back those loans. That's tragic to me.

A real estate agent is not trained, qualified or legally allowed to make an appraisal on your house. They are trained to market and sell your house. If you want an accurate appraiasal of the value that will have any legal standing (for the banks) get a certified appraiser.

Thanks. You are right. But I think the larger point was they are looking for someone who will be the most aggressive in getting them a good price from a buyer.

Is there a rule of thumb for how much disability insurance the primary breadwinner should have?

As a general rule, people should have long term disability coverage to replace 70% of income.  70% is the most common number as some of the expenses you have going to work such as commuting costs, clothing, etc. eliminate the need for higher replacement of income.

 I've paid off most of a debt with MMI as well as a 401(k) loan, about 40,000 in total, over the last three years. I should be happy, right? But all I see is the huge mound of the rest of the MMI/401(k) debts, mortgage and HELOC. It makes me feel like I've just put a drop in the bucket, but getting to that $40,000 was really hard. Any suggestions and words of encouragement? I haven't taken a "get out of town" vacation in five years, and I'd really like to do that next year, but I also feel like I have so much farther to go that I shouldn't spend the money on that, either. Help!

Look at what you have already made happen.  You are learning to live below your means as you slowly, steadily work off debt.   This painful process changes the way you handle money hopefully for the rest of your life.  Once you have your debt killed off take 1/3rd of what you have been paying into your debt management plan and put it in a fun account, 1/3rd in a rainy day account and 1/3rd toward retirement savings.  Nothing great is easy.

I like that Clark. Nothing great is easy.

Do you deserve a vacation?

Not yet. Go through this pain. Pay off that debt. Then you will have earned the "get out of town" trip. 

Additionally going thru the pain, denying yourself will hopefully make your never want to be in this place again.

My niece just turned 9 years old, and I would like to start building some savings for her like my grandfather did for my brother and me. I've been looking at EE Savings Bonds (good for education, and can be put under the Christmas Tree attached to something fun), but I was wondering if either of you have other suggestions that could be more 'giftable' than a 529.

I love the 529 plan.  It is superior to Series EE's.  The 529 is tax free for college, the series EE's can be depending on income.  The 529 is flexible and you retain ownership in case your niece doesn't go to college.  You can then use the money for any other person's college tax free.

My wife is a government employee who hates her job. She is given until the end of next week which is when her written warning period is up. She will be given the option to resign or be terminated. I would rather her get terminated to help with costs and collect unemployment but she would rather resign to save face and be able to apply for another government job. What do you recommend?

This is tough.  If you can get by on your income alone, then your wife should resign rather than be fired.  

Next year I'd love to have you follow-up with someone who says that they have to get their 42" flatscreen/laptop/gaming system etc. on Black Friday with the economy being the way it is. Look at their finances and give them a good talking to. Obviously any sane person knows that you don't need any of those things. So annoying...

Yes. So annoying and troubling. I'll think about it for next year. Thanks.

The time has come to end. So sorry if we didn't get to your questions. But keep a look out because I may answer it in my live video chat, eletter or print column. (Subscribe to the weekly eletter if you don't already.)

Thanks for all you joined in the chat today. Special thanks to Clark Howard. 

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.

Subscribe to Michelle's newsletter
Color of Money Q&A Archive
Color of Money Video Archive
Clark Howard
Recent Chats
  • Next: