Color of Money Live

Dec 15, 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 15th at 12 p.m. ET.

Thanks for joining me today. I see lots of questions already, so let's get started.

Hi Michelle, Love your advice - always spot on. I keep hearing a local diamond jewelers ad that goes along something like this: "Your heart should dictate when you propose, not your checkbook. If you got the honey, we got the money!" I always think you must be having heart palpitations when you hear that (I hope not!), but really, I think that ad says so much about peoples' mindsets about spending - oh, I want it NOW. I know it would be a long answer, but since I have a toddler - what are the best ways to ensure he doesn't grow up thinking that way? We leave within our means (although if hubby and I are furloughed tomorrow, that will be a damper on things, though we have our 3 months savings), but beyond that, what can we do to raise him to be money-wise?

Love your questions.

I haven't seen that commercial but I would have heart palpitations. Unbelievable. Yet very believable.

The best way to help your child become a good money management is to practice good money management. Kids see everything. They know. They watch. And they learn from watching. Also talk to your son. Show him how to save money he gets. When you take him to the store, show him how to comparison shop. Talk about your money values. 

In other words show and teach. It's really that simple.

Hi Michelle, love your chats! I'm 27-years-old and make about $51,000 a year before taxes. Now that I've paid off my car and lowered my car insurance, I'm trying to figure out how best to spend my extra money (about $300-400 a month). Should more money go toward my Roth IRA or pay off my students loans faster? I have a $6,000 private student loan and about $58,000 in a consolidated federal loan. I work for the government, so I am hoping to have the remainder forgiven once I've made 120 payments on the federal loan. I'm already contributing $300 a month to student loans. I just started the Roth IRA and only have about $1200 in it so far and contribute about $200 per month. I have a three month emergency fund and a $1,000 "life happens" fund. Also trying to save for buy a place, but I know that's a longer term goal once I have my loans paid off and more money saved for retirement. How should I best spend my extra money? Many thanks!

Well, aren't you a very smart 27-year-old! I love that you are thinking so concrete about all this and taking good actions.

Since you have a good and somewhat stable job (although you never know with the crazy Congress we have), and an emergency fund AND a life happens fund, I would stop contributing to the Roth for now and plow all that money into the private student loan. If you are relatively sure you will get the federal student loans forgiven because of your public service work, just make those payments as required.

When you finish with the $6,000 loan then you can go back to contributing to the Roth. You still have a lot of time to save for retirement. And you can take the payments you were making on the loans plus anything else you have from perhaps pay raises to boost your retirement savings later.

A couple weeks ago you took a question about a spouse who can't find work in his field and won't look elsewhere. I have always heard that for someone looking for work, having any job is better than having no job. You makes some money, you prove to prospective employers that you are worth at least something to someone, and you are demonstrating a basic work ethic. On the other hand, when does taking any job look like desperation? If someone with extensive training and experience in a specialized field takes a job as a retail clerk or a taxi driver, does that work against him? Does that signal to prospective employers that there is something wrong with him? Will employers look at an applicant as a potential executive or professional when he is currently slinging coffee? Would you personally hire an experienced reporter or editor who had worked as, say, a bookstore clerk or a house painter for the last two years? When is no job better than any job?

I definitely see your point. However, everyone knows this has been a tough economy and that jobs are hard to come by. I've known folks who have taken jobs they are extremely overqualified for but they just explained to the prospective employer their situation. So yes, to pay the bills take whatever job you can get. And as you are looking for a new job, be prepared to explain the temporary job you took. Becaues I would hire someone who had done something else outside the field because I know how tough things are right now.

Hi Michelle, How important do you think it is to secure a 20percent down payment when buying your first home, in this market? I've calculated that, if I save $400 a month, it will take 10+ years to save the $50,000 additional (on top of $10,000 in the bank) to get to $60,000 , which is 20 percent of $300,000. I'd like to buy a house before I'm 40, plus I'd like to take advantage of current market conditions!

I hear you. If you can get a loan for less than 20 percent, I would consider doing that. However, my test is how does the house payment fit into your budget. You shouldn't be spending more than about 35 to 36 percent of your net pay per month on housing. So if you can stay within that limit with less than a 20 percent downpayment, I wouldn't have a problem with putting less money down. Also understand less money might also mean you have to pay PMI or private mortgage insurance, which will increase your monthly payment.


I am a one income household - my husband is quitting tomorrow with no other job lined up (sore subject in the house). Anyways., I make enough to cover the mortgage and bills (minimum on credit cards) with little left over. We have $2,000 left on a car payment and about $20,000 in credit card debt (I know bad) along with a $3,000 per month mortgage. The car payment is normally $400 per month. Would you take the last paycheck of my husbands to pay off the car this way that additional money from the payment can go to other debt? There's no telling how long he's going to be unemployed which is scarey. My husband thinks we should save that last check in the bank. We have about $9,000 in savings but I want to pay off the car and be done with it, what's your take?

Normally, I would say pay off the car but considering you will be down to one income and just barely enough of that income to cover your bills, you need to preserve all your cash for right now. 

As you say you don't know how long your husband will be out of work. So save the cash, keep making the regular car payments. If he gets a job soon, then I would pay off the car and be done with it.

Sure wish I could persuade your husband not to quit a job given your family finances. Unless he's in a job that is wreaking his health or something like that, he's making a rather irreponsible move at a time when you guys are on the financial edge. 

Hi, Michelle -- checking my bank account on line two days ago, I noticed a pending eleven dollar charge from Orbitz that neither my husband nor I made. I notified the bank, and they will dispute the charge when it posts. Last night, someone from Smart called me, trying to verify the name of the cardholder who tried to make a reservation on their site. He gave me the name (unknown to me) and recited the last four digits of my card (still in my possession). I told him that someone was trying to use my number fraudulently. I also called the bank to report the phone call. My card has been canceled and another is being reissued. My questions: Is there anything else I need to do? And how could this have happened? Could the cause be all the on-line shopping I did for Christmas? I'm worried now about shopping on line.

I'm not sure how the person got your card number but crooks are very clever these days.

One thing you need to check is your credit reports. Be sure nothing else is going on with your accounts. 

You can go to to get free copies of your credit files from all three credit bureaus.

And obviously keep a close eye on your bank account.

Michelle, for my Christmas present, can you please get my wife to stop working? We both retired from high-paying government jobs under the old Civil Service Retirement system, and have high five figure pensions. We sold the house we bought many years ago in Bethesda for $130,000 for $800,000, and used the proceeds to buy fully paid for houses in Naples, FL and Maine. We have no children or needy relatives to support. We have enough money to travel, attend cultural events, and donate generously to charity. After all, isn't that why we worked so hard all these years? However, my wife now has a second career as a free-lance editor, ad she can't seem to let it go. She's continually taking on new assignments, causing her to work late nights and even skip events for which we have tickets. I'm afraid we're destined to live largely separate lives, but am hoping she might listen to you if you told her to cut back. Can you help? Thank you very much.

Do you think soemthing else is going on with your wife. Perhaps it's not the money but the feeling of being needed. Retirement can be tough for a workaholic. She might need some counseling just to figure out what she can to do keep busy but also find time for an obviously wonderful husband.

So yes, send her this post. Here are my comments to her:

Hello, I received a wonderful question from your husband who wants to spend time with you. Girl, do you know how many wives would jump for joy to have their man wanting them to travel, attend cultural events, etc. I understand you may want to still work a little. But don't work so hard that you miss out on the fruits of your great financial planning. 

Work a little if you must. But enjoy life. Because at the end of your day --your life -- what will count for more, the freelance assignments or time spent with your honey?


Michelle Singletary, a fellow workaholic

I bounght a house in 2008, so before the full on melt down, and I had no trouble getting a loan with my 10 percent down. A few things that were in my favor: the 10 percent was in cash in my savings account, and a review of the past year's bank records showed that I had steadily built it up--in other words, it wasn't a gift; a credit score of 800; and not buying at the top of my 'approved price range', which was 3.5 times my annual salary! Michelle's advice is exactly right--look at what your monthly payment will be (make sure that amount includes taxes and Homeowner's Insurance) and figure out your mortgage amount from there.

Great points. Thanks!

When you have a mortgage and have to pay PMI, what happens when you have paid enough in that the PMI is no longer required? Do you keep paying the same amount with the former PMI figure going to the principal? Or do you get a reduced mortgage payment because the PMI is no longer required? Do you get a choice in the matter? Personally, I would rather keep making the current payment to get the principal paid off sooner. Thanks!

To get rid of PMI you need to contact your lender or mortgage servicer. They won't tell you when you don't need it anymore and won't apply the money to principal. 

There are usually a lot of hoops you have to jump through You can ask -- in writing -- that PMI be cancelled when you've paid down your mortgage to 80 percent. But there are other thesholds to cross. You have to have a good record of payment or that you don't have any liens on the house, etc. 

Here's a good link from about getting rid of PMI

Regarding the cleverness of credit card thieves: It has long been a problem that someone in a restaurant or store might copy a credit card number or even use a pocket scanner to record it. I was told recently that the latest scam is to use a cell phone to photograph the card: In two clicks you've got both sides of the card, and it doesn't set off any alarm bells to see someone with a phone in his hand. Never let your card out of your sight.

Good tip. Scary out there. I dropped my debit card and soon after I think some kids tried to rend some videos. But they weren't aware that I only carry a debti card that requires a PIN everytime you use it. I don't have an ATM that is considered offline meaning you can just swipe and pay. So the kids couldn't get the videos from Blockbuster because they didn't have my PIN number. 

Just another layer of protection I use with my debit card.

I have a collection that appears on my credit report from a hospital stay in 2006. I have documentation to prove that the bill should be paid by my insurance company and not by me and have sent that documentation to the hospital's billing people. I have disputed the charge with all three credit reporting agencies and sent them that same documentation, and yet it remains on my report. The collections agency has never contacted me to pay the bill; it is under $200. Do you think this will negatively affect my credit history? And how can I get this off my report? I plan to purchase a house in the next six months and am trying to get all my finances in order before beginning that process.

Definitely keep trying to get this off your reports but you are almost at the time at which negative information is supposed to drop from your credit files (6 years). Besides the further you are away from when the collection was posted on your files the less impact it has on your credit scores. However, since you will soon apply for a mortgage you might need to explain to a lender what happened. They may be able to help get the item removed or the lender might ignore the collection if you have good income and good credit scores.

Hi Michelle, I wrote you a couple of months ago about my fiance and I. We are getting married soon and we have discussed financial matters in the past couple of months. I want to say this: it was one of the hardest discussions I've had. Money has been a contentious issue in my family, and I was afraid to have the conversation. With him, no one combines finances with their spouses. It took a lot of talking and I will say, crying and arguing too. Now, he can't believe how great it's working out financially since we have agreed on a budget, how to combine assets, etc. We each have our own ideas about money but we work it out. I'm so glad we had this conversation before the marriage. No question here but just wanted to support you. Thanks!

Oh, I'm so very happy f0r you both. I just wish more couples would have this conversation or conversations before they get married. It's so very important, far more important than all the talking and planning that goes into the wedding ceremonies. 

So big congrats to you. 

I am trying to pay down a $5,000.00 loan. I have been making payments on it each payday instead of just once per month to try to speed things along. Well, I thought that my "extra" payments would be applied to the principal balance with no interest taken out, but I was wrong. When I contacted my Credit Union because the balance wasn't going down as fast as I thought it should have, the rep told me that the interest that accrued daily would be taken out of the extra payments. I asked him what's the best way to pay the loan off more quickly and he said to add the extra money to the one monthly payment instead of making two payments each month. Is this true? I want to be wise in paying this loan off well prior to the established term. Thank you.

Listen to the instructions from the credit union. Again, call and ask very specifically how you can be sure to add extra money to the prinicpal to pay the loan down as fast as you can.

And when you do send a check be clear what portion you want applied to the principal. Ask that when you send the regular monthly check should you include a second check along with the first to put on the principal. 

Sometimes, I feel like I am drowning in debt, but I don't know why. We make a "comfortable income" of $60,000- $80,000, depending on overtime worked. We have three kids. We also have a few debts, but they are large ($500 for a truck payment; $300 for college loan repayment, $300 in loan repayments, $300 for a credit card-we no longer use it EVER, but we do have to pay it off), childcare (only one of our children is in school), then utilities and groceries, our mortgage, etc. My husband has tried to refinance the truck loan but he is repeatedly turned down because of his credit score.Please help us. It feels like we are on a ferris wheel that just continues to go 'round and 'round. What should we do? Where should we start? I am lining up items to sell online to get us started. We are just tired. We know we have to dig out of this mess somehow. The sooner, the better. Thanks!

First breathe.

Really, I mean it.

So take a moment before your read the rest of my post to take in a deep breath and let it out.

Do it now.

Okay, now you two need a debt payoff plan.

I suggest you write down all your debts. The list should start with the debt with the lowest balance. Don't worry about which debt has the highest interest rate. 

Paying off your debt by this method allows you to hopefully clear entire debts off your page. That will help you breathe and give you encouragement to keep going even though you'll still on that wheel.

Throw any extra money you have or that you were spreading out on other debts to the first debt on the list. If you haven't been making extra payments look at your budget and see where if any where you can cut. Reduce cable service, cell phone plans, cut out eating out, whatever it takes.

Then just make the regular minimum payments on the other debts. Once the smallest debt is gone move on to the next debt and so on.

With a clear plan you might not feel so overwhelemed.

Michelle- after saving up for years, I finally bought my first house this week! Now that my savings goal has changed from "house down payment" to "furniture/decorating/maintenance" fund, I'm having a hard time figuring out just what my budget is for all of that. I have not debt, $5,000 in my Life Happens fund, $10,000 in my emergency fund, and another $6,000 in savings which I was going to use to buy my furniture, get the floors refinished, replace the broken dishwasher, etc. But I'm scared of pulling the trigger and wiping out that $6,000! How do I know when I have "enough" saved to spend it on that stuff?

First, congrats on the house. How wonderful.

Now, here's what I might do. Make a list of all the things you need to do with the house. Then make a list of all the things You want for the house. And there is a difference.

Start on the things you need. For some that might be replacing the broken dishwasher, although you could wash my hand. Still you could put that on the need list. 

Also, list the need/wants items in order of cost. 

Now you have a plan. You can attack the need list first startng with the things that cost the least to fix, buy, upgrade, etc.

When you get through that list start on the want list.

With both list make a promise to yourself to only use cash, so that will dictate what you can get and when. If you get to an item and you don't have any more money save, then start saving for that item.

Hope this helps.

Hi Michelle, I'm starting grad school part time in January and have saved up enough cash to cover all my expenses for both years I'll be in school. I'll still be working full time while I go to school too. This will take a significant chunk of money out of my savings but I'll still have more than six months of living expenses saved up. I have no other debts and a stable job. My masters will be well worth it in the end, I work in science where a BS really only gets you so far and I've now hit that ceiling. And in all honesty, I'm excited to go back to school. I just feel like I'm going to have a panic attack when I think about taking that money out of my savings. How the heck do I get past this? I have to write my first tuition check here soon.

Go on line and read as many post from the many folks who are drowning in grad school debt. 

That should help you write that check for cash for your degree.

Be grateful you have the money and write that check. You save for it. So spend it with no fear. It's a good thing and you should be proud of yourself!

Contact you bank's fraud prevention/detection department. Most banks and credit lenders have such departments specifically to handle issues like this. Nowadays, many banks will look over the history of when you called, what your spending patterns are and talk to you to try to determine when charges are fraudulent and when they are real. For every forgiven fraudulent fee, the lender has to eat those costs because they can't get the costs back from the vendor. So, fraud prevention/detection departments try to hunt down the perpetrator and attempt to sue to get the money back. They are the ones that you should contact and they should talk to you about recent history of use which may help to track down where and when the theft occurred. Sometimes it is impossible to track down the perpetrator, but if it is possible, your bank has a vested interest and far more significant resources than you to track down the thief.

Good tip.

But of course your heart should determine when you propose. And your checkbook (and not your credit limit) should determine the size of the bling. Or not. Happily married without a diamond.

Amen to that!

Another testimony: I just bought a house and paid 15 percent. In addition, I paid $2,000 to pay the mortgage insurance up front and saved a lot on the amount/interest that would have otherwise been added to each payment. Not necessarily what you will do, but just wanted to let you know that I too freaked about having 20 percentuntil I actually met with my mortgage company and realized there are plenty of alternatives.

Thanks for sharing your testimony.

Well, my friends now to wrap up.

Thanks so much for joining me today. Great questions, comments and tips. 

I have one more chat for the year, next week Dec. 22. So join me as we wrap up 2011.

Take care and stay 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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