Color of Money Live

Dec 16, 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 on Thursday, Dec. 16 at 12 p.m. ET.

So sorry for the delay. Computer problems. Let's get started

My husband and I both lost our jobs, have run through our savings and now face losing our home. I'm worried about celebrating Christmas on a zero budget with young children who do not understand why they will not be getting presents, and not feeling bitter because we both did everything right (our spending and saving habits would have made you proud) and now we have lost everything. It's hard to start over at 41 and 43, and it may not even be possible.

I'm so sorry about your situation. And it would be easy for me to say suck it up and explain the kids how tough times are. I hope you have reached out to family, friends or any church, religious or community groups you belong to.

Now it not the time to be too prideful to ask for help in at least getting some gifts for the kids.

And as for yourself and your spouse, try to remember that even if you lose the house you still have your family.

I work hard. I make a decent living. I have no debt. I max out my 401k and have a good amount in non-retirement savings. I live by a reasonable below-my-means budget. But for some reason, I am stressed about money every day. Please tell me its ok to exhale and enjoy what I have.

Yes, it's okay to relax. And if you still can't read the question and answer I just posted.

Maybe that will help you feel more grateful for what you have becaues frankly there are a lot of people losing a lot right now and would love to be in your position and they wouldn't be stressing about it.

I'm not discounting your feelings just asking you to truly assess where you are and not let your fears ruin the good life you have.

Dear Michelle, Thank you for taking my question. My husband and I differ about how to go about paying off our car loan. We have a couple years left on the loan. We have the money in stocks and our savings to cover the rest of our loan (with more than enough left over for 8 months of emergency funds), but he is concerned that it will set a bad precedent of dipping into the funds to cover costs. I think that the funds are there for big purchases. We also recently purchased a house, and he wants to see how our cash flow is for a few months first before doing anything big. I think it would open up more money every month for the house if we just paid off the car and got it out of the way. Meanwhile, we are both maxing out our employer's contributions to our retirement funds but could definitely stand to be putting more in there as well, but that's another series of questions! Besides the car and house, there isn't any other debt. Thanks for your advice.

Why not compromise. I think your husband has a resonable suggestion to wait a few months to adjust to the new BIG home expense. Then if you can comfortably handle the new expense, I agree with you about getting rid of the debt especially since you have an emergency fund (and I hope a life happens fund for the things in life that happen such as car repairs etc.)

In this case you both win. He gets some breathing room and you help him see that the only precedent you will be setting is not living with the burden of debt if you don't have to.

Hi Michelle, I have an extra $200 a month and would like your opinion on whether I should increase my TSP contributions or open a ROTH. I contribute 7% of my pay to TSP and I plan to retire in 12 years. Thanks.

First, do you have any other debt you could retire with that extra $200?  A car loan? Student loan debt?

Got any kids? Are you saving enough for their college fund?

Is your emergency fund good? (meaning you have at least three to six months of living expenses saved up)

What about a life happens fund (see previous answer)

If all that is covered (and you feel that you give generously as well), the I like the idea of putting money in a ROTH. That way you have another retirement vehicle that has a different tax situation. Meaning the money you pull out won't be taxed. It's good to have different baskets of retirement money with different tax treatments.

I remember when banks used to pay interest. They paid us a decent interest rate. What is your advice for savers who seek interest income?

I would suggest you talk to a financial advisor. There are a number of investments you could choose if interest income is what you seek but of course I can't recommend anything in this forum and without knowing more about your entire financial picture. In your case talk to a financial professional who can guide you in the right direction given total financial picture and risk factors.

If you have someone you can't think of anything to give them, give them the gift of yourself. I have found that people like a special time to spend with you. It may be an invite for a cup of coffee or a trip to the movies in the future. For pre-teens, we have them sign up for a special event, e.g, ice skating at night near the D.C. museums. Twenty years from now they will remember that event more than the latest and greatest trinket.

Love this idea.

I've done that in years past and it really worked out.

Hi Michelle,

I love your chats, and with the holidays coming up, I'm sure a lot of us could use some help. My husband and I just bought a house 3 months ago. The mortgage payment is almost double what we paid in rent so it takes away some of our income. We're still able to pay normal bills and save, so we're not in a crunch, it's just an adjustment. How do we handle the holidays? My husband still spends like he did when we rented. I, on the other hand, want to cut that budget down and scale back. He doesn't seem to understand that. I'm also going to feel bad since his parents spend WAY too much money on us (I'm talking $300 EACH). My in-laws don't understand that this makes me uncomfortable. I've talked to my husband about it and he always says if they want to spend that much, then let them. How do you scale back the holidays?

Thanks for the lovely comments. Definitely appreciate it.

As for hubby, really sit down with him and show him the numbers. Give in a smack with the facts. Then say in a loving way that you are concerned about holiday spending with the more expense house note. Perhaps if you present it that way he will listen and agree.

As for your in-laws. I side with your husband. They are grown. It's their money and if you've expressed that you feel they spend too much and they spend anyway, be grateful and send a very nice thank you note. BUT don't feel as if you have to respond in kind. Do what you can afford and if they get upset, that's on them.


For Christmas, I have received some money gifts from various extended family members (totaling around $300) with the instructions to spend it on something (nice dinner, books, music, etc.). Can I in good conscience put the money towards paying down debt instead and still maintain the spirit of the gift? Thanks.

This is such a GREAT question. And I've gone back and forth on it. I had a dear friend (or she used to be) that gave me gift certificates  to buy something for my kids. Turned out we couldn't or didn't get it. She was pissed! We had planned to buy the thing she wanted with the gift certificate money  but it would have had to add to it and there were other issues. So we didn't get the gift. So the thing is the person may ask what did you get to treat yourself. And that person may be offended if you didn't treat yourself.

So here's what I would do (having learned my lesson). Ask the person or persons if it's okay if you instead treated yourself to getting out of debt. Make a case that getting rid of the debt would really make you feel better and after all isn't that what they intended. Hopefully they will agree. If not then buy the dinner or books or music. Think of it as if they had actually given you the dinner or books or music, and you probably wouldn't have taken it back for the money.

How do I change the Jones mentality in my head? Buying clothes to look rich.

Read the paper about others suffering, losing their homes, jobs...and then ask yourself if they could trade all the stuff they bought (including clothes to look rich to impress people they don't like and probably don't like them) would they?

The answer would for most be yes. You have to do some internal digging to figure out why you need to look rich.

Warren Buffet still lives in the same house he had before he became filthy rich.

Read the "Millionarie Next Door" and you will see that the average millionaire doesn't spend to look rich. That's how they keep their wealth.

Hi Michelle, I love your chats and I always come away inspired to do better in my personal finances. I would love your advice on something. I'm 29 and have about $80K in my 401K and Roth IRA. I have ~$23K in savings for my emergency fund and have no debt other than the FHA mortgage on my tiny condo in Arlington. In 2011, I plan to contribute the maximum to my 401K to lower my taxable income so that I can continue to contribute to my Roth IRA (I'm starting to bump up against the income limits). I'm hoping to sell my condo in the next 2-3 years and upgrade to something larger. My question is whether I should decrease the amount I'm contributing to retirement (but still maximize the matching contribution) in order to put more cash in savings for a 20% downpayment on a larger house? Thanks again!

You are so kind.

Yes, if you are going to buy in a few years I would suggest you increase your savings.

Hi Michelle, I know you are always preaching this message, but maybe hearing it from someone going through it will help readers. My spouse and I were both in "recession-proof" fields and had little reason to worry about loss of income. Nevertheless, my spouse is soon losing his job. We've been saving up so much, though, and living under our means for so long that if we cut out some luxuries, we can live on one income indefinitely - with a 6-month emergency fund to boot. The emotional stress and pain of job loss is already enough to handle - not having to worry about paying the mortgage or the bills is a real blessing at a time like this. So, if you are lucky enough to be in relatively good times now, save! Keep saving! Don't be tempted by an apartment lease or a car you can just barely afford! Trust me, one day you will look back and be very grateful to yourself for being prudent. Keep the good advice coming.

Bless you for that. What a great testimony.

The thing is you have to do this in good times, which people don't because the times are good. So now you are reaping the rewards. Good for you and a great lesson for others.

Hi, Michelle. Please spare one minute for an etiquette question. My CPA has made a math mistake (at least one!) every year. He's also been unresponsive to questions and moved out of state a few years back. A friend recommended someone local. How do I tell the old CPA I'm, um, dumping him and going with someone else? The old one will still have to stand by me in case there's a problem with my past returns. Thank you.

I will definitely take time for this.

I would write the old CPA a nice letter thanking him for his service and letting him know you are moving on to another professional.


And then don't feel guilty. This is your money and ultimately any mistake he makes especially as it relates to your taxes you have to fix with your money because it's your return.

Dump him nicely and don't look back.

Just wanted to add to Michelle's response. When I lost my job a few years ago, we were in exactly the same situation, and reaching out to church and family was how we got through it. Never had to borrow money from anyone, thank goodness, but our kids got one or two more Christmas presents from relatives than they usually did, so they didn't notice fewer presents from us; and becoming clients of the church food pantry went a long way to stretching our food dollars; and one of our church friends happened to have a second house for which she needed a caretaker, so we got to live there rent-free (and we easily made time for caretaking duties next to job-searching duties). So although it looked pretty hopeless for us, we found ways to make it work. And although it took much longer than I expected, I did find a new job at age 41. Reach out, and keep going.

Thank you so much for your note. Proof that you can ask for help and people will respond. I can't tell you how many people I know who are in trouble and don't aks for help because they are too proud. I understand what's behind the pride but it's not good. Let others come to your aid and then remember that when you see others in trouble.

Further if you see a family struggling don't wait to be asked for help. Buy an extra present. Pay a bill one month or two (I did this for a friend. At first she balked but then she cried from just being grateful to have a few months not to worry about a bill).

My house value has decreased so much (about $150K) that I don't think it will get back its value. Right now, I can make payments (interest only). But in another 5 years when principal hits, I won't be able a strategic default the best option? Seems like I am only waiting for the inevitable.

If you aren't in trouble now, why default now? You never know what can happen in a FIVE years.

Defaulting will have an impact on your finances for much longer than five years.

My heart goes out to the first letter-writer today, wondering how to face Christmas with no presents for the kids. By coincidence, when I was a child of 7, my dad died suddenly a month before Christmas, age 43. My mom was 41. Same age as the parents in today's letter. That Christmas we were blessed with the love and support of family and of my dad's colleagues and friends. The next Christmas, we still didn't have much money. My mom had us kids go through the catalogues and cut out presents of "what I would give you if I could." We kids pasted our cutouts onto cardboard and made fancy envelopes. It sounds so corny and cheesy now, but on Christmas morning, we had a lot of laughs over exchanging and opening those silly envelopes. Later Mom did rebuild her life, going back to school to get her teaching degree. She eventually taught school for 20 years, and just recently passed on, age 91. I was so grateful that even in the midst of scarcity, she raised us with humor, love, and a sense that our ideas and love for each other was unlimited, regardless of the status of the funds in the bank account. So, please, dear letter-writer, know that yes, you can rebuild your life, and your kids can still have happy Christmas memories, and your family can pull together in surprising ways. Try to use the resources you have, like creativity, humor, friendship, and trust that you can pull through this. Your kids will have a stronger life for learning those lessons than they will through having presents that are here today, gone tomorrow. Good luck to you all.

I really can't add any to that because my eyes are so filled with tears I can barely see to type.

Thank you for a remind of what the season is really about.

Another data point--Yes, there are tax considerations in that choice. Important in fact. But, no investment vehicle (besides your mattress) beats TSP for it's low fees -- we're talking dirt-cheap compared with others that advertise on TV. Over a lifetime, you should weigh taxes and fees.

You are exactly right. Thanks.

Consider taxes, fees, other savings, etc.


My smallish credit union gives much better interest rates on savings accounts than any major bank in the region. Something to consider.

Also consider online-only financial institutions such as ING

We always get a check from my mother for Christmas, and I have my sons put some money in their savings account and they can spend the rest on "fun stuff." In the same way, you can split a cash gift between paying down debt and having some fun. So you honor the giver's intent, but also your own priorities.

That's another great idea.


Although, I still say ask and if they insist, what this person writes is a good compromise.

Hi Michelle, You mentioned in one of your answers about giving generously. Do you include tithing in giving generously or are talking about giving beyond tithing? Thanks.

I was talking about giving above tithes and offerings.

It has taken me quite a while, but I'm finally starting to build up my emergency fund. It isn't much money at all, just about $500. Recently I got hit with a big repair bill for my car: over $2000. In the past, this situation would have had me in tears. I would be frantically wondering how I could pay for my car AND buy groceries. But for some reason, I am not panicked, and I think its because of my dinky little emergency fund. I'm not using any of that money on the car (it wouldn't cover the costs anyway) But knowing I have SOMETHING in the bank beyond my most recent paycheck has made a huge difference. Yes, I am very unhappy about this repair bill, but I'm not panicked. I know I'm going to be ok. Thank you for all of your help and advice. Merry Christmas.

All baby steps lead to walking steadily.

Merry Christmas and Happy New Year to you too.

Is $400 per month adequite to contribute to a soon-to-be-born child's college fund? I figured if there's zero growth in that money, there should be nearly $90k by the time he/she reaches 18. I could comfortably go as high as $600 per month, but $400 seems more reasonable.

In 18 years it's hard to know how much to have for a college fund. There are a number of online calculators (I like Vanguard's) that will help you figure out based on where you think the kid might go to school (although with the baby not here yet that's hard to guess). The thing is you are thinking about this now and that will tremendously help your kid or kids.

My 22-year-old son is getting his first car and needs his own insurance policy. But quotes are all over the ballpark, based on different coverage levels. For example, we have $100,000/$300,000 liability, but some firms are quoting me $25,000/$50,000 for him to keep the rate down. What kind of dollar coverage will protect him without bankrupting him with monthly insurance payments? He has no accidents and good credit. Thanks!

I wanted to take this question even though I don't really know the answer. But, if I were you (and I will be in a little while when my teen starts to drive) talke to some car insurance agents. I mean actual insurance professionals, not just look at quote sites, to get an idea of how much coverage on average (based on accidents and lawsuits) might be enough.

Hi Michelle, my husband and I have no debt other than our mortgage, which we are paying off rapidly. We both have 401ks which we max out, but we have a lot of savings which we think should be doing something other than sitting in the bank. How should we go about looking for a financial planner to help us move forward?

Here are some sites to go to to begin your search. Also ask around. Ask friends and co-workers if they use a planner and get some personal recommendations.

National Association of Personal Financial Advisors

The Garrett Planning Network

Th Financial Planning Association

he Certified Financial Planner Board of Standards.

Hi Michelle, I already submitted a detailed question, but I wondered if you could write a column sometime about how to deal with college costs while supporting an elderly parent? It seems that the FAFSA doesn't have anywhere to deduct eldercare costs. Thanks!

Good idea for a column because lots of folks are in this position.

The story about the poster whose dad died reminds me of how important it is to have a good attitude in the face of hardship. I hope "Sad Christmas" and spouse will stay strong and united and positive, especially for their children's sake. It is easy to get down and to start squabbling with spouse when money gets tight. If your kids see you treating it like the end of the world, then they will suffer; if they see you handling it well, like the mom of the other poster, then they will remember it forever. Sending prayers and good wishes.

I'm hoping "Sad Christmas" is still online and will see all the wonderful comments to help keep their spirits up.

Just remember "this too shall pass."

And I say that because I know what it's like to go without. Been there. And I'm a survivor.

It's tough, because ultimately it's whether you just want to protect your son, or whether you want to have enough insurance. My sister was in a serious auto accident, but had only minor injuries to her knee. She needed surgery, and after the bills, the car (an old minivan), etc. it easily totaled over the other driver's limit of $25k. After consulting with a lawyer, she decided to just take the insurance and not sue, because the other driver had no assets to sue for, so she wouldn't have gotten anything anyways. So although the other driver was technically "covered", the low liability limits didn't come anywhere near what he actually needed to cover the accident. Just an example of things to consider when shopping for car insurance. Sometimes it's worth it to suck it up and pay a little more.

Something to think about. But again, talk to insurance agents who can provide at least a guide.

Can you suggest any resources for learning how to invest money wisely?

I love They have a resource page with lots of great links.

Michelle, For several years now, my family has had a gift exchange ($20 limit) for the adults. I recently found out that my Mother has helped one of the adults (my youngest sister) buy her gifts each year. Many of the adults don't wish to participate any longer so we have cancelled it this year. I had a talk with my Mother regarding this issue but she felt she did the right thing since my sister is so irresponsible with money and her life. I say she should have stayed out of it and let my sister fess up to her gift exchange partner. Otherwise, the cycle continues (enabling). What is your take?

I agree with you about your sister but I wouldn't have cancelled the exchange. I would have talked to the triflin' sister and told her you guys were going to leave her out.

Hi Michelle, My late 60's single mother could greatly benefit from some reputable debt counseling, but refuses to go. I know the issue is pride and she thinks she can handle her money problems herself, but she's under constant stress about it. I have found a good place near where she lives and am willing to incur any costs, but short of kidnapping her, are there any suggestions for persuading her to get some help? I worry that my sister and I will "inherit" her mountain of debt one day and I would like for her to stop stressing about money. Thank you in advance!

First,  keep reminding yourself of that often used phrase, "you can lead a horse to water, but can't make him drink."

Do what you can to provide your mother with the information to help her. But after that you can only just stand back.

As for inheriting her debt. Not an issue. Unless you or your sister have co-signed for any of the debt, you are not liable for her debts.

Well, it's that time.

Thank you all for joining me for the last text chat for 2010. It's been a trip of a year for so many people.

I am so grateful for all your participation. I hope I've helped a lot of you.

 I hope I didn't offend too many of you.

I'm always glad to get those who even disagree with me because it makes for a lively discussion.

Most of all, please know that my life's work in this area from my Color of Money column to my weekly e-letter (I hope you subscribe and actually open it) to my new live  video chat to my books (lastest one "The Power to Prosper") is ALL about helping you -- my readers -- become financially safe.

And if you are already a good steward over your money, I hope you pass along my columns, chat archives, etc. to help the people in your life who won't listen to you or who need confirmation that you are right.

Here's hoping, praying and wishing that 2011 is a great year for so many who lost so much in 2010.

Merry Christmas and Happy New Year.

I'll be away for a few weeks but right back at this in January.  Until then.

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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