Motley Fool Hidden Gems Investing - Money Expert Michelle Singletary

Episode Date: May 1, 2022

For more than 25 years Michelle Singletary has penned the nationally syndicated column "The Color of Money". Between her column and her books, she doesn't hold back when it comes to helping people be smarter about budgeting and personal finances. Deidre Woollard caught up with her to talk about: - How our financial habits changed during the pandemic - One significant way to take control of your budget - Why she suggests not buying a home right now Host: Deidre Woollard Guest: Michelle Singletary Producer: Ricky Mulvey Engineers: Brandon Gentry, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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really when i look at people's budget it's housing maybe transportation like the car loan and then eating out it's third before retirement savings and you know saving for college it's third we waste so much money on food and eating out i'm chris hill and that was michelle singletary writer of the nationally syndicated column the color of money in 2021 she won the gerald loeb award for commentary in 2022 she was named investing author of the year in the motley fool's women in investing awards recently deidre woolard talked with her about how our financial habits change during the pandemic budgeting housing and a lot more. I've been reading her column for more than 20 years. One thing I like about Michelle

Singletary, she doesn't hold back. You may not always agree with her ideas. That's exactly why we wanted to have her on the podcast. I'm here today with our Women in Investing Award winner for Best Investing Author, Michelle Singletary. Michelle's 2021 book, What to Do With Your Money when crisis hits. A survival guide is a practical roadmap for managing money through tough times. She also writes a nationally syndicated column, The Color of Money, which appears in the Washington Post twice weekly. Welcome, Michelle. Thank you. Thank you for having me. Well, I want to start off by congratulating you on 25 years of writing your column. I mean, what a great gift that is, I think, to people. I love that you recently wrote about

saying if debt were a person, you'd slap it. I just love that. So can you explain what you meant by that? Yeah, that's sort of my mantra. So it really is my way to say how much I hate debt and how I want so many other people to hate debt. Recognizing that we obviously use debt. I took out a loan to buy my home way back when. I took out loans to buy cars, no longer do that. So just recognizing that it is something that people have to do, but I want you to hate it, hate doing it. It's just signing the papers. I want you to curse so that by the time you finish, you're either going to take on less debt or you're going to get rid of that debt sooner. I love that.

Do you feel like right now with interest rates rising, it's a time when people are particularly kind of feeling a little bit more of that debt pinch? I think so. I mean, as interest rates rise, people pay attention to the interest rates and the debt that they're taking off, taking on. But the thing is, you've got to pay attention to it, even in a low interest rate environment, because, you know, people will say, well, why do you buy a car with cash when you could take the 0% interest rate? And I said, well, it's still debt.

And if I lost my job and that payment came due, it didn't matter to me that there was an interest rates on it. I can't pay that loan. And so that's how I tell people. So I don't want that on my book so that if something happens to me or my husband or we have to, you know, we lose our income or have an income disruption, we don't have loans on our books. And we can weather that storm a little bit longer if we don't have that debt. Interesting. And that relates to your book as well. Did your book sort of come from the COVID crisis or were you writing it before that?

No, it was definitely precipitated by the pandemic. No, we had the Great Recession and we have economic downturns. And then people sort of think, oh, this is going to be over. And they go right back to their old habits. So I wanted to write a book that said, listen, there's always going to be an economic crisis. It's the pandemic now. It was the Great Recession. It's going to be something in the future.

So you need to position yourself all the time to be prepared. So at the beginning of the book, in the introduction, I talk about, I live like I'm always in a recession. And people are like, oh, well, that sounds depressing. But no, it's a way to plan. So when things are great, I don't lose perspective. And the hardest time I have is getting people to save and reduce debt when things are going well. It's when things aren't going well, of course, you don't have a choice but to handle your money well. But I want you, in your times of plenty, to know that there is going to be another pandemic-like economic issue coming down the road.

So, I wanted to talk to you about another flavor of the month, I think, which is inflation. It's on everybody's mind. We've got, you know, it's at 8.5%, which is just, it's hard. It's really increasing what people have to spend. What advice are you giving people right now who are wondering how to cope? so you know inflation is such a tough thing because there's certain baskets of things that we have to buy you got to pay for the roof over your head and so if you're renting and your rent's going up there's not much you can do about that you got to put food on your table even if you

you know take out steak and all you know lobster no most people aren't buying that anyway um lots of areas um so you've got to rethink how you buy your groceries and so it is something that you have to deal with no matter what. And this means that you've got to have a better handle over your budget. If you're living paycheck to paycheck, you've got to really look at your budget and see what can you cut to make up for the increases and the staples things that you need, like groceries, gas, the roof over your head. If you're middle income or upper income, it's an annoyance, but it's not going to really change or impact your life that much. But paycheck to paycheck, and people living in poverty, those are the ones that this inflationary environment is going to

really take them over the edge, unfortunately. Yeah. I worry about that too. I study real estate and one of the things I'm concerned about is the impact on rents and things like that and people being able to afford. I'm also concerned, I've studied this for a long time, and the unequal levels of home ownership. What factors do you think play a role there? And how can we think about adjusting that a bit? You know, I approach that question two ways. So the practical way. So rents are going up. People are saying we can't afford to buy a house or maybe we're in a house we can't afford to upgrade. So what I say to you is, so if you're a homeowner and you're trying to upgrade, you might just stay where you are. If you're not moving for a job or there's no reason,

You just wanted to get a bigger house and just stay where you are. Let the kids stay in the same room. Take the dog for a walk if you don't have a yard. Because this is not the time to try to buy a house. It's still a seller's market and interest rates are going up. If you're renting and you don't have control over that, and if you move, you're going to move to another situation where the rent is high. So you have to cut elsewhere. It's not else anything that I can tell you to do. But if you can move in with parents, relatives, grandparents, sisters, brothers, do it and do it now. I am a huge believer in multi-generational housing and shared housing. Even if you're a single parent and you know another single parent and you're both,

you know, your risk going up 20%, then move together, you know, come together so that you can handle that cost of housing. Now, people do not like when I say that, I don't want to live with anybody or, you know, I need my own space. But right now, what you need is to secure your finances. And if you're coming out of college or you're thinking, you know, maybe you move back home with your parents and none of the things, you know, don't have to wear a mask and things you're thinking, I want to get out, stay, stay, stay, stay, stay that money until rents and housing stabilizes. Really solid advice. And I like what you said there about multi-generational housing. That's something I'm thinking a lot about too. Makes me think about retirement,

the aging of America. We've got baby boomers. They're in their 70s. They're headed towards their 80s. They're at that age where they're going to need more care. Multi-generational housing seems like one answer. What else are you thinking about with regard to that and how it's really going to change our country as a whole? Yeah. And as I get closer to that age, I was thinking people want to stay independent. They want to stay in their homes. And we're talking about people who find that they need more help. And I'm going to need you to be open-minded that you might not be able to age in place. It's got a lot of stairs.

You don't have help. You're far away from your kids or people who can assist you. But, you know, I want to say, and I know what I'm talking about. My father-in-law lived on his own for many, many, many, many years. And when it came time, when we realized he could not live on his own, it was very difficult. It was a difficult conversation. he didn't move right away uh and he eventually did move in with me and my husband uh and after he moved in it was he the first month or two he was surly he was dark i had to get therapy i'm

just gonna be honest with y'all i had to get therapy because he was so angry we could not leave him in his house he was diabetic he wasn't taking his medicine he wasn't eating properly it would have just, it would have been, we wouldn't have been good children to leave him in that house. So he came to live with us, dark, mad. After about two months, it, the light started to come. And someone told me, I was talking to a minister and I was saying how depressed I was becoming because he was so depressed. And he said, you just have to have the most cheery perspective that you could possibly have. And he gave me a recommendation that worked for me. So he said, every time you go in his room and he's like, you know, how's your day?

I said, well, my father, I said, you know, I said, no dad, what's one thing that you can look forward to today? What's just one thing? He's like, nothing. And went on for about a week or two. And finally, I said, after doing this every single day, I said, so what's one thing? He said, well, the sun is out and I like that it's warm. And I thought, yes. And then every day after that, and it became our little thing that I'd ask him and he'd go, oh, I like that food that you fixed me last night. And I saw a change in his disposition and mine. And at the end, we thought he'd lived with us for a while, but he ended up getting lung cancer and his time with us was much shorter than we thought it would be. But I remember taking a trip. I had to go on a speaking engagement

and I had to leave for a day or two. And I remember at that point, we had an in-home healthcare aide come in to help me and my husband. And I said, I'm leaving, but I'm coming right back. and at that point he was in hospice and he opened his eyes and he looked at me he really couldn't talk and he looked at me and he kind of blinked and I said I'm coming right back I'm coming as soon as I can so I got back from my trip and I had my travel clothes on in my suitcase and and I didn't even go change my clothes I went right to his room and I said I'm back I'm here and and the aide said he had not opened his eyes for most of the time I was gone and he heard my voice and he opened his eyes and he died shortly after that. It's like he waited for me to come

home. And so it was the best thing for him to come. We had to take him in, kick it and screaming. So if you are that adult, senior adult listening, and you're like, I'm not leaving no matter what you can't do that because you're going to stress out your caregivers. And so it may come with time that you have to go live with your kids or your niece or nephew or someone. And then if you are that person taking them in, you've got to prepare for that and be ready for it. When my husband asked, can we take his father in? I didn't hesitate. Absolutely. Dear, because that's your dad. And so that's how we're going to have to handle it. And we had money to have, he had money to help with the aid. So we figured that out. We couldn't afford an aid 24 seven, but we have

someone come in the morning to help with breakfast and get him dressed. I took care of lunch. Then we had an evening person come in and help him prepare for dinner and wash him up to go to bed. And that's how we made the money work for the time that he was living with us. Wow. Thank you. Thank you so much for sharing that. I think that's really powerful because so many of us are dealing with the, what they call the sandwich generation. You know, I'm, I I'm there with my mother as well. And, and she does not want to move and she does not want to have people move in with her. And it's just, it's hard on both sides and it's going to require a lot of really, really, really tough conversations. Yeah. You have to keep having the conversation. There will be a point where she

You will just have no choice and you have to make the move. But you just keep talking. Therapy helped. And, you know, we had sort of a family intervention. All his I wasn't part of that conversation, but he had a couple of sons and daughter and they all kind of had an intervention. It said you can't live here anymore. And he fussed and he yelled and he cussed. But in the end, he came that day with my husband to move in with us. Uh, and I, we treated him so well, even if, even though he was at mad and dark and eventually he came out of that darkness. So I just hope that people who are listening, if you're listening and you're like, I'm not leaving that you take a different attitude because you need to listen to

your adult children and how they need to help you and what they need to help you. And this is part of that financial conversation. You know, this is a time where we don't want to have these conversations. They're difficult. We put our head in the sand, both the person, the caregivers

and the person who needs care until it hits a crisis. And then it costs you more. And so we believe that had my father-in-law come live with us earlier, we would have been able to catch that cancer sooner

because we would have made sure he went to the doctors when he was supposed to. And so if I could just say that to, both the caregivers and the person who might be receiving care is be open to a different living situation. Be open to having someone come in and care for you. Be open because the longer you wait, the more it could cost you and your caregiver. Yeah. And absolutely. Another aspect of that is power of attorney, healthcare directives, all of the paperwork that older

people often don't want to sign because they feel like they're losing control. All of that plays a role as well. In terms of the pandemic and the lessons we learned, some of them relating to having people move in together, what good habits do you think we've picked up and what bad ones do you think are still with us? So the best, I mean, we had sort of forced habits of not eating out as much. So we talk so much about how people can save money. And we talk about, you know, Starbucks and coffee and little things like that. But honestly, it's the big things that make the difference. It's housing and transportation, insurance. Those are the big, you know, you're not going to not be a millionaire. Can I use a double negative? That coffee is not keeping

you from being a millionaire. I mean, the numbers just don't work out that way, but paying so much for housing that you can't save is keeping you from being a millionaire. And so during the pandemic, we had people moving in with each other. We had people moving, you know, giving up their apartments and we had people welcoming folks into their homes and they were saving and paying off debt. And I just hope that we don't, you know, as things open up and people say, oh, I want to be back on my own. We stick to that habit, particularly if you have debt or you don't have enough savings eating out. Really, when I look at people's budget, it's housing, maybe transportation, like the car loan, and then eating out. It's third. Before retirement savings and saving for

college, it's third. We waste so much money on food and eating out. I mean, to the tune of a couple hundred to a thousand dollars, seriously. I mean, I do this financial fast with, I run a ministry at my church and I do this financial fast where people can't spend on anything that's not a necessity for 21 days, three weeks, do you know the number one area where they save is eating out? And you know, the average amount that people save is about five to $600 a month. Imagine if that was going into a retirement account and some families as much as $1,500 a month. So when they fast for those three weeks, not eating out, just, you know, and eating out of their homes. And by that I mean is I challenged them not to go to the grocery store except for perishables like,

you know, milk and bread and just eat whatever's in their house. All those canned beans and the rice and the chicken in the back of the freezer, pull it out, cook it. And they saved a ton of money, which then they then redirected to saving or paying off debt or both or boosting their retirement account. We heard a lot last year about what they were calling revenge spending. And I think this summer is the first real test of how much people are going to spend on vacations and everything else. Because now with mask mandates lifted, it's sort of, you know, it seems like everyone's going everywhere. And I hope we don't undo some of the good savings rates that we've had in recent years. Well, the numbers already show that we are already. Credit card

debt is ticking up, savings is going down. People have short memories when it comes to their money that you'll never forget that guy or that gal that dumped you, but you don't remember the things that happened when you couldn't spend money. So unfortunately, when things get better, people forget. They go back to that. And I mean, if you've got debt, you've got credit card debt, I would even say a car loan or student loan debt, there's no way you should be going on a vacation right now. That is just financially reckless. You ought to be taking that money and putting towards that. Or if you don't have a decent emergency fund, you need to get a basket and go to the local park and have yourself a little picnic instead of going on a vacation.

Yeah. You know, that brings me to this question of, we don't do that because we feel like it's, we want to reward ourselves and things like that. And I think that part of this is because we're not taught this stuff at home. If you don't get great financial lessons from your parents, and honestly, most of us don't, we don't really get it in school. What aspects of personal finance do you wish we learned in school? Well, actually, you started it off right. The things that stick are things that we learn at home. So the default should be teaching your children how to handle money and modeling your own financial values. It's got to start at home because it's not going to stick otherwise. But since it doesn't happen at home, the backup is school because that's where

the kids are. That's where the skilled professionals are in terms of how to teach them. But that's a lot to put on teachers in addition to what they already have to do. And so as we build financial literacy programs into the school system, we need to build it into the current curriculum. So if you're teaching math and you're teaching percentages, you can add in, you know, what does it mean to be 50% off or 35% off? Add that to your lesson plan. If you're talking about a civics class, or so I'm trying to think of a class where you teach financial stuff, but you know, history of the great, if you're doing history, you know, talk more about the great recession or the great depression, add all those lessons in. And within those lessons, you talk about the importance of

saving and investing, right? Because if you invest and diversify, then you're going to be okay over the long haul. And so, yeah, I think that since we know that lots of people don't get it at home, the second choice is to incorporate it from kindergarten to when they graduate from college. I think every year there ought to be some sort of mini course on personal finance to make sure they get the basics. They're not necessarily maybe taught the values like at my house. So my value is everybody in my house hate debt. My kids hate debt. They, you know, they didn't get credit cards in college. They only got a credit card to establish credit and then they don't use it. And so that's the values that we teach in my home. We teach tithing in our home. We teach

giving in our home as part of your budget, not extra. You give because that's what you're supposed to do because to whom much is given, much is required. And so they've been given much and we say, you know, give. And so that can't necessarily be taught in the school because that's my value. That's my husband's value. So, and I, you know, parents are listening and you're not a good money manager. I get it. This stuff is really hard. I'm going to need you to take some courses. I'm going to need you to sign up for a program where they, you know, teach you how to budget. And then you turn around and teach that to your kids just in case they aren't getting it in school. As always, people on the program may have interest in the stocks they talk about

and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow. Thank you.