MADELEINE BRAND, host:
And if you have questions about handling money, Michelle Singletary has some answers. Michelle writes the syndicated column The Color of Money. She's our regular guest for discussions about personal finance, and she joins us today to help some listeners solve their financial puzzles. Welcome back to the program, Michelle.
MICHELLE SINGLETARY: Thank you. It's good to be here.
BRAND: Well, first we have this question: We are two educators who are not very well versed in money matters. We have a second house in Vegas. It's appreciated and could bring us about $70,000 in profit if we sell it, but what do we do with the money?
SINGLETARY: What you do with money depend on a lot of what's going on in your life. I would want to ask them, do you have any debt outside this home like credit card debt or car loan debt. If you do, I would want to maybe put that money toward that. Or do you have your emergency fund set up? If you have an emergency fund and you don't have any debt, then look to your retirement fund. Is it well funded? Do you need to do some catching up? And if so, I might advise them to put some of the money in perhaps a Roth IRA.
BRAND: Would it be wiser for them to put that money back into their first house, so then they'd have lower monthly payments, and then, over the course of a long time, be able to put more money into, let's say, the Roth IRA, reducing credit card payments, that kind of thing?
SINGLETARY: I would take that path if they don't have higher other consumer debt. If they have credit card debt that has interest rates that are higher than their mortgage debt, I would put that money towards that first. I would also make sure I have an emergency fund set up. If those two things are in place, then certainly putting the money to your mortgage, especially if they are closer to retirement, would be a smart move.
BRAND: Okay, next question, again from a couple. We have an 8-year-old with a disability. We also have two older children, and we're saving for the older children's college funds. It's in a tax-exempt program through the state of Oregon. When we withdraw, we don't pay any taxes on the earnings. Is there any way to save for our disabled daughter's future and avoid taxes when she needs to withdraw the money?
SINGLETARY: The first thing I wanted to know is do they have a special financial plan set up for that disabled child? Instead of worrying so much about taxes, I would rather make sure that they've got a plan in place. I would ask them, do they have what's called a special needs trust. And that's something that they can set up so that it would help take care of that disabled child later in life when, you know, unfortunately they pass away. They need to look at the whole picture. Where will that child live? Instead of just focusing on I need to put money to have a tax savings, where are you going to put that money? How is it going to be set up so that child can access that money if something happens to you?
BRAND: Okay, and now this one from a single listener. If I make roughly $24,000 and manage to save $4,000 a year - which should be applauded, if this person is indeed doing that on $24,000 - what should I do with the savings? I'm 30 and single with no dependents, and my only debts are student loans that roughly amount to $14,000.
SINGLETARY: Well, you know, I agree with you. I wonder about that $4,000 savings on $24,000. But let's just say they're being honest. Fourteen thousand dollars in student loans, I don't care what interest rate. Let's attack that debt and then start setting up a housing fund to buy a home to secure their future.
BRAND: All right. And, Michelle, finally, we get a lot of question on this. So very quickly, please again list those Web sites to go to get free credit reports.
SINGLETARY: It's Annualcreditreport.com. It's the only official Web site. Annualcreditreport.com.
BRAND: Okay. Michelle Singletary's latest book is Your Money and Your Man: How You and Prince Charming Can Spend Well and Live Rich. She's our regular guest for conversations about personal finance. Thanks, Michelle.
SINGLETARY: You're welcome.
BRAND: And if you have money questions, Michelle would be happy to hear them. To send letters, go to our Web site: NPR.org. Click on the Contact Us link. That's at the top of every page. Be sure to include Michelle in your subject line.
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