Pro tips Q&A with author Michelle Singletary

This week we spoke with Singletary about prepping for a future recession, working financial goals into your budget and the financial mistakes she sees others make.

Myelle Lansat

By

Myelle Lansat

Myelle Lansat

Personal Finance Editor

Myelle Lansat is a personal finance editor at Policygenius. She writes and edits the Easy Money Newsletter.

Published June 2, 2021|4 min read

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No one wants to think about the possibility of another financial crisis right after emerging from one. But it’s important to look for lessons in each economic downturn to better prepare your finances for future crises. Michelle Singletary’s latest book “What to Do with Your Money When Crisis Hits: A Survival Guide" explores how to ready your wallet now so you’re ready to face a future emergency. 

This week we spoke with Singletary about prepping for a future recession, working financial goals into your budget and the financial mistakes she sees others make. 

The end of the pandemic is in sight. How can people prepare for a future economic crisis?

Oftentimes, when things get better, people forget the lessons they learned from the previous crisis. You have to constantly remember that the next crisis could be just around the corner. That doesn't mean that you should operate your life in fear, but you do need a plan for what comes next.

I liken it to the umbrella bin right next to my door. They’re not packed in a box or in the closet. They’re at the door for when I need them. And that’s what you should do with your finances. You want to have a plan so you’re prepared to push that umbrella up when a financial crisis hits. 

What advice do you have for people who saw their investments dip because of the pandemic? 

Don’t act on panic. Take care of the things you have control over. You don’t have control over the market. You do have control over the amount of debt you accumulate. You also have control of your expenses.   

How can people work financial goals into their budget?

When I sit down with a client the first thing I say is, what are your financial goals? We list them in no particular order at first, and then organize which goal should come first.  

We handle our money through our emotions. Ask yourself, "What do you want to do with the money you have and what do you want it to do for you?" Then you can create a plan. 

By the time you create a budget, you’ve bought into the idea of your goals. It becomes easier to cut expenses so you can keep working towards [those goals]. There's a process to prosperity — it doesn't happen accidentally.   

What’s the biggest financial mistake you’re seeing other people make today?

The biggest mistake people make is they have so much debt that it interferes with their cash flow. Oftentimes people will ask me what budget app I recommend to help get their money together, and that’s the wrong question. Budget apps are a tool for people who are already motivated. I usually respond by asking them what they need to get in shape? That means understand what it is that’s keeping you from doing better. 

Do you have any financial regrets?

The biggest mistake I made was in my early twenties. My company introduced a 401(k) plan and different options within that plan. I knew nothing about investing or stocks or bonds and they didn't really offer a lot of information about it. The colleague who sat next to me was about two or three years away from retirement. He was really good with money and I asked him what I should do.

He said bonds and was all about the safety of it. Well, he was three years from retirement and of course that's where he was at in his life. And I listened to his advice. All of my 20s and my early 30s, I was only invested in bonds. Even saying it now, I cringe.

I missed a lot of gains because I was extremely conservative when I didn't need to be because I got advice from someone who was at a different place in his life. I wish I had sought more professional advice early on. Someone who could have looked at my particular situation, took into account that I was a little afraid of investing, and gave me better advice. Which didn’t happen until later. 

What’s your current financial goal & how are you working toward it?

My goal is to spend without guilt. I have spent my entire life being saver, not a spender then beating myself up when I do spend. Now that I'm comfortable financially, I don't know how to spend. And it weighs on me.

A lot of people talk about saving, but we don’t really spend a lot of time saying, OK, at what point can I let it go? Can I take that five-star vacation and not feel guilty or worry that I won't have enough money to do it? And that’s the goal for me, to not to worry so much and enjoy the fruits of my labor.

If you got a $1M windfall today how would you spend it?

If I had a million dollar windfall, I would immediately figure out how much I owe in taxes. I wouldn't even celebrate that I'm now a millionaire.  

I’d put enough aside to make an estimated payment and give Uncle Sam his cut. Then I could put 10% to my church, so right there that money is gone and accounted for. 

Then I’d look at my balance and probably help some people out before helping myself — I don’t really want for much. I would pay off my sister’s house and help my niece pay off her college debt. Then I’d get a house somewhere where I can sit and watch the ocean. Nothing extravagant, but big enough for the family to come. 

Image: Nastia Kobzarenko