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Brian Lehrer: Brian Lehrer on WNYC and all this week during our fall pledge drive, we're hearing from some of our favorite professional advice-givers on thorny topics like relationships, finances, and etiquette. Last week, we took questions for Cheryl Strayed about the creative process and podcast host Jamilah Lemieux about parenting. Joining me now to give advice on personal finance in this crazy financial world that we're living in right now is Michelle Singletary, personal finance columnist for the Washington Post and author of the new book, What to Do with Your Money When Crisis Hits. Michelle, always great to have you on the show. Welcome back to WNYC.

Michelle Singletary: Oh, thank you so much for having me.

Brian Lehrer: Listeners, do you have a personal finance question for Michelle Singletary, maybe on pandemic era-specific investing or saving advice, or if you're hoping to start investing but don't know where to start or you want to start investing in businesses that align with your ethics? Whatever the question is 646-435-7280, 646-435-7280. As your questions are coming in, we'll touch on some things that Michelle has been writing about recently.

One of your article was inflation had a 13-year high in September with consumer prices up 5.4% compared with a year ago. For people who are feeling worried about inflation, are there any changes that they should make either in their spending habits or in their saving habits and investing habits?

Michelle Singletary: Well, yes. Definitely, inflation is a big problem and most people don't understand what that means exactly, but it means that your dollars don't go as far as it might've gone before inflation went up. Right now one of the things you can do is take a look at your budget. I know people are thinking, "Okay, I've heard this ad nauseum." My experience when I work with people in their budget is there is still a lot of room for cutting.

When prices are going up, you need to look at your budget and see where you can cut, where you might be able to make substitutions? For example, maybe you were brand loyal, "I've got to have this certain brand" but it's now really expensive so perhaps look at the store brand. One of the things you might do is put off major purchases that aren't necessary until the price is stabilized.

Maybe you were thinking about doing something, adding to a deck, or doing something in your home that's not necessary but it's hard to get materials, it's hard to get people to even come and so when there's a high demand, then prices go up so you might want to pull back. This was just minimal things that you can do to address this issue that prices are going up.

Brian Lehrer: You know what I'm curious about how inflation should affect how people invest for retirement because we had Paul Krugman on the show last week and he's seeing as a Nobel Prize-winning economist and New York Times columnist, he's seeing signs that the inflation is going to be transitory. This isn't going to be like

the 1970s. That this is a pandemic-specific bubble of inflation and that it's probably going to go back to the low inflation that we had before the pandemic but we don't know that. If you're an investor trying to keep your eye on the long-term, how do you take this into account?

Michelle Singletary: Well, the first thing you have to do is you can't time the market. You can't say, "Well, I'm going to invest this way because inflation is up or it's going to go down." You need an overall plan. My husband and I, for example, we've had investments in our retirement. We have investments for our kids' college fund and we have non-retirement investing and we decided how aggressive we want to be as investors. Do we want more stocks, some bonds, a mix?

Then we set a plan and then no matter what happens in the economy, we just let it ride because we've got time for all of those pots but you could say, "Listen, I can't take all this stress of risk." Then you'd put it in something that's less risky, but overall your investment plan needs to be a plan that could weather all kinds of things in the economy.

Obviously, if things are happening and you might want to adjust it as you, for example, get closer to retirement. Maybe up until 10 years to retirement, you're thinking, "I've been really, really aggressive, but now I'm going to really need this money so I might pull back some." The investment experts that I've talked to said just have a plan stick to it and that overall time based on how the market has performed historically will do you well.

Brian Lehrer: Carl in Manhattan, you're on WNYC with Michelle Singletary. Hi, Carl-- oh, Carl's line dropped out just as I was going to him. Let's try Emily in Flatbush. Emily, you're on WNYC. Hi there.

Emily: Hi. I'm just calling because I'm a freelancer in film and I actually create budgets for a living, but my personal budget month-to-month, how much money I'm going to make varies widely. I just love advice on how to personally budget when you don't even know what kind of money you're going to make next month.

Michelle Singletary: That's such a great question, Emily. Lots of times when people have irregular income, I think there's something special they have to do. Really the key to your budgeting is discipline. This is what I mean. There are months, Emily, are you still there? I'm going to ask you a couple of questions.

Emily: Yes, I'm here.

Michelle Singletary: There's months when the money is just flowing, you're like, "Yes, it is a great month," and then there are months where they're not. What you need to do is establish a baseline budget, what's the minimum it costs to run my household. Months when money is just not coming in, what's minimum? You'd be like your rent or your mortgage, utilities, if you've got a car payment, insurance, and cutting out all the extras, what's the baseline?

Then every month as you get in your money, you only fund the baseline and all the extra goes into what I call a sweep account. Say you're getting in your contracts, you  

put all that money into the sweep account, and then you transfer out what you need to run your household for that month into your regular household banking account because what happens and Emily correct me if I'm wrong, in the good months, you feel a little bit more flushed and you might eat out more, do some more things because it's a good month. You have to treat every month like it's your baseline budget month, no matter what you're earning. That will even out the ups and downs of the months where you have good contracts and months when you don't. Does that make sense?

Emily: Yes, I guess so. I think I just lean into credit cards more and then just know I'm going to get a lot more money down the line that I can pay back, but I know probably that's the wrong way to do it.

Michelle Singletary: Yes. Let's not do that. I know it's really hard. That means-- I would suggest for the next couple of months, you live like you're not, no matter what is coming in, even if it's a good month, just live bare bones and try not to use the credit cards and that could cause some major life differences in how you live, but you've got to create a baseline for yourself so that you're not using those credit cards in months while you're waiting for that next contract because here's what also could happen and I know you know this, that people say they're going to pay you when they pay you and is the delay and now you've got to use the credit cards even more while you wait for that check to come in. We want to try to wean you off of using that credit to bridge those gaps, the good months to bridge the gaps when you're not making as much.

Brian Lehrer: Emily, I hope that's helpful. Thanks for calling in. We're taking some personal financial advice questions for Michelle Singletary, Washington Post personal finance advice columnist who comes on with us from time to time. Terry in Jersey City you're on WNYC with Michelle Singletary. It's Terry and Singletary. Hi, Terry.

Terry: Thanks, Brian. Speaking of finances, Brian Lehrer is invaluable.

Brian Lehrer: Very nice.

Terry: Let me just say that I have actually received a windfall of somewhere around $100,000 and other than that and a home, I don't have pretty much anything. I wanted to know, what's the best way to go about. I don't plan on spending any of it. I'm going to put it all away. The first thing I'm going to do is take six months of salary and put that aside for an emergency fund but after that, I don't know what to do. Should I get a planner or should I just go look at mutual funds? What's the best way to approach that lump sum?

Michelle Singletary: Well, first of all, I'm so glad you're pausing before you do anything with that. You said you don't have any other debts other than your mortgage?

Terry: Well, yes, that's it. I have a car payment too, sorry. That's a debt.

Michelle Singletary: That is a bet. How much is the car payment? How much do you have left on the car that you owe?

Terry: The entire thing about $16,000.

Michelle Singletary: Why don't you pay that off?

Terry: I could. I guess you're right. I'm giving them the money anyway. Is there a way that I can do that to reduce the percentage that I'm paying in terms of the money that I borrowed to get from because it's through the--

Michelle Singletary: Why pay-- Listen, you got a windfall, you sound like you're doing great. You don't have any of the debt except for your mortgage and the car that we found out. You're just giving somebody money because you just want to give it to them. You've got the money, it's extra, you weren't expecting it. I suspect by just what you said that you're on track for saving for retirement, right?

Terry: I don't know about that.

Michelle Singletary: All right, now we're getting a little deeper, so now you have to ask a whole bunch of questions to get to the deeper. I would say, why don't you create a master financial plan for yourself? Look if you're on track for retirement, and one of the things you could do, do you have a workplace retirement account?

Terry: Yes, but I'm self-employed.

Michelle Singletary: You could maybe boost what you're putting into your retirement account for your business. Maybe you could put, based on what you earn, maybe it says your last tax that you could put in 20, but you only put in 10. Now you could put in that extra money. List all your debts, and now we know you got two debts, so why don't you pay off the car? All that money, those payments that you were making now you can put that and build your savings account. Look, get a master plan before you decide what to do with the money and we already talked about some things you could do, like pay off the car.

Brian Lehrer: Let me say goodbye to Terry because we're going to get one more person on here before we run out of time. Terry, thank you. I hope that was helpful. Let me follow up on one of the things you told Terry that has a lot of people wondering. When you said take $16,000 of that $100,000 windfall that he came into and totally pay off your car payments, what's the principle there? Why is it better to do that and chip away so much at your $100,000 windfall, rather than put that money toward long-term retirement investing?

Michelle Singletary: Well, it's a philosophy of life. I hate debt. You know I've been on the show so much. If debt was a person, I'd slap it. I want him to free up the cash in his budget, and then pay off the debt. Then all that money he would have given debt he can still put in the market. It's not a zero-sum game. He still had that money. Now he doesn't have the debt, and he can put it in the market.

The other thing is, the market is no guarantee. It's been doing really well this past

year, even during the pandemic, but you don't know, we don't know, but that's a guaranteed return by paying off that car note. then he can still have that other money to put into the market. Lots of times people-- here's what else, human behavior comes into play because I will tell them that, don't hold the money but oftentimes people don't end up putting the money in the market. They don't end up doing those things. On paper, it might make sense but in practice, people don't actually do it.

Brian Lehrer: One more question. Daniel in Brooklyn, we're going to have to do this as about a 30-second question and a 30-second answer, but I think we can do it. Daniel, you're on with Michelle Singletary. Hi.

Daniel: Hi, Michelle. Hi, Brian. Thanks for taking my call. I was wondering for a lot of us younger people who want to get into investment in the stock market, I feel like especially in this day and age, it's so important to invest your money in some things that don't actually end up working against you like climate change, or just industries that are predatory towards consumers. What would be your advice for younger people who want to get involved in the stock market but don't want to feel like they're selling their soul in a way?

Michelle Singletary: I love that. I love that so many investment companies have socially conscious investment funds where you can look at-- For example, they're not investing in tobacco or other things that you're against so just contact your current investment company. If you're investing, if you've got a workplace plan, you can contact that investment company and ask them about their socially conscious funds so that you can put your money where your values are.

Brian Lehrer: We leave it there for today with Michelle Singletary, personal finance columnist for The Washington Post and author of the new book, What To Do With Your Money When Crisis Hits. As always, Michelle, thanks for coming on with us.

Michelle Singletary: My pleasure. Thank you for having me.

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