Michelle Singletary is one of the most respected and influential personal finance columnists in the media today. Her award-winning Washington Post nationally featured column, “The Color of Money,” appears twice a week, and she is a frequent guest on “PBS NewsHour,” “Today” and “CNN Newsroom.”
His new book “What to do with your money in a crisis: a survival guide”, published by Houghton Mifflin Harcourt (NASDAQ: HMHC), explains how to respond to financial problems that arise when money gets tight. In this interview with Benzinga, Singletary offers her take on the depth and scope of the current economic landscape and discusses topics such as investing, cryptocurrency, housing, and savings.
How confident are you in the US economy over the next 12 months? Are we on the path to recovery or are we on a path we shouldn’t be?
I would have liked to know how things were going to move, but like so many others, when I look at various forecasts, there are two tracks.
Things will get better for many people who have kept their jobs and even thrived during the pandemic because they could save more, pay off debts, or both. Then there are the millions who are still out of work and those who may have returned to work but need to catch up on their bills. They are the ones who worry me and for whom inflation will hit hard.
Yet overall I am confident about the economy. Retail sales are on the rise. People are going back to their jobs, and the New York Federal Reserve reported in May that there was a sharp drop in the number of people with credit card balances.
You have a fascinating quote at the beginning of your book: “I manage my finances like I am in a perpetual recession”. Why are you taking this approach to financial management?
I knew this quote could be controversial because some might interpret it to mean I live in fear. But I don’t. I see it as firefighters who keep their equipment and trucks ready to respond to a fire at all times – they hope there won’t be a fire, but they know that eventually there will be one. and they should always stay ready.
So that’s what I do with my finances. I’m living well below my means so that when a financial fire hits, I’m ready. Now, just like a house fire, it could be something small (an unexpected but high vet bill for my little dog) or something major (a child getting sick and going through all of your sick days. and having to take unpaid leave – almost happened to me with one of my children).
It all depends on that old expression: “Hope for the best, prepare for the worst.”
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During the pandemic, moratoria were imposed on evictions and foreclosures. In addition, during this period, home sales and prices have skyrocketed. What happens when the moratoriums are lifted, both for the people who were protected from them and for the general condition of the housing?
I am more concerned about tenants, as many of them face a more immediate eviction from their homes. With a home, the foreclosure process can be lengthy, so they have more time to sort things out. There will be a great deal of panic and displacement of families once the moratoriums on evictions are lifted, and that worries me a lot.
During the pandemic period, many people started operating brokerage apps and started trading online. Are you encouraged by this new wave of investing activity or are you worried that people are using these apps to get rich quick rather than for long term investing?
I’m afraid people see investing as a game – a lot of people actually play. As I wrote in a column, investing should be boring and, for most people, a long term endeavor. I’m not encouraged by the investment fervor which seems closer to people huddling around a blackjack table in a casino, hoping luck and skill will make them rich.
What is your take on cryptocurrency as an investment asset? And do you think cryptocurrencies will eventually fall under some form of government regulation?
I’m not a fan of speculative investing and that’s what cryptocurrency is right now. It is very volatile and not suitable for the average investor. If you have crazy money and want to invest in cryptocurrency, fine, but recognize that it is very risky.
And ultimately, it will take regulation, if not nothing else, to provide strong consumer protections for investors.
In your opinion, has the pandemic crisis encouraged people to start saving money with new vigor?
Don’t take my word for it. Look at the latest data from the Federal Reserve Bank of New York, which reported a sharp drop in credit card balances. And the American Bankers Association found that for the fourth quarter of 2020, revolving accounts were down, while the number of accounts where people pay the balance in full each month was up. So, yes, being locked in and excluded from spending has helped millions of Americans save and pay off their debts. And it is very encouraging.
Ultimately, what is the message you want readers to get from your book?
I want people to realize that the economic recession caused by the pandemic will pass. But just behind, there will one day be another crisis. Don’t live in fear, but you need to position yourself financially for the next financial crisis. And that means, pay off your debts now. It means saving all you can when times are right.
This means being better informed about your personal finances, because it is not a question of whether a crisis is going to arise, it is when.
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(Photo courtesy of Houghton Mifflin Harcourt.)