When it comes to personal finances, Jean Chatzky is seemingly everywhere.
From TV to blogland, she dispenses advice as a financial editor on NBC’s "Today" show, her own website and as the author of eight books on money matters, including her newest, "Money Rules."
Last month, she debuted as the new "financial ambassador" for AARP’s monthly magazine and its website. After her inaugural column, Chatzky spoke with McClatchy Newspapers. Here’s an excerpt:
Q.Even though we’re told the recession is officially over, it still doesn’t feel that way for many people. Is that why you call this a "scary economy?"
A. If anything, what we’ve learned coming out of the recession is that it’s not an event, it’s a process.
Some of it is driven by the market’s volatility, even if you’re not an active (stock) trader. If you’ve got retirement accounts with (exchange-traded funds) or target-date funds, the volatility is scary.
Q. To feel in control, you recommend that consumers first create a "financial road map." Can you elaborate?
A. The most important number people need to know is, how much do I need to be saving to get to my retirement goals? Half of all Americans have never run the numbers on what retirement will cost, what they’ll need to live on month to month.
You start there. Figure out what you’ve got, what you’ll expect from Social Security, your rate of return on investments and savings. Don’t assume you’ll earn the 12 percent a year that you could during the market’s heyday. Plan on a conservative 6 percent in a diversified stock portfolio over the long term.
Go to the "Ballpark E$timate" retirement calculator at http://www.choosetosave.org. It’s not the most elegant retirement calculator out there, but it’s very easy to maneuver and asks the right questions.
If you feel like you can’t do that, pick up the phone and get some help. I’m a fan of certified financial planners, and fee-only financial advisers. Or if you already have an accountant, [have a chat]. The important thing is to do it.
Q. Is your advice different for those in their 20s and 30s, as opposed to those in their 50s and 60s?
A. The most important thing for 20-to-30-year-olds is just saving as much as they possibly can — in IRAs, 401(k)s or (other) vehicles. Savings give you options down the road. There’s so much research in behavioral finance that says the very best way (to save) is to make a good decision once. Set up automatic payroll deductions so you don’t see the money coming out of your paycheck. With a 401(k), you’re aiming to save as much as you can to reach (your employer’s) matching dollars. Or save 10 percent of your monthly paycheck.
Q. Paying down debt is one of your mantras. Where to start?
A. If you haven’t dropped down every interest rate on your credit cards or refinanced your car loan or your mortgage, do so. It’s money in your pocket.
If you don’t have the credit score to qualify for lower interest rates, you have time to work on it. With credit cards, stay current on monthly payments, pay down the debt so your utilization rate improves, don’t apply for new cards, don’t close old credit cards. They all play into the mix.
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