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Video: Jean Chatzky’s 6 ‘Rules’ for fit finances

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    >> this morning on today's money, financial rules to live by. despite years of saving 50% of people will run out of money during retirement. what can you do to make sure it doesn't happen to you? jean chatzky is the author of "money rules, the simple path to lifelong security." welcome.

    >> tank you.

    >> these are simple rules you explain in perfect ways. let's get to them. if you can't see it and you can't touch it, you won't spend it.

    >> this is why 401(k) works. you have to get the money out of your line of sight . you can do it for other things. any goal you want to save for, get the money into a separate account.

    >> how about this one? just because someone will lend it to you doesn't mean you should borrow it.

    >> this is the lesson of the credit crisis . the whole housing bust and boom. banks now are willing to lend you a lot of money for a mortgage. maybe more than you can afford. don't take it. and don't take the high credit limits either. know your own budget and keep yourself in check.

    >> this next one has entered my life on a number of occasions, i will be honest. don't shop angry, don't shop sad, don't shop hungry.

    >> three rules. don't shop angry because you're more optimistic and you are likely to take foolish risks buying things. by the way, investing in things. when you feel sad you have a hole in your sad you're looking to fill up and a new pair of shoes might do it.

    >> it makes you feel good for a little while.

    >> then you feel really bad afterwards.

    >> and hungry.

    >> you go into the warehouse stores . you have samples and you come home with a tent you didn't go to buy in the first place. it gets you going. and drinking the wine and cheese things at that time neighborhood boutique, stay away.

    >> i have gotten good use out of that tent. if you can't explain it, don't buy it.

    >> any investment you do not understand does not belong in your portfolio.

    >> why? some could be really good but it's above your head.

    >> if it's above your head a financial adviser should be able to explain it to you so you do understand it. if you can't wrap your brain around it, it doesn't belong.

    >> this one will get people thinking. count dollars like calories.

    >> you should be tracking your spending. that's the thing that will get most people on track. you know, i read michael pollen's book "food rules" and i started quoting him like crazy. i thought, this is what we need for money. we tried to simplify.

    >> the best cost-cutting tool is a good night's sleep.

    >> absolutely.

    >> everything in your life you can say that about.

    >> if you don't wake up 24 hours later, you don't need it.

    >> i like the way you

TODAY books
updated 3/13/2012 5:52:07 PM ET 2012-03-13T21:52:07

As the financial editor for TODAY and the personal finance contributor for Prevention and Newsweek magazines, Jean Chatzky offers a veritable wealth of information on how to organize your finances. In "Money Rules" she spells out a simple guide to lifelong security. Here's an excerpt.

Make Money

The money that goes out--whether you spend it, save it, invest it, or give it away--has to come from somewhere.

That generally means earning it.

And that's a good thing.

Getting paid is an indication that others value what you do, how you think, and who you are.

All of those things are a boost to your self-esteem.

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The rules in this section will help you understand how to earn what you're worth, how to extract the most happiness possible from those earnings, and when, in fact, you shouldn't do that particular work but instead delegate it to someone else.

1. Your job is your most important investment.

For years, you were told your home and retirement accounts were your greatest assets. Wrong. If the Great Recession has proven anything, it's that your job--more specifically, your earning power--is by far your greatest asset. Protect your financial security by treating this asset like any other investment. If your work profile is risky, you're paid on commission or bonuses rather than straight salary, or your job security is largely tied to the economy, it's like a stock. If it's more stable, you work for the government, you're one of the lucky few who still has a traditional pension plan, or you're a tenured teacher or college professor--you're essentially holding a bond. Consider this when you fashion your asset allocation: Those in "stock-like" jobs need to account for that by being a little less aggressive in their other investments. Those with job security can take a little more risk.

2. Your education is your second-most important investment.

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The rising cost of college has led to a populist cry that college degrees aren't worth the money. That's completely backward. A study from Georgetown University shows the value of a college degree is going up. The typical worker with less than a high school diploma will earn $973,000 over the course of a career. The typical professional (think doctor or lawyer) will earn $3.6 million. College grads fall halfway between. The pay gap between those who go to college and don't has gotten wider--and is expected to continue to grow. This isn't just an income gap--it's also a "social" one. College grads are more likely to get and stay married, to have strong networks of friends, to be active in their communities, and are less likely to be obese and smoke (both are wealth reducers--see rules #82 and #83). It's also important to note that graduating from college is more important than where you graduate from college (although a 4-year degree does pay off better than a 2-year one does). Bottom line: The more you learn, the more you expand your horizons and rack up cold, practical experience, the more you're worth to someone who needs your talents. Your stock can rise in any economy.

3. Know your worth on the open market.

Are you worth more than you're earning today? Or less? If you don't know, that is a huge problem. If you're under-earning, you're losing money every day you're not asking for more. If you're overpaid, you're ripe for the chopping block, and you'd better update your skills or improve your productivity. You can find salary information online. Better yet, ask a friend or colleague at a competing firm, "What would someone with my skills be paid at your company?"

4. If you don't ask for more money, the answer will always be "no."

Here's a shocker: In 2011, newly-trained female doctors earned salaries that averaged $17,000 less than newly-trained male doctors. It's not that women were picking less-lucrative specialties or that they were asking for more flexible work schedules. That used to be the case, but not this time. The difference this time was a problem that's existed for years. Women don't ask. Whether you're a woman or a man, you have to ask for the money you want. The answer may not be the one you're looking for. But if you don't ask, the answer will always be "no."

5. You're never more valuable than when someone else wants you.

If you've been at your job more than a few years, chances are you're underpaid. The last few years have been some of the leanest for salary increases in three decades. Who did receive a decent raise? The guy or gal who jumped ship, that's who. Someone else recognized that person's value. You can do the same, but note: This gambit works best if your last performance evaluation was stellar and if taking the new job is something you're actually willing to do. That's the best way on the planet to earn a raise.

6. The four most powerful words in any negotiation: "Can you do better"?

You're sitting in the office of the person who's dying to be your new boss. He's just offered you a job that you really want with the title you've been craving. The only hitch: The salary isn't where you'd hoped it would be. Don't commit--at least not until you ask, "Can you do better"? It's the perfect haggle. You sound as if you know there's wiggle room, and you're willing to let him work his magic. And note: This works just as well when you're on the phone with the cable company, at the mechanic for an oil change, talking to a mortgage rep about locking in a "refi" rate. It even--I know from experience--works with teenage kids.

7. "More money" won't always make you "more happy."

The next time you're considering taking a job "just for the money" remember this: Money only buys happiness to a point. Beyond that, more money makes no difference in how happy you feel. According to some Nobel laureates, $75,000 buys happiness. That's an average that varies regionally--happiness is more expensive in Manhattan, NY, than in Manhattan, Kansas. But the message is this: As long as you earn enough to pay your mortgage or rent, put gas in a car that's not a clunker, eat what you want when you want to, and take the occasional vacation and, oh yes, save a decent chunk of whatever you're bringing in, more money will not make you more happy. Coming up short on any of those basic wants and needs, however, will make you miserable.

8. The more time you spend looking, the less happy you'll be with what you find.

When an opportunity seems good enough, take it. Researchers surveyed job-hunting college seniors and found that those who searched for perfection generally did land jobs paying 20 percent more. Unfortunately, those former students liked those jobs much less. That makes sense. If you're looking for the ultimate opportunity, the one you eventually choose is destined to fall short. The not-so-picky students were happier with their jobs. The same applies to any big purchase. Spend days searching for the best flat-screen TV and you'll always doubt your choice. Find one in a few hours that fits all your needs at a decent price? You're gonna love it.

9. An hour is worth of your time _______.

Here's a quick and dirty way to compute your hourly rate. Remove the last three zeros from your annual salary and divide the remaining number in half. For example, if you earn $30,000 a year, that gives you a rate of $15 an hour. If you make $100,000, it's $50 an hour. Use this handy formula--in combination with your enjoyment/hatred of the task at hand--to decide when it's okay to hire others and which tasks aren't worth doing at all. The weeding of the garden you could hire someone to do for $15 an hour? If you hate it and earn more, hire help. If you love it and earn more, don't. And if you earn less yourself, plug in your iPod, pour yourself a cold one, and start digging.

From "Money Rules" by Jean Chatzky. Copyright © 2012 Reprinted by permission of Rodale.

© 2012 MSNBC Interactive


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