TODAY | April 19, 2010
>> around the country .
>>> now to "today's" money and getting rid of your money demons for good. from constant credit card debt to frequent shopping sprees, bad spending habits are hard to break. there are things can you do right now to change your financial future . from redbook magazine , and jean chatzky writes a column for "more" magazine. good to see both of you.
>> nice to see you.
>> these are some habits, i think, all of us have one or more of them. allison , credit card debt . you say you can start small just by putting an extra 20 bucks to your bill?
>> putting an extra $20 on your bill can give you a huge difference. if you have $5,000 in debt at 16% and you only pay the minimums, it will take you 18 years and $ 10,000 just in interest.
>> if you only pay the minimums. add $20, you cut both those numbers by more than half. a small amount really does make a difference. credit card debt , when you're in it, it feels like you're never going to get out. a little bit and knowing a little bit can make such a huge difference can really make you motivated.
>> jean, allison mentioned a 16% interest rate . it's really important to try to find the lowest interest rate possible.
>> absolutely. the trick is to get yourself out of debt in the cheapest, fastest way possible. people think that there aren't any balance transfers available anymore. that's completely untrue. there's a website called lowcards.com. they list them all. generally if you can lock into a good one for six months, it's probably worth taking.
>> savings, a lot of people really not doing well in the savings department.
>> allison , how do you break that?
>> one of the things that is recommended and that everybody names as a top financial goal is to have three to six months of an emergency fund ready , but most people don't have it. that, again, is something you can start to get to with just a small amount of money at a time. it's really important, especially right now with so much job and security to feel like you have that cushion. it cannot only protect you literally but make you feel more confident about your financial situation.
>> the key is making sure that you only have to pull the trigger once. if you're just asking yourself to save every time you get paid, at some point you're going to give up.
>> automate it. you have money flowing into your 401(k) or into a savings account . set up an automatic transfer with your bank. it happens date after you get paid and you don't spend the money .
>> you have to look at it basically as pay iing yourself.
>> it's paying yourself first is what we call it.
>> do you save or pay down debt?
>> you do both. in this economy , you do both. not having that emergency cushion, if you lose your job, you're going to float everything on your credit cards and everything is going to get completely messed up. split the difference . save a little bit, pay a little bit off that credit card debt .
>> next one, retirement. a lot of folks just -- they think, okay, i've got this. it's way down the road. next thing you know, you're ten years away from retirement. so, what's this trick here, allison ?
>> you know, it's just get started with the savings. if you have an employer-sponsored 401(k), that's a great deal. there are often matching funds . if not, open your own ira. particular fear for women is ending up destitute. it's not completely irrational. women do come in and out of the workforce more, tend to earn a little less, tend to live longer. it's something you need to prepare for. the earlier you start, the more you can build up. a lot of people feel like it's too late. i didn't start in my 20s. it's never too late.
>> can i put in a push for the word plan? we talk about the retirement plan . nobody plans. half of all people out there have never even run the numbers to figure out how much money you're going to have to have in order to retire. go to a website called choosetosave.org. run their retirement clarity. it's really easy. it will take about half an hour. you'll figure out, are you putting enough money away? are you not putting enough money away? you'll have some idea of what you have to do.
>> you shouldn't be doing this by yourself, especially if you're in a relationship. you've got to -- this has to be a team effort, right?
>> absolutely. if one person, man or woman, is taking their eye off the ball and something happens, you're going to be completely and totally lost . and especially where those retirement plans are concerned. you want to be making sure that your assets are allocated as a team, so that you're both not being too conservative or both not being too aggressive.
>> now, a lot of people, both men and women -- i think men more than they admit --
>> yes, yes.
>> do splurge shopping to kind of soothe whatever is going on.
>> we call them collectors when they're men, right? they tend to invest in technology. give me a break. yes.
>> wow, okay, jean. before jean comes off the chair here at me, what do you say to trying to cut down on the splurging?
>> retail therapy cuts both ways . you shop when you don't feel great. you shop when you do feel great. main thing you can do to fight this is have a budget . it's like a diet. nobody wants to stick to it. if it's too rigid, you're going to binge. and undo all the hard work you've done. the key to making a budget you can stick with is to put in a little miscellaneous column. don't even say what it's for. another treat for the kids or an extra date night for you or a pair of shoes . make sure to leave that wiggle room so you don't feel deprived as you're trying to save. that's basically the best splurge prevention there is.
>> little fun money ?
>> and a little stop, drop and roll when it comes to the shopping. you need to be able to just say, whoa. pump the brakes. what am i doing here? do i really need this? if you're not so sure, put it on hold for 24 hours , or leave it in your cart online. it will still be there when you come back the next day if you decide you want it, but chances are you won't.
>> if you're hiding it from your spouse, chances are --
>> if it still has the tags on under the bed, not a good idea.
>> both men and women basically ignore their finances.
>> don't do that.
>> well, ignore them and they'll completely go away. it's true. i think everyone has a lot of fear, especially if you've made mistakes in the past. it's easy to feel like i can't handle this. i don't know the answers. forget it. i'm just going to keep paying the minimums on my credit cards and that's all i'm going to do. the point of what we're talking about here, you can take one step in any area and you'll start to feel more empowered, motivated and more confident . the more good steps you take, the more control you'll feel over the whole situation.
>> get a little help if you need it. if you're not doing it, you know you're ignoring it, call in a financial planner . doesn't have to be for years. call it in, have a session. be done with it.
>> allison brower, jean chatzky, thank you.
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