The financial expert and author discusses how the pandemic can improve financial habits, what works in financial education, and the link between financial stress and well-being.
Our guest on the podcast today is personal finance expert, Jean Chatzky. She is the CEO of HerMoney.com and host of the podcast "HerMoney with Jean Chatzky." Jean has served as the financial editor of NBC's TODAY show for the past 25 years and she is also the financial ambassador for AARP. She has written several best-selling personal finance books. Her latest is Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and, Yes, Rich) Life You Deserve. She holds a BA in English from the University of Pennsylvania.
Background
The Pandemic and Personal Finances
“Should You Save More Right Now (in the Pandemic) or Pay Down Debt?” by Jean Chatzky, savvymoney.com, Dec. 8, 2020.
“Four Secrets to Mastering Your Money (Even in a Pandemic),” by Jean Chatzky, hermoney.com, Nov. 6, 2020.
“The Hidden Costs of Unpaid Caregiving,” by Sarah Gammage, Naziha Sultana, and Manon Mouran, imf.org, March 2019.
“7 Personal Finance Concerns in These Uncertain Times--and a Plan of Action for Each,” by Jennifer Folsom, nbcnews.com, March 16, 2020.
“Jean Chatzky on the Financial Challenges of Being a Caregiver,” AARP.org, March 11, 2020.
Financial Education and College Funding
“Financial Literacy Effectiveness & Providing Just-In-Time Training By Financial Advisors,” by Michael Kitces, kitces.com, Sept. 21, 2016.
“Do Schools Get an F in Financial Education?” by Jean Chatzky, jeanchatzky.com.
“This Week in Your Wallet: Funding a College Education,” by Jean Chatzky, jeanchatzky.com.
“6 Ways to Talk to Your Kids About Money,” by Jean Chatzky, nbcnews.com, March 6, 2019.
“Are You Teaching Your Kids the Wrong Money Lessons?” by Jean Chatzky, thebalance.com, Nov. 20, 2019.
Women & Money
“The Real Challenge for Women Breaking the Glass Ceiling,” by Jean Chatzky, hermoney.com, Oct. 29, 2020.
“Women Face Financial Challenges in Retirement That Men Just Don’t. Here’s How to Overcome Them,” by Jean Chatzky, hermoney.com, Nov. 11, 2019.
“Jean Chatzky: Here’s How Women Can Take Charge of Their Money,” by Jessica Dickler, cnbc.com, March 31, 2019.
Financial Advice & Wellness
“Jean Chatzky: The 4 Biggest Money Mistakes of My Life,” by Jean Chatzky, nbcnews.com, May 16, 2019.
“Saving for a Goal,” by Jean Chatzky, savvymoney.com, May 20, 2019.
“Jean Chatzky on how to Make Your Money Last After Retirement,” by Jean Chatzky, today.com, Jan. 2, 2017.
“This Week in Your Wallet: The Truth About Multitasking,” by Jean Chatzky, jeanchatzky.com.
Christine Benz: Hi, and welcome to The Long View. I'm Christine Benz, director of personal finance for Morningstar.
Jeff Ptak: And I'm Jeff Ptak, global director of manager research for Morningstar Research Services.
Benz: Our guest on the podcast today is personal finance expert, Jean Chatzky. She is the CEO of HerMoney.com and host of the podcast "HerMoney with Jean Chatzky." Jean has served as the financial editor of NBC's TODAY show for the past 25 years and she is also the financial ambassador for AARP. She has written several best-selling personal finance books. Her latest is Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and, Yes, Rich) Life You Deserve. She holds a BA in English from the University of Pennsylvania.
Jean, welcome to The Long View.
Jean Chatzky: Thank you so much.
Benz: We're excited to have you here. I want to start by talking about the pandemic. Some people have experienced serious disruption in their incomes during this period. And women appear to have been particularly hard-hit with one in four saying that they're considering leaving the workforce or downshifting their careers. So, what are some of the key factors that have caused women to be so adversely affected during this period?
Chatzky: We have been talking about this a lot at HerMoney. And I think it's an amplification of trends that we hadn't quite escaped, things that have always been there. Women have always been the caregivers. When you have looked at a woman's retirement trajectory and her retirement security, we've always known that women don't wind up with as much in their retirement accounts, in part because we are the ones who take breaks from the workforce to care for kids or to care for older parents. And during COVID, the need for that care with kids at home and older parents falling ill has just been amplified. Add to that, I think, the wage gap. And so, we know on a national level, when you look at women, on average, we still earn about $0.80, $0.81 on the dollar. For every dollar a man earns, women of color earn less. And so, when a family is trying to make the decision, the difficult decision of who is going to take a step back, who is going to man, for lack of a better word, the fort at home and make sure things continue to run smoothly if somebody has to step back, it's more than likely going to be the woman.
Ptak: What advice do you have for women who are having to balance caregiving alongside growing their careers and their wealth?
Chatzky: In normal times, and I guess also in these times, but these times are so strange, because as a mother, you just worry about bringing other people into your house, sending your children out into the world, yourself going out into the world if you don't have to go out into the world when things are so fraught. But in normal times, I think sometimes we think of it as an either/or question when it really shouldn't be. There's a lot that we lose when we step out of the workforce to take care, full time, of kids or older parents. It's not just our income in that year. It's Social Security credits, it's seniority, it's the strength of our networks. And so, although I know that there are some women who want to be home, and this is the choice that they are making, and they feel positive about it and I think that's great. If that's not you, if you are thinking that you'd like to maintain your career focus as well, I think doing whatever you can do to keep a foot in the workforce is important. And even if you are looking at the cost of paying someone else to provide care versus what you earn, sometimes it seems like, well, if it's a wash, I should just be the one to stay home. But even if the salary is the equivalent of what you spend, it isn't a wash for all of those other reasons that I mentioned before. And so, I think we have to think of it not just as a decision that we are making in the moment, but as a decision that we're making in the moment that has lasting repercussions.
Benz: Let's talk about people who have been lucky during this period, men and women, whose incomes haven't been seriously affected and their savings rates have actually picked up. What advice do you have for them to ensure that the good habits they've put in place stick even after life has gotten back to normal or semi-normal?
Chatzky: So, I think--and I don't know about you, Christine--but I think this is the silver lining of the pandemic. I think that we have all gotten a little closer to our values, that we have adopted some good thrifty habits, and holding on to those I think is going to be really fantastic heading into the future. If you just look at one thing: just look at grocery shopping. So, before the pandemic, many of the people that I know, and I on occasion--I wouldn't just grocery shop once a week, I would grocery shop almost once a day. I would think about all right, what do I want to make for dinner tonight, and maybe I would go to the fish store, or maybe I'd go to the grocery store and I'd pick up a couple of things. And because I was there, I would pick up a couple of things by impulse that I didn't even need.
Now, we are shopping with a list. We are trying really hard not to go to the store very frequently. We are cooking from our pantries. We are just cooking more often. And we are saving a lot of money. Because of that we're actually probably also healthier and the same is true of our exercise routines. We got so caught up in, “could I make this class or that class,” we forgot that just getting outside and walking a couple of miles is amazing exercise, plus it's free. And then, there's also just this sense of watching where your money is going, seeing if it lines up with your values.
I did a piece early in the pandemic where I learned that the average American has, I think it's 21 or 22 different monthly subscriptions. And some of them are cable channels, some of them are streaming services, some of them are box things that come to the house. We now know which of those we really value and which of those we don't. We know which channels we watch. We know which shows we tune into and which ones we never watch. And we can get rid of all the stuff that we're not using. When I look even at my closet, it's a lot emptier than it was at the start of COVID. I haven't gotten rid of the work clothes that I hope that I'll be able to wear again someday soon. But I have gotten rid of stuff that I just know I'm never going to wear again. And I've done it in an ecologically minded kind of a way. I’ve tried to either sell it on consignment or give it to a charity or free cycle it. I think those sorts of things are habits that we're going to want to continue.
Ptak: Maybe segueing to financial education, you've devoted your whole career to helping educate consumers about improving their financial lives. It seems like you're a believer in sharing stories that hearing personal narratives has power and that people should spend time discovering their own money story, so to speak. So, can you talk about how people can tap into the events in their lives that have shaped their attitudes toward money?
Chatzky: It's not anything that has likely happened recently. I mean, that's the confusing part. What really shapes us when it comes to our finances is the home that we grew up in. And that means that we really have to think back to what the atmosphere was like in the home where we were raised, whether there was stress around money, whether our parents thought about money, because it's not really… I am, as you said, I am a believer in financial education and I think we need more of it. But when it comes to shaping the behaviors that are a little bit more innate for many people, it is what we felt when we grew up, and it continues to impact us to this day if we haven't figured out what it is and dealt with it. Once we know that we don't like to spend money because we were raised in a household where spending was considered something that you don't do when there were values of thrift. And once we understand that these values were just all over and we took them in and they're very hard to escape, well then, we can deal with it. Then, if we have trouble spending money on ourselves, we can set up a separate account specifically for doing that. But until you understand what your issues are, what your money story happens to be, it's very hard to escape.
Benz: One conversation we've had with various guests on this podcast is about what kind of financial education sticks and actually improves outcomes. Based on your work in this area over the years, what are the characteristics of financial education that sinks in and helps improve decision-making?
Chatzky: So, I've done a ton of research on this, as I'm sure you guys have as well. And what seems to work best is what's called just-in-time education. And that's educating people, giving them the skills they need right before they need to use them. There was this study done years and years ago--Wells Fargo did it on a college campus. And it was such a long time ago, it was before the CARD Act, before they pumped the brakes on who was allowed to market credit cards on college campuses. But they offered incentives often on campuses to get students to sign up for a credit card. It would be something like a bag of M&Ms or I think I got a two-liter bottle of Pepsi for signing up for my first credit card or a T-shirt or something like that. And so, Wells Fargo decided that they were going to offer a little extra incentive for getting some education right as you got your card. They split the population into a couple of groups. And they offered this 15-minute tutorial. And then, they were able to, because it was their own customer base, they were able to track the behaviors of students who took the tutorial and didn't take the tutorial. And what they found was that this 15-minute tutorial made a big difference in going over limits, in paying bills on time, in good credit behaviors. And we've seen bits and pieces of that along the way.
I think there's some stuff you can't solve with education. I'm very excited that the SECURE 2 Act is teeing up the idea of auto enrollment into retirement plans, 401(k)s for everybody across the board. I think that's necessary. I don't think we can trust ourselves to always make the decisions that are in our own best interests. But I do think that some education right before we're ready to use it or when we have a really good reason for wanting the information or wanting the particular tool, that's a good time to give it.
Ptak: Have you seen some good examples of just-in-time education that's been applied to successful effect when it comes to student loans?
Chatzky: I have seen some. I don't know that they would fall necessarily under just-in-time education. But I have seen a couple of interesting programs and startups that have tried to address the student loan problem in that way. So, there's a company called NextGenVest. It was acquired a couple years back by College Bond. But it was a free service where students who got student loans were then counseling other people who were taking out student loans on making the right borrowing decisions and it was all happening over text. And it was successful because it was peer-to-peer counseling. That's another hallmark, by the way, of good education. But also, because these students who were doing the counseling had just been through it and so they understood the lessons of overborrowing. There's another company called Frank that does something a little bit similar in student loan education and tries to encourage students to limit the amount of borrowing or teaches them and gives them the tools that they need to negotiate their student loan offers.
Benz: Speaking of education funding, one issue that a lot of families struggle with is rightsizing their buy for higher education. So, how can people make better choices in deciding how much to pay for education given the family's total financial situation? How can we get better about that?
Chatzky: The best rule of thumb that I've heard, and it comes from a guy named Mark Kantrowitz, who for years has been not just my go-to source on college financing but pretty much every financial journalist that I know, he's also their go-to source on college financing. And his rule of thumb has always been try not to borrow more than you think you're going to earn in your first year out of school. And so, what that basically says is, if you think you're going to be a journalist at salary X, you borrow less than if you think you're going to be an investment banker at salary Y, because your payoff trajectory is going to be very, very different.
I don't think parents and kids can any longer look at college in terms of the best college that I get into or the dream school. I think it's a value proposition. And the best way to approach it is to apply not just to those schools that you most want, but to the schools that you know are likely to want you based on your grades, based on your extracurriculars, based on geographic or ethnic diversity, that you know they're going to want you and so, they're going to give you money to attend. It means you've got to do it in a way that you have choices, which probably means not going early decision and then, really weighing the amount paying back your loans is going to cost you and whether you're going to be able to have a life and repay simultaneously.
Ptak: Maybe to generalize for a minute, how have you tried to educate your own children about general financial matters? And how would you urge parents to do this on their own?
Chatzky: I have two children. And one came out of the womb a saver and one came out of the womb a spender. And I think that that is not at all unusual. I've always wanted to see somebody do a longitudinal study of identical twins and see how that works, because I have identical twin nieces, and one is a saver and one is a spender. One is really motivated by earning money and one could not care less. And so, I think parents have to do their best by modeling good behavior, because our kids see everything. They see what you're doing much more than they listen to what you tell them to do. I think we have to, before our kids go off to college, figure out a way to get some money into their hands so that they can learn how to manage a sum of money, kind of like a budget so that when they go off to college and they've got a chunk of money that they have to make last over a month or a semester, they can do it without blowing it. I think it's hugely important that our kids work. I mean, I worked from the time I was 11. That's when I started babysitting. I got my first real job at 14. I liked earning. I liked the feeling that I was earning my own money. But I also think that kids do not understand--they don't get the connection between time and money until they are working for it.
I saw that with both of my children, that there is a light bulb goes on when they realize oh my god, it took me four hours of really difficult work to earn this money that--I'm not spending that. You know, my money is so much more valuable than your money. And so, I think it's a combination of all of those things and maintaining an open channel of communication. We just have to talk about money. We have to talk about it at dinner. We have to talk about big concepts, the deficit and investing, but we also have to just talk about what things cost, and whether they're worth it and who gets to decide whether they're worth it and why it's important to have your own money because your own money equates with power and freedom.
And that's not a one and done conversation. That's just a continuing conversation that you have to have their whole life and then when they grow up, and they're worried that they're going to have to take care of you, they can flip the switch and they can have that conversation with you so that everybody is on the same page.
Benz: Speaking of the idea of learning by doing, what's your take on the Robinhood phenomenon for newer investors? Do you think that type of experimentation is valuable? And do people need to make mistakes and perhaps get a little beaten up along the way in order to learn?
Chatzky: Did you read Jason Zweig's column last week?
Benz: I did. It was hilarious.
Chatzky: It was hilarious, right? So, I've worked with… Jason Zweig is a fabulous columnist for The Wall Street Journal. He writes The Intelligent Investor column. He has worked with Warren Buffett. He has coauthored his books. He is just…Jason is the voice of sanity when it comes to investing. I worked with him when I was a young reporter, fresh out of school at Forbes. I was a fact-checker. He was writing about mutual funds and writing about you guys. And Jason got on Robinhood because he was told by his editor that he had to get on Robinhood, and play and try to make as much money as possible really quickly. And even Jason got sucked into wanting to trade fast and furiously and turn a profit.
To me, that's not investing. To me, that's gambling. And maybe it was just the way he was doing it. And the Robinhood folks were very clear in their comments about this column. But that is not how the majority of users do it. But I do think the fact that they've gamed it up, that they've read everything about behavioral finance too, the fact that when we do well, when we get that little reward, we get that dopamine rush and we want to do it again. Well, yeah, that's the kind of thing that turns people into impulse shoppers. That's the kind of thing that makes us take another piece of chocolate when we've already had one. That doesn't belong in your investment portfolio in my opinion--not if it's a retirement portfolio, not if it's something where you are trying to grow your money in a very disciplined way for retirement or for another goal, because it flies in the face of discipline. It's anti-discipline.
That said, I do know people who like to take risks with their money. And I think that's fine as long as you can afford those risks. I've made some angel investments, I'm completely aware that I could lose every bit of that money. But it's additional money that I don't need that I took off the top to make those investments. And if you want to do that with Robinhood, or if you want to approach Robinhood in a more disciplined way, then I think that that's fine.
Ptak: Since we're talking about mistakes, on your website you share some of the money mistakes you made when you were just starting out, presumably to illustrate that even financial experts haven't always been perfect with respect to financial matters. What's the biggest money mistake that you made in your own life? And what did you learn from it?
Chatzky: Well, the biggest one was probably pulling money out of a 401(k) when I changed jobs and spending it. I didn't really get what a 401(k) was at that point in my life. I didn't understand that I was going to have to pay taxes. And it's one of those things that people do so frequently. And we know that it sabotages their chances of getting to a successful retirement. So, it's just one of those things that I don't like to see people doing. But for me, God, it was not the only one. By far, I've made a ton of mistakes. I have I gotten myself into some credit card debt early on. I definitely have given away too much control of my own finances. I have taken it back. But you know, it's a learning curve and it's definitely been a learning curve for me. I think that's why I'm still doing it actually. I came out of college--I'm an English major. I did not go to school for this. I spent a couple of years on Wall Street after college because I decided I wanted to write about business and finance and I couldn't get the job that I wanted at Forbes because I was coming from a woman's magazine, and they didn't think that I had the chops to do it. So, I learned along the way. But I think what has kept me interested in personal finance is the fact that it changes all the time, that it's really psychological, that humans just--we just don't do things that we should do and we do a lot of things that we should not do.
And we're not taught. And yeah, that's the other big thing. We are not taught the right things to do. We're not educated. And so, it's completely understandable that you make mistakes. And what you want to try to do is recognize when you're a fish out of water and get a little bit of help to get on the right track. And then, if you want to DIY it, DIY it, but get a checkup every once in a while to make sure that you are heading where you want to go.
Benz: Because your work is mass market rather than working one on one with individuals on their plans, how do you stay in touch with the challenges that people are facing in their financial lives? What are your go-to resources, especially now given that we're all having limited face-to-face contact with one another?
Chatzky: So, I read a ton. But I actually am so lucky that I have the ability to talk to individuals every day. And the reason that I can do that is because of HerMoney. So, about three years ago now, I started a company, HerMoney.com, the parent company is HerMoney Media. We produce a podcast every week, and I get a ton of letters from listeners who want to talk about what's going on in their own lives. We've got a very vibrant Facebook community, a private Facebook group. If anybody would like to be part of that, just check out the HerMoney private Facebook group and tell us that you want in--it's women--and we will let you in. But we've got close to 15,000 women on there who are just talking about what's going on in our own lives every single day. And although we've been home, I've been doing a lot of events. I've been doing a ton of webinars and Zoom events with hundreds, sometimes thousands, of people. And I listen very, very carefully to their questions. For a speaker like me, the Q&A is by far the best part because that's how I come away with story ideas, that's how I come away understanding where the pain is.
Ptak: Let's shift gears and talk about women and money if we can. My first question for you is, how do women invest? What does the data say about how women invest? How that's different from men and is it all that different once you control for income levels?
Chatzky: It's a little different. So, the data says that women are more reluctant to get started in that we keep more of our money in cash. BlackRock data actually shows women keep about 71% of their assets in cash, men keep around 60%. And that differential--when I go out and I talk to a big group of women or when I do it on Zoom--it is very, very common for a lot of women to just have much more money than we might need in our emergency cushions or even for our short-term goals sitting in a checking account earning nothing. And that money should be working. It should be invested for our longer-term goals. And so, the getting in is a little bit more difficult for women.
We're just a little more wired for safety and security. And again, I think this is fundamental I think it's a need. I don't think it's a want, this idea that we will be OK, we will be taken care of. When I wrote my last book, which is called Women with Money, I interviewed hundreds of women before I sat down and started to type. And one of the questions that I asked them was, “What do you want from your money?” And what I heard in many different ways was that answer: “I want safety, I want security, I want stability, I want savings, I want actual cash in the bank.” And it manifested in interesting ways, too. It wasn't just “I want to own a home.” It was, “I want to own a home with a paid-off mortgage.” And it wasn't “I want to buy a car.” It was, “I want to buy a safe car with all the backup cameras and the airbags and the blind-spot indicators.” And it's very, very precise. That said, when women invest, we do fine. In fact, research will tell you we do better than men. And the reason for that is that we don't trade as frequently. And so, we don't lose as much to commissions.
Benz: You note in your latest book that women coming out of college earn 95% of what their male counterparts do, but that percentage begins to slide as women age. Is that mainly due to the caregiving issues that we talked about earlier? Or are there other factors in play?
Chatzky: It's mainly the caregiving issues that we talked about earlier. It also may be the reluctance to negotiate. There have been lots of studies, and you know this, Christine, where you look at men and women with similar skills, but one is named James and one is named Julie, and the one that's named James gets the bigger bonus or gets the salary bump in these blind studies. There just is still a salary problem in this country, and we are going to have to fix it both from a policy perspective, I believe, from a corporate perspective, and there are companies that are working on this, to their credit, but also from the ground up with women taking steps to ask for more.
Ptak: I wanted to shift to financial advice for a moment if we could. Some financial advisors argue that the idea of do-it-yourself investors is outmoded, that most of us don't fix our own cars, so why should we be managing our own portfolios and so forth. Do you agree that everyone needs a financial advisor?
Chatzky: No, I don't. I think every person's money needs time. And if you are not going to put in the time, or you don't feel competent doing it or you don't want to do it, then you should have somebody else working with you on it. And even if you do want to DIY it, I think that having another pair of eyes on it every once in a while, like a physical, is a pretty good idea. But I think time is this factor that we don't talk about often enough. When I worked on Wall Street, I worked at Dean Witter in equity research, working for three different research analysts, two out of the three were on the II list of the best analysts. So, they were really, really good stock-pickers. And I remember one of these guys, they were three guys, telling me that he was leaving early one day because he was going to the financial advisor. And I said, “Why do you need a financial advisor?” And he said, “I do this all day long. Do you think that I really want to do this when I go home at night?” And that was a lightbulb moment for me, you know, just realizing this is a choice. This guy had plenty of money, he certainly could have hired out, he could have done it himself. He had plenty of skills. But he recognized that this was an asset that had to be tended and that he wasn't going to do it himself. So, he got help. And for me, I've had a financial advisor for years and years and years. I want another set of eyes on things because I get really, really busy and sometimes I also get nervous, and I want somebody else to talk to.
Benz: There are lots of different business models for financial advice, assets under management, hourly subscription models. Do you have a favorite among those? And how would you urge consumers to find the business model for financial advice that makes sense given their own situation?
Chatzky: I love that there are so many models. I like that the industry has become more democratic. And I don't really have a huge favorite, although I do think that it's very important that as you're selecting an advisor, you try to get a dollar figure for what a relationship will likely cost you over the course of a year so that you can do more of an apples-to-apples comparison. My advisor charges a percentage of assets under management. I'm very comfortable with that because I feel like he does better when I do better, and vice versa. And so, that has made sense to me. And I like that the percentage goes down as the assets grow. I do think that makes a considerable amount of sense.
At HerMoney, we just launched a partnership where we're actually helping do some matchmaking for women who want financial advisors. We've put up a questionnaire that was developed with an organization called Wealthramp, which is run by Pam Krueger, who was the host of MoneyTrack on PBS for many, many years and she has spent the last three years of her life vetting financial advisors. Because when you're somebody like me, I get a lot of people who say, “Hey, can you just give me a recommendation, can you just give me a name?” And I have a handful of advisors that I'm comfortable recommending personally, but I don't have them in every part of the country, and I don't have as many as I would need. But Pam does, Wealthramp does. And so, it's a free questionnaire that people fill out. And we will serve up, based on your own criteria, typically two to three names that look like you would match with, and then it's up to you to go ahead and contact them, nobody is going to contact you.
Ptak: There's a growing movement in the financial advice industry to incorporate broader life planning, things like goal setting, spending time and money purposefully, and so on. You've long talked about these issues in your work. How do advisors help build up their skills in this area to ensure that they're not just using life planning and coaching as a marketing hook?
Chatzky: I think it's really all about listening. How do they build up their skills? I think what you're asking is, and what you're requiring of them, and what I like to see in an advisor is an advisor who does that holistic work, who doesn't just say, “Well, I can get you X, Y, and Z return,” but who says, “What do you want?” Then figures out how to help you get there. Because I think money is a tool. And we will be happiest if we can figure out how to use our limited resources to get the most of what we want out of our lives. And that's a very, very individual question. So, for those advisors, I don't know if there's listener training out there, but that might be helpful. Empathy training might be helpful. This is why I think women make such great financial advisors because I think we are naturally good listeners, naturally empathetic. I don’t know that I have a particularly great answer for that question, I’m sorry.
Benz: That’s good, that’s helpful. One issue that you've likely thought about is that the people who are most receptive to financial education, the people who might pick up one of your books or listen in on your podcast, are probably reasonably financially well to begin with. So, how do you think about people who most need the help who might be disinclined to engage with anything related to their money because they just feel really bad about their situation?
Chatzky: Yeah, there's no doubt about the fact that people have to be ready. I can't take somebody who's not ready to do this and make them do it. I've tried. I've done enough money makeovers and enough coaching to know that if you're not ready, I can't make you ready. Something in life will make you ready. There's going to be something that you want, and that's the time to really jump on the advice bandwagon. And that's what we see, by the way, in real life. We don't see people come for financial advice just because. We see people come for financial advice because something happened. And it could be a good thing or a bad thing. They got an inheritance and they don't want to blow it; they got a new job and they got a raise, and they don't want to blow it; they're having a baby; they're getting married; they're getting divorced; they got fired. Things happen, and that's when they realize, “Oh, boy, I better figure out how to do this.” And the hope is that you capture that good impulse when it strikes and really just grab it and make the phone call or go to the website, or pick up the book or subscribe to the podcast or do one thing that is going to set you on the right path.
Ptak: And you alluded to this earlier in our conversation, you started your career in print media, and then you built your brand, at least in part with your books, columns, and smart money, and appearances on television. How have changing consumer preferences for media affected how you allocate your time? And I think you were alluding to some of these things just a moment ago, but maybe you can elaborate just a bit more?
Chatzky: I used to feel like I was spending about a third of my time doing TV, a third of my time writing, and a third of my time speaking. And it was pretty well divided. Social media is the beast that will not be satisfied. I spend a lot more time on social media, reading it, trying to deal with it than I have before. Plus, I'm trying to build a brand that's bigger than me. So, with HerMoney I have some writers, some great, great people and I'm working to expand beyond just what I do myself.
Benz: Thinking back to the early days of your career, what areas of financial wellbeing do you think you underrated at that time that you spend more time on today, and which did you overrate?
Chatzky: That’s a good question. I actually think I was pretty early on the behavioral finance and the money and happiness train. I felt like I tapped into that early, before people were really ready to think about it. I sometimes think in my career that I covered the right topics but not necessarily at the right time. I wrote my book about getting out of debt a little bit early, right before the bubble burst. So, I'm not sure. But I do think right now financial stress is a big topic in need of more oxygen. I think that the degree to which our health, our mental health, and our financial health are intertwined is, it's really just started to gain in popularity, but it's going to stick with us for years and years and years.
And the other thing--and I think I'm not alone in having missed this one--but for many years in print media we wrote a ton about accumulating assets. We were following the baby boomers. Whatever media you were in, you were following the curve of the audience and the big part of that audience were the baby boomers and they needed to accumulate, accumulate, accumulate for retirement, especially after the advent of 401(k)s. We didn't, until later, come to this realization that deaccumulation, that spending down, that making your money last, was equally, if not more, important. And so, that's the other area that is going to just continue to soar.
Ptak: Do you think that the behavioral finance experts are too focused or overly focused on accumulation and should spend more time on deaccumulation and helping people to navigate the spending phase of their lives?
Chatzky: I think they're starting to make the turn. I think they're starting to focus on it. I think that's where the money is heading. And so, they will undoubtedly focus. But I had a conversation with Dan Ariely a month or two ago, and I know he is starting to think in that direction. And I work with an organization called the Alliance for Lifetime Income. There are a lot of economists who are really focused on the withdrawal problem and how to solve it.
Benz: One feature of financial decision-making across life stages is multitasking. You write about these things all the time, deciding whether to pay down student loans or invest for retirement when you're just out of school, or deciding whether to pay off a mortgage or invest in the market later in life. So, are there any overarching principles that you would impart in this area as people think about some of these choices, whether to put their money toward this thing or that thing?
Chatzky: I think these decisions are a lot easier with interest rates as low as they are. I've always been a follow-the-money kind of a person. I was always a bigger fan when it came to paying down debt of the avalanche where you stack your debt from highest interest rate to lowest and you focused on that highest first, than the snowball where you focus on the smallest amount of debt to get the psychological win. I just think the avalanche, because it saves you the most money, makes the most sense to me--acknowledging that you need some discipline to stick with it. But in terms of these either/or decisions, and there are a ton of them, I think there are two ways that you can approach them, and you're better off approaching them in both ways simultaneously. First is numerically. You got to look at where you get the biggest return for that next dollar. And so, you get a much, much smaller return paying off a mortgage than you do paying off a credit card debt. And student loan debt is somewhere in the middle. You have to sort of look at it that way and you throw your 401(k) with its match into the equation, and it gets you the highest return of all. And so, that's one of the reasons that the focus on the matching dollars in the 401(k) is always paramount, and health savings accounts, too, these days if there's an incentive on the table for making a contribution.
But there's also the emotional thing, and I don't think that I truly got this until I started looking at college for my kids, the sense that you're a parent and although people—experts--will say you got to prioritize retirement before college, you're going to do something to help your kids, you just are. And so, figuring out a way to divide and conquer to put something into a 529 or a Roth IRA where you can access it for education so that you can help your kids, I think is important.
My other rule--not really a rule, but it's a rule for me--is get out of the mortgage before you retire. And I've had arguments with other financial experts about this, because they will tell me numerically it doesn't make any sense, particularly with interest rates where they are now. But I think from a stress perspective, as your income starts to decline, you don't want to have to worry about not being able to pay the mortgage.
Benz: Well, Jean, it's been such a treat to talk to you today. Thank you so much for taking the time out of your schedule.
Chatzky: Thanks for having me.
Ptak: Thanks again.
Chatzky: My pleasure.
Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify, or wherever you get your podcasts.
Benz: You can follow us on Twitter @Christine_Benz.
Ptak: And at @Syouth1, which is, S-Y-O-U-T-H and the number 1.
Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.
(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)