Jean Chatzky is an award-winning journalist, best selling author, and the Financial Editor of NBC's Today Show. She has a knack for taking complicated financial concepts and breaking them down in a way the rest of us can understand.
Recently, Chatzky teamed up with Cleveland Clinic wellness expert Dr. Mike Roizen to co-author the book AgeProof: Living Longer Without Running Out of Money or Breaking a Hip. In the book, Chatzky and Roizen explain the critical link between a healthy lifestyle and financial well being that can add years to your life and dollars to your retirement account.
I recently had the opportunity to talk with Jean about a variety of financial topics and one thing is clear, she is passionate about teaching people how to make smart money decisions. Here is the transcript of the interview:
Q: I've read your bio on your blog, it's quite impressive! Besides your education, what other factors do you feel played a major role in getting you to where you are today?
A: During college, my Professor Nora Magid was an invaluable mentor to me. During my career, I have developed a very strong network of journalist friends that continue to provide help and support for each other.
Q: Shifting gears, in your bio you mention several money mistakes you made in the past. Looking back, which mistake was the most valuable ‘lesson learned' as far as helping you improve your financial well being?
A: Having and getting rid of credit card debt. Having debt can be very stressful and putting your head in the sand and not taking action to fix your financial mistake just makes things worse.
Q: What actions did you take to overcome this mistake?
A: The first thing I did was to take on extra work to increase my income. This allowed me to pay down my debt faster. As a woman, in the past I felt the need to play it safe with my money, preferring the security of keeping my money in a bank earning 5-6% rather than using it to pay off debt costing 20%. Consumers should carefully evaluate the best uses of their money and take action when appropriate.
Q: In the June/July edition of AARP The Magazine, you wrote an article titled Want to Take Out a Home Equity Loan? Not So Fast in which you mention that nearly 10 Million people are projected to borrow money from their homes over the next 5 years. That's a very large number! What advice do you have for someone contemplating a home equity loan?
A: Keep the value of your home in mind before deciding to take on a home improvement project. Never over-improve your home and always make each decision based upon the impact to the rest of your financial life.
Q: During the housing crisis of 2008, many people lost or walked away from their homes because they ended up being ‘underwater' on their mortgage because of carrying too much debt and the decline in housing values. Could we potentially see a similar situation during the next housing market downturn?
A: At this point in time it’s difficult to predict however, I hope we have learned the important lesson to not over-borrow from the equity in our homes. Making financial decisions based on the belief that home values will continue to appreciate is unwise.
Q: Can you explain to our readers the difference between a home equity loan and a home equity line of credit and why they need to be aware of this difference especially in an environment of rising interest rates?
A: Home equity loans are a second mortgage with a fixed rate, meaning that you will pay a fixed interest rate on the entire amount for the term of the loan. A home equity line of credit (HELOC) is also a second mortgage however, these loans have a variable interest rate that is tied to the prime rate. Lenders will most likely offer consumers a HELOC with the opportunity of making a portion of the loan into a fixed repayment plan.
Q: The Tax Law changes of 2017 changed the rules on Home Equity Loans. What changes should consumers be aware of?
A: Home equity loan interest is deductible only if you use the money to make an improvement that adds to the value of your home. Current rates are averaging prime plus 2 percent so consumers should do the math to see if it they will save money by using a HELOC to pay for college or pay down debt.
Q: I have a 19 year old daughter in college. If there is one piece of financial advice you could pass on to her, what would it be?
A: She should save 15% of any money that she earns/inherits and have it work for her future.