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CNN Live Today

Interview with Ronnie Roha

Aired January 02, 2003 - 10:47   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL LIN, CNN ANCHOR: Well, it is a new year, and time to focus on new resolutions like getting financially fit for 2003. 2002, I don't have to tell you, was a tough year for many investors, but help is on the way, courtesy of "Kiplinger's" personal finance magazine and associate editor Ronnie Roha.
She joins us from Washington with tips for the New Year -- hi, Ronnie. Happy New Year.

RONNIE ROHA, "KIPLINGER'S PERSONAL FINANCE": Hi Carol. Same to you.

LIN: Well, thank you so much. I was taking a look at some of the top five tips that you are going to helping us with, and the first one I find a little bit painful -- calculate your net worth.

ROHA: Well, it really -- it is a little painful, I suppose, but it is really the best place to start, because it's what gives you -- calculating your net worth is figuring your total asset values minus your total debts. And it gives you the picture to start with. Are you on track for your goals? You can look at the big picture. Perhaps your portfolio has decreased, but perhaps your house has increased in value. So you can find out where you are overall, and you can look at the bits and pieces to see if you're on track. For example, as you get older, you would like to see your debt declining in relation to your assets. So you want to get a feel for where you're going and how you are getting there.

LIN: OK. And you are asking people to ask themselves, How big is your emergency fund? What is an emergency fund?

ROHA: Well, an emergency fund is three to six months' of expenses. Not income, but the amount you actually spend in a month that you have in a fairly liquid form, such as in a money market account. This lets you take care of the emergencies that come up without having to, perhaps, sell stocks at a disadvantageous time, and it lets you see whether -- when you look at your net worth, it lets you see whether too much of your net worth is tied up in illiquid things. They may be very good things...

LIN: Like your house.

ROHA: Like your house or your retirement plan. But you also want to keep this liquid stash because life throws curve balls, and you want to be prepared to catch one and not have it fall.

LIN: Cash is king. All right. And you are telling people to bump up their savings. Isn't that the same thing?

ROHA: Well, no, not really. Because your savings -- your cash is money on hand that you can spend if you need it. But your savings are -- can include that, but really shouldn't. You're looking at things like maxing out if you can, or putting as much as you can in your 401(k) or other deferred -- tax deferred accounts so that you are building up toward a goal.

Perhaps you want to buy a house in the future. Well, set a date for that if you can, in your mind, and start saving for that. Now, one of the ways that people have trouble is figuring out, Well, I can't save. My money is all gone. A 401(k) or an automatic deposit into an account may be a way to trick yourself into saving more. You don't see the money, so...

LIN: Pay yourself first. Pay yourself first.

ROHA: Exactly. Exactly. Always good advice.

LIN: What about the last two? We are going to whiz right through. Rebalance your portfolio. That might mean selling some stock?

ROHA: It may mean selling. What it means is, taking a look at where you are now, because you want to be diversified, and you want your risk to be comfortable for you. So if you're too heavy into something, stocks which you don't really want to be, this is the time to perhaps buy or sell it to get back into a comfortable diversification.

LIN: And setting your goals in writing? You think that's really going to work?

ROHA: Well, you know what? If -- you can easily lie to yourself, or that is probably too strong. You can tell a fib if you don't have it in writing, because to have it in writing means focusing on it, and what happens is, if you focused on it and you put it in writing and you look at it six months later, you did that back when you had the whole picture in mind. So you were more thoughtful about your finances. If you do this -- don't write it down, it's very easy to say, well, I didn't really mean that I wanted to go to Paris next year, or put away this amount for my kids' savings, education. If you put it in writing, you're promising yourself, and it's a little harder to cheat.

LIN: Right, right, right.

ROHA: It is a psychological trick.

LIN: There you go. Thanks so much. Great tips, Ronnie. Ronnie Roha, "Kiplinger's" magazine.

ROHA: Thank you.

LIN: And writing down those goals in writing doesn't mean writing down that you are going to win the Powerball. They are practical tips, realistic ones.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired January 2, 2003 - 10:47   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Well, it is a new year, and time to focus on new resolutions like getting financially fit for 2003. 2002, I don't have to tell you, was a tough year for many investors, but help is on the way, courtesy of "Kiplinger's" personal finance magazine and associate editor Ronnie Roha.
She joins us from Washington with tips for the New Year -- hi, Ronnie. Happy New Year.

RONNIE ROHA, "KIPLINGER'S PERSONAL FINANCE": Hi Carol. Same to you.

LIN: Well, thank you so much. I was taking a look at some of the top five tips that you are going to helping us with, and the first one I find a little bit painful -- calculate your net worth.

ROHA: Well, it really -- it is a little painful, I suppose, but it is really the best place to start, because it's what gives you -- calculating your net worth is figuring your total asset values minus your total debts. And it gives you the picture to start with. Are you on track for your goals? You can look at the big picture. Perhaps your portfolio has decreased, but perhaps your house has increased in value. So you can find out where you are overall, and you can look at the bits and pieces to see if you're on track. For example, as you get older, you would like to see your debt declining in relation to your assets. So you want to get a feel for where you're going and how you are getting there.

LIN: OK. And you are asking people to ask themselves, How big is your emergency fund? What is an emergency fund?

ROHA: Well, an emergency fund is three to six months' of expenses. Not income, but the amount you actually spend in a month that you have in a fairly liquid form, such as in a money market account. This lets you take care of the emergencies that come up without having to, perhaps, sell stocks at a disadvantageous time, and it lets you see whether -- when you look at your net worth, it lets you see whether too much of your net worth is tied up in illiquid things. They may be very good things...

LIN: Like your house.

ROHA: Like your house or your retirement plan. But you also want to keep this liquid stash because life throws curve balls, and you want to be prepared to catch one and not have it fall.

LIN: Cash is king. All right. And you are telling people to bump up their savings. Isn't that the same thing?

ROHA: Well, no, not really. Because your savings -- your cash is money on hand that you can spend if you need it. But your savings are -- can include that, but really shouldn't. You're looking at things like maxing out if you can, or putting as much as you can in your 401(k) or other deferred -- tax deferred accounts so that you are building up toward a goal.

Perhaps you want to buy a house in the future. Well, set a date for that if you can, in your mind, and start saving for that. Now, one of the ways that people have trouble is figuring out, Well, I can't save. My money is all gone. A 401(k) or an automatic deposit into an account may be a way to trick yourself into saving more. You don't see the money, so...

LIN: Pay yourself first. Pay yourself first.

ROHA: Exactly. Exactly. Always good advice.

LIN: What about the last two? We are going to whiz right through. Rebalance your portfolio. That might mean selling some stock?

ROHA: It may mean selling. What it means is, taking a look at where you are now, because you want to be diversified, and you want your risk to be comfortable for you. So if you're too heavy into something, stocks which you don't really want to be, this is the time to perhaps buy or sell it to get back into a comfortable diversification.

LIN: And setting your goals in writing? You think that's really going to work?

ROHA: Well, you know what? If -- you can easily lie to yourself, or that is probably too strong. You can tell a fib if you don't have it in writing, because to have it in writing means focusing on it, and what happens is, if you focused on it and you put it in writing and you look at it six months later, you did that back when you had the whole picture in mind. So you were more thoughtful about your finances. If you do this -- don't write it down, it's very easy to say, well, I didn't really mean that I wanted to go to Paris next year, or put away this amount for my kids' savings, education. If you put it in writing, you're promising yourself, and it's a little harder to cheat.

LIN: Right, right, right.

ROHA: It is a psychological trick.

LIN: There you go. Thanks so much. Great tips, Ronnie. Ronnie Roha, "Kiplinger's" magazine.

ROHA: Thank you.

LIN: And writing down those goals in writing doesn't mean writing down that you are going to win the Powerball. They are practical tips, realistic ones.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com