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American Morning
Interview of Terry Savage, Financial Columnist
Aired December 28, 2001 - 09:25 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.
MILES O'BRIEN, CNN ANCHOR: Maybe one of your New Year's resolutions is to save more money. That's always a good idea. The big question is, how can you avoid the money mistakes in the New Year? Terry Savage is a financial columnist with the "Chicago Sun-Times." She's the author of the book you see on the screen, "The Savage Truth about Money." She joins us, fully ensconced in Miami. I don't think she's ever going back to Chicago.
TERRY SAVAGE, FINANCIAL COLUMNIST, "CHICAGO SUN-TIMES": Not if it's cold.
O'BRIEN: Wouldn't blame you a bit, Terry. Good to have you back. Let's do some tips, shall we? We need some tactical information. Get your pen and paper, excuse me, yeah, pen and paper out, or whatever you use, your computer, your Palm Pilot, and listen up. What's tip number one?
SAVAGE: Well, it's time for resolutions. You know, everybody is making resolutions this time of the year, and that always reminds me that it is much easier to make a resolution than it is to keep a resolution.
O'BRIEN: Yes, well, that's another segment, I think.
SAVAGE: Yeah, since the part that requires self-discipline, but everybody I talk to about money resolutions, they think the number one resolution is to save more money in the New Year, and to put it to work wisely, and involved in that is the idea of, where does your money go? My feeling on this is if you see it, you'll spend it. So all of the aspects of this resolution to save more money involve making your money disappear into good places instead of bad places. Start with tip number one.
O'BRIEN: If you see it, you will spend it. I'm writing that down.
SAVAGE: Okay. I'm going to put that on the wall at the house. If you see it, you will spend it. All right. So, tip number one with that in mind.
SAVAGE: Well, first of all, you need to get your paycheck out of your hands quickly. The best way to do that is if your company allows, and many of them do now, direct deposit of your paycheck, you will avoid the temptation of walking into the bank, cashing your check, and taking an extra $20 or $30 in your pocket, which will disappear. That will be money you'll never see. So step number one is to get the money out of your hands before you see it and spend it.
A lot of that involves just simply tracking your cash, so tip number two instead of spending cash, wherever you can use a debit card. Some people still carry a checkbook, you know, you and I talked about online banking, and that is a great idea, people hate to stand in line behind you when you're cashing a check, and there's always the temptation to cash a check for a little bit more than you're spending, so use your debit card. It'll come right down in your bank statement, especially if you are banking online and downloading, and then you'll know where all the money was spent, because it will show you when you debit that it was at the pharmacy or the grocery store, at the gas station. So use your debit card instead of cash, and even much more quickly instead of checks.
O'BRIEN: There is nothing worse than being in line behind somebody trying to write a check, it's like, can you get manager over here please, you know.
SAVAGE: I always want to say --
O'BRIEN: Just use the debit card, please.
SAVAGE: Yes, your ATM card, if it has a Visa or MasterCard logo, is a debit card. You already have one, so use it, and it's safe, it's protected against fraud, and you will know where your money went.
O'BRIEN: Now, as far as credit card payments, when we're talking about credit cards -- we're moving from debit cards to credit cards, slightly different animal here, but nevertheless, you're paying a lot of interest whether you know or not, right?
SAVAGE: That's the biggest waste of your money. If you are only making the minimum monthly payments, then could it take you between 20 and 30 years to pay off that credit card debt. However, if you will just double the minimum monthly payment, and never charge another penny on that card, you will be out of debt in less than three years. Just the rule of thumb, the way they're calculated, so when it comes to saving money and using it wisely, stop paying the minimums, pay double the minimums, and you will save a fortune on credit card interest even if it's 10 or 11 percent, that's about 3 times what could you get if you had it even in a savings account for a C.D., so don't pay all that extra interest.
O'BRIEN: All right. We will be remiss if we didn't talk about -- usually, our single biggest payment for most of us is the mortgage, and we were refinancing a few years ago, and thinking about doing a 15-year note, and somebody said, don't bother, do a 30-year, just pay one extra payment per year, and it comes out to about -- like a 20- year note or something to that effect.
SAVAGE: There are -- oops, we're gone, but I'm still here.
O'BRIEN: We're still here. SAVAGE: There are so many ways to save money on your mortgage. Now, look, this is controversial. A lot of people say don't pay extra on you mortgage, look, you could invest it, make more money. Well, we learned last year that -- and, perhaps, you might not always make more money just in the stock market, and my tip to you is, either, if you are refinancing, go to a 15-year-mortgage, or pay extra on that monthly payment. You know, if your monthly payment is $652, round it up to $700 dollars, or round up to the nearest number. Mark on your check to have that credited, or on the stub, to have it credited to your principal, and you'll put more into your house, especially if you are planning to stay there.
O'BRIEN: And so, that's important to earmark it for principal, right?
SAVAGE: Exactly, so that the bank knows this is a pay down of principal. You'd be surprised how much money you can save by paying off your mortgage early, and it's a way to kind of casually build up equity. It's the last equity you'll want to touch, but it does build a reserve for you.
O'BRIEN: Terry Savage, some good tips. We hope you folks were listening, and putting those right into your Palm Pilot, or whatever you use, pen and paper, whatever, the old fashioned way. Terry Savage is the author of "The Savage Truth About Money," and she is also a columnist for the "Chicago Sun-Times," joining us from Miami today. Thanks very much.
SAVAGE: You bet, Miles. And don't forget IRA's.
O'BRIEN: All right.
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