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American Morning

Minding Your Business: Financial Resolutions

Aired January 02, 2004 - 07:46   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.


HEIDI COLLINS, CNN ANCHOR: Instead of becoming lighter in the new year, perhaps you'd like to get a little heavier -- at least in the wallet.
Well, here are some easy ideas now on what you can do in 2004 to keep what you have and possibly making even more.

Jack Otter, senior editor of "SmartMoney" magazine, is with us this morning.

Jack, happy holidays to you.

JACK OTTER, SENIOR EDITOR, "SMARTMONEY" MAGAZINE: Happy holidays.

COLLINS: OK, so, everybody has done their shopping. They're kind of in recovery mode most likely, a lot of people whipping out that credit card store after store after store for the holidays.

OTTER: Well, the best thing you can do -- and you've heard it before, but I'm amazed at how many people I meet who haven't done this -- is pay off that credit card balance in full, and not doing so is like ripping up $20 bills once a month. Even if you have to dip into savings, pay it off. You're probably getting what? Half a percentage point in return on your savings account, and you might be paying 20 percent on your credit card. That's a 19.5 percent guaranteed return. Do it.

COLLINS: Yes.

OTTER: And well, what are some of our other tips?

COLLINS: Well, we're talking about gift cards. You know, that's become so very popular. I got a few of them for Christmas.

OTTER: So did I.

COLLINS: But you kind of have to get out there and use them quickly. Is that the deal?

OTTER: Last year, $4 billion was left on the table -- people who got those cards and just never used them. That's great for the stores.

COLLINS: Yes, the retailers kind of count on this a little bit, don't they?

OTTER: Absolutely, absolutely. But individuals should always make sure they use those. And also, some of them lose value over time. So, you can't sit on it all year.

COLLINS: That just doesn't seem right.

OTTER: It doesn't.

COLLINS: All right. Well, what about making your money go a little bit further for you this coming next year, let's say? That's one of your resolutions. You're going to watch your money closer...

OTTER: Sure.

COLLINS: ... and hopefully bring in more than you did last time around.

OTTER: Well, there are a couple things you can do. One, I had mentioned that savings accounts have awfully lousy rates right now. One thing you can do is try a short-term bond fund or even a CD if you don't mind tying up the money for 3 or 6 or 12 months. That will boost your interest rate from maybe a half a percentage point to, say, 2 or 3 percent.

COLLINS: So, what if you are a little bit afraid, though, to tie up that money? Are there other places where you can look for investment?

OTTER: Actually, some short-term bond funds you can dip in and out of pretty quickly. Vanguard has one with very low expenses, no load. So, you could even put it there for a month and then pull it out. Another thing, of course, is the 401(k), again -- or the IRA. You've heard this before. But putting money into that every year, if you can boost it just a little bit, not only will you be very happy when you retire, with these budget deficits we've got -- I wouldn't count on social security -- but also you aren't actually losing much money as you're putting in.

So, for instance, if you put in, say, $50 more a month into your 401(k), your paycheck's only going to go down by about $35, because you've just saved on taxes.

COLLINS: And so, obviously, in the same respect, we want to continue to diversify.

OTTER: Yes.

COLLINS: Now, a little bit of this, you just have to do it that way.

OTTER: The big danger is that people are going to see how well the market market did in '03 and think, oh, great, the market is back, I'm dumping all of my money in. Well, that's exactly the wrong attitude. The time to invest, of course, was last year when everything was bad.

The market might do well again this year, but it's not guaranteed. So, I would absolutely be in U.S. stocks, but be broadly diversified. You and I were talking about energy. We think this might be a good year for energy stocks.

COLLINS: Right.

OTTER: Natural gas, prices are very high. But also, make sure you're in foreign stocks, even emerging markets. Both are cheaper than U.S. stocks. Also, stay in bonds. The bond market is probably going to have a tough few years, but municipal bonds, high-yield bonds should probably get you a slightly better return.

COLLINS: All right, and if anybody has questions, just call you directly, right?

OTTER: Oh, please, yes. How about e-mail?

COLLINS: OK. Jack Otter is senior editor for "SmartMoney" magazine. Thanks so very much for your advice. We appreciate it.

OTTER: Great to be here. Thanks.

COLLINS: All right.

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, 2004 - 07:46   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Instead of becoming lighter in the new year, perhaps you'd like to get a little heavier -- at least in the wallet.
Well, here are some easy ideas now on what you can do in 2004 to keep what you have and possibly making even more.

Jack Otter, senior editor of "SmartMoney" magazine, is with us this morning.

Jack, happy holidays to you.

JACK OTTER, SENIOR EDITOR, "SMARTMONEY" MAGAZINE: Happy holidays.

COLLINS: OK, so, everybody has done their shopping. They're kind of in recovery mode most likely, a lot of people whipping out that credit card store after store after store for the holidays.

OTTER: Well, the best thing you can do -- and you've heard it before, but I'm amazed at how many people I meet who haven't done this -- is pay off that credit card balance in full, and not doing so is like ripping up $20 bills once a month. Even if you have to dip into savings, pay it off. You're probably getting what? Half a percentage point in return on your savings account, and you might be paying 20 percent on your credit card. That's a 19.5 percent guaranteed return. Do it.

COLLINS: Yes.

OTTER: And well, what are some of our other tips?

COLLINS: Well, we're talking about gift cards. You know, that's become so very popular. I got a few of them for Christmas.

OTTER: So did I.

COLLINS: But you kind of have to get out there and use them quickly. Is that the deal?

OTTER: Last year, $4 billion was left on the table -- people who got those cards and just never used them. That's great for the stores.

COLLINS: Yes, the retailers kind of count on this a little bit, don't they?

OTTER: Absolutely, absolutely. But individuals should always make sure they use those. And also, some of them lose value over time. So, you can't sit on it all year.

COLLINS: That just doesn't seem right.

OTTER: It doesn't.

COLLINS: All right. Well, what about making your money go a little bit further for you this coming next year, let's say? That's one of your resolutions. You're going to watch your money closer...

OTTER: Sure.

COLLINS: ... and hopefully bring in more than you did last time around.

OTTER: Well, there are a couple things you can do. One, I had mentioned that savings accounts have awfully lousy rates right now. One thing you can do is try a short-term bond fund or even a CD if you don't mind tying up the money for 3 or 6 or 12 months. That will boost your interest rate from maybe a half a percentage point to, say, 2 or 3 percent.

COLLINS: So, what if you are a little bit afraid, though, to tie up that money? Are there other places where you can look for investment?

OTTER: Actually, some short-term bond funds you can dip in and out of pretty quickly. Vanguard has one with very low expenses, no load. So, you could even put it there for a month and then pull it out. Another thing, of course, is the 401(k), again -- or the IRA. You've heard this before. But putting money into that every year, if you can boost it just a little bit, not only will you be very happy when you retire, with these budget deficits we've got -- I wouldn't count on social security -- but also you aren't actually losing much money as you're putting in.

So, for instance, if you put in, say, $50 more a month into your 401(k), your paycheck's only going to go down by about $35, because you've just saved on taxes.

COLLINS: And so, obviously, in the same respect, we want to continue to diversify.

OTTER: Yes.

COLLINS: Now, a little bit of this, you just have to do it that way.

OTTER: The big danger is that people are going to see how well the market market did in '03 and think, oh, great, the market is back, I'm dumping all of my money in. Well, that's exactly the wrong attitude. The time to invest, of course, was last year when everything was bad.

The market might do well again this year, but it's not guaranteed. So, I would absolutely be in U.S. stocks, but be broadly diversified. You and I were talking about energy. We think this might be a good year for energy stocks.

COLLINS: Right.

OTTER: Natural gas, prices are very high. But also, make sure you're in foreign stocks, even emerging markets. Both are cheaper than U.S. stocks. Also, stay in bonds. The bond market is probably going to have a tough few years, but municipal bonds, high-yield bonds should probably get you a slightly better return.

COLLINS: All right, and if anybody has questions, just call you directly, right?

OTTER: Oh, please, yes. How about e-mail?

COLLINS: OK. Jack Otter is senior editor for "SmartMoney" magazine. Thanks so very much for your advice. We appreciate it.

OTTER: Great to be here. Thanks.

COLLINS: All right.

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