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CNN Saturday Morning News

Interview With Clark Howard

Aired April 27, 2002 - 08:26   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: All right, listen up, tightwads, or tightwad wannabes. For the past five or six years we have been asking one guy to come on this program and he has steadfastly turned us down. Now he has an opportunity to line his wallet by plugging his book and here he is. Imagine that.

KYRA PHILLIPS, CNN ANCHOR: Clark Howard. Here's the name of the book, "Get Clark Smart." Do you want to go ahead and defend yourself, Clark?

CLARK HOWARD, AUTHOR, "GET CLARK SMART": You do not have to mention the book. You know what? By mentioning...

O'BRIEN: And by saying we're not mentioning the book, we're mentioning the book, of course, but that's another thing.

HOWARD: OK, now, wait, wait. Nobody needs to buy my book. What you can do is you can wait till it's in the library. You can go read it for free.

O'BRIEN: Then you...

PHILLIPS: Then you are a tightwad. My husband said you're interviewing the famous tightwad tomorrow.

O'BRIEN: Yes. No, why don't you just post the whole thing on your Web site, clarkhoward.com?

PHILLIPS: Yes, there you go.

HOWARD: Well, actually that's a great alternative. If people don't want to spend money on the book, they can go to clarkhoward.com and get all kinds of content for free and never have to buy the book. Or, even better, look for one of my older books, because this is my fifth book. Look for one of the older books, you know, at a used bookstore. Maybe you'll get it for $0.50 or $1 or $2. It will just be a little out of date.

O'BRIEN: They're going to pay you to take it away. Who knows?

PHILLIPS: You know, Clark could donate all the proceeds to charity, you know, and not take any of the money from his new book.

O'BRIEN: There you go. HOWARD: Actually, do you know that I'm donating half of the money from this book to charity?

O'BRIEN: Well, good. Well, that...

PHILLIPS: All right, very nice.

O'BRIEN: All right, we'll let you off the hook then.

PHILLIPS: All right, let's get down and dirty.

O'BRIEN: You're in Raleigh, North Carolina. How much did you pay to get there?

HOWARD: Oh, all right. Well, I've been all around the northeast U.S. and now I'm in Raleigh. What you'd love is the hotel room I had last night was $34.

PHILLIPS: Where did you stay?

HOWARD: I stayed at an Amerisuites if you know?

O'BRIEN: It's $0.50 extra for the magic fingers, right?

HOWARD: OK. No, Amerisuites is a nice hotel. I got free breakfast this morning. And the way I got it for 34 bucks is I bought it on one of those blind bid sites. In this case it was Hot Wire. And I had no idea where I was going to stay. I was just told it was going to be a three star hotel and I took it and that's where I ended up. And I did that in Connecticut. I got a $50 room on Priceline and it was OK. And it's a great way for you to save money to use sites like Priceline and Hot Wire.

And do you know about biddingfortravel.com? Have you heard of that one?

PHILLIPS: Travel.com, no.

O'BRIEN: I heard about it on a radio program here in Atlanta.

PHILLIPS: The Clark Howard Show.

O'BRIEN: Oh, and it might have been yours, yes.

HOWARD: Well, biddingfortravel.com, what it does is it lets you have a look see at what other people have gotten on Priceline or Hot Wire, what kind of hotels they've gotten, what they paid for them in whatever city they're in. And it is fantastic because it then guides you if you're going to go do a Priceline bid, hey, somebody else got a great four star hotel for $80 or $60. You go and you bid that price. Because people always worry at Priceline, am I bidding too much? Am I leaving money on the table?

So if you go see what other people have been successful with, then you're going to get a great deal.

O'BRIEN: All right...

PHILLIPS: I've got to ask, I have to ask him a personal question.

O'BRIEN: Well, don't you want to get a phone line open?

PHILLIPS: Yes, yes, no, no, I want to do that. I've got to ask you this question.

HOWARD: Yes?

PHILLIPS: We, my husband and I continually get these calls, these junk calls, OK, these recordings. They're recordings now. And you pick them up and once you pick it up, you're stuck. They've got your number. They see that they've got you...

HOWARD: Right.

O'BRIEN: You need to get on the no call list.

PHILLIPS: But see, but we've tried to do that. You tried it, you know, you're supposed to tell them don't call me back, take me off your list. Well, it's a constant recording. What do you do about these recording calls?

HOWARD: All right, have you heard of Telezapper or Callmenot?

PHILLIPS: Oh, no. What's that?

HOWARD: OK, these are devices that fool the telemarketers into thinking that your number is disconnected.

O'BRIEN: Cool.

PHILLIPS: Wow.

HOWARD: It's the greatest thing. They're expensive, though. They cost 50 bucks. I'll tell you the cutest thing, though. We got a call from one of the top people at Callmenot, who said hey, you know, if people don't want to buy our machine, they can download the tones on your answering machine and you'll have the same thing for free. And at Callmenot.com...

O'BRIEN: Sort of a little booby boo thing, you know, where it tells this number is disconnected?

HOWARD: Yes, it's that dude. Yes. And so you can go to their Web site and you download what's called a wave file, whatever that is. And then you put that on your answering machine and then you don't get bugged by about 90 percent of the telemarketers go away.

O'BRIEN: And 90 percent of your friends go away, too, because they think you've left and disconnected your phone. But that's another issue.

(CROSSTALK) HOWARD: No, it only sends the...

PHILLIPS: You can get rid of all your friends that way that you don't, you know, are kind of hanging on.

HOWARD: How about that? That's a good idea, huh?

O'BRIEN: All right, let's get a phone call in.

HOWARD: OK.

O'BRIEN: Do you ever hear from Joe McCuchin (ph) up in LOJ, Clark?

HOWARD: I don't know.

O'BRIEN: Joe is one of the all time great phone-in callers. All over the country, he's our dean of callers. He's on the line right now.

JOE McCUCHIN: Miles, you're great, and it's great to have Clark Howard on CNN. And my question, Clark, with the stock market down, is this a good time to buy a blue chip stocks? And the second part of the question was if the Senate passes the permanent Bush tax cuts, will that not help consumers get more money in their pockets?

HOWARD: Well, let's deal with the first question first. On the stock market, I don't know which way stocks are going to go, because there's a lot of data that says stocks, even at this point, are still way over valued. What I do is I don't try to guess. I just put money in month after month after month -- it's called dollar cost averaging -- into a variety of index funds, which, you know, an index fund is where you own a ton of companies all in one tidy investment.

And so I'm not worried about whether the market is over valued or under valued today because I'm in for years and years to come. So I really don't worry about whether or not the blue chips are fairly valued, over valued, under valued because really time is my ally. Even if they're over valued today and they go through a slump, by buying shares every month, eventually the math is going to work my way.

If you believe in capitalism -- and speaking of that, your second question about taxes, you know, with taxes the more you cut them the more opportunity you free up for capitalism. And so there's always this debate about what's the role of government in terms of the services that a government offers versus the taxes that we pay. And you know? That's outside of my area. I'm going to let the political types debate about taxes and what that does for capitalism and for the country.

PHILLIPS: Yes, let's talk about your book. That's, what we're going to get...

HOWARD: No, we don't have to talk about the book.

PHILLIPS: ... out of focus here.

O'BRIEN: We won't, let's not talk about

(CROSSTALK)

PHILLIPS: Oh, that's right. We're not going to mention your book, "Get Clark Smart."

HOWARD: Yes, don't mention the book.

PHILLIPS: All right, we've got another call, Kevin from Georgia. Go ahead, Kevin.

KEVIN: Good morning, everyone. Good morning, Clark.

HOWARD: Good morning.

KEVIN: Clark, in the past you have made some less than glowing recommendations in reference to commercial banks. And I just wanted to get some feedback to, feedback from you regarding how you feel about commercial banks because a lot of us bankers out there are wheeling out -- they're trying to help consumers, you know, get a good rate of return...

HOWARD: Right.

KEVIN: ... and save money. I just wanted to get your thoughts about that.

HOWARD: Well, first things first. I'll tell you something that will make you happy. On my radio show, the number of complaints I'm getting about banks are significantly lower than they were three or four years ago when the big merger mania was going on with all the banks. And the second thing that's helping are all these community banks that are springing up around the country, because even though I talk about banks like a monolith, what I'm really talking about are the giant monster mega banks that have become so large that they really don't have a good touch with their customers anymore.

And banking is, there's a lot of basics involved in banking. One of them is people want to be treated with respect. As you know as a banker, just as you do when you go somewhere else. And in the banking business, as we get more and more of these small one, two, three, five office banks, the personal touch is starting to return and you know what happens with that? Customer satisfaction does, too.

But as you know as a banker, what really drives you crazy is what I really want people to do, is go join a credit union, because I love the deals that people get at credit unions, because it's a co-op and all of the money that comes in that would become profit ends up benefiting the members of the credit union part of the co-op.

O'BRIEN: All right, Clark, let's get an e-mail in. We've got a few e-mails. This one from Mrs. R. "We want to invest in our granddaughter's college future. We are thinking of a Treasury bond fund or a Treasury bond or EE U.S. savings bonds, an educational IRA or a UGMA custodial account." She's got a lot of offerings that she's thinking about. "We don't want to risk a mutual stock fund, however. Which investment sounds the best and how should we set it up?"

HOWARD: OK, well, the risk thing I'll come to in a minute. But because of tax law changes where you really want to put that money, if it's up to $2,000 a year, is in what's called a Coverdale. You mentioned the education IRA. That doesn't exist anymore. It was replaced by the Coverdale that allows you to put the two grand in each year.

And there's something really, really neat about the Coverdale. The money can be spent on private school or on college. So the first time we've had a big tax break that allows you to put money aside for grades one through 12 if you're going to send your child to private elementary, middle or high school. And with the Coverdale, listen to this. You put a dollar in, OK? Let's say over the years that dollar becomes, with earnings, $1.50. Well, with a normal investment you're going to pay tax on the $0.50 of earnings. With a Coverdale, if the money is spent on education, it's never taxed.

It's a cousin to something called a 529 Plan, which is a college savings plan that you can use to save for college. And with that you can save more than $2,000 a year. In fact, you can save up to $50,000, $55,000 all at once into a 529 Plan or as little as $15 a pay period. And you can find out about the 529 Plans at Savingforcollege.com.

Now, let's go back to the thing about risk. With the 529 Plans, you have your choice. Do you want the money invested conservatively or do you want it in the risky kind of things I do, like stocks? That's one option.

The other thing is they'll do age-based. If a child is, let's say, one, two, three years old, the money is very heavily invested in stocks. By the time a child is 15, 16, 17, the money is almost all in bank kind of investments, almost like CDs and there's no risk in the later years, lots of risk in the earlier years.

O'BRIEN: Clark, on those 529s, $55,000 is the total cap?

HOWARD: $55,000 is the maximum that you can put in at one time. It's especially...

O'BRIEN: Can you do that each year if you want? I mean if you're well endowed enough to put $55,000 a year in, you can put that in on an annual basis?

HOWARD: No, you can only do it one time.

O'BRIEN: All right.

HOWARD: You can put in the $55,000. Like, I'll tell you who does that. A very wealthy grandparent who's doing estate planning will put $55,000 into a grandchild's 529 Plan, or if their child is starting college very late in life they would put it in the child's account. But anyway, you put the money into the 529 and it does not count against the grandparents' estate and if the grandchild never goes to college and the grandparent is still living, they can take the money back because it can only be used for college.

They get hit with a penalty if they take it back, but the child only gets to use the money, or grandchild, if it's used for college.

PHILLIPS: Hey, Clark, in your book you say you can tell collection agencies to drop dead.

HOWARD: Yes.

PHILLIPS: He likes that one.

HOWARD: I really do.

O'BRIEN: Yes.

HOWARD: Well, because, I mean collection agencies are brutal. That's the business they're in. You know, you owe money so they come and eat you up. But all in time. You know, a lot of times a collection agency will be all over you, usually for a credit card debt, and maybe you've lost your job or maybe you've had a reduction in income. And we tend to pay money to who screams the loudest.

But where should money really go? First, the roof over our heads. Second, you've got to provide for transportation, because if you don't, you're not going to be able to go to a job to earn money anyway. And then you've got to deal with your food. You know, you've got to have food. And then the credit card companies, they come way last.

So you have the right to send them a drop dead letter, which is go away till I'm in better shape and then I'll deal with you, because they're an unsecured debt and that's why the credit cards, if you have to set up priorities in your life, the credit cards are at the bottom of the list. It doesn't mean you don't owe them the money. It just means not right then.

O'BRIEN: All right, let's get an e-mail in. This one comes from Anne. "What is your rule of thumb for an ongoing cash of highly liquid fund reserve?" How much cash should you have on hand, is what Anne is asking?

HOWARD: You know, financial planners differ some in this and I'm not a financial planner. But the most typical answer is three months of salary to six months of salary. And I don't care if that money is specifically in, you know, a bank savings account or a money market fund. If you have no debt at all in your life, if you're one of those people like me who's just not willing to borrow money, you can even do it in that case with a standby home equity line of credit, to have your rainy day money available.

Now, remember, I said a key thing. Only if you don't carry debt is it OK to use a home equity line of credit as an emergency mad money fund. If you tend to be someone who carries debt, the most important thing I want you to do is not worry about building up your cash reserve, but changing how you handle money and get rid of credit card debt left, right and center, and other debts you have, because think of this.

You put money into a rainy day account, what are you earning? One and a half percent interest. What are you paying on the credit cards? The average rate now is 17 percent. Let's say even if you're really a good shopper for a credit card and you get a 7.9 percent rate. Well, if you're paying 7.9 percent interest on the credit card, you're earning one and a half percent in the bank, that's a bad spread. I mean you're losing a lot of money, which is why the most important thing for people to do is before you worry about the rainy day money, stop owing other people money.

O'BRIEN: All right, Clark, before you get away, how much did you pay for that suit?

HOWARD: Well, this one, this sport jacket was actually $69. I know that's a lot of money for me...

O'BRIEN: Mark, you're disappointing me.

HOWARD: I know. I know. But the shirt...

O'BRIEN: Did you take the Geranamos (ph) tag off?

PHILLIPS: Miles, you gave him the tie. Look it, it's a Save the Children tie. I can see.

O'BRIEN: That's a Save the Children tie.

PHILLIPS: Yes.

O'BRIEN: And we'll (UNINTELLIGIBLE).

HOWARD: Yes, well this was a gift. The one that I bought for myself is one I found on the streets of New York that's actually a copy for $2. But this is the real thing. It's got the Save the Children logo on it and this one was actually real money. But I got it as a gift.

O'BRIEN: A knockoff of Save the Children. Clark, that is, that is the all time low.

PHILLIPS: That's frightening.

Hey, Clark, we have an idea. Will you have us on your show now and we'll tell people what news to watch and what news not to watch and the reasons why?

HOWARD: You know, if you can get that by my executive producer, you go right ahead.

O'BRIEN: All right, Clark, we'll see you back here next week, right? HOWARD: That is right. Next Saturday.

PHILLIPS: In a new suit.

O'BRIEN: All right, and if we were plugging the book, it would be "Get Clark Smart," but we're not doing that.

HOWARD: No, don't mention the book.

O'BRIEN: Good to have you with us, Clark. All right, take care. Bye-bye.

HOWARD: Thank you.

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