October 13, 2004

News & Opinion: A Better Personal Finance Book

By: 800-CEO-READ @ 5:53 PM – Filed under: Management & Workplace Culture

Personal finance is one of those areas with about three basic rules for success (track your finances, avoid bad debt, and save money as a goal.) And yet the vast majority of Americans are hopelessly in debt, or miserable about their finances, or simply have no basic skills at managing them with the proficiency they display in other aspects of their lives. To date few business books have done much to address this crisis. Far too many finance books promise easy wealth, propose sleazy tactics, or ignore the fundamental fact that personal finance books need two types of smarts: intelligence for the money part, and wisdom for the personal aspect. Welcome Jean Chatzky. Her new book, Pay It Down Today, is a clean, clear, and lovely book on personal finance. Recently she conducted a brief conversation about what sets her book apart from others in this field. Q: Your book really emphasizes the personal aspect of personal finance. Why is that? A: Its all about better common sense choices. Some people are very skilled in analyzing a balance sheet in a business, but that is not what Im talking about. This is a different set of skills. People who adopt a few basic personal finance habits have more in savings than those who dont. They know what is coming in and what is going out and they manage to spend a little less than what is going out. There is nothing all that difficult about it. But that is not to say that changing lifelong habits is easy. Q: What keeps people from practicing these simple things? A: Many people simply have strong preceding habits. They havent learned, from an early age, what they need to do, and how to set the sufficient limits for themselves. And today the credit card companies are to blame as well. They are wiling to lend a lot of money in the form of a credit line to people who dont make a lot of money. They have figured out how much money they can afford to lose and dont care if they lose it on your back because they will more than make it up on others. Q: How can individuals use some early victories to change their more fundamental habits? A; Scoring a few successes makes you feel much better, and helps you realize that you can take a step back and see how you can begin to save even $10 a day. This is a significant milestone. Having people pay attention to what they do throughout the day with their money is a big step in the process. Quite often, we simply dont pay attention to what we do with our money. In my book I try to show how to keep your eye on the ball. Let me be very clear: I am not saying dont spend money. In fact, I like to shop and spend as much as anyone else. The real message is that we do make choices. And everyone must make them consciously. Whether you are well off or have more limited means this message holds true. And if you are dealing with limited resources than you cant have everything. So choose: is it the vacation or the jeans? Q: But by the same token, is a more attentive approach to personal finance also likely to lead to a more productive of these same finances? A: Absolutely. Tracking how you spend your money pays off in many ways. You become a more effective consumer, for one. And you enjoy more leverage from your resources. Q: In your book you share the story of how you received literally thousands of emails after announcing on the Today Show that you would do a series about helping individuals get out of debt. What did that tell you? A: Yes, I got 5000 emails within 24 hours of the Today Show. And when I announced the same thing on a local station I got 1000 emails. I always knew debt was a dangerous problem but never knew how big it was. This response is a clear signal that debt is a problem that we dont devote enough attention to, on the air or in the pages of the media. Debt is a problem on a scale of obesity in this country. And if we dont do something about it we are heading for a crash. This is not because Americans are greedy or careless people. Its just a consequence of living a way that we are used to living, and not understanding how dangerous this is. The consequences today are far greater than before. In previous generations, for example, we had pensions to pick up the slack. We dont have that type of protection any more.