The American appetite for debt is back. According to recent reports, the largest quarterly debt increase since 2007 occurred in the 3rd quarter of 2013. What advice would you give consumers about amassing debt in this climate?
Keep in mind, there’s a big difference between taking on mortgage or student loan debt and credit card debt. I don’t like the idea of “amassing” debt in any climate. But taking on debt because you’re buying a home or a car or financing your education because you need a place to live, transportation to work or a degree for your future is understandable. You shouldn’t take on more than you can comfortably afford to repay, but now is not a bad time to borrow for those things as interest rates are still low.When it comes to credit card debt you have to be more careful. Teaser rates (15 months, 0% interest) are commonplace right now. That doesn’t give you free reign to charge with abandon. The best credit card users put just about every purchase on their plastic, pay them off in full every month, and do fun things with their miles and other rewards points.
What advice would you give early-career individuals about financial independence? What should they be particularly wary about?
Be particularly wary about debt. It’s easy to get in over your head when you’re trying to furnish your first apartment or put together a wardrobe for work. Keeping that under control also enables you to focus on saving. I know the future is inconceivable at this point, but the biggest financial regret I hear from people is that they wished they’d saved more and started sooner. So put some emergency cash in the bank, get into your workplace retirement plan, and amp up your contributions until you’re kicking in the max.
Every year millions of Americans leave tens of millions of dollars in unclaimed tax deductions on the table. What advice would you give individuals on how they can claim more of their own money?
The tax code has become so complicated it’s very easy to miss deductions and credits unless you get some help with the forms. The low cost way to do this is to use a tax software program a la Turbo Tax. It’ll ask you questions in plain English that’ll get you to the right answers. If you’re up for spending a little more, hiring a tax pro to help you is often worth the money – particularly if your financial situation is complicated.
Job growth has remained sluggish at the beginning of 2014 even as unemployment figures are at their lowest level in 5 years. What advice do you have for job-seekers about maintaining their financial independence and what alternative income sources would you recommend to them?
One thing we know about the unemployment stats is that – although they have fallen – they are still too high, particularly when you factor in the number of people who have either stopped looking for work or who are underemployed. That said, millions of people change jobs – and therefore get hired – every year. So, if you have a job, don’t leave it without first securing another one. If you’re out of work and having trouble landing a new position, get off the Internet and into the real world. Have coffee with people. Ask for a few minutes from anyone you can think of in the field of your choice. Join networking organizations. In other words, get out there. As for alternative sources of income, think about skills you have that you could put to use for money (even if they’re not in your chosen field) and see if you can pick up a gig here and there to tide you over.
Obama bluntly stated in his State of the Union address that income inequality has deepened, upward mobility has stalled and too many Americans are working more than ever just to get by. Are there steps individuals can take to make sure their earnings stay on track?
Stay in school. By far, a college degree is the best guarantee of being able to keep your income up.
What advice would you give first-time entrepreneurs starting their own business?
Don’t quit your day job. Work on your new venture nights and weekends until you not only know you have a proven concept but have enough of a revenue stream to support yourself?
What financial advice would you give young couples looking to purchase their first home in a seller’s market?
Start working on your credit scores now. You want to be able to qualify for the best rate possible on a mortgage. Then, get pre-approved for a loan so sellers know you’re for real. As you start looking for a home, keep in mind that the mortgage payment is the tip of the iceberg when it comes to your spending. You have to be able to afford not just to furnish the place, but to live there. In fact, if you have friends who will give you a peek at their home finances (for a similar sized place in the same neighborhood) it can be eye-opening.
The ‘Gig Economy’ has created a force of new entrepreneurs who could soon make up 50% of the U.S. workforce. What advice do you have for freelancers filing their 1099s this year?
Freelancers often short-change themselves when it comes to saving for retirement. Make sure you’re making a contribution for yourself into an IRA or – if you can do more – a SEP IRA or SIMPLE. You may see this part of your working life as temporary, but the longer you stay freelance, the more important it becomes to make saving for your future habitual.
Millennials have the worst unemployment rate, lowest credit scores, and are saving the least for retirement. What advice would you give millennials who are living paycheck to paycheck?
I wrote a column for Fortune.com on just this topic. In fact, Millenials have the worst credit scores because they have – in some ways – been smart about credit. They’ve been hesitant to load their wallets up with cards. Not having enough credit (or a large enough credit line) can hurt your credit utilization (the percentage of your credit that you’re actually using) because even if you just charge a bit, your utilization is high. Aim to keep it under 30%. If that’s tough, consider asking for an increase in your credit limits or taking on an additional card.
What advice would you give the newly minted WhatsApp millionaires?
Figure out a way to shield your (future) offspring from the riches. There’s nothing that leads a kid to do too little with his/her life than access to too much wealth.
Check out Jean Chatzky’s Personal Finance courses on Udemy.
Join the conversation on Twitter with the hashtag #ASW and #UdemyFinance.