Every spring, I often find myself thinking of new beginnings and fresh starts… Because even though this last year has felt like “more of the same” in many ways, so many of us have found ourselves on brand new paths. New jobs. New cities. New homes. New friends. New daily routines… And with all that “new,” many of us have been inspired to take a look at certain aspects of our lives — especially our financial lives — and see where we’re headed.
We hear from our HerMoney listeners and readers all the time that you want to “get good with money,” that you want to take control of your finances in a real way and get a handle on exactly where you’re headed. And we LOVE hearing that, because the truth is that many of us have a long way to go until we’re in an empowered place with our money. More than 85% of women are stressed about their finances, according to research from our sponsor, Fidelity Investments. Just 25% of women say they feel comfortable with their knowledge of investing, and just 44% of women invest outside of their retirement accounts.
But the good news — and you knew there was good news coming — is that more women are taking control of their money, and one of the women who is leading the charge for female financial empowerment joins us in episode 262: Tiffany Aliche. Through her company, The Budgetnista, Tiffany has created a financial movement that has helped over 1 million women worldwide collectively save more than $200 million, pay off over $100 million in debt, purchase homes and transform the way they think about their finances.
Tiffany’s new book, “Get Good With Money” just hit bookstore shelves, and in it, she takes a deep dive into realistic and achievable wealth-building, and gets crystal clear on the short-term actions that lead to long-term goals.
Listen in as Tiffany dives into her personal story — she was a successful preschool teacher with a healthy nest egg when a recession and advice from a shady advisor changed all that. She speaks candidly about her mistakes.
Tiffany also breaks down her ten-step formula for attaining both financial security and peace of mind. She walks our listeners through the most important steps, and touches on one of her favorite money-savvy skills: Negotiating. She talks about how early in her career, she didn’t do enough of it.
“I didn’t push for more. I didn’t see my value,” she says. “So, not enough of us see our full value and are willing to negotiate, because we’re afraid if we negotiate, the offer is going to be taken off the table, and that’s just not true.”
Tiffany also dives into credit scores — she raised her credit score from 547 to 752 in just 2 years. She discusses her journey. She also talks about insurance (specifically the need women have for insurance), paying down debt, and not getting into debt in the first place!
We also break down some of the most important first-steps women can take if they’re looking to make 2021 the year they really and truly get serious about their finances…So, if you’re out there there saying, “2021 is going to be the year I really wrap my arms around my finances,” this is an episode you don’t want to miss!
Lastly, in Mailbag, Jean and Kathryn tackle three questions from anonymous listeners, on how to invest a settlement from a car accident (save it, invest it, or pay down credit card debt) how a woman living overseas should best invest for the future, and with car-buying, how much to pay in cash vs. how much to take as a loan. And in Thrive, the good news/bad news story of COVID: Kids and money.
- The Best Budgeting Apps
- How To Be A Budgeting Queen
- It Could Take 4 Years To Rebuild Savings Post-Pandemic. Here’s How
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This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Tiffany Aliche: (00:01)
I didn’t push for more. I didn’t even see my value. She saw my value. She wanted to put her own son in my classroom and was willing to find additional money. So not enough of us see our full value and are willing to negotiate because we’re afraid if we negotiate the offer’s going to be taken off the table. And that’s just not true.
Jean Chatzky: (00:22)
HerMoney is supported by Fidelity Investments. At Fidelity, we believe planning for retirement can help you feel better about where you stand today and more prepared for tomorrow. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:38)
Hey everyone. I’m Jean Chatzky. Thank you so much for joining us today on HerMoney. It’s a beautiful spring day here in New York as we are recording this episode with trees budding and flowers blooming and noses running, including mine. So apologies for the sniffles, but it is the kind of day that I totally felt myself wishing for during those long winter months. On days like this, I always find myself thinking of new beginnings and fresh starts because even though the last year has felt like just more of the same in many ways, a lot of us have found ourselves on brand new paths. We’ve got new jobs, new cities, new homes, new friends, new routines. And with all of that new, many of us have been inspired to take a look at our finances as well, and to just see where we’re headed. We hear a lot from all of you that you want to get good with money — that you want to take control of your finances in a real way and get a handle on exactly where you’re headed. We love hearing that because the truth is that many of us do have a long way to go until we are in an empowered place with our money. And we can all use a pick me up along the way, no matter where we’re at. More than 85% of women are still stressed out about their finances. That’s according to some recent research from our sponsor Fidelity. Just 25% of women say they feel comfortable with their knowledge of investing and just 44% invest outside their retirement accounts. But the good news is, and you knew that there was good news coming, cause there always is, is that more women are taking control of their money. And one of the women leading the charge for female financial empowerment is here with us today. Tiffany Aliche the Budgetnista. Tiffany has created a financial movement that has helped well over a million women worldwide save more than $200 million and pay off a hundred million in debt. They’ve also purchased homes and transformed the way that they think about their finances. Tiffany’s new book, Get Good With Money, just hit bookshelves. And in it, she takes a deep dive into realistic and achievable wealth building, and gets really clear on the short-term actions that lead to long-term goals. Hey Tiffany, it’s good to see you. Thanks for being back on the show.
Tiffany Aliche: (03:19)
Thank you for having me back Jean.
Jean Chatzky: (03:21)
So Tiffany, I want to get into the book because I know the book is fabulous. But first, I just want our listeners who don’t know you to hear a little bit more about your personal story. You were a successful preschool teacher. You had a healthy nest egg and then a recession and some advice from a shady advisor changed all that. Tell me what happened.
Tiffany Aliche: (03:45)
Yeah, so I love teaching preschool. I thought I was going to do it forever. But I wanted still to grow wealth. And so I reached out to a friend of mine in my early to mid-twenties that I thought was wealthy. And instead he tricked me into a credit card scheme that left me $35,000 in debt. And it was right before, I didn’t anticipate the recession happening in 2008, but it was right before. It was compounded because I’d just bought a condo, in my mid-twenties, and then I’d just graduated with my master’s in education. So I had my mortgage. I had my student loans. And then this $35,000 in debt. And just when I thought, okay, let me put a plan in place to do something about it. The recession hit and I lost my job as a teacher.
Jean Chatzky: (04:26)
Oh no. That just, that must have been so awful. How did you pick yourself up? How did you recover your mojo, so to speak, because clearly you’ve got a whole lot of it, and get yourself to this place where you became the Budgetnista?
Tiffany Aliche: (04:47)
I felt like, I don’t know, if you’ve ever seen, it’s like when you’ve fallen down a well. I just felt like I was falling into this dark abyss and I didn’t know where the bottom was. But I finally reached it, which was in my middle school bed, back home with my parents at age 30. And I was just like, yeah, I’m pretty sure this is the bottom. I remember distinctly thinking Jean, when I was laying in the bed looking up at the ceiling, the last time you laid in this bed and looked up at the ceiling, you were barely a teenager, maybe like 12, 13. And you actually had more money then because I used to babysit and I would save my money. And I thought, wow.
Jean Chatzky: (05:25)
One of the things that I know people love about you and I hear how hard this was, but it’s important. You acknowledge that you’re not perfect. You acknowledge that you’ve learned along the way. Look, I’ve been there too. Credit card debt, messing up my 401k, getting fired. We’re very, very open and very transparent around here. And I admire the fact that you have built your business in that way.
Tiffany Aliche: (05:54)
And I just felt so ashamed of myself and I was really beating myself up. But it was from that place, after speaking with my best friend, Linda, who I’d been avoiding. And she assured me that she too was on her mother’s couch and that she too had credit card debt just like the rest of our friends. And student loan debt was normal for just about everyone. She normalized what I thought was just a Tiffany issue and a Tiffany problem. And she was like, you know, not that it’s fun, but you’re not alone. And so I started to dive deep for solutions. And as I fixed myself, I started to help fix other women around me.
Jean Chatzky: (06:28)
And so you became the Budgetnista. Which came first? Getting good with money or becoming the Budgetnista and starting this movement?
Tiffany Aliche: (06:40)
I think because I am, self-admittedly, not a guru, that I tell them, I’m your financial girlfriend. And as I learn, I will share with you. And not only will I share with you, but the people that I am learning from, I will share them with you as well. I think it’s the transparency. I think that people don’t want to hear from the perfect person. They love the fact that I’m like, oh, credit card debt, sis. Oh, foreclosure, almost bankruptcy — same. And not only that, but I’m no longer there. And so I know how you feel, but I also know how to come back from that place. So I think that that’s what it is. And I think there’s a lot of judgment in personal finance. Thankfully that’s changing a lot because a lot more women are entering into the space. I feel like we’re not tolerant of that. You know, I don’t see the women well, some but not as many women doing the judging. And so I think that resonates as well, that the preschool teacher in me is determined to create a safe space for the people who want to learn.
Jean Chatzky: (07:39)
So let’s go to the book, Tiffany. Let’s go to this wonderful, wonderful book that has gotten such a terrific response. I know that you based it around 10 steps. 10 steps that you have to take to get good with money. So talk me through that a little bit.
Tiffany Aliche: (08:03)
So yeah, there are 10 steps. Although I don’t turn anyone away, I always tell men, when it comes to the Budgetnista, that you’re a guest of the guest. So that means you eat last. So I’m speaking to the women. The ones that resonate with me are Learning To Earn. I really love that chapter because I feel like we talk about negotiating, how to monetize a skillset that you might have. So really getting women on a path to do that. Another chapter that I like is Estate Planning because so many of us shy away because we say we don’t have estates. But 21 year old Tiffany’s estate plan was I have a bank account and my mom is the beneficiary. That was plenty for 21 year old, Tiffany. So just teaching people that there are levels to estate planning. What does that look like? And I would also say something that people might not expect is the insurance chapter, because we don’t talk about insurance enough in personal finance.
Jean Chatzky: (08:56)
I would say you’re right. I don’t think we actually talk about insurance enough on this show. I don’t think we talk about estate planning enough on this show. I’m excited that we’re going to dig into both of those topics with you. But let’s first start with earning, with the need to monetize your skillset, with the need to really bring in the money. Why is it that you think women need to get on a path to do that and that we’re not on a path already?
Tiffany Aliche: (09:30)
Because 1) women don’t negotiate as much as men do. And 2) there’s an unconscious bias, sometimes conscious bias, that women are not paid as much. So I’ll give you an example. Even when I was first starting to teach preschool, I went to school for business, hated my internships and said, I want to teach instead. So I was just interviewing at different schools. And there’s this one school I remember distinctly, that the principal took out a sheet. And she said, this is the sheet. This is how many years you’ve been teaching. And this is what your degree is, if you have a master’s, a bachelor’s or a doctorate, right? And I saw that where my years, zero, match my degree, bachelor’s, it was $32,000 a year. And I said, okay. I said, okay, I’m still interviewing, but I very much liked this place. I’ll let you know. But in my mind she showed me the sheet that’s it is what it was. And then my father, who was a CFO of a small nonprofit that had childcare centers said, well, over here in Newark, New Jersey, teachers are being paid $39,000. So that’s $7,000 more here. So I was like, that sounds better to me. So I went back to the original lady and said, this is 20 year old Tiffany, thank you so much, Mrs. Such and Such, but I found a different job. And she was like, what? No. Because I didn’t realize that she had a child that she really wanted to put in my classroom because we would do test teaching. And she just thought I was so energetic. And she just was like, I want my kid to be in your class. And I was like, oh, well. And she asked me why I was choosing someplace else and I was candid. I said, well, honestly, they’re paying me more. And she said, we can pay you more. And I remember being like, but no, you can’t, the sheet.
Jean Chatzky: (11:12)
You saw that sheet. You saw that list and you thought that’s the reality. You thought, okay, all right. That is just the way it is.
Tiffany Aliche: (11:19)
You know? And so she was like, well, we can find a budget here, and she was able to push it up to 36,000. But still it wasn’t the 39. But a light bulb went on like, oh, I didn’t even negotiate, because I was told this is what it was. And I just assumed that’s what it was. I didn’t push for more. I didn’t even see my value. She saw my value. She wanted to put her own son in my classroom and was willing to find additional money. So, not enough of us see our full value and are willing to negotiate because we’re afraid if we negotiate, the offer’s going to be taken off the table. And that’s just not true.
Jean Chatzky: (11:57)
It’s sad, I think. But it is true. Sometimes we need other people to show us what our value is. Sometimes we don’t see it ourselves until somebody else makes us an offer that says, hey, you’re worth more. I’ve had that experience at different times in my life. And it’s always like a light bulb goes on. It’s like, oh, oh, okay. I can earn that much.
Tiffany Aliche: (12:22)
Jean Chatzky: (12:23)
You know, one of the things that I’ve been wondering, somebody said to me recently, that they think that you’re at financial risk if you don’t have multiple streams of income. That you’re in a precarious position without multiple streams of income. Do you think that’s true?
Tiffany Aliche: (12:40)
Well, I think that that’s not necessarily true. I do believe that everyone should know how to activate an additional stream of income, should they need it? So I’ll give you an example. When I used to teach preschool, it was fine. I loved it. I got up at three. But the moment that I said, I want to go on vacation this summer, I want to buy a car, then I would activate two streams of income that I had already identified and vetted. One of them was babysitting. Because I was like the perfect babysitter. You know, here I was preschool teacher. I already got my fingerprints. You do a background check as a teacher. Parents love that. And tutoring. So I would tutor up through middle school. Again, I can make more because by then I had my master’s in education and I’d been a teacher for a number of years. So I didn’t always activate tutoring and babysitting on the side. Only when I needed it. So do I think everyone should be able to activate additional sources of income when need be? Absolutely. I don’t believe it over sacrifice. You might be making more than enough to cover all the things that you’re wanting to do. But in the back of your mind, you should have that kind of have that handy.
Jean Chatzky: (13:48)
Can we pause on that for a second? You just said over sacrificing. You’re basically talking, at least as I am hearing you, you’re talking about finding that place of balance. Although I hate the word balance. But finding that place where you both have enough money for your needs and for saving, but you also have a life, right?
Tiffany Aliche: (14:15)
Absolutely. It took me a while to learn the over-sacrificing rule. I still struggle with it. Because let’s just say you’re wanting, I don’t know a house. If five will get you the house, I’ll sometimes say, well, why not go for 10? Well, if the end goal is the house and 10 gives me extra anxiety and less time with family and friends, then why am I going for 10 and five is going to give you what I actually reaching for? And so I learned that lesson when I was teaching and I was saving so much, I don’t even know why. I grew up in a really frugal household. And I thought, this is how you’re responsible. But I’d saved so much money and I was living so frugally that my parents actually got concerned. They literally told me, you look terrible.
Jean Chatzky: (14:57)
Oh man. Wow.
Tiffany Aliche: (14:59)
And I was like, what? They’re like, Tiffany, your clothes. I mean do you go get your hair done? You know, like your clothes. They thought, because as a preschool teacher, I wasn’t making much money, that I was struggling. So they gave me, I remember for the first time ever, they gave me their credit card and said, go buy some new clothes. It was $400 they gave me. And I was so offended, but I was like, I’m still going to take this $400 on this credit card. Because what was so crazy, Jean, is that the first two and a half, almost three years of teaching, I say $40,000 from side hustling and working. So what they saw wasn’t that I was struggling financially, but I was over sacrificing so much, it was showing externally. But to what end, like was I trying to buy a Lamborghini? No. I just thought like, well you’re supposed to save, right? But I didn’t know how to also enjoy. I want us just to remember, and it’s one of the reasons why I wrote Get Good With Money, is to remember that money is a tool for the end goal, not the end goal itself.
Jean Chatzky: (15:56)
Absolutely. A hundred percent. I could not agree with you more because I say that all the time. Money is the tool that makes your life possible. It’s not what you’re reaching for itself. It’s the means that you use to achieve all of your other goals. Okay, let’s go to that Estate Plan. 21 year old Tiffany needed an estate plan? And what’s the difference between an estate plan that you needed at 21 and an estate plan that you need now?
Tiffany Aliche: (16:29)
Yes. It just looks different. So 21 year old Tiffany, with no real assets other than her bank account, just having beneficiary setup on the things where you can have a beneficiary, that was enough of an estate plan for her.
Jean Chatzky: (16:45)
Pause for just a second. What’s your definition of estate plan? Let’s start there.
Tiffany Aliche: (16:51)
An estate plan is just a plan for what happens to your assets when you’re no longer here. What is the plan for that? So in this loosest terms, that’s what I think of when I think of an estate plan, because what I want to do is to teach the 21 year old reading that I can participate in an estate plan. Because beneficiaries is one of the components of an estate plan that many people don’t think of as a component. I had a friend, unfortunately her brother passed away. He was young. He was only 33. He was a teacher and he set up his retirement account at work. And they asked him about his beneficiaries when he first started working. He was like 28 when he first started working. And he was like, oh, let me ask my mom what I should put down as a beneficiary because he felt, I have time.
Jean Chatzky: (17:37)
I’m sorry, such a sad story, but actually not such an unusual one. I heard a similar story. A friend’s brother passed away just way too young in his sleep very recently. And fortunately, they were prepared.
Tiffany Aliche: (17:55)
You know, he did not know that he was going to pass away at such a young age. And it left his mother and his sister to really struggle through probate court. It was just a nightmare for them. And so that’s the easiest baby toe you can dip into estate planning. Just asking yourself, do I have bank accounts? Let me add my beneficiaries. Do I have life insurance? Like whether at work or my own personal policy. Do I have any other kind of insurance that might pay out that I would add? Like my husband has a pension from work. Do I have a retirement account? So asking yourself, like all those accounts, do I have an updated beneficiary? You know, so that’s the first component of an estate plan.
Jean Chatzky: (18:35)
So once you’ve done your beneficiaries, what comes next? At what point do you need the other components of a more fully fleshed out estate plan.
Tiffany Aliche: (18:47)
You might consider, you know? But maybe a 21 year old said he didn’t necessarily need a will because honestly, I didn’t have anything. But when I turned 30, by then I had a condo. So it’s like, okay, what do I want to happen? You know, via this will. I want to kind of share. I have some things of value and I have got four sisters and two parents. What do I want to happen to those things? If you have a child, you absolutely want to have a will, a child that is a minor. Because you want to be clear about who you want to look after that child. And what you want kind of like that upbringing to look like. And then, from that will, you might consider a trust.
Jean Chatzky: (19:28)
When you are starting to talk about the world of trusts, there are different kinds of trusts. There are living trusts. Those are revocable trusts. You set them up during your life. And there are irrevocable trusts, where you’re essentially giving money away during your life. Tell me what your estate planning attorney told you.
Tiffany Aliche: (19:53)
She shared with me that she wouldn’t consider doing a trust for someone who didn’t at least have a hundred thousand dollars in assets, because the trust is not inexpensive. And so it just didn’t make sense if you didn’t have at least a hundred thousand dollars. But she said, if you have $500,000 in assets or more, you absolutely should have a trust. Because the cost on the other side of not having one is tremendous without having a trust. So, a living trust, this is what she was sharing. But we talk about both an irrevocable trust and a revokable trust as well. So she just shared that having a trust, especially as you start to grow wealth, because a trust essentially can behave like a human being that doesn’t pass. So as a result, you’re not paying the death tax that you would pay when your assets are passed from one person to another person when someone passes. It seems like so much and so overwhelming, but if I can get you to just say, okay, today, I’m going to look at my beneficiaries. I remember I did it with my husband, and before we got together, just the other day I was looking through, he wanted to show his friend how to find his beneficiary on his pension plan. And we looked, it was his sister’s name not mine. And so, because I’m like realizing, like we didn’t even do this for you. So we had to update that.
Jean Chatzky: (21:09)
I was always told that the rule of thumb for updating your estate plan was every three years or when something in your life changes. When you buy a house, when you have a kid, when you get married, when you get divorced, all of those are sort of triggering events. And the world of estate planning is tied very, very closely to the world of insurance. Because again, you’re protecting those important people in your life including yourself. So how do you approach insurance?
Tiffany Aliche: (21:43)
This is my philosophy about insurance. It’s not an investment for me. It is a tool for, what do I call it in the book? I say that basically, it’s your safety net. That you’re getting insurance to protect you, should something happen. That’s the stance that I take in the insurance chapter. But just even going through the different types of insurance out there, because I found that I was underinsured, even as I was writing the book. So I was interviewing my CFP Enjoli, and so we’re going through our insurance and she said, Tiffany, you’re insured like you’re 27 years old. I’m like, that’s what I got this insurance. She’s like, I can tell. It’s not nearly enough.
Jean Chatzky: (22:26)
Yeah. I totally get that it was not nearly enough. Because as your career grows, as your life grows, as your assets grow, you need to make sure that you’ve got all of those different things covered. I mean, the same is true with homeowners insurance, right? When we improve our homes, like so many people have done during the pandemic, we have to make sure then that we bump up the value of our homeowners insurance, so that if something happened to this newer better home, we would have enough replacement cost coverage to pay to repair it, to fix it, to put it back into working order.
Tiffany Aliche: (23:05)
My disability insurance was like next to nothing. I think it would pay out like $1200 bucks a month. She’s like, no, that’s not Tiffany anymore. She’s like, you know, you don’t have, even for my businesses, she’s like, I don’t believe that the insurance is enough to cover what your businesses are currently doing in revenue. So we looked at long-term health insurance, short-term health care insurance. We looked at disability insurance. Of course, life insurance. Because insurance could just seem like a racket, right? Cause you know, I always tell people, I want you to think of insurance like your car insurance or your pet insurance. No one says, oh, this cat is still alive. This insurance. What am I doing with this insurance? You’re grateful that you have it should something happen to Muffy. You know? And so we have to look at insurance as a protection tool. And so I think that the way I was able to lay out and explain different insurances that you might want to look at, depending on where you are in life, I think are going to be really helpful for people to look at insurance as what it is, a tool to protect you and your assets.
Jean Chatzky: (24:06)
I’m smiling Tiffany, because I have the same experience every single time it comes time to pay my disability insurance premium. It’s expensive. Disability insurance, especially when you’re buying it yourself, not through your employer. And by the way, if you have the option to buy disability insurance, long-term disability insurance from your employer, say yes, because it is going to be so much less expensive than a policy that you buy on your own. But I get the bills for my disability insurance policy four times a year and every single time it comes in, I think, do I really have to pay this? Can I just drop this coverage? And every once in a while, I’ll pick up the phone and I’ll talk to my financial advisor and I’ll say, can’t I just drop this coverage. And I get the same answer. No, you cannot drop this coverage. And my friend, Sharon Epperson, who we’ve had on this show, who had a disability, says exactly the same thing. You are more likely to be disabled than you are to die. And you’ve got to protect yourself from that. You’re basically insuring for your income.
Tiffany Aliche: (25:16)
I wanted to model good behavior. This is something that you learn as an educator. Because I could have just interviewed everyone and just like absorbed the information and then just rehashed it, you know? But I really wanted to showcase some of the folks that I interviewed because I wanted to show people that I don’t believe in the one only true financial guru, right? I believe that you should get financial information from specialists the way you get from your doctor. So I consider myself like financial lifestyle, right? So I know a little bit about everything. I dabble here, dabble there, but then I have friends who, credit is their life, you know? And I’ve got friends who, like my estate attorney, she loves talking to estate planning. I’m not an attorney. And then I’ve got friends who I’m trying to think of another chapter. Investing for wealth or investing for retirement. They love like diving deep into that. So I wanted and get good with money that I got to showcase their expertise, but also teach you that it’s okay to have a board of directors when it comes to your financial education.
Jean Chatzky: (26:17)
You were reporting. I mean, that’s what I do every day, right? This world, people have sometimes said to me, how can you have spent 30 years in the world of personal finance? How can you have spent 30 years doing one thing? And my answer is always, it changes every day. It changes every day. And I still love picking up the phone and talking to really smart people — the experts who are in the minutia of all of this stuff and learning from them.
Tiffany Aliche: (26:44)
So I say this that, although debt freedom is certainly a goal, it’s not the goal. So too many people stop at debt freedom. They’re like debt-free. But okay, you still have a lot more walking to do, you know, because I tease that I’ve got a nephew that doesn’t have a mortgage. He doesn’t have a car note, but I always tease that Roman is broke. Because he’s five, right? So if debt freedom equals wealth and all your toddlers out there would be rolling in the dough. But you know, they’re not because they’re debt-free, but they’re our little broke, best friends. And so my stance on that freedom is that you should set it and kind of like almost semi-forget it. And that with your refund check, there’s some checks that I want you to do first before you consider paying off debt.
Jean Chatzky: (27:28)
So what does come first? If you’re rank ordering things for me, what is at the very top of that list?
Tiffany Aliche: (27:36)
Especially during times like now, when things are still quite uncertain, I would start first to say, how am I with my current bills. Am I current? If I’m not current, then likely the money’s going to go toward those bills to bring me current. And then I would ask myself, well, how am I with my emergency savings account? You know, I think 2020 taught us just how important that emergency savings account was. And so, okay. If my emergency savings account is looking light, then I might want to go there second. Then I would look at, okay, how is my debt looking? You know, because my emergency savings account actually is fine. Let me pay off some of the more expensive debt. Let me focus on debt with double-digit interest rate, typically your credit card debt. And I still might set aside some for my double-digit debt, and then some for retirement.
Jean Chatzky: (28:27)
We haven’t spent a lot of time in this conversation talking about investing for retirement, getting to retirement. But I think all of these other building blocks lead you there. And it’s something that many people have a hard time focusing on. That we get so caught up in the day to day that we don’t give enough attention to the long term.
Tiffany Aliche: (28:55)
I call my retirement self Wanda. That is her nickname. Somebody had done a study once where it showed that people don’t save for retirement because they feel disassociated from their older self. And I thought, well, let’s lean into it. Let’s name that older sefl. So mine is Wanda. And I think to myself, okay, although, you know, working toward debt freedom is really important for Tiffany, let me not forget Wanda, who is not working, who is looking for Tiffany to support her. So I’m going to set aside some for Wanda and then set aside some toward debt for Tiffany. So that’s what I would look at kind of like the tiers of what potentially I would do with a refund check.
Jean Chatzky: (29:32)
I’m smiling about Wanda, Tiffany. I’m thinking in my head, okay, if I’m going to name my retirement self, what name am I going to give her? Am I going to give her a name like Wanda? Or am I going to give her some fabulous name that I wanted to have my whole life? I am not committing to it at this point, but by the time we have our next conversation, which I hope will be soon, I will have an answer for you on that. Tell us more about where our listeners can find you.
Tiffany Aliche: (30:00)
So I am the the Budgetnista on all the socials. That’s Instagram, that’s Twitter, that’s YouTube, that’s Facebook and more. And, you can find me and more about Get Good With Money at getgoodwithmoney.com.
Jean Chatzky: (30:14)
Thank you so much, Tiffany. This was fun.
Tiffany Aliche: (30:17)
Thank you, Jean.
Jean Chatzky: (30:18)
And before we get into our mailbag, I want to remind everyone that HerMoney is proudly sponsored by Fidelity Investments. Whether you’re just starting to save for retirement, inching closer to it, or you’re already enjoying your post-career years, Fidelity can help guide you every step of the way. And when life throws you changes, as we all know it will, Fidelity is there to help you keep your financial plans in check, so you’ll feel better today and more prepared for tomorrow. Visit Fidelity.com/HerMoney to learn more. And while I’m talking about our sponsor, HerMoney has teamed up with Fidelity Investments this spring to give moms the financial solutions, suggestions, and support that we know you need right now. Mother’s Day is just around the corner. And we can’t think of anyone who deserves a round of applause after this last year, more than moms, You are incredible. But even rockstars who do it all, successfully, every day, need a little help every now and then. Because the truth is, this last year hasn’t been easy. Many of us had to step off the financial path we wanted to walk towards retirement and other big life goals. But the good news is, it is never too late to get back on track. We hope you’ll sign up for our week-long Motherhood & Money event. Just go to HerMoney.com and we’ve got a banner at the top of the page where you can pop in your email address and you’ll get great content delivered straight to your inbox starting May 3rd. And we will be right back with Kathryn and your mailbag.
Jean Chatzky: (31:55)
HerMoney.com’s Kathryn Tuggle joins me now for our mailbag. Hey Kathryn.
Kathryn Tuggle: (32:06)
Hey Jean, how are you?
Jean Chatzky: (32:08)
I’m good. I’m actually good. I feel very allergic as I said at the top of the show. I don’t know if you can hear how much I’m sniffling, but I have these two trees outside my house. They’re like my sign that spring is here — when they get their little white flowers on them. And when I pulled into my driveway last night, they had flowers on them and they didn’t have flowers when I left in the morning. So it was like, oh my gosh. Here we go. It had just all bloomed. So I’m feeling good about that.
Kathryn Tuggle: (32:39)
It is pretty miraculous how spring can get sprung pretty much overnight. I’ve seen that happen pretty much everywhere I’ve lived, especially in Alabama at my parents’ house in the woods. It seems like you wake up and everything is just this bright spring green or pink or some other shade of Easter pastel.
Jean Chatzky: (33:00)
And I don’t want to encourage people to take off their masks, but I do want to encourage people to take off their masks just to smell what’s going on around them. Because I was in New York city yesterday. I had a couple of doctor’s appointments. One of them with the surgeon who fixed my back earlier in the year. Thank you, Dr. Tyndall. And he made the point that we’re all walking around with masks. And he said, you know, even in New York, even in the city, you really can smell spring. Like there are a lot of tulips and there are a lot of trees. But he said, we’re all missing it because our noses are behind these masks. So when you’re not around people just take off your mask for a second and give a good sniff so that you definitely enjoy it.
Kathryn Tuggle: (33:45)
So, in other words, stop and smell the roses.
Jean Chatzky: (33:48)
Ha ha, yes. In other words, stop and smell the roses, or the peonies or whatever happens to be blooming in your area.
Kathryn Tuggle: (33:57)
Jean Chatzky: (33:58)
Let’s take a second to answer some questions.
Kathryn Tuggle: (34:01)
Yeah. So our questions this week actually all happened to be from anonymous listeners. They all came in this way and I thought, why not? We’ll just have an anonymous day with everyone electing to just stay private this week. Which is fine. Our first listener writes, hi Jean and Kathryn. I hope this note finds you well. In 2020, I got into a car accident and I have just now received my settlement for $18,500. I’m 25 and never had this much money given to me at once before. I’d really like to take advantage of this opportunity. I’ve just started becoming interested in personal finance and I’m still learning and growing. I would really appreciate advice on how to make this lump sum of money best serve me. I should also add I’m expecting a healthy raise in April. I currently make $51,000 a year and received a $2,000 bonus last year. My company has increased their salary bands for my position and I’ve been guaranteed I’ll make between $65,000 and $70,000 starting next month. I’m also anticipating another bonus. I live in Los Angeles and my lease ends in December. My parents are encouraging me to purchase a condo and they asked me to set aside $5,000 for a down payment and they’ll cover the rest. This now leaves me with $13,500. I have no student loan debt and my side hustle currently pays for my car. I’m already contributing to my 401k, but I would like to increase my contributions. I currently contribute a hundred dollars a month. However, I do have a high amount of credit card debt. Here’s the breakdown of my credit cards, outstanding balances with APRs. Credit card number 1, $12,200 at 23% APR. Credit card number 2, $5,000 with 20% APR. Credit card number 3, $9,000 with 22% APR. This year, my financial goals are to develop an emergency savings fund, increase my 401k contributions and pay off my credit card debt. Lastly, own a condo. Finally, here are my questions. Number one, what do you think I should do with the $13,500? How much of this amount should go towards debt and to which credit card. Number two, how much would you recommend I contribute to my 401k. I should mention my employer doesn’t match. Number four, if I do get that bonus, should I put it in savings or pay off debt? Thanks for all that you do, Jean. I stumbled upon your podcast last year and it has changed my life. I learn and grow every time I listen and I have shared it with many family and friends.
Jean Chatzky: (36:46)
First of all, thank you so much for those really nice words. I’m so glad that you’re enjoying it and I hope you’re okay. After a car accident, that’s always really so scary. I’ve got a couple of questions before we go forward with a plan. The first is, where did this credit card debt come from? And are you still racking up credit card debt or are you in a position now where you are paying it down? I ask that because the debt’s pretty significant. And what we want to do is put you on a path where you can accomplish all of those goals. Where we can get you into a place where you can develop emergency savings, increase your 401k contributions, pay off that credit card debt and own the condo. But we’ve got to get your spending in line first. And so I would like to see you track your spending for at least a month. Figure out where your money is going. Figure out where you can trim. Because then we’re going to make a plan to get rid of the rest of this credit card debt. Your raise is absolutely going to help with that. But part of what we’ve learned from behavioral finance is that human beings have this crazy ability to adapt to how much we make. And the very first time that you get that paycheck, after your salary jumps from 51,000 a year to $65,000 a year, it’s going to feel like a lot of money. But if you’re not careful, within two or three paycheck cycles, you are going to find yourself wondering how you ever lived on less money. So track your spending. That’s job one. Then I would take that $13,500. I’m okay with you setting aside the $5,000 for a down payment. Put that in a separate savings account where you know that you’re not going to touch it until you work on finding the right place to purchase and getting that going. Take that $13,500. Pay off credit card #1, the one that is $12,200 with the 23% APR, and put the other $1,300 away for emergencies. You’re just in case money. The money that’s going to prevent you from getting into additional credit card debt. Then I want you to look at credit card number two and credit card number three. Pick up the phone. Call those credit card companies. See if they have any way for you to reduce those interest rates. If not, you may want to look into a balance transfer card. Your credit score is going to pop once you pay off that first credit card. Don’t close it, just pay it off. But your credit score is going to pop because your credit utilization is going to go down. And so that’s going to help you in terms of qualifying for a better interest rate, perhaps with the cards that you already have, but if not perhaps on a balance transfer card. Because we want to get that debt into a position where the interest rate is low enough that you can take any extra money that you find by tracking your spending, as well as the money that you are currently paying toward credit card number one on a monthly basis. Credit card number one is costing you $3,000 in interest alone per year. You’re going to use that money, as well as any money that you find tracking your savings, to pay down credit card number two and credit card number three. And we want you making well over the minimum payments. Why am I putting this ahead of increasing your 401k contributions? I’m putting it ahead because you’re not getting a match on that money. When we look at where to put the next dollar, we look at where we’re going to get the best rate of return on that money. By investing the money in your 401k, you’ve been getting a tremendous rate of return if it’s in a diversified stock portfolio. But paying off those credit cards at such high interest rates is a guaranteed return and we’ve got to get you out. So that’s your goal. Let me just recap it for you because I threw a lot at you. Take the additional money. Pay off the highest interest rate card. Try to lower the interest rates on the other two credit cards or look for a balance transfer card that will allow you to lower the interest rate. Throw all of your additional money, including any money that you get in bonuses or in tax refunds, toward those other two credit cards. And once they’re clear, you are going to have plenty of money to supercharge your 401k contributions, which you should do even though you’re not getting matching dollars. You want to try to max out those contributions as soon as you possibly can. And finally, when it comes to looking for a condo, I know that your parents are helping you with the down payment. That’s amazing. But be careful not to buy more house than you can afford to live in. And if you want to go through the math on that decision, as it comes down the pike, write in again, and we’ll be really happy to help you do that.
Kathryn Tuggle: (42:28)
I loved this letter because I feel like she is on the cusp of a new financial life. You know, she’s got a raise. She is going to become a homeowner and she knows she’s got to pay down that credit card debt. So I think as excited as she is about getting that condo, she should try and get equally excited about freeing herself from credit card debt. Because I do think this is going to be an era for her with a brand new financial mindset.
Jean Chatzky: (42:58)
I totally agree. And look, we know debt stresses people out, and this is a lot of debt to be dealing with at a very young age. But she’s got it within her. I mean, I can just see that that debt is going to be wiped out, and not within a year, but within months.
Kathryn Tuggle: (43:15)
Totally agree. Thanks Jean.
Jean Chatzky: (43:18)
Kathryn Tuggle: (43:18)
Our next listener writes, hi Jean and Kathryn. I’m a big fan of the show and recommend it to all my women friends. My question revolves around what to do next. My husband and I live overseas. So our expenses are very low. I have $193,000 in my Vanguard account in bonds, stocks and index funds and my additional Roth IRA. I max out my TSP at $19,000 a year, which is now in a lifecycle fund for 2050. I’m 35 years old. I have around $70,000 in an online savings account plus CDs related to that bank, and $15,000 in a Fundrise passive real estate account. My question is where do I place the cash I have now? Into the online savings account? Into the market? What should I focus on next? My husband and I have no kids, own no real estate, and I have already paid off my student loans thanks to the organization’s student loan repayment plan. My husband also has his own investments so the above is all me. Thank you for your guidance.
Jean Chatzky: (44:25)
Well, first of all, congratulations on all of this. I mean, this is incredible. You are doing amazingly well. No debt, a lot of investments, low expenses. I want to throw this question back to you. And my question is, what do you want? I mean, you said you own no real estate. Do you want to own real estate? Do you want to set up a fund to travel? Do you want to start a side hustle, open a winery? I don’t know where you are overseas, but sometimes getting a sense of what you want and when you want it can help you build a roadmap for your money. Because you don’t sound like you may have the answers to those questions right now. I’d probably just invest it as you are now, in that brokerage account, splitting it between bonds and stocks and index funds, in a way that makes sense for your age and your risk tolerance. You are young. So you can’t afford to take a considerable amount of risk with your money if that money is truly there for the longterm. You may also want to talk to a financial advisor. There’s a lot of money at play here between both you and your husband. I don’t know if the plan is to continue to live overseas or if the plan is to come back at some point, and if you want to start building a path toward that. But if you can sort of chart out what your life is going to look like or what you expect your life might look like, even if those things will change down the road, then you can figure out how to use the tremendous amount of resources that you have at your disposal. And just for everybody who is wondering, TSP is thrift savings plan. It’s basically like the government’s form of a 401k.
Kathryn Tuggle: (46:37)
I always love the, where do I put my money questions? Because I feel like most of the time they come from listeners who have got most things figured out, you know. They come from people who are in a hopeful place about their money and they’re just looking to see how they can make the most of it. It’s interesting that she says that she’s saving money because she’s living overseas. Because that tells me she’s not living in Paris or London, right? Because those would be very expensive. And when she looks at what she wants from her money, I mean, that is another good question, right? Because if you are planning to move to a more expensive place and see more of the world, then maybe start a fund for that. Maybe start a fund for when you do move to a more expensive place.
Jean Chatzky: (47:25)
Yeah, absolutely. I kind of read it. I was trying to figure out she was. This is one of those things where I’m sure, like me, all the details of these letters run through your head and you try to puzzle it out as if it were a mystery novel. But the one thing I looked at was when she wrote that she already paid off her student loans, thanks to the organization student loan repayment plan. I’m wondering if she’s working for a company or her husband is working for a company where they subsidize your lifestyle because you live in such an expensive place. So she could be in Asia someplace, where the company is paying for housing or something like that.
Kathryn Tuggle: (48:06)
Yeah. Great point.
Jean Chatzky: (48:07)
So if you want to share, if you want to quell our curiosity, just drop us another note and tell us where you are. We don’t have to share it with the world.
Kathryn Tuggle: (48:15)
Or a postcard.
Jean Chatzky: (48:18)
Yeah, a postcard. Send us a postcard.
Kathryn Tuggle: (48:21)
And we can continue puzzling over it. Our last listener email says, my husband and I are planning to purchase a car soon and are unsure how much to pay in cash or how much to put on a loan. We’re in our early thirties and we have $325,000 in retirement accounts, $18,000 in an emergency fund and $6,000 in a brokerage account. We should have an additional $10,000 saved to go towards the car by the time we purchase. The car will be about $25,000 total. Our credit scores are above 800, so we think we can get a fairly good car loan. Should we try to wait to buy the car until we can put the full $25,000 down to avoid the loan? Or should we get a car loan to keep more cash liquid especially as we may start a family soon. We live in a high cost of living city so we should probably have more in cash in case an unexpected gap in employment occurs. Thank you so much for the help you provide to women.
Jean Chatzky: (49:25)
I think you, in many ways, just to answer your own question. I would take a car loan and keep cash at the ready. And I don’t even know that I would put the full $10,000 down on that car. I might look at financing rates and think about what my needs for cash are going to be in the next year, particularly if you think that there’s a baby on the way, and bump up that emergency fund by another few thousand dollars. You can often get an even better than current low interest rates deal on car financing by being willing to be a little bit facile or a little bit negotiable in the type of car that you’re buying or the brand of car that you’re buying. You can play one manufacturer off against another, and you should be looking for financing deals as you do this. But I would make sure that whatever car loan you take, you expect that you’re going to have the car at least that long. Don’t take a five-year car loan if you think you’re going to be getting rid of this car in three years. Cars lasts a lot longer than they used to. They drive easily well over a hundred thousand miles, if not 200,000 miles. So if you take good care of it, you should be able to keep it for a long time. But I would continue investing my money for retirement, where I know I’m going to get a much better payoff than I am by borrowing money at a low interest rate car loan. And lots of luck.
Kathryn Tuggle: (51:00)
Yeah, good luck. And I totally agree. And I get not wanting to have a loan, right? It’s just one more thing to pay. And we all know how good it feels when you pay off alone so why would you ever want to take on a new one. But it is the smarter move.
Jean Chatzky: (51:14)
Well interest rates right now are so low. And look, I know that I have friends in the world of personal finance who say, you should always just save up the money for a car and then buy your car, right? I don’t really agree with that. I think we have to look at the arbitrage. I think we have to look at okay, if I’m going to take this next dollar and I’m going to use it for something, where am I going to get the bigger payoff? And here, you’re going to get the bigger payoff by continuing to put money away for retirement in your retirement investments. But also, right now, having a sizable emergency cushion is, as we have learned through this pandemic, the smartest financial move. And I don’t want to see her struggling to build up that emergency cushion when she could borrow for a car at a very, very low interest rate. There are three big purchases that I think it’s unreasonable to try to expect ourselves to pay off in full, you know? It’s okay to borrow for the car that gets you where you need to go. It’s okay to borrow to buy a house. It’s okay to borrow for education. Of course, we want to try to not borrow more than is smart at that time. We want to try not to borrow more than we need to, but not to the exclusion of achieving the other needs that we have in our financial life. And emergency savings is one of those needs.
Kathryn Tuggle: (52:49)
Absolutely Jean. Thank you so much for the great advice. And just a reminder to please keep your emails coming to us every week at firstname.lastname@example.org and we will pick them up.
Jean Chatzky: (53:00)
A hundred percent. Thank you, Kathryn. And in today’s thrive, the good news and bad news story of COVID are kids and money. When it comes to facing a period of financial ups and downs, parents often do their best to shield their kids from money discussions. During the K-shaped recovery that has defined the COVID pandemic, with some families prospering, others suffering, and members of both cohorts more than ready to escape the confines of their walls. A new study from Junior Achievement and Citizens shows just how impossible that’s been, which is not necessarily a bad thing. Before COVID, 56% of teens said they’d talked with their parents or guardians about family finances. Interestingly, half of those said they had spoken on the topic only once. But since the pandemic took hold, 44% said they were talking about finances more, including 15% who said they were talking significantly more. Considering the fact that prior research has shown that teens rely most heavily on their parents for financial advice, I don’t think these conversations could come soon enough. So how can you start talking to your kids more about money in these complicated times. At HerMoney.com this week, we’ve got a few suggestions. First, open the door to the post-high school conversation early. Whatever your family is planning as far as financing college goes, you’re going to want to bring your teen into the tent sooner rather than later. Having a greater understanding about a) how much college costs and b) whether they can expect financial help, will enable them to better plan their future. And you want to foster a realistic discussion of the differences in price between public schools and private ones, and how doing two years at a local community college before transferring to a four year school can significantly cut the price. Then encourage your kids to cast a wide net. As I discussed recently on this podcast with Ron Lieber, author of The Price You Pay For College, merit aid has become a hugely important factor in financing college. Your child will have the best shot at getting a sizable amount if they apply for a wide range of schools, including schools that want them based on their academic or other achievements. Lastly, go through the real life numbers. Before your child borrows for college make sure you go through the numbers on repayment when talking to kids about money. The total amount borrowed can look so big that it seems unreal. What’s important to get a grip on is the monthly payment upon graduatio and how much your child will need to earn in order to both make those payments and achieve her other life goals, like paying for a car or moving out of your house. Thanks so much for joining me today on HerMoney. Thank you to Tiffany Aliche for enlightening us on how we can get good with money and move into a more positive, empowered place in our financial lives. If you like what you hear, please subscribe to our show at Apple podcasts. Leave us a review. We love hearing what you think. We’d like to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper, and our show comes to you through Megaphone. Thanks so much for joining us and we’ll talk soon.