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A financial management bible, updated

Marketplace Staff Feb 5, 2010

A financial management bible, updated

Marketplace Staff Feb 5, 2010


Tess Vigeland: Jane Bryant Quinn has been teaching all of us how to better manage our money — for the better part of three decades. She’s written on personal finance for the Washington Post, Newsweek, Bloomberg. Quinn’s classic bestseller, “Making the Most of Your Money Now,” debuted in 1991. It’s a financial management bible and about as big as the King James. A new edition’s just been published, taking into account the economic crisis and Great Recession we’re all living through.

She recently visited our studios here in Los Angeles to talk about it.

Well, Jane Bryant Quinn, it is such a pleasure to meet you in person. I grew up seeing your photo in the back of Newsweek, and I’ve gotta tell you, I wish that my parents had made me read it. Every issue.

Jane Bryant Quinn: Thank you. Thank you very much.

Vigeland: All right, so I know that there’s no money back guarantee on your book. But if I read all — let’s see, shall we do this?

Sound of book thud

1,190 pages!

Quinn: That’s right. There is everything you want to know is in that book.

Vigeland: Will I, more importantly, be rich if I read it all?

Quinn: Well, you will avoid being poor, let’s start with that one.

Vigeland: Good enough, good enough. We all do want that quick fix, don’t we?

Quinn: We want that quick fix. This is more get rich, slowly.

Vigeland: Well, let’s talk about that a little bit. So you wrote this book originally in 1991. Recessionary times, much like we’re in now; in fact, even a housing bust in California. Does it make you wonder if anybody read your book, since we’re repeating so many mistakes over and over again?

Quinn: People are coming around to some of the old-fashioned ideas that say “I need to save more money.” Home equity loans won’t work anymore, because there’s not any home equity. The way I build equity is to pay down my mortgage, what a concept.

One thing that really worries me a lot — and you can see all around you what has happened — is that credit card debt has come to be normal. But credit card debt isn’t normal. Consumer debt is pure waste. What has happened is is that as people get older — they move to sort of middle age, beyond middle age — it used to be they would get rid of their debt then. But no, they are still carrying consumer debt. And when your paycheck stops, you are cooked if you have all of this debt. So, younger people need to say, “I don’t want this to happen to me.” Which means, you have to save earlier and you just need to quit with these 20 percent interest rates. Well, I mean, adding 20 percent to everything you buy is ridiculous.

Vigeland: It certainly is, especially, when you might be clipping coupons at the same time.

Quinn: That’s right. You’re living paycheck to paycheck, and yet, all of this is slipping through your fingers. And I remember, this happened to me once, I was living paycheck to paycheck. I was in my early twenties, and I wasn’t saving a dime. And a friend came by, was with the company that I worked for at the time, and said, was I contributing to the thrift plan? And I said, “No, I can’t pay the dentist, but how could I save money?”

Vigeland: Wait, but you’re Jane Bryant Quinn.

Quinn: I wasn’t then. I was 21 years old and learning. So, he called me… well, he actually called me an idiot, is what he called me, and said I should start putting money into the thrift plan. And so, with fear and trembling, I took 5 percent of my paycheck and put it in. And you know what happened? Nothing happened.

Vigeland: Didn’t miss it.

Quinn: My life didn’t change; I still couldn’t pay the dentist. I was living the way I was living before, but I was suddenly saving 5 percent and I went to seven and I went up to 10 percent and it still didn’t change my life.

Vigeland: Well, you know, you talk about common sense and I think you’re probably more familiar than just about anyone with kind of the rules of personal finance. Do you think that any of the tenets, the basic rules, have changed out of this financial crisis?

Quinn: I do not think so. I think that what has happened is that people are gaining a new appreciation of the basic rules, which they have previously ignored. If you think in terms of mortgages, for example, an interest-only mortgage was always insane.

Vigeland: Right.

Quinn: But now, you have to put a down payment. This is an old rule: Save some money, have a down payment and then start paying off your mortgage. So that was not what we did for the past 10 years, right? So there’s one thing that’s an old rule that makes sense that now people are looking at.

In terms of the stock market, people have been trying to buy individual stocks. That is ridiculous. What do you or I know about what is going on inside a particular company. Look at the people, Citibank, widows and orphan stocks supposedly. And it crashes. Don’t buy stocks, buy mutual funds and furthermore, buy index mutual funds that follow the market as a whole.

Vigeland: You know, I wonder where you think the fault lies with so many of the mistakes that we all make, whether it’s getting caught up in a dot-com bubble or housing bubble or what have you. Is this a matter of financial education at a young age? How is it that we get to the point where so many people are so confused about what’s right and wrong in personal finance?

Quinn: I very strongly believe that we should have some kind of personal finance education in high school. At least a semester of things like credit cards and to tell kids that credit histories exist, the basics of personal finance. We should do that in every single high school. Then, of course, I have a little book that they could read or a big book they can read, which tells them all about it. But there’s some responsibility on the other side too. I know we need to be responsible for ourselves and we need to learn how to do this, and you can’t just hand your money to someone else and say, “OK, it’s up to you” and walk away and then be surprised if something goes wrong.

But I also feel very strongly about this deregulation that has taken place of the financial industry. That with stronger regulations, better disclosures, better requirements would give consumers something at least to help them with, when they’re faced with these so-called “experts” that are going to mislead them, if an agency like that were passed, you should be able to do something about things that are simply unsafe products. For example, these exploding mortgages that everybody got stuck with. They should not have been on the market in the first place. And there are other products that would benefit from someone saying, “You’ve gotta disclose this. You have to tell people this. You can’t hide this and it’s gotta be right upfront.” And I think that that would help people.

Vigeland: You know, so many people were hurt by this down turn. Lots of them who believed, perhaps rightly, that they were doing everything right — they got responsible mortgages, they diversified their investments — and they still ended up taking a big hit. What do you say to those folks?

Quinn: How big a hit you took in the stock market depended on what percentage of your money you had in the stock market. And if you had it all there, that was a mistake; it shouldn’t have all been there. You need an appropriate division between stock funds and bond funds, depending on your age. So, if you were 50, 55, 60, you should’ve had probably less money in stocks than you actually had. And if you had more bonds and fewer stocks, you would not have been hit as hard. So one of the lessons to learn is that it’s very important that you have a balance between stocks and bonds that are appropriate for your age.

Vigeland: What about outside of the market. I guess what I’m trying to tap into here is the anger that is out there. You know, you have the person who got the 30-year fixed mortgage, has been making their payments and yet now they’re stuck in a neighborhood where there are foreclosures all around them — and at the same time, perhaps, they are being asked to pony up to help banks that helped out those bad mortgages and they have also lost property value, and you know, people look around and say, “Why should I pay any sort of price for the bad decision that my neighbor made?”

Quinn: Because if you are not that way, then our country will never be repaired. You can say, “Don’t save the banks.” Fine, don’t save the banks and then we would be in 1933 at this moment. You can say, “Don’t help my neighbor with the mortgage,” and fine. It forecloses, the house is a mess and now, it’s hurt you even more. And truly if you simply think that way, our country cannot be repaired. You have to say, “By saving other people, I am also saving myself.”

Vigeland: You touched on this a little bit before, but I did want to ask you, do you think it’s hard to conquer personal finance? Or do we make it harder than it should be?

Quinn: Personal finance isn’t hard. It is basically common sense. And if you do the simple things — you know, put a down payment on your mortgage, pay your bills on time, don’t stretch them out, don’t have too many credit cards — there is nothing hard about that. As long as you just say to yourself, all this other stuff I read about — the hedge funds, the this and the that — you don’t need any of that stuff. It is expensive. It’ll make your broker rich; it will not make you rich. And I don’t use any of that stuff. And I have come to it, learned by investing in an oil well that was dry. I mean, I’ve been there, I’ve done it!

Vigeland: Oh you did not!

Quinn: I did, I did.

Vigeland: Jane Bryant Quinn is the author of “Making the Most of Your Money Now,” in its… What edition are we on now?

Quinn: It’s the third edition and I am also posting new material on my Web site, JaneBryantQuinn.com.

Vigeland: Where you are blogging and tweeting, you told me.

Quinn: I certainly am.

Vigeland: Thank you so much for coming in. It’s been a pleasure.

Quinn: Thank you. This has been fun.

Vigeland: We heard earlier from Jane that credit card debt is not normal. But lots of us still have it and still struggle with it. New laws go into effect later this month that are supposed to help us in that struggle.

We want your opinions about the new regulations and whether they’ll have any impact on your behavior. Write to us.

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