Howard hands out helpful tips

By Eric Rangus erangus@emory.edu

According to Atlanta-based consumer advocate Clark Howard, what should be the first priority for your personal finances?

A child’s education? No, that’s way down at number four.

Save it for a rainy day? Closer, but that’s only the number two reason.

The best use of money, Howard told a crowd April 17 in WHSCAB Auditorium, is saving for retirement.

“Once you’ve started saving for retirement, only then do you worry about a rainy day,” he said. “If you always figure out a way to spend money today, you’ll never save it for tomorrow.”

That was just one of the nuggets of advice offered by Howard, who spoke for 35 minutes, then—appropriately enough, for someone who hosts a radio call-in show—answered half an hour of questions from those in attendance, as well as a handful from Crawford Long, which was receiving a webcast of the event.

It made for a fast-paced evening, as the upbeat Howard remained in the middle of the stage throughout. The stage-left podium served only as the place where he stored the soda he came in with.

A nationally known consumer advocate, Howard’s Atlanta-based radio show airs on nearly 140 stations. He writes a weekly column for The Atlanta Journal-Constitution, appears occasionally on WSB-TV, and his recently published fourth book, Get Clark Smart, has outsold all three of its predecessors combined. Howard is heard locally weekdays on WSB 750 AM from 1–6 p.m.

Blue-blazered members of Emory’s benefits department served as ushers for the evening, so perhaps Howard’s plug for retirement savings was a bit convenient. But he backed it up with a great deal of information.

He lauded Emory’s 401K plan, which doubles employee contributions up to 2 percent and provides 6 percent of an employee’s salary regardless of individual contribution, as an ideal way to save for retirement

“You have to take advantage of saving at work. If you don’t ever have the money, you won’t spend it,” Howard said, noting the psychological effect of having money deducted from a paycheck on a pre-tax basis.

The goal, Howard added, is to put away 10 percent of your salary a month, if possible. Since Emory’s plan provides a 12 percent investment (with just a 2 percent employee contribution), it is excellent, he said.

While Howard hammered home the importance of saving, he was even more adamant about the necessity of a specific kind of spending.

“Before you can talk about saving,” Howard said, “you have to rethink if you want to live a debt lifestyle.” Specifically, credit card debt.

Over and above every other bill, Howard said, consumers should attempt to eliminate their credit card debt. And he quoted a few alarming statistics to make his case. For instance, 20 percent of Americans are carrying so much debt that they cannot pay the interest every month.

“That’s scary,” said Howard, who proudly declared that he carries no debt—credit card, mortgage, loans, nothing.

So he offered some hints to pay down that credit card debt. Perhaps the most intriguing was what he called the “14-day plan.” It entails paying the half of the minimum balance on a credit card every 14 days, rather than the entire minimum every month.

This serves several purposes. First, since interest is calculated daily, a payment midway through the billing cycle lowers the balance and eliminates the interest that would’ve otherwise accrued over those 14 days. Second, a total of 26 payments means an equivalent of 13 monthly payments are made each year. Third, when minimum monthlies go down with a lower principal, consumers should keep their payment steady since they will have learned how to live without the money.

If this plan is followed, Howard said, a credit card debt that would require 20 years to be paid off could be eliminated in five.

Howard offered other hints regarding a likely drop in real estate prices in the Atlanta area, making it a good long-term investment (“These are not the best of times, but if you don’t lose your nerve, there will be some opportunities.”); the importance of contributing to a 401K even in tough times (“I’m staying the course, and I strongly encourage you to do so, too); the growing irrelevance of banks (“statistically, they only hold 12 percent of the average family’s assets; it’s just a place to park your money”); and touched on travel savings, Roth IRAs and overseas investing during his wide-ranging discussion

By the way, the third priority for personal savings?

Spending for today.