Talking Goals

Talking Money: Everything You Need to Know about Your Finances and Your Future
by Jean Chatzky

From the NBC Today show financial expert and Money magazine columnist, Jean Chatzky comes...

Everything You Need to Know about Your Finances and Your Future

I want to start saving for retirement...
How do I do it?

I'm planning to invest in stocks...
How do I pick the right ones?

We're buying a house...
What kind of mortgage should we get?

Today everyone is talking about money: how to spend it, how to save it, and how to invest it. But how much of this wall-to-wall money talk really makes sense? And how does all of it affect you? Now America's best known and most trusted personal finance expert brings her down-to-earth style to a book for real people with real issues about money. Jean Chatzky wants you to grab a cup of coffee, pull up a chair, and start...

In this amazingly concise and easy-to-understand book, Today show financial expert and Money magazine columnist Jean Chatzky tells you what you need to know about all money matters. Take control of your financial future today and learn:

• A breakdown and comparison between college saving plans, with the strengths and weaknesses of each option
• Five questions to ask before buying any stock, and the answers you should get before you do
• The essential steps in buying or selling a home, and how to come out ahead in real estate
• How to get the best deals on insurance, including life, health, and homeowners
• A simple formula that shows how much you must save now to retire comfortably tomorrow
• The do's and don'ts of estate planning - including steps you should take now.

Chapter 1

What do you want from your money? Think about that for a minute. It's a loaded question, a difficult question, a question with an infinite number of answers. But it's a question you need to address. You've already taken the first step: You picked up this book. That alone tells me you know that figuring out what you want from your money is something you're ready to do.

Some of it won't be easy. It's important that you understand that up front. Setting financial goals means making at least some temporary decisions (and I say "temporary" because you'll certainly revise them along the way) about not just your money but your life. It means thinking about how big a family you want to raise, how you wish to retire, and whether your aging mother should live with you or in a nursing home. It means dealing with the queasy subjects of who should be the guardians for your minor children and how and when you need to write a will.

But the payoff will be enormous. Just think about how good it would feel to have a plan in place to deal with all the "what-if " scenarios in your life (what if I lose my job, what if I get divorced, what if I become disabled...). And the rewards won't just be emotional. Once you leap in and get hold of your finances, there are a number of small moves you can make that'll pay off big in the wallet.

The key here is to relax. I'll talk you through all the issues, page by page, one by one. And we'll start back at the question I asked a moment ago: What do you want from your money? What do you want your money to do for you? Let's take a look at the answers some other folks gave to get us going.

My friend Susan, who recently married, can sum up the answer in one five-letter word: h-o-u-s-e. She and her new husband want to move out of his bachelor pad/apartment in New York City and into a house of their own, preferably somewhere in the suburbs of Westchester County, where she grew up. She doesn't know exactly what the place will look like, but she's got a specific enough list of prerequisites that she'll know it when she sees it. "It has to be old," she told me, "with lots of charm. But it doesn't have to be huge. I don't want bedrooms that are big enough to land a plane in. And I don't want so many rooms that I can't afford to furnish the place nicely all at once. And I don't need a ton of land either, just enough for a substantial garden."

Ken and Nancy, a couple nearing forty with two young kids, are crystal clear on the subject, too. They want an early retirement with plenty of free cash to travel the globe. When Ken was around thirty, he passed up a chance to spend six months in Asia roughing it with three friends. All three of these other guys were at career roadblocks. Not one of them really liked what he was doing. So they quit their jobs and went on an adventure to clear their heads.

Not Ken. He had been working at the same bank since college and was quickly rising up the ranks. Every time I spoke to him, it seemed, he had been given more people to manage. Taking time off to travel would have deadened his momentum. In hindsight, it was a good thing that he stayed. Shortly after his friends left on their trip, he met Nancy. A year later, they married. And nearly a decade later, he's still at the bank and he and Nancy have two kids and a house they designed themselves on a quiet cul-de-sac. They live well, but not lavishly. Instead, they sock every extra dollar into savings, so that once the kids are through with college, they'll be free to go on an adventure of their own when they retire-at age fifty. And this time they won't have to rough it.

As for me... in the short term, my husband, Peter, and I already have a house that we love. We've tackled the big-time structural fixes: new heating system, new roof, new air-conditioning. (It's seventy years old, and we knew it was a fixer-upper!) I'd like to see it fully furnished sometime soon, but we're taking it one room at a time. Long-term, our goals are fairly straightforward. We'd like our kids to go to the colleges of their choice with no financial worries. We'd love to-someday-add a beach house to our real estate portfolio. And though I, in particular, can't get a clear picture of my "retirement" yet (probably because I'm one of those people who doesn't believe I'll ever really retire), I know that as I get into my fifties or sixties, I'd like to be able to work a little less, play a little more, and have enough free time to exercise just about every day.

But that's me. What do you want? Clearly, if you're reading this book, then one of your goals is to gain a clearer understanding of your money in general. But what about the specifics?

• Do you feel you're not investing enough for retirement?
• Are you fighting about money with your spouse?
• Are you afraid you'll die leaving your family in a bind because you don't have the right insurance?
• Do you feel like everyone's making money in the stock market except you?
• Are you mired in credit card debt?
• Or do you feel like you simply need a good-that is, an understandable-introduction to money?

I could sit here and type questions like this page after page after page. And perhaps I'd never hit on what drove you to the business section of your favorite bookseller. But it's important to get a grip on what you want from this book-and what you want from your money in general-in order to be truly successful as you work to-ward your financial goals.

Most people, you should know, have absolutely no idea what their financial goals are. According to one survey from the Certified Financial Planner Board of Standards, not setting measurable goals is the number one mistake Americans make with their money. Fewer than one third of financial planning clients actually have an idea of what they'd like their money to do. (And remember, those are people who've sought out professional financial help. The percentage of the population at large that's setting financial goals must be slimmer still.)

Why is goal setting a big deal? Because research shows it works. Establishing benchmarks for your money is like setting goals on the job, or on your diet or exercise plan. Unless you have them-unless you know that you want to make manager in under a year, lose five pounds in four weeks, or run a 10K this fall-your accomplishments will be meaningless. You may achieve all of those things, but be-cause you never set benchmarks, you won't have any means to measure your success. You'll never know when you've crossed the finish line. As a result, it'll be harder to keep going.

You also never get the emotional payoff that comes with having knocked an item off your list. I remember when my husband and I got our first wills. We already had an infant (yes, we should have done it before he was born, but we waited-like many people- until we were getting on our first airplane). And I was definitely nervous about sitting down in a lawyer's office and discussing all the issues that come up when you're making a will. But when the document finally arrived in the mail, all I can remember feeling was relief. We ran over to a friend's that day so we could sign in front of them as witnesses.

So that's the first thing we're going to talk about in this chapter: how to figure out what you want, and why you also need to revisit those desires every so often simply to make sure they haven't changed, and alter your plans if, as is likely, they have.

You may have noticed that earlier I didn't refer to just plain goals, but to measurable ones. Setting your benchmarks is one thing. But once you've set them-whether they include a new station wagon, retirement at sixty, or eliminating credit card debt-you have to figure out what they're going to cost you. Only then can you develop a schedule for stockpiling the assets you'll need in order to make those things happen.

Can you accomplish all of this yourself? Absolutely. You can do it with instruments as basic as a No. 2 pencil and a legal pad. Or you can install the latest version of Quicken or Money from Microsoft in your computer and let it walk you through the decisions. And if you're comfortable online, the Internet has more financial planning tools than I could ever describe in a book twice this size. (You can also hire a financial planner to help.)

Finally, none of this works unless you can make it happen- consistently-for weeks, months, or even years on end. Those of you who have seen me on television probably know I like to com-pare managing your money to exercising. The first day you hit the gym for Cardio Kickboxing (or whatever) it's brutal. Your thighs hate you. You can't breathe. Your muscles weren't made to work this way. Five minutes into the class, you're fantasizing about vegging out in front of Rosie. But if you can get yourself to stick it out, three times a week for a month, then all of a sudden you realize you can do it. You're kicking higher and punching harder. You have form. Now if you don't make class, you feel as if you're missing some-thing. That dose of endorphins has become as indispensable as your morning coffee. It's a habit. It's part of your life.

Managing your money works the same way. The first day you save every receipt so that you can track your spending, it's a pain. The bulge in your wallet is annoying. You don't quite understand how knowing that you spent $6.95 on a cobb salad roll-up and a Diet Coke and $4.69 on film is going to make a difference in your retirement account. But if you stick with it for a few days, then a week, then a month, all of a sudden you experience the same sort of confidence-boosting flash of results. You've got $200 more in your bank account at the end of the pay period this month than you did last month. Your brokerage account is gaining weight. Over time, saving those receipts, following your money, taking pride in Talking Goals your growing account balances becomes a part of you. You don't understand how you could have ever done it any other way.

Copyright © 2001 by Jean Sherman Chatzky. All rights reserved.

About the Author

Known to millions of readers and tv viewers, Jean Chatzky is the financial editor of NBC's Today show and also appears on CNBC. She is a regular columnist for Time, Money, and USA Weekend magazines. She is also the author of Pay It Down!