Helping us learn to make good financial choices, the Today show editor talks about her upbringing, her career, and more.
by Sue Tomchin
Pensions are becoming an endangered species, health insurance is a luxury and confidence in Social Security is ebbing. Now, more than ever, each of us has to be responsible for our financial well-being. That’s what makes Jean Chatzky such a valuable ally. As financial editor for NBC’s Today show, blogger at jeanchatzky.com and author of such best-selling books as Money 911, Not Your Parents’ Money Book (for young people) and, most recently, Money Rules: The Simple Path to Lifelong Security (Rodale Books), Chatzky conveys the message that everyone is able to make good financial choices. She came by her own money smarts through years in the trenches of financial journalism at such magazines as Money, SmartMoney, Forbes and Working Woman. She also spent two years in the equity research department of Dean Witter Reynolds. Chatzky also offers Money School, a series of online classes to help individuals get their financial lives on track.
You dedicate your book Money Rules to your parents, whom you say taught you the rules. What money messages did you receive growing up?
JC: I think the most important money messages of all: They taught me that money is a limited resource and that I had to learn to allocate toward things I needed first. They taught me the value of work. I started working at a very young age. And they taught me to save for the things that I want, in part by not opening their own wallets every time my brothers and I asked for something.
How did they have this wisdom?
JC: Neither had grown up with a lot of money. My father was a college professor. When I was young we certainly were comfortable but not rich. And they lived on a budget and always within their means. They had priorities. They very much wanted to put my brothers and I through college without debt, which they managed to do but it wasn’t easy for them. They knew what was important to them and made choices along those lines and taught us to do the same thing.
Were they unusual in their attitudes?
JC: I don’t think so—then. I think they were unusual in the sense that they were open and willing to talk to us about money. My mother has said that her own mother was open and willing to talk to her and her sister about money and that was very unusual. I think the era of entitlement has come along in the last decade or so. I don’t know that it was so profound when I was growing up.
At JWI, we know from our financial literacy work that many young women still resist learning about money because it seems so complicated. What money messages do you try to convey to women?
JC: I try to convey that although there are parts of the world of money that are difficult and complicated, you don’t necessarily have to get into them in order to have a very successful and comfortable financial life. The parts of the world of money that tend to get the most complicated are related to investing and certain insurance products. Although you do need to participate in the markets, and you need to save and put your money to work, you don’t need to do it in a complicated way in order to succeed. In fact, there is a lot of research that shows that the simpler, more basic, more boring investments, as I call them in Money Rules, are actually better for many, many people, because they are significantly cheaper.
Did you have a sense of where you wanted to go in your career?
JC: I knew I liked business journalism from the time I got my first job. I was very lucky in that the job that was open when I was looking for a job was as the editorial assistant to the business editor. It was a very good fit for me. I always loved math. I always loved numbers. I liked learning that numbers can be really useful in telling a story. I transitioned into personal finance a few years down the road because of a job opportunity and have really loved exploring the world of real people and their real money. I get to tell what are essentially very human stories; I get to know people and the struggles they are going through and sometimes help.
A lot of people talk about money, but your voice is unique in its clarity and the accessibility of your messages. How did you develop the Jean Chatzky brand of financial wisdom?
JC: I came into this as a layperson. I’m not an economist. I’m not a fund manager. I’m an English major. I needed to learn how to manage my own money, and I was very fortunate to be covering personal finance as my job. I learned on the job, and that enabled me not only to take care of my own finances, but to teach other people.
We live in a world where marketing is pervasive and sales are everywhere. How can we avoid overspending?
JC: I think we can do a couple of things. The first thing we can do is save before we spend. We do that by making saving automatic, however you are doing it and whatever you are doing it for. There is a lot of research now on 401(k) plans and the fact that automatic contributions and automatic escalation in contributions have made them much more effective. If we can help people figure out other ways in their lives to replicate the same thing—to save before you spend and put your money someplace where you can’t see it and can’t touch it—that will help us spend less.
The other thing that helps is to understand your own nature when it comes to spending. Play mind games to get yourself to cross the street or turn off the website where someone is having a sale. If you find yourself more inclined to spend money with a credit card than you are with a debit card or cash, only carry the debit card or only carry cash. Work within what you know about your personality.
What are you teaching your own children about money?
JC: I am teaching them to make choices by only giving them a certain amount of money and making them decide where they believe it’s important to spend it. I am teaching them that they have to work for things that they really want. I discuss things with them when it comes to value and making smart choices about how we use our resources. We have discussions about charitable giving because again everybody has a certain budget for the amount they are giving to charity. Where will our money be put to the best use? Where do we feel the gift is best made? My children are now teenagers. I have one in college and one in high school. They are ready for a level of conversation that is a little more advanced.
Can some of these messages start earlier, but in different ways?
JC: Absolutely. You can start conversations about choices when your children are in elementary school and you start an allowance because they tell you they need money for the school store. You decide what’s a reasonable amount but they have to decide how to allocate those resources, just like they decide whether to wear the red shirt or the blue.
On your website, you talk about the importance of giving back in a way that is meaningful to you. Did growing up in a Jewish home contribute to this philosophy?
JC: I remember having tzedakah every week at Hebrew school. That was part of what we were expected to do with our allowance; we had to make room for tzedakah. My parents were always givers. I don’t know if it was because they were Jewish, or if it was just who they were. When you are raised by givers, you become a giver.
Would you be willing to share one financial mistake that you have made?
JC: Sure. I’ve made many. My most classic mistake was pulling money out of a 401k account early in my career and not rolling it into an IRA. That was one of the mistakes that you look back on and think, Ach, what would that money be worth now? But I’m human. I’ve had credit card debt. I’ve mistimed some purchases including a big one when I bought a house. Things happen. But we move on. We try not to make them again. I am a very big believer in the power of saving. I have a money rule in the book which says that you can fix any financial mistake by saving more. I really believe that.
In Money Rules, you give guidance about money that is also just good sense advice about how to live one’s life. In doing the book, did any rules emerge that you’ve now incorporated into your own life?
JC: I’ve incorporated most of them into my life. There are some things that I’ve learned from the research that has come out of behavioral finance in the last few years that I try to live by. There’s a rule in the book that says if you are just looking, don’t try it on. If you are in a store and you try something on, at that point your psyche almost believes you already own that item and when you don’t buy it, it feels like a loss. One of the tenets of behavioral finance is something called loss aversion. We will go to great lengths to avoid feeling loss. It’s very true. If you are in a store and are really just looking and you don’t want to buy and you just want to see, you shouldn’t be touching things and you definitely shouldn’t be trying them on.
The shopping rules in the book—don’t shop sad; don’t shop angry; and don’t shop hungry—come from well-regarded academic studies. Anger makes us more optimistic. You really shouldn’t be handling money when you are angry, whether you are shopping or investing, because you will take too much risk and are going to overspend.
You debuted a program on your website called Jean Chatzky’s Money School. Could you tell us about it?
JC: For a long time people asked, “Can I hire you to come to my house and teach me about money?” I wish I could go to everybody’s house and teach them but my life quite doesn’t work like that. I decided to start a school on the Internet. I’m the child of a college professor and I have that in the back of my mind. I’m offering a series of classes that talk about budgeting, saving more and spending less, digging out of debt, improving your credit score, focusing on retirement and protecting yourself and the people you love with insurance and an estate plan.
(Originally published in spring 2013)