Jill Schlesinger knows a thing or two about money — and the dumb ways people spend it.
Last year, the certified financial planner and CBS business analyst wrote the book "The Dumb Things Smart People Do With Their Money: Thirteen Ways To Right Your Financial Wrongs."
Now, Schlesinger is back to share three of her top tips on how to spend your money the smart way.
Don’t Take On Too Much College Debt
According to the Federal Reserve Bank of New York, Americans owed about $1.5 trillion on student loans as of last March — more than twice the amount from a decade earlier.
Students whose families make too much money to receive good financial aid but don’t make enough to pay out of pocket are the ones taking on tremendous amounts of loans, Schlesinger says.
College graduates make more money but people take on too much debt to pay for school because they don’t critically consider the payoff, she says.
“I think that debt has really started to sink many young people's financial fortunes at far too early in age,” she says.
Schlesinger’s general rule for student loans: Don’t take on more debt than you’ll make in your first year or two in the workforce. If you’re studying to be a software engineer and expect to make close to $80,000, for example, taking $60,000 is reasonable, she says.
But for lower-paying fields, Schlesinger doesn’t recommend taking on more debt than your expected starting salary to pay for school.
Some of the most “pernicious” debt people take on is to pay for graduate school, she says.
“In many cases, the graduate school degree does not see a huge bump up in salary in many fields,” she says. “So you get a credential that doesn't pay off in the long run.”
Buying A Home Isn’t Always A Better Deal Than Renting
In some markets across the U.S., housing prices may suggest it’s a better deal to buy a home rather than rent one.
People think they should avoid renting, Schlesinger says. But this rush toward homeownership hasn’t paid off for many eager buyers, she says.
“Renting is a fabulous option for lots of people,” she says. “Number one, you are not burdened by upkeep. Number two, you have flexibility if you get a job offer someplace else.”
When people crunch the numbers, they often don’t consider the cost of upkeep — on top of interest, taxes and homeowner’s insurance, she says. Upkeep can cost between 1% to 3% of the purchase price every year, she says.
Plus, homeowners aren’t getting full write-offs in some high-tax states that changed their tax laws, she says.
Renting gives older people an opportunity to free up the equity in their homes and decide where they want to go next, she says.
Schlesinger recommends people use the New York Times rent vs. buy calculator to determine whether they should buy or rent.
“Try to drown out that that noise from maybe your parents or your grandparents who are saying, ‘You're throwing money out the window,’ ” she says. “Instead of saying, ‘I'm throwing money out the window,’ say ‘I'm buying flexibility.’ ”
The Worst Financial Mistake, According To Schlesinger: Neglecting To Write A Will
By not planning for your own death, you can cause chaos for the loved ones you leave behind, she says.
“First of all, just because you don't want to talk about or think about your own death doesn't mean it's not going to happen,” she says. “And by not planning around this and not putting documents in place, you are robbing your heirs of their ability to grieve for you.”
Some folks believe they don’t need a will because they don’t have money, she says. But a will can also resolve other issues like guardianship of children or assigning someone to make health care decisions on your behalf.
People can make a will online, but Schlesinger recommends going to a qualified estate attorney.
“Know that not doing this is not going to make it go away,” she says. “Make your wishes known.”
This segment aired on January 27, 2020.