♪
OLIVER: HELLO,
EVERYONE.
WELCOME TO ANOTHER EDITION OF
"THE MONEY PRO$."
I'M ALSO TIGHT THAT I WILL BE
YOUR HOST FOR THE NEXT HALF HOUR
AS WE TALK ABOUT ALL THE ISSUES
RELATED TO YOUR MONEY -- HOW TO
KEEP IT, HOW TO MAKE IT, AND HOW
TO HELPFULLY MAKE IT GROW.
LET'S TALK ABOUT A SURVEY FROM
TIAA-CREF ABOUT RETIREMENT DATES
AND HOUSW SET IN STONE THEY
ARE.
FIRST, WE WILL BE JOINED BY
SPECIAL GUEST, OUR
MORTGAGE PRO, STEVE
TETZNER.
IT'S A SPECIAL REQUESTS --
SOMEONE TO EXPLAIN HOME-EQUITY
LOAN LINES AND CREDITS.
WHO BETTER TO TALK ABOUT THAT
TODAY?
WE WILL BE TALKING ABOUT A
QUESTION THAT I GET A LOT AND
IT'S A LITTLE CONCEPTUAL, BUT IT
COMES UP A LOT WITH FINANCIAL
PLANNING.
THEY REALLY CUTS TO THE HEART OF
PERSONAL FINANCE AND THAT'S THE
QUESTION OF CAN YOU AFFORD IT?
IF THERE'S SOMETHING YOU WANT TO
BUY THAT IS A BIG PURCHASE
OUTSIDE OF YOUR USUAL GROCERIES
AND ELECTRICAL BILL AND THINGS
LIKE THAT, AND YOU WANT TO
DECIDE IF THAT IS SOMETHING YOU
CAN AFFORD TO DO, HOW DO YOU
MAKE THAT DECISION?
THIS IS A QUESTION THAT COMES UP
A LOT AND PEOPLE MAKE THIS
DECISION AND A LOT OF DIFFERENT
WAYS, SOMETIMES TO THEIR
DETRIMENT.
FINALLY, FOR THOSE OF YOU WHO
ARE "SEINFELD" FANS, YOU WILL BE
FAMILIAR WITH THE SOUP NAZI.
HE GOT INTO SOME TAX TROUBLE
RECENTLY AND I WANTED TO SHARE
THAT WITH OUR VIEWERS BECAUSE
IT'S A TOPIC THAT COMES UP A LOT
ON THE SHOW AS WELL.
WE WILL BE TALKING ABOUT ALL
THOSE THINGS.
FIRST THING UP IS A NEW SURVEY
OUT FROM TIAA-CREF.
MANY OF YOU ARE FAMILIAR WITH
,
THEY ARE THE SPONSORS AND
MANAGERS OF THE STATES
RETIREMENT PLAN AS WELL AS MANY
STATE RETIREMENT PLANS
THROUGHOUT THE COUNTRY.
IF YOU ARE AN EMPLOYEE OF THE
UNIVERSITY OR MANY OTHER PRIVATE
SCHOOLS, SOME OF YOUR PENSION
MAY BE OFFERED BY T
TIAA-CREF.
A VERY LARGE INSURANCE ANNUITY
COMPANY, THEY PUT OUT A LOT OF
RESEARCH ON THINGS RELATED TO
RETIREMENT.
THEY PUT OUT A SURVEY AND I WANT
TO SHARE THEM WITH OUR VIEWERS.
FIRST, WANT TO SHARE THE DETAILS
OF THE SURVEY.
THEY SURVEYED A THOUSAND PEOPLE
BETWEEN THE AGES OF 55 AND 68.
THEY ALSO HAD TO INDICATE THESE
PEOPLE THAT THEY WERE PLANNING
TO RETIRE WITHIN THE NEXT FIVE
YEARS.
WHAT THEY WANTED TO LOOK AT, THE
PRIMARY PURPOSE OF THE STUDY WAS
TO COMPARE ANTICIPATED
RETIREMENT DATES WITH THE DATE
THAT THAT SAME PERSON
ANTICIPATED 10 YEARS PREVIOUSLY.
INTERESTINGLY ENOUGH 61%
INDICATED THAT THEY CHANGED THE
DATE AS THEY'VE GOTTEN CLOSER.
LET ME PUT UP THE DETAILS OF THE
RESULT OF THE SURVEY.
LET ME TALK QUICKLY ABOUT THAT.
ACCORDING TO THE SURVEY, 37%
INDICATED THEY ARE ON TARGET.
IN OTHER WORDS, ACCORDING TO THE
SURVEY, WHEN THEY WERE ASKED,
THEY WERE PLANNING ON THE SAME
DATE THAT THEY PLANNED ON 10
YEARS PRIOR.
THEY WERE STILL ON TARGET.
THOSE FOLKS HAD NOT CHANGED.
24% PLANNED ON RETIRING
EARLIER.
A LOT OF PEOPLE ASSUMED THAT IF
THE DATE WAS GOING TO CHANGE
THAT THEY WOULD BE PUTTING OFF
RETIREMENT.
MAYBE THEY WERE NOT FEEL SECURE
ENOUGH YET, BUT THE REALITY IS
THAT PEOPLE CHANGE THE DATE AS
THEY WORK LONGER AND LONGER AND
THEY REALIZE THEY SIMPLY CAN'T
TAKE IT ANYMORE AND MOVE UP THE
RETIREMENT DATE FORWARD.
THIS IS SOMETHING I'VE SEEN A
NUMBER OF TIMES IN MY PRACTICE.
THE FINAL PIECE IS 37% OF THOSE
PEOPLE SURVEYED INDICATE THAT
THEY PLAN TO RETIRE LATER THAN
THE DATE THEY HAD IN MIND 10
YEARS PRIOR.
FOR MANY PEOPLE, THEY DO IN FACT
DELAY THE DATE OF WHICH THEY
PLAN ON RETIRING.
I'VE ACTUALLY SEEN THIS WHERE
THE DATE WAS PUSHED OFF MULTIPLE
OCCASIONS.
PEOPLE GO INTO IT THINKING THEY
ARE GOING TO RETIRE EARLY AT 62.
WHEN 62 APPROACHES, THEY WILL
PUSH IT OFF TO 65, 67.
I WANT CLIENT GO ALL THE WAY TO
70 BEFORE SHE DECIDED IT WAS
TIME TO PULL THE PLUG.
IT'S FOR A VARIETY OF DIFFERENT
REASONS.
SOME OTHER RESULTS FROM THE
SURVEY THAT I T
FIND INTERESTING.
PRIORITIES OF RETIREMENT --
96%
OF PEOPLE INDICNTED
TO HAVE FLEXIBILITY TO DO
WHATEVER THEY WANTED.
I THINK THAT PROBABLY GOES
WITHOUT SAYING.
93% OF PEOPLE INDICATED THEY
WANTED TO SPEND TIME WITH
FRIENDS AND FAMILY.
80% INDICATED THAT THEY WANTED
TO SPEND MORE TIME TRAVELING.
IN MY EXPERIENCE, THE TRAVEL ONE
IS ONE THAT PEOPLE THROW UP A
LOT.
UNFORTUNATELY WHEN I SEE TOO
OFTEN IS THAT WHEN PEOPLE
FINALLY RETIRE, THEY ARE
DISTRACTED BY A LOT OF OTHER
THINGS.
I DON'T SEE THE TRAVEL AS MUCH
AS PEOPLE ANTICIPATE THEY ARE
GOING TO TRAVEL.
IN TERMS OF FEELING PREPARED FOR
RETIREMENT, KIND OF MIXED NEWS.
43% OF PEOPLE REPORTED FEELING
EXTREMELY OR VERY PREPARED FOR
RETIREMENT.
KEEP IN MIND THAT THESE ARE
PEOPLE IRE WITHIN
THE NEXT FIVE YEARS.
43% FEEL EXTREMELY PREPARED.
46 PERCENT FEEL SOMEWHAT
PREPARED.
55% FEEL PREPARED TO
MANAGE
RETIREMENT INCOME.
INTERESTINGLY FOR ME
, IN THE
PAST SIX WEEKS, THAT HAS BEEN
THE MOST COMMON PHONE CALL I'VE
GOTTEN FROM PROSPECTIVE CLIENTS
ON HOW TO MANAGE OVERTIME
INCOME.
-- A RETIREMENT INCOME.
SOME INTERESTING RESULTS FROM
THE TIAA-CREF SURVEY AND ONE TO
SHARE THEM WITH YOU.
OLIVER: WELCOME BACK TO "THE
MONEY PRO$."
I'M JOINED BY STEVE TETZNER.
THANKS FOR BEING WITH US.
WE TALKOPICS WE
ARE COVERING ON THE SHOW AND I
SAID I HAVE A CLIENT WHO WANT
SOMEBODY TO EXPLAIN HOME-EQUITY
LOANS TO HER.
THIS IS A PROCESS SHE WENT
THROUGH AND FOT
CONVOLUTED.
YOU WERE KIND ENOUGH TO SAY, ALL
RIGHT, LET'S DO THAT.
I'M SURE SHE HAS A QUESTION AND
PEOPLE HAVE QUESTIONS ABOUT IT
TOO.
LET'S BE VERY ENTRY-LEVEL ABOUT
IT AND SAY, WHAT ARE WE TALKING
ABOUT WHEN WE SAY HOME EQUITY
LOAN?
ISN'T ANY MORTGAGE YOU TAKE OUT
ON YOUR HOUSE A HOME EQUITY
LOAN?
STEVE: TECHNICALLY NOT.
A FIRST MORTGAGE IS JUST THAT.
IT'S A DIFFERENT MONEY SUPPLY
THAN WHAT HOME EQUITY MONEY
COMES FROM.
HOME EQUITY MONEY IS BANKS
LENDING THEIR OWN MONEY WHERE A
MORTGAGE IS TECHNICALLY A
SECONDARY MONEY PRODUCT.
HOME-EQUITY IS TECHNICALLY
A
SECOND MAIN POSITION.
IT IS MAYBE FOR PEOPL C13
PAID OFF THEIR FIRST MORTGAGE
ALREADY AND GET SOME TYPE OF
SECOND THE PRODUCT -- EQUITY
PRIVATE.
PRODUCT.
OLIVER: A CLIENT BUT THEIR HOUSE
AND USED A MORTGAGE TO TYPICALLY
BUY THE HOUSE.
THAT IS NOT WHAT THEY ARE
TALKING ABOUT, BUT NOW THEY TALK
ABOUT THEY GO OUT AND TAKE
ANOTHER LOAN TO BORROW
ADDITIONAL EQUITY.
YOU SAY THIS MONEY IS BEING
BORROWED FROM THE BANK.
THERE'S A LOT OF DIFFERENT TYPES
OF THESE LOANS.
THIS ISE WANT TO SPEND
SOME OF OUR TIME.
CAN YOU GIVE US A
BREAKDOWN OF
THE UNIVERSE OF HOME-EQUITY LOAN
PRODUCTS AND HOW THEY ARE
DIFFERENT FROM ONE ANOTHER?
STEVE: SURE.
THE HOME EQUITY ENVIRONMENT
PRODUCTS AND ADJUSTABLE RATES.
THERE ARE LOANS AND THEN THERE
ARE LINES.
ALONE IS TYPICALLY LIKE A FIRST
MORTGAGE.
IT MAY BE A 25 YEAR
MINIATURIZATION FIXED RATE --
AMATEU AND HER EYES ASIAN
MORTIZATION PRODUCT.
A LOT OF THESE PRODUCTS NOW WILL
COME BACK WHERE CERTAIN BANKS
AND CREDIT UNIONS ARE LETTING
PEOPLE ARE A BACKOUT -- BORROW
BACK OUT TO 100% OF THE MARKET
VALUE OF THEIR HOMES.
THE HOME-EQUITY LINE IS
TYPICALLY A VARIABLE RATE.
IT'S A LINE OF CREDIT.
I HATE TO USE THE WORD CREDIT
CARD, BUT IT'S LIKE A CREDIT
CARD ON YOUR HOUSE.
IS A MUCH LOWER RATE AND
INTEREST CAN TYPICALLY BE
TAX-DEDUCTIBLE ON HOME-EQUITY
PRODUCTS.
THE HOME-EQUITY LINE IS A LINE
OF CREDIT.
YOU CAN DROP MONEY OUT AND USE
IT AND PAY MONEY OUT.
TYPICALLY THE DRAW WILL LAST
AROUND 10 YEARS.
AFTER THAT 10 YEAR HAS EXPANDED
-- 10 YEARS HAS EXPIRED, YOU
TYPICALLY IT TO A
DIFFERENT PRODUCT OR BEGIN TO GO
TO AN A
MORTIZATION.
PRIME
RATE, THE RATE THE FEDERAL
RESERVE IS BASICALLY INFLUENCING
DIRECTLY.
WHEN YOU HEAR THE FED RAISED
RATES, THAT WILL HIT YOUR HOME
EQUITY LINE IMMEDIATELY
EFFECTIVE THAT DAY.
THE LOWER THE LOAN TO VALUE, THE
BETTER RATE YOU ARE GOING TO
GET.
IF YOU ARE BORROWING OUT TO 80%,
YOU'RE GOING TO GET A BETTER
RATE THAN SOMEBODY LOOKING TO
BORROW TO 90% OR 100% OF THE
VALUE OF THEIR HOME.
HOME EQUITY ARE TYPICALLY FOR
SHORT-TERM LENDING.
YOU'LL TAKE THE MONEY OUT AND
PAY BACK IN A SHORT TIME.
YOU WANT TO HAVE THE FLEX
A13
OLIVER: THAT'S THE NEXT THING I
WANT TO TALK ABOUT.
MAKE
SURE EVERYONE UNDERSTANDS
THAT A HOME-EQUITY LOANS
DISTINGUISHED FROM A HOME EQUITY
LINE -- IT SEEMS TO ME THE MAJOR
DIFFERENTIATING FACTORS ARE THE
FIXED VERSUS VARIABLE RATES.
THE HOME-EQUITY LOAN, THE RATE
THAT YOU ARE QUOTED IS THE RATE
FOR THE LIFE OF THE LOAN.
THERE'S GOING TO BE SOME FIXED
PAYMENT SCHEDULE, LIKE C13
5, 101, 15
YEARS, A LOT
LIKE A FIRST MORTGAGE OR CAR
LOAN.
HOME EQUITY LINE, THE RATE IS
GOING TO VARY BASED ON THE PRIME
RATE PLUS I IMAGINE SOME MARGIN.
THERE IS NOT A SET PAYMENT
SCHEDULE, AT LEAST INITIALLY.
STEVE: IT WOULD USUALLY BE AN
INTEREST ONLY PAYMENT ON A
MONTHLY BASIS UNTIL YOU GET OUT
OF YOUR 10 YEAR DRAW PERIOD.
OLIVER: WE SET THE STAGE OF TWO
VERY DIFFERENT DISTINCT
PRODUCTS.
HOW ARE PEOPLE USING THE
DIFFERENT PRODUCTS?
WHAT OUR SITUATIONS, TECHNIQUES,
METHODS?
WHAT DOES ONE WORK REST IN --
BEST IN AN ANOTHER NOT WORK WELL
ETC.?
STEVE: IT IS SOMETHING WHERE YOU
HAVE A DEFINED PROJECT.
I NEED $50,000 OR $30,000 AND
YOU WANT TO PAY IT BACK IN A SET
TIME.
IF YOU KNOW IT'S GONE TO TAKE
YOU 10 YEARS TO PAY IT BACK, I
ALWAYS RECOMMEND TO DO THE FIXED
RATE LOAN PRODUCT.
IF IT'S A
SITUATION WHERE IT
SHORT-TERM LENDING, YOU USE THE
LINE.
THAT GIVES YOU THE FLEXIBILITY
OF A MINIMAL PAYMENT, BUT I'VE A
LOT OF CLIENTS WHO SEE ANNUAL
BONUSES.
THEY MAY DO A PROJECT ON THEIR
HOUSE, BUT WHEN THEY RECEIVE THE
BONUS, THEY WILL PAY THEIR LINE
OFF.
HAVING HOME-EQUITY LINE
OF CREDIT ON YOUR HOME, JUST TO
HAVE THAT RESERVE AVAILABLE TO
YOU, DOESN'T HURT YOU.
THERE MAY BE AN ANNUAL SAY A $50
OR $75 TO MAINTAIN IT, BUT IT'S
NICE TO HAVE TO JUST HAVE THAT
LINE OF CREDIT AVAILABLE IN THE
EVENT OF A LARGE PURCHASE OR
EMERGENCY.
OLIVER: I TALK TO CLIENTS ABOUT
THIS AND I HAVE ONE AS WELL.
LINE OF CREDIT CAN BE USED FOR A
LOT OF DIFFERENT THINGS, BUT
EMERGENCY FUND IS ONE OF THEM.
CREDIT IS A VALUABLE THING
OBVIOUSLY THAT YOU CAN TAP ON A
RELATIVELY ECONOMIC BASIS,
CERTAINLY COMPARED TO MOST LOANS
THAT CONSUMERS CAN GET OUT
THERE.
THEY WILL PROBABLY BE THE LEAST
EXPENSIVE TO GET A LARGE AMOUNT
OF MONEY.
ON THE HOME-EQUITY LOAN SIDE,
FOR SET PROJECTS OVER
A
PARTICULAR TIME, TYPICAL
EXAMPLES WOULD BE IN ADDITION.
STEVE: HOME IMPROVEMENT.
OLIVER: MAY BE BUYING A CAR AND
WE CAN DISCUSS THE MERITS OF
THAT.
THOSE ARE THE TYPICAL THINGS
WHERE YOU ARE GOING TO SEE THAT.
HOW MUCH -- AND YOU ALLUDED TO
THIS EARLIER -- HOW IS IT
DETERMINED HOW MUCH SOMEBODY CAN
BORROW?
YOU TALKED ABOUT 80% OF VALUE,
90% OF VALUE, AND IN SOME CASES
100% OF VALUE.
WAS THAT WHOLE PROCESS LIKE?
HOUSE THAT DECISION BE MADE?
STEVE: THE BANK WILL DO AN
APPRAISAL ON THE PROPERTY TO
DETERMINE CURRENT MARKET VALUE.
IF THE PRODUCT THEY ARE APPLYING
FOR ALLOWS THEM TO GO TO 90% OF
THE VALUE, KEEP IT SIMPLE.
TO HOUSE IS WORTH
$100,000 AND
THE FIRST MORTGAGE IS $70,000,
THE EQUITY PRODUCT IS UP TO
$90,000, SO THEY CAN GET A
$20,000 LOAN OR LINE.
IT DEPENDS ON THE PARAMETERS OF
THE LOAN OR LINE THEY ARE
APPLYING FOR.
THE CLOSER YOU GET TO THE 100%,
THE HIGHER INTEREST RATE, THE
HIGHER THE RISK.
WHAT WE ARE SEEING IS HOME
EQUITIES BEING USED FOR BRIDGE
LOANS.
PEOPLE WHO ARE LOOKING TO BUY A
HOME BEFORE THEY SELL THEIR
CURRENT HOME, THEY MIGHT PUT A
LINE OF CREDIT ON THE HOUSE THEY
BUY OR THEY ARE SELLING.
IT HELPS THEM BRIDGE THE EQUITY
GAP UNTIL THEY SELL THEIR
CURRENT HOME.
THE 801010 IS BACK
, THE OLD
PRODUCT WHERE YOU BUY A HOME AND
YOU PUT 10% DOWN AND TAKE A
FIRST MORTGAGE FOR 80% AND THE
SECOND MORTGAGE FOR 10% TO AVOID
THE PRIVATE MORTGAGE INSURANCE.
ALSO VERY POPULAR IN THE JUMBO
MARKET.
YOU CAN BUY A HOUSE FOR A
MILLION DOLLARS AND ONLY PER 10%
DOWN.
YOU DO AN 80% FIRST MORTGAGE AND
A 10% EQUITY LINE DEPENDING ON
WHAT THE CONSUMER WANTS, AND
THEY ARE USING IT TO PURCHASE
HOMES WITH LOWER DOWN PAYMENTS
THAN PUTTING 20%.
OLIVER: THERE ARE VARIOUS
FINANCING STRATEGIES THAT THESE
DIFFERENT PRODUCTS CAN BE USED
WITH.
THE ONE YOU JUST TALKED ABOUT
WAS ONE THAT HAD BEEN SUGGESTED
TO ME WITH THE POSSIBILITY OF
BUYING ANOTHER HOUSE.
IF YOU HAVE TO PUT DOWN A
DEPOSIT OF 5% ON A
MILLION-DOLLAR HOUSE, YOU'RE
TALKING ABOUT A $50,000 CHECK.
NOT EVERYBODY CAN TAP $50,000 IN
CASH.
YOU MIGHT HAVE TO LIQUIDATE
SECURITIES AND IT MAY NOT BE AN
OPPORTUNE TIME TO DO THAT.
YOU CAN WRITE A $50,000 CHECK ON
YOUR LINE OF CREDIT AS A DEPOSIT
ON A NEW HOUSE POTENTIAL.
STEVE: NOT JUST A DEPOSIT BUT
DOWN PAYMENT.
IN THIS MARKET, THE PURCHASE
MARKET IS SO AGGRESSIVE.
IF YOU WANT TO BUY AND THAT
PRICE RANGE, IT IS DIFFICULT TO
MAKE A CONTINGENT ON SELLING
YOUR CURRENT HOME.
IF YOU HAVE A HALF-MILLION
DOLLAR HOME WITH A $200,000
MORTGAGE, YOU HAVE $300,000
WORTH OF EQUITY HE WANT TO ROLL
INTO THE NEW HOME.
IF YOU HAVE AN EQUITY LINE
WITH
$200,000, YOU CAN TAKE THAT
WHOLE $200,000 AND PUT ON THE
MILLION-DOLLAR HOME WITHOUT
TAPPING INTO RETIREMENT
OR INVESTMENT MONEY.
HAVING A HOME EQUITY LINE IS A
REALLY SMART THING TO DO.
OLIVER: I WASN'T PLANNING ON
ASKING THIS QUESTION, BUT YOU
WOULD ADVISE SOME OF YOU HAVE IT
IF THEY DID NOT HAVE IMMEDIATE
PLANS FOR IT.
IF YOU DO NOT DRAW ANY MONEY,
YOU WON'T COST ANYTHING.
DOES THE APPLICATION PROCESS
DIFFER FROM A TRADITIONAL
FIRST MORTGAGE APPLICATION
PROCESS?
WHAT ARE SOME OF THE CLOSING
COSTS, PREPAYMENT PENALTIES?
WHAT ARE THE THINGS CONSUMERS
SHOULD BE AWARE OF IN TERMS OF
TAKING A LOAN OUT?
STEVE: TO QUESTION.
-- GOOD QUESTION.
MOST OF THE TIME WHEN YOU'RE
TAPPING THE EQUITY, TYPICALLY
THE HOME EQUITY PRODUCTS ARE
DONE WITH NO CLOSING COSTS.
THEY WILL HAVE A EARLY
TERMINATION FEE TYPICALLY.
IF YOU TERMINATE THE LINE AND
SELL THE HOUSE WITHIN TWO YEARS
OR THREE YEARS OF TAKING THE
LINE, THAE THE BANK MAY
CHARGE YOU A PENALTY FOR
TERMINATING THE LINE BECAUSE IT
COSTS MONEY TO PUT THE LINE IN
PLACE.
THEIR PAYING THE APPRAISAL FEE
,
ETC., SO THEY NEED TO RECUPERATE
THE COST.
OLIVER: LAST QUESTION AND WE ARE
PRETTY MUCH OUT OF TIME.
DURING THE HOUSING CRISIS, WE
SAW LENDERS RESCIND LINES OF
CREDIT.
BORROWERS WERE NOT IN TROUBLE,
BUT LENDERS DO NOT WANT TO RISK
OUT THERE.
DO YOU SEE THAT HAPPENING AGAIN?
IS THAT SOMETHING TO BE AWARE
OF?
STEVE: ABSOLUTELY.
IF YOU SEE A LINE OF AGREEMENT
WHERE THE LINE IS ONLY 80% OF
VALUE AND THEN YOUR HOME DROPS
BY 20%-40%, THE EQUITY POSITION
MAY NO LONGER BE THERE.
THEY HAVE THE RIGHT TO
TERMINATE.
THEIR TERMINATING THEM BECAUSE
IN MANY CASES, THE LINE AMOUNT,
WHEN THE PROPERTY VALUES
DROPPED, WOULD NOW EXCEED 80% TO
MAYBE EVEN THE FULL VALUE OF THE
HOME.
OLIVER: THE BANKS HAVE TO
PROTECT THEMSELVES.
THEY CANNOT BE ON THE HOOK FOR A
LOAN WHERE COLLATERAL IS NOT
PAID OUT.
I HOPE THAT ANSWERED SOME OF MY
CLIENTS QUESTIONS.
, CAN YOU AFFORD IT -- UP NEXT,
CAN YOU AFFORD IT?
STAY TUNED.
OLIVER: WELCOME BACK TO "THE
MONEY PRO$."
I WANT TO TALK ABOUT SOMETHING
THAT COMES UP FROM TIME TO TIME
AND THAT IS SOMETHING PEOPLE
LAST THEMSELVES OR ME IF THEY
ARE A CLIENT.
CAN I AFFORD IT?
I'M NOT TALKING ABOUT CANNOT
AFFORD TO GO OUT TO DINNER
TONIGHT OR CAN I AFFORD A CUP OF
COFFEE AT STARBUCKS?
I'M TALKING ABOUT MAJOR
PURCHASES WHERE YOU LOOK AT
SOMETHING AND SAY, I WOULD
REALLY LIKE TO DO THIS, WHETHER
IT'S A VACATION, NEW CAR OR
BOAT, WHATEVER IT IS.
AN UNUSUALLY LARGE PURCHASE MAY
BE EQUAL TO AT LEAST ONE MONTH
TAKE HOME PAY IF NOT
SUBSTANTIALLY MORE.
YOU ARE ASKING YOURSELF, CAN I-4
TO DO THIS?
-- CAN I AFFORD TO DO THIS?
MANY PEOPLE WILL NOT ASK THIS
QUESTION I AT ALL.
WE CALL THIS THE STICK YOUR HEAD
IN THE SAND APPROACH.
THAT IS NOT ONE I WOULD
ADVOCATE.
THOSE WHO TAKE THE STEP OF
ASKING YOURSELF IS THIS
SOMETHING I CAN AFFORD, LET ME
GIVE YOU OTHER QUESTIONS TO
REFLECT ON TO HELP YOU MAYBE
FIGURE THAT OUT.
LET'S KEEP IN MIND THAT PERSONAL
FINANCE IS ALL OF CURRENT
--
ABOUT CURRENT CONSUMPTION VERSUS
FUTURE CONSUMPTION.
IT'S NOT ALL ABOUT SAVING FOR
THE FUTURE.
YOU GOT TO DO SOMETHING'S NOW
AND YOU HAVE GOT TO BE ABLE TO
DO SOME THINGS LATER AND YOU
HAVE GOT TO BE ABLE TO BALANCE
THOSE TWO THINGS NOW TO HAVE A
HAPPY FINANCIAL LIFE.
YOU HAVE TO EVALUATE THIS
QUESTION EFFECTIVELY.
LET ME TAKE YOU THROUGH SOME OF
YOURSELF.IONS YOU CAN ASK-
YOU CAN SEE HOW THE PERSONAL
CONVERSATION GOES AS YOU DECIDE
CAN I AFFORD TO DO THIS?
ARE YOU A NET SAVER?
WE TALK ABOUT THIS ON THE SHOW
ALL THE TIME.
THE KEY METRIC TO WHETHER YOUR
FINANCIAL SITUATION IS HEALTHY
OR NOT, THE ONLY THING THAT
MATTERS IS ARGUMENT AT SABR?
E UN
YOU A NET SAVER?
DO YOU SPEND LESS THAN YOU MAKE?
MI NET SAVER THIS WEEK, MONTH,
OR YEAR?
DAYS, WEEKS, AND MONTHS DON'T
MAKE A LOT OF DIFFERENCE.
WHEN YOU GET TO THE MONTH, IT'S
IMPORTANT TO LOOK WHETHER YOU
ARE A NET SAVER.
ON A YEARLY BASIS, THAT BECOMES
A VERY EFFICIENT METRIC TO
DECIDE HOW I SAVED ANYTHING THIS
YEAR?
IF YOU ARE A NET SAVER, THAT
BODES WELL FOR THE IDEA THAT YOU
CAN AFFORD TO DO SOMETHING.
IT WILL EAT INTO YOUR SAVINGS,
BUT IT WILL NOT FURTHER PUT YOU
UNDER WATER WHEN IT COMES WITH
YOUR ABILITY TO BECOME A NET
SAVER.
IF YOU'RE NOT A NET SAVER, YOU
HAVE TO EVALUATE TRIED TO GET
NEXT, DO YOU HAVE REVOLVING
CREDIT OR REVOLVING DEBT?
IF YOU CARRY BALANCES ON CREDIT
CARDS MONTH-TO-MONTH -- I DON'T
MEAN YOU USE CREDIT CARDS AS A
CONVENIENCE AND PAY THEM OFF AT
THE END OF THE MONTH, BUT DO YOU
MONTH-TO-MONTH.
THAT'S AN INDICATION THAT YOU
ARE A NET SPENDER.
YOU NEED TO GET RID OF REVOLVING
DEBT BEFORE YOU MAKE ANY BIG
PURCHASES OR YOU NEED TO WEIGH
THAT DECISION VERY CAREFULLY.
NEXT, ARE YOUR LONG-TERM GOALS
ON TRACK?
HAVE YOU DONE ANY LONG-TERM
FINANCIAL PLANNING?
ARE YOU PUTTING MONEY AWAY FOR
COLLEGE, FOR RETIREMENT, FOR
WHATEVER YOUR LONG-TERM
FINANCIAL GOALS ARE?
IF THOSE GOALS ARE ON TRACK,
THEN YOU HAVE TO EVALUATE IS
THIS EXPENDITURE GOING TO UPSET
THOSE GOALS AND IF IT'S NOT
GOING TO, THEN THAT OBVIOUSLY
WOULD INDICATE THIS IS SOMETHING
YOU CAN AFFORD DO.
IF IT IS GOING TO AFFECT THOSE
GOALS, THEN YOU HAVE TO BALANCE
THE IMPACT ON YOUR LONG-TERM
GOALS WITH THE JOY OR PLEASURE
YOU ARE GOING TO GET OUT OF THE
CURRENT EXPENDITURE THAT YOU ARE
LOOKING TO MAKE.
AT LEAST YOU HAVE SOMETHING TO
WAY -- THE FUTURE GOAL URSUS THE
PRESENT GOAL.
FINALLY, HOW LONG IS IT GOING TO
TAKE TO PAY THIS BACK?
IF YOU ARE GOING TO MAKE AN
EXPENDITURE THAT NORMALLY YOU
ARE A NET SAVER OVER THE COURSE
OF THE YEAR, BUT THIS PARTICULAR
EXPENDITURE WILL THROW YOU INTO
THE CATEGORY OF NET SPENDER, THE
QUESTION IS -- UNDER YOUR NORMAL
SAVINGS PACE, HOW LONG WILL IT
TAKE YOU TO ESSENTIALLY PAY
YOURSELF BACK?
SO IF YOU ARE SAVING ON A NET
BASIS $500 A MONTH, THAT IS
$6,000 A YEAR.
THIS IS BEEN A CHAIR IS $12,000.
THAT -- EXPENDITURE IS $12,000.
THAT IS TWO YEARS OF SAVINGS.
IS THAT THE IMPACT YOU WANT ON
YOUR FINANCES?
WE ALL REALIZED YOU HAVE TO
SPEND MONEY AND MOMENTS YOU WANT
TO TAKE IT VANTAGE OF.
THESE ARE THINGS TO THINK ABOUT
AND RATIONALIZE AS YOU CONSIDER
WHETHER YOU CAN REALLY AFFORD TO
DO THIS THING THAT YOU BADLY
WANT TO DO.
UP NEXT, TALKING ABOUT THE SOUP
NAZI FOR THOSE "SEINFELD"
FANS
OUT THERE AND THE TAX TROUBLE HE
OLIVER: WELCOME BACK TO "THE
MONEY PRO$."
THOSE OF YOU WATCHING WHO ARE
"SEINFELD" FANS WILL REMEMBER
THE SOUP NAZI.
IT TURNS OUT THAT HE HAS TURNED
INTO A PRETTY BIG CHAIN OF
RESTAURANTS BASED IN STATEN
ISLAND.
THE CFO OF SUPERMAN -- NOT THE
CHARACTER YOU SEE ON THE TV
SHOW, BUT THE CFO RESPONSIBLE
FOR THE FINANCES OF GOTTEN --
GOT INTO TROUBLE WITH THE IRS
AND ITS SIGNIFICANT TAX TROUBLE.
IT'S RELATED TO NOT PAYING
,
WITHHOLDING TAXES ON SOCIAL
SECURITY, MEDICARE, AND INCOME
FOR INCOME PAID TO EMPLOYEES OF
SOUP MAN INCORPORATED.
WHAT WAS HAPPENING IS THAT HE
WAS BASICALLY PAYING EMPLOYEES
UNDER THE TABLE.
THIS WAS NOT A SORT OF SIDE
TRANSACTION.
THIS AMOUNTED TO A COUPLE
MILLION DOLLARS AND AMOUNTED TO
OVER $500,000 IN TAXES AVOIDED.
THIS GENTLEMAN IS FACING FIVE
YEARS IN PRISON.
SO LET THIS BE A WARNING TO
ANYONE THAT THINK ABOUT THE IDEA
OF NOT PAYING YOUR ENTIRE IRIS
BILL.
THIS DOES NOT MEAN TAXES AND
PENALTIES.
THEY CAN ALSO MEAN CRIMINAL
CHARGES, WHICH IS NOT SOMETHING
YOU WANT TO FACE.
NOT ONLY NO SOUP FOR YOU, BUT
FIVE YEARS OF NO FREEDOM FOR YOU
IS NOT A GREAT DEAL.
THANKS FOR WATCHING "THE MONEY
PRO$."
WE LOOK FORWARD TO SEEING YOU
NEXT TIME ON "THE MONEY PRO$."
TAKE CARE, FOLKS.
HAVE A GREAT WEEKEND.
♪
For more infomation >> Trapezius Muscle l | Five Advice That Will Help You When You Twist Your Neck - Duration: 5:27. 
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