Potential Drawback to Saving?
Question: What are some of your potential drawbacks to saving your money?
Answer: The drawback is inflation. What you don't spend now, you're going to spend later. You could get that eaten up in inflation. It's important that you know what the inflation number is. It's been 1.2% for a long time, but it's moving up very rapidly now. You need to beat that rate, even if you're talking about your savings account. Right now, online there's a bank offering 4% in an insured account, so if it's not at your local bank, you need to go online to find a way to beat the inflation rate.
Store Credit Cards
Question: What is your advice about stores that offer credit cards?
Answer: The downside to store credit cards is people forget they have them. People get them to get 10% off their bill that day and then they forget they have them. But it's counting against your credit score every day. The other thing is a lot of folks sign up and think they're getting, for example, Spencer's credit card from the Spencer's store, but they're not. They're getting a Spencer's-branded Visa card. Most people don't know that so you should be asking whether you're getting a store credit card or a Visa or Mastercard. The store cards tend to get used less, so it tends to curb your spending because you can only use it at the one store.
Better to Buy or Rent Right Now?
Question: What are the trade-offs between buying a home or staying in the apartment that I'm renting?
Answer: There's a real freedom in staying in a rented apartment, but on the other hand, if you buy something now, there are trade-off's later. Let's say your payment today is $2,000 a month, well in 10 years when you're saving to put your kids through college, it's still going to be $2,000 a month. And in 20 years when they're actually in college, it's still $2,000 a month. But rent would consistently be going up. And when you retire, it's much better to own your home so you don't have to pay rent. So although I could prove on paper why you should never buy a home, but if we go walking through a neighborhood everyone who is doing well financially, owns their own home.
For more of Michael Finney's consumer stories and advice, visit 7 On Your Side.
