March 30, 2004 — To build wealth, not debt, think like a millionaire-80 percent of them are “self-made.”
So advises personal finance expert Jane Schuchardt, who will be in town next week to present “The Art of Saving: How to Build Wealth, Not Debt.” Schuchardt, who has conducted extensive research on how families can increase their wealth, will share her findings at a free, public lecture on Wednesday, Apr. 7, at noon, in the Utah Museum of Fine Arts’ Dumke Auditorium, on the University of Utah campus. Several U.S. Savings Bonds will be given away at the event.
While the dictionary definition of wealth is connected with affluence-having an abundance of money, Schuchardt says wealth is “about having enough money to be financially secure. The concept of financial security means you are first, financially independent, or out on your own; then financially stable, or able to meet day-to-day expenses; and finally, able to save, invest, and control debt in order to reach future goals that take money to buy, such as a home, a college education and a comfortable retirement.” Schuchardt, a former senior fellow with the National Endowment for Financial Education, suggests these simple tactics:
- Save money on a regular basis, make sacrifices when possible and scrutinize purchases based on need versus want.
- Pay yourself first. Deduct an amount for savings directly from your paycheck. By making saving a priority, it is easier to stay focused on achieving financial goals.
- Get rid of high-cost debt. Paying for purchases with a credit card may seem convenient, but, says Schuchardt, “Many people don’t realize just how costly these purchases actually are over time. For example, if you have a $3,000 balance at 19.8 percent interest, and you pay the required minimum balance of 2 percent of the balance-or $15 (whichever is greater), it will take 39 years to pay off the loan at a cost of more than $10,000 in interest charges.
- Take advantage of “free money” at work. Some employees fail to take advantage of “free money” because it requires their own matching contribution. When the employer’s contribution and the employee’s match is combined, on a dollar-for-dollar basis, your retirement fund could earn more than a 100 percent return, a rate unlikely to be topped anywhere else.
- Buy a home and pay off the mortgage. Home ownership is a key wealth-building strategy for most Americans.
Schuchardt notes that the best way to avoid debt is to pay with cash, not credit cards. However, when credit card purchases are necessary-for safety or to take advantage of good deals-only use one or two cards, and only buy what you need. This makes for easier record keeping and helps avoid spending to the limit on more than one account. Schuchardt suggests using clever tactics to avoid use of the card. These might include putting the card in the freezer (where it is readily accessible but not too convenient) or wrapping it in paper with the balance of charges on it.
Schuchardt offers these strategies to get out of debt and avoid it in the future:
- Pay off the debt with the highest interest rate first. When one debt is paid, use that money to pay down another, and so on, until all are paid off.
- Seek and use loans and credit cards with a low interest rate.
- Ask existing creditors for a lower interest rate.
- When interest rates drop, refinance existing debts, such as a mortgage or car loan.
- Pay credit card balances in full to avoid interest charges.
- Borrow money for the shortest time possible.
- Ask credit card companies to lower your credit limit.
“The Art of Saving: How to Build Wealth, Not Debt” is sponsored by the University’s Department of Family and Consumer Studies, TIAA-CREF and the United States Department of Agriculture.