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Podcast 94: The Ten Commandments of Money, Liz Weston

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Today’s guest on the Consumerism Commentary Podcast is Liz Weston, author of The 10 Commandments of Money: Survive and Thrive in the New Economy, and the most-read personal finance columnist on the Internet. Liz, Flexo and Bryan discuss each of the ten commandments in the book.

The 10 Commandments of Money is available in the Consumerism Commentary Store.

Consumerism Commentary Podcast #94
The 10 Commandments of Money, Liz Weston: S04E16 / 117

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Table of contents

[00:00] Introduction from Bryan J Busch
[00:38] Interview with Liz Weston
[01:02] Why are they commandments?
[02:01] A budget that works in the real world
[03:12] The 50/30/20 plan
[04:28] Charitable giving
[05:21] Needs vs. wants
[06:37] Survival plan with cash and credit
[09:10] Neutral debt vs. toxic debt
[11:25] Federal student loans vs. private student loans
[13:01] Risk-free investments
[14:23] Stocks vs. bonds or cash?
[15:38] Your home as a piggy bank
[16:52] Started homes
[18:31] Remodeling and improving your home
[20:00] Changes to retirement
[22:44] Value of a college education
[24:12] Maximizing financial aid
[25:32] Too much insurance
[27:38] Choosing life insurance
[28:40] Treat your marriage like a business
[31:08] The war on consumers
[32:23] How banks spy on you
[33:18] Credit unions as an alternative, FindACreditUnion.com
[35:40] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

Full transcript

Bryan J Busch: This is the Consumerism Commentary Podcast for Sunday February 6. I am Bryan J Busch. Today Flexo and I talk with Liz Weston, author of The Ten Commandments of Money.

[music]

Bryan: Welcome to the Consumerism Commentary Podcast, I am Bryan J Busch. Today Flexo and I are joined by Liz Weston, the most-read personal finance columnist on the Internet, whose latest book, The Ten Commandments of Money: Survive and Thrive in the New Economy hit stores on January 20. Liz, welcome back to the Consumerism Commentary Podcast.

Liz Weston: Thanks, guys. It’s great to be here.

Bryan: Thanks, Flexo, for being here today as well.

Flexo: Always a pleasure, Bryan.

Bryan: I’d like to take a look at each of the ten commandments in the book. Before we start, why you use the metaphor of commandments rather than, say, rules of money.

Liz: [laughing] I don’t know how we got into this, the original title of the book was, “The New Money Bible” and then we just started getting more and more biblical. Just to decide, it was actually my Twitter followers that helped decide on the title because I put them both up and said, “OK, what do you guys like better?” and ten to one they liked the ten commandments approach. I guess people just like being told what to do with this aura of great authority behind me.

Bryan: It sounds like you’ve been crowd-sourcing a few things here and there which is always nice to hear.

Liz: Yeah, also my Facebook fans helped me with the cover. We got the first design and it was really busy and it didn’t have my photo on the front. I just slammed it up there on my Facebook page and let the readers go at it, and then just summarized their responses and send them onto the publisher. And to their credit, Penguin was very responsive and came up with the cover we all like better.

Flexo: Your first commandment in the book is to create a budget that works in the real world, which seems to imply that most budgets just don’t work in practice. Why is budgeting failing?

Liz: I think it is like dieting, if we don’t have a lifestyle change, a really realistic budget that we can live with, it’s not going to work. You can do crash diets and save all your money and not spend any money for short periods of time, but if you want to have a lifestyle change, something that actually works for the long run, it’s got to be something you can live with, and my problem was you know, I was hearing from people, “How much should I spend on this?” or “How much life span on that?” And it varies so much by your situation.

If you are a recently graduated college student your situation is way different from somebody who has three kids and a bunch of other bills hanging over their heads.

When I came across Elizabeth Warren’s budget plan, which is the 50/30/20 budget plan, it was like a light bulb going off. You know what, it can work on any budget, it can work on any income and it makes sense because it really focuses you on what your overhead is. If your overhead is too big you really can’t make room for any anything else.

Bryan: Can you go into a little more detail about the 50/30/20 Plan?

Liz: It starts with your after-tax income — and that’s not your net pay, that’s not what’s in that little box when you get your pay stub. Your after-tax income is your gross income minus only your taxes, so you need to add back in things like 401(k) contributions and health insurance and stuff like that.

Once you have your after tax number, you cut that into half, and that’s the maximum you should be spending on what are called must have expenses. These are any expenses that you can’t put off for a while without any consequences. That would be your rent or mortgage, insurance, minimum loan payment, childcare, food, transportation, utilities. Just those basic things.

And then, once you’ve gotten your overhead down to that level, 30% of your after-tax income is for wants. That’s the fun stuff. That’s clothing, vacations, eating out, all the goodies.

Twenty percent is left for both paying down debt and saving for the future, and that budget really puts things into perspective, makes you understand how your basic living expenses can affect your spending. It also gives you some balance so that you are enjoying your life today as well as dealing with tomorrow.

Flexo: Among those categories, how does charitable giving fit in with your necessary expenses. Some families often put charitable giving ahead of their own necessary expenses.

Liz: Yeah this is really a tough one and it’s kind of the third rail of personal finance because when you get into issues of tithing people are very, very passionate about wanting to make sure they are contributing what they think is required.

And all I would say is, if you think of tithing or charitable giving as an absolute must-have expense, then it needs to go under that 50% bracket.

That means you have to cut something else to accommodate whatever percentage you want to give as your charitable expenses. I am not telling people what should or shouldn’t be in the must-have expenses, I am just saying, if you are going to tithe 10%, then something else has to give.

Bryan: In the same vein a lot of things, as time marches on, seem to become more necessity than luxuries — for instance, an air conditioner or high speed Internet. How do you determine which expenses are needs and which are wants? Is it really just a personal decision?

Liz: Well yeah, ultimately it is. My editor and I went round and round about this about whether Internet access was a need or not. Whether cell phones were a need or not. If you can get it under the 50% bracket I don’t care. You can say that your green socks are a necessity.

What you need to keep in mind is that we say the word need for a lot of things that are really aren’t. When it comes right down to it, our needs are shelter, food, transportation, clothing, social interaction. How we choose to manifest those is kind of up to us.

Shelter could be a box under a bridge, but most of us don’t want to live there, so we are going to want to spend a little bit more to make sure that we have a nice place to live. On the other hand, you can’t say, “I want to spend 40 percent of my gross on my rent and I see that as the need.” Well, you can say it all that you want, but the math is not going to add up. You’re going to have an unbalanced life if you spend that much on one category.

Flexo: Your second commandment is to create a survival plan with cash and credit. Many people simply use credit when they run into emergencies like sudden unemployment, but, we often suggest building up savings to cover our rainy day expenses. Why is a savings account not sufficient?

Liz: Well, there are two factors here. One is that it takes a while to really buildup an adequate emergency fund. One of the things that absolutely drives me crazy about some pundits is they’ll say, “You need a years’ worth of expenses in the bank.” Well, it can take years for the average family to build up that much cash. They’re not getting big bonus checks at the end of the year like investment bankers. They’re not winning the lottery.

So they have to painfully cut expenses and put that money aside in the hope that they don’t have a setback that requires them to tap it. That’s a lot of assumptions. I think a lot of families just getting a few months worth of savings can take years.

What I wanted to tell them in the book is to make sure that you’ve got a backup plan while you’re building those savings. You need to have resources that will help you cover an emergency if you need it.

Obviously, we don’t want to have people racking that big credit card debt if they don’t need to. But, have an access to credit can really be helpful in an emergency.

Part two of that was, sometimes you get hit with a bunch of things at once. I know a lot of people who have just been through that with this economy. You lose your job, you have a big medical expense, a bunch of things happen at once. It can be pretty scary if you use all of your savings and you don’t have anything else to tap beyond that.

Bryan: Are there any other options besides credit cards that people who are living paycheck-to-paycheck can use to prepare for an emergency?

Liz: When you’re living paycheck-to-paycheck, it can just seem pointless. Every time you put a little money aside, something happens and you have to drain that fund. I would say change your perspective. Adjust your attitude about that. The money that you set aside was money you didn’t have to charge on your credit cards. In that sense, it’s working.

I would say if you’re living paycheck-to-paycheck, start with a small attainable goal, like putting $500 in the bank. Once you realize you can do that, you’ll be able to build your savings beyond that. That’s a pretty good goal.

If you have to drain it for an emergency, fine. Just work on building it back up again. But just that one step back from living paycheck-to-paycheck can really get you on the right path.

Bryan: Your third commandment is to pay off debt the smart way. We spoke to David Bach last week, author of the “Finish Rich” series of books. He mentioned that he came to discover last year that all debt is bad debt. You suggest using good debt to get ahead. How do you categorize different kinds of debt?

Liz: OK, I take the perspective of a financial planner who’s looking at the entire, comprehensive situation that you’re in. I think, for most people, a moderate amount of mortgage debt, a moderate amount of student loans is an investment in your future. That’s why we call it good debt.

Now, anybody can overdose on debt, and turn it into bad debt, but I don’t think it’s necessarily in and of itself. The mortgage debt and student loan debt are debts that can help you get ahead.

What you really want to focus paying down is your toxic debt. By that, I mean any variable-rate debt, any high-rate debt, credit card debt, payday loans, bounced fees from banks. All of those have a really corrosive effect on your finances. You want to focus paying on those first before you tackle what I call neutral debt which is like a reasonable car loan or something like that. Get your toxic debts out of the way. After that, you could focus on your neutral debt.

But put off paying back the good debt until you have all of your financial ducks in a row. Most people have better things to do with their money than pay down a low-rate, tax-deductible debt.

Bryan: Does your approach of paying off the worst debt first and then moving eventually towards the better debts take into account the interest rates, at all? What’s your suggestion for someone who wants to payoff debt the fastest?

Liz: I know there are people that want to payoff a small debt just to get that win and I totally understand that. So if that’s what you need to do, great. I come from an economics background. I look at the math. The math says the best way, the fastest way, to get out of debt is to target those high-rate loans first. The high-rate credit card debt. Payday loans first, obviously, get those out if you happen to have them. Then the high-rate credit card debt. That will get you out of debt a lot faster than doing the debts by size.

Bryan: But you would still group the variable-rate stuff first and then within that, order them by interest rate?

Liz: Yeah. I think the one debt that’s really questionable is private student loans. I don’t think we’ve made enough of a distinction between federal student loans which have a lot of consumer protections. They’re fixed rate, they’re generally a good debt.

Private student loans are like paying for your college education with credit cards, and credit cards that can’t be discharged in bankruptcy.

If you have a moderate amount of private student loans, and they’re really low rate right now, I still would want to focus on those after you get the credit card debts paid off because those rates can rise and they can rise a lot. So you want to get rid of that private student loan debt fairly quickly.

Flexo: What would encourage someone to apply for private student loan debt in that case instead of just going for the government options?

Liz: About 25 percent of people that have private student loans, have no federal loan. They didn’t go to federal loans first. My conclusion is that they just didn’t understand what they were doing to themselves.

You really do want to exhaust all of your federal loan options first if you have to borrow for an education. You really want to be cautious about taking on that private debt just because it can be really onerous. It can be tough to pay off. My problem is, when I see people that have private student loans, often they’ve overdosed. They have taken on an education they really can’t afford.

If you’ve exhausted all of your federal options and you still have to go to private loans, I would take a really close look at the education you’re buying and make sure you can afford it.

Bryan: You warn readers not to avoid risk in your fourth commandment. What kinds of risks should someone be willing to take?

Liz: I made the point that there is no such thing as a risk-free investment. Even the super-safe investments we talked about like an FDIC insured bank account, Treasury notes, and things like that, there’s a risk there, and the risk is that you are losing earning power.

Your investment is not going to grow fast enough to offset inflation. You add in taxes and you’re losing ground. That’s the big risk of those so-called super-safe investments. I point out that many of us are going to spend 10, 15, 20, or more years in retirement. That’s a long chunk of time. The only way we’re going to be able to save enough money to afford that, most of us, is by taking some risks in the stock market.

In other words, having some equity investments in our plan. The risk obviously, is that those investments can drop a lot in value and be very scary. I talk about the importance of balancing the risk of the stock market with bond investments and with cash so that you have a truly diversified portfolio.

It doesn’t mean that everything can’t go down at once. But over time, you should have a less volatile, and more importantly, a portfolio you can live with and sleep with at night.

Flexo: How do you determine how much you should put in stocks versus bonds or cash?

Liz: This is a great question and it’s basic asset allocation. It’s one of the most personal things I can imagine. That’s why I default to, you know what, at some point you should talk to a family financial adviser, because I can give general guidelines, but really, everybody’s different in terms of how much money they need to retire, when they’re going to need it, what their risk tolerance is, and it’s such a personalized thing.

It’s like me telling somebody, you know what, go out and buy a size six shoes. Well, may be they don’t.

If you are just getting started, I would say, if you’ve got a 401(k) at work, you probably have something like a life cycle fund or a target date maturity date fund where they do all the picking of investments and the asset allocation for you.

There are some problems with those, but if you’re just getting started, jump in there because they will do the heavy lifting for you. As you learn more about investing, you can alter that.

The other thing you can do is go back to a classic pension fund. Now, they don’t do this anymore, but they used to do a breakdown of 60 percent stocks, 30 percent bonds, and 10 percent cash. That was just a classic day-in and day-out. That’s not a bad place to start.

Bryan: In your fifth commandment, you said that your home is not a piggy bank. How has the best approach to buying a house changed in the past few years?

Liz: I would say it actually hasn’t changed, all that much. One of the first columns I wrote for MSN was, “The Three Worst Reasons to Buy a Home.” [laughs] I talked about how buying a home as an investment was a dumb idea. Buying it for the tax break was a dumb idea. I forget the third one.

In any case, the basic reasons for buying a house are still the same, and they really haven’t changed. If you have a strong desire to be a homeowner and you can stay put for a while — I used the guideline back then of, can you stay put for 10 years? There’s a lot of people that can’t project beyond a year or two where they’re going to be. Those are not the best people to buy a home.

I know that it varies by area. Sometimes buying is definitely better than renting, yadda, yadda, but you really can’t predict what kind of returns you’re going to get.

Every time you’re selling a house you’re basically setting fire to 10 percent of the home’s value. Because that’s about what it costs to sell a house and to move. So I’m just saying, be very clear that you can stay where you are.

Flexo: I remember after I graduated from college and I moved back to my home state, a lot of people around me around the same age, were buying houses. A lot of people were telling me that I should buy a starter home, and sell it in a few years when I have more money and can buy a much better home or my dream home down the road. Is that good advice, should people buy a starter home?

Liz: One of the reasons I wrote this book is because a lot of advice people are getting, we know that the rules that applied during the bubble years don’t work anymore. People are trying to go back to the old rules like the started home idea.

It really doesn’t work. The problem with it is that again, you have to have enough growth in the value of that house to offset the cost of selling it in a few years. That’s not guaranteed in a lot of markets. It’s going to be really tough to sell a home for several years in many markets. So it doesn’t really make sense to lock yourself into a mortgage payment in a house that isn’t going to serve you for a longer haul.

A lot of people took the advice that you were given, got themselves into a condo and now they’re stuck. They owe more on the property than it’s worth. They can’t sell it and move somewhere else and they’re not where they want to be. They’d be so much better off if they had just rented in the neighborhood they wanted to be in.

I think we just got sold on this idea that you always have to have a house and it’s always the best investment. The reality is houses are expensive, keeping them up is expensive, buying and selling them is expensive, and it’s not necessarily the best choice for everyone in all situations.

Bryan: Do you think it’s financially worthwhile to remodel and improve your home?

Liz: There are a lot of factors involved in that particular decision. During the bubble years people became convinced that anything they did to their home was going to pay off in terms of a profit. In other words, if they spent $50,000 remodeling their kitchen, they’d get $100,000 back. That was never true, actually.

If they had left the house alone they probably would have gotten a big jump in the value. People were convinced that something was going on that actually wasn’t. They were convinced that remodeling was a profitable venture. It very, very rarely is.

Now we’re seeing the statistics showing that just about anything you do to your house, you’re lucky to get 60 to 70 cents back on the dollar. So instead of getting a profit, you’re guaranteeing a loss.

All that understood, you still want to make the house reflect you and be a good house for you to live in, and if there’s something you simply can’t live with, go ahead and remodel. But I would say, pay with cash if you possibly can for any improvements you make on your home. If you have to borrow, or you talked yourself into the idea that you have to borrow, don’t borrow more than fifty percent of the project’s cost, because again, you’re not going to get that money back when you sell. You’ll get some of it back if it’s a reasonable, and well thought-through, and well done improvement. Those are all very important qualifiers.

But you’re not going to make a profit on what you do to your house.

Flexo: Your sixth commandment is “Saving for Retirement Must Come First.” How has the concept of retirement changed, and what will it look like 10 or 20 years down the road?

Liz: A lot of things about retirement have changed, and one of the things is that we have it at all. In previous generations the older folks tended to work as long as they could, and then they’d move in with their kids when they could no longer work, assuming the kids ever moved out. There were a lot of multigenerational families.

In the 1960s, when we started getting medicare and real improvements in people’s health and longevity, we had this idea that the old folks would live separately and they would live for a long time. What that did was increase the duration of retirement, and also increase the cost, since you’re out there living on your own.

When we look at what people really need to retire, if that’s the model that they’re looking at, it is quite a bit. The problem is — talking with Roger Ibbotson, who formed Ibbotson Associates, he’s done a lot of research about investment return — if you don’t get started by the time you’re 35 saving for retirement, it is really tough to catch up. All but impossible, I would say.

This idea that you can just put it off and do other things until you have enough money left over to save for retirement, we’ve got to get rid of that idea. We’ve got to get it into people’s minds that they have to save for retirement first, starting from their first job. You don’t stop, and you don’t cash out, because that’s really the only way to make sure you’re going to have enough money to get a decent retirement.

Bryan: If you were fortunate, or smart enough to start saving for retirement at the right age, how do you make an educated guess about how much you’ll need when you get to the age you want to retire?

Liz: That’s a great question, because there’s so many variables involved. How long you’re going to live, what investment returns will be like, what the inflation rate is going to be. A lot of it is out of your control. On the other hand, we’ve got pretty good statistics showing that the people who at least try to make an estimate tend to save more, and they tend to be in better shape.

There is a retirement planner at MSN Money, there are lots of retirement planners out there on the web. The ball park estimator at choosetosave.org. Anywhere you get started will at least give you some idea, and you can fine-tune your plan as you go along.

But if you’re in your 20s and 30s you’re just guesstimating how much money you’re going to need anyway. There’s really no way to tell what your spending is going to be like in retirement when you’re that young.

My advice is to just get going, save as much as you can, because that will give you more flexibility down the road. If you want to take a break, take a sabbatical, take a year off to have a kid, travel, retire early… You have so many more options if you just get started early.

Flexo: Related to your seventh commandment, an affordable college education, we’ve discussed on Consumerism Commentary quite a bit about whether a college education is still worthwhile, because of the increasing costs. Is a bachelor’s degree still a good investment?

Liz: Not every bachelor’s degree is. If you pay too much for that degree, there’s no way you’re going to get it to pay off. I’ve talked to people who have borrowed $200,000 for a bachelor’s degree, and you know what? I can’t make that math work. Any way you do it, that’s just too much.

Here’s the thing, people who have college degrees overall do better in our economy, and that’s going to be even more true going forward. There’s a lot of outsourcing, a lot of manufacturing jobs are going away. So if you don’t have a college degree you are really putting yourself behind the eight-ball.

If you look at the unemployment statistics, even now people with college degrees have an unemployment rate that’s under five percent. It’s twice that for people that just have a high school degree, and three times that for people who don’t get through high school.

So, it really is a survival tool in today’s economy. You just have to be smart about what you pay for it. My rule of thumb is, if you have to borrow more for your education in total than you expect to make your first year out of school, you’re probably paying to much, and you need to look at less expensive, more affordable options.

Bryan: Regardless of what the tuition ends up costing, how can a person maximize the financial aid that they, or maybe their kids, will be receiving?

Liz: Lynn O’Shaughnessy wrote a great book and I’m trying to remember the title of it. It’s something like “The College Solution.” She points out that every family is in a different situation.

What you really need to do is understand how the federal and private financial aid systems work. That’s a little too intricate to get into in a podcast, but I will say this: Don’t fail to save because you’re trying to maximize your kid’s financial aid because that really doesn’t work.

The financial aid formulas are based very heavily on your income. If you have sufficient income to where the financial aid formula thinks you should have saved, whether or not you did, you’re going to have to cough up that money. There’s just no way around it.

I’m a big fan of the 529 college savings plans. They have their flaws, but if you get started when your kids are young and put that money aside, it has a favorable treatment in the financial aid formulas. They’re not going to just kill you because you’ve saved that way.

It gets you in the habit of regularly putting aside money for your kids because anything you save is going to reduce their future debt that they have to take on.

Flexo: A lot of the mainstream advice about insurance, your eighth commandment in the book, seems to come from insurance sales people — people who want to sell you something. How much insurance should we have and how much is too much?

Liz: Well, I love insurance people. [laughs] I have some in my family. I have to be very careful about what I say here.

One of the members of my family says that his job is to take away your comfort level and then sell it back to you. He warns about all these awful things that can happen and then sells you the assurance that you will be covered.

Here’s the thing, you want to make sure you actually have a need for coverage. You want to make sure that you have adequate coverage at the right time.

In other words, don’t insure yourself for stuff you can easily pay out of pocket. That’s why we always tell people have a higher deductible. That way you won’t be making a bunch of claims, it’ll raise your premiums, and it will get you in the discipline of paying for the small stuff, so that the coverage is there for the catastrophic expenses that you can’t cover yourself.

That pretty much covers every aspect of insurance. If you’ve got auto insurance, the most important thing is to make sure you have enough liability coverage. That is the catastrophic. You cause an accident, you paralyze someone or kill them, that is a catastrophic expense, so don’t cheap out on your liability insurance. Max it out if you can.

Life insurance, same thing. Insurance salesmen love things like universal life, which is a fascinating product. They can show you all of these charts and graphs.

The big problem with it is that it’s expensive. What tends to happen is that people get really attracted by all of the bells and whistles. They wind up not buying enough. What the most important thing with life insurance is to make sure you have enough.

For most people that’s going to confine them to buying term insurance or pure insurance, however you want to call it, because, that’s what’s affordable for them, to make sure they have enough coverage if they die and leave behind financial dependents.

Bryan: Is affordability the most important factor in deciding between term versus cash value life insurance, or are there other factors?

Liz: When I went through the CSP training program and was learning all about insurance, we really did have a good time poking into these difference coverages. A lot of times, it just comes down to that. If you have a need for life insurance, in other words, if somebody is financially dependent on you, leaving them a $50,000 universal life policy, because that’s all you could afford, is not going to help them that much.

If you do have a need for life insurance, chances are you need at least five times your income, maybe 10 times your income to adequately fill that gap. You just have to make sure that you buy enough. Again, for a lot of people, that’s going to be term.

Bryan: Is that five or 10 times your income for a single year?

Liz: Yeah. Again, that’s a rule of thumb, it’s going to vary. If you have a ton of investments and savings and rental properties, and all of that, you can get by with less. If you’re just skimping along without those things, you may need more.

Bryan: Your ninth commandment is to treat your marriage like a business. Who gets to be the CEO or maybe more aptly, the CFO?

[laughs]

Liz: The CFO, and that’s very important because nobody puts the CFO in charge of the business, right? The CFO is in charge of the money but not necessarily the business. That’s an important distinction to make.

With a lot of couples, there’s one just more naturally able and willing to handle the day-to-day financial things. Making sure the bills get paid. Comparing the insurance policies, doing that.

Essentially, that may be a job of default. Whoever wants to do it gets to do it. The other person still needs to be involved, still needs to know where the money is and what’s going on. So you’re in effect, joint CEOs. You’ve got to make decisions together.

I bring this up because this was my situation. I came into the marriage and my husband is an artist. I’m the one who knew all about the money. So I decided well, I know how we should do things. It took a while of talk and compromise to realize his point of view is just as important.

He likes to joke that if it were up to me, we’d be sitting on orange crates in the living room. If it were up to him, we’d have no retirement. Between the two of us, we manage to compromise and come to a lifestyle and money choices that work for both of us, but neither one of us get’s to have the final say. We work it out together.

Flexo: So are these rules the same for a couple where there’s a wide disparity between income levels compared to a couple where both partners are doing the same type of work and making the same type of money?

Liz: Well, I can talk about my experience. We’ve had periods in our marriage where I was making a lot more than he was.

I don’t see that it works for a command-and-control kind of arrangement to step in just based on who’s making more money. I think if you’re a partnership, you’ve got to work these things out together. If anything, the one who’s making more money needs to make sure that the one who’s making less or who may be a stay-at-home parent is adequately getting enough money to do what he or she needs to do. I see way too often where one partner is getting the short shrift, and they’re expected to make do with an amount of money that’s just not adequate.

You’ve got to talk to each other and make sure that you’re on the same page, and that you’re listening to each other. How much money you’re bringing to the relationship shouldn’t’ be the deciding factor in what you do.

Bryan: And the tenth commandment is, “Defend yourself in the war on consumers.” Who’s waging this war?

Liz: [laughs] Sometimes it feels like just about every corporation in America is taking potshots at us. I know that there are corporations out there that are really good with customer service and don’t try to nickel-and-dime you, but my friend Bob Sullivan wrote a book “Stop Getting Ripped Off,” and he talks about how the hidden fee arrangements and how the “Gotcha Capitalism” — that’s the title of his other book — has sort of replaced free market capitalism that I studied and learned to love. Free market capitalism works on transparency and good information and people making rational choices.

If companies are hiding fees and hiding the gotchas in their contracts, and you don’t find them until you trip over them, you’re at a disadvantage as a consumer. The company that’s trying to play it straight is also at a disadvantage, because they quote you a price. It seems higher than the other guys because they’re not nickel and diming you, so the business goes to the guys who seem cheaper, but then get you in the long run. That’s what I was talking about with the war on consumers.

Bryan: You recently wrote on MSN Money about ways that banks can spy on you. What sort of information are they collecting?

Liz: It depends on the bank. An d the one thing that almost every bank and credit union does is the transaction score, which is: when you take your plastic out, whether it’s a debit card or credit card, they’re scoring the transaction to see how likely it is that it’s fraudulent.

Most of us have had the experience of getting a call from our credit card company. Even having a transaction shut down because they were so suspicious that it might be fraud.

So that’s something that’s going on all the time. They’re also looking at new ways to learn more about their customers. One of the ways is the income estimator, trying to figure out from information in your credit reports and information they know about how you use your bank account, to figure out how much your income is likely to be, and also how profitable you might be to them, as a customer.

Flexo: You mentioned credit unions having the same approach to their customers as banks, but you did mention credit unions in the book as good alternatives to banks. What are the differences?

Liz: The big difference is that credit unions are owned by their members. In other words, if you and I belong to Pop-Co Credit Union, we would be co-owners of the credit union. That’s very different from banks, who have shareholders that they have to account to.

So the difference in a practical sense is that member-owned credit unions tend to have lower fees, fewer fees, better interest rates, and they tend to be a little bit more small-town. Even the big ones tend to have a more hands-on approach to their customers.

If you’re somebody that has had troubles with credit in the past, sometimes you can restart your credit at a credit union a lot more easily than you can at a brick and mortar bank.

Bryan: I’ve noticed that the readers of Consumerism Commentary are frequently recommending the credit unions that they’re a part of, up to and including USAA. But every time I go to one to see if I’m eligible, it seems like I’m not allowed in. Can anybody join a credit union?

Liz: I haven’t yet found anyone who couldn’t find any credit union that they could belong to. I’m trying to remember the URL of one of the places that can help you find credit unions. I think it’s FindACreditUnion.com. If you put in information about where you live, some basic details about yourself, it can pick out a pretty good list.

What you’ll find is that some of the credit unions are incredibly narrow. Some require you to belong to a certain church. Others are incredibly broad. If you live or go to school or work in a broad geographic area, you can join the credit union.

So you should have, depending on where you live and what you do, you should have several options to try. It may not be the credit union you pass on your way to work. But it should be there.

I will bring up one point, that if you are a big user of technology, and you’ve gotten used to really slick bank interfaces, it may be a bit of an adjustment to join a credit union, because some have really good online capabilities, and others are cranking along a few years behind the times.

Bryan: Well I’ll give that website a try. It looks like you had got the URL correct, FindACreditUnion.com. Thanks for coming back to the Consumerism Commentary podcast, Liz.

Liz: It’s my pleasure. Thanks for the invitation.

Bryan: And thanks again to Flexo for helping out.

Flexo: You bet.

Bryan: That was Liz Weston, author of The 10 Commandments of Money: Survive and Thrive in the New Economy, available today wherever books are sold. The book is also available at the Consumerism Commentary store. You can read Liz Weston’s articles on MSN Money, and you can visit her website at AskLizWeston.com. Thanks for joining us today for Consumerism Commentary Podcast.

Updated May 3, 2011 and originally published February 6, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 4 comments… read them below or add one }

avatar skylog ♦368 (Nickel)

another great cast! i know others have mentioned it, but i totally love the transcript. need versus want is something i say all the time to people around me…i am sure they hate me for it!

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avatar eric ♦1,549 (Half-Dollar)

I’m a fan of Liz’s. Thanks for the podcast.

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avatar shellye ♦107 (Cent)

Liz is always so great to listen to. I’m a big fan. One thing to mention about credit unions – if you’re looking for one, you might also try googling your state’s credit union league. Every state has one, and their websites usually have a place to help you find a credit union to join.

Great podcast.

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avatar 4hendricks ♦248 (Cent)

These podcasts are great – I love the topics – Liz is always great

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