NEW YORK (AP) — Black Friday sales are beckoning and you’ve got so much credit card debt that one more holiday won’t make a difference, right?
Ali Velshi and Christine Romans have some questions for you to answer first.
The CNN financial experts aren’t anti-debt. In fact, they admit “debt can be a good thing,” in their new book, “How to Speak Money.”
But before you decide to borrow — whether for that HDTV your husband has been begging for or to help cover college tuition, Velshi and Romans say you should think hard.
“We’re in favor of sensible, practical borrowing for particular situations, consistent with your goals and your finances,” they write.
Before you add to what you already owe, consider these questions:
— Why are you taking on the debt?
— Are you purchasing something you truly need or that will make your life significantly better?
— How much debt can you handle without jeopardizing your financial security?
While particularly relevant at this time of year when the pressure to spend is so high, debt is just one of the topics the two broadcasters address. Their aim is to help readers understand the language used to discuss money in all its aspects: investing, working, paying for college, buying a home, retiring and so forth.
Velshi and Romans start off by explaining that they don’t always agree on all aspects of personal finance. But they do agree that in order to discuss any one of these topics and communicate clearly, it’s necessary to know the terminology.
The authors recently spoke with The Associated Press about their viewpoint.
Q: One of the unique things about this book is that you combine big picture issues like globalization with smaller issues like budgeting. Why did you take that approach?
Romans: It all goes together. Before you can begin any of the bigger concepts, you have to get out of debt and get a budget. And you need to understand the language that is used to talk about money around the world if you’re going to do your financial planning properly. People think financial literacy is saving enough money this year so they can go on the Disney cruise next year. That’s too short term. If you’re doing your financial planning properly, the Disney cruise is a benefit, not the goal.
Velshi: It’s about getting the big picture first and then thinking about the details. People are saving to buy things, as opposed to asking themselves what they want their life to be like and reverse engineering it.
Q: In several chapters, like the one on housing, you offer contrasting advice. Ali says now is a once-in-a-lifetime moment to buy a house because of affordability, while Christine points to the restrictions on mobility and the ability to resell as a reason to hold off. Are you concerned that you’ll confuse your readers?
Velshi: Sometimes books will just give you the one view that the writer holds. There are no canned decisions, and personal finance books that suggest there are annoy us both. Rent versus buy is a real kitchen table argument, and there are two sides.
Q: You make the argument that education is one of the few good reasons for going into debt, because it is likely to lead to a more financially rewarding career. But with student loans skyrocketing and the unemployment rate so high, many people are questioning that viewpoint. Why do you hold to it?
Romans: These cocktail party conversations about whether a college education is worth it are being had mostly by people who have a college education. In the book, we include a graphic that shows the relationship between education, earnings and unemployment rates. The unemployment rate for college graduates is still well below what it is for people without a degree. I agree some are feeling a lack of opportunity in this country right now, but that’s all the more reason why people need to be educating themselves.
Q: Is there one issue financial issue you discuss in the book that you think is the most challenging?
Velshi: Investing and retirement. And this brings us back to the title of the book. You have to have the lexicon. Why is it we’re still afraid to talk about retirement? The absence of the lexicon makes you afraid of words like risk tolerance and rebalancing. People have this sense that learning about finance is not for them.