Costco Connection - August 2011

AUGUST 2011 ;e Costco Connection 19 Living large Consumer expert Clark Howard wants you to take control

By Steve Fisher

PEOPLE LISTEN TO Clark Howard. The Atlanta-based consumer advocate and Costco member has found national renown with a syndicated radio show, a newspaper column and a weekly television program on HLN. He attributes his success, and his trustworthiness, to one thing.

“The only thing I can think of,” he says,
“is that I really am the same in any situation.
You see me in person, you hear me on the air,
you watch me on TV, I’m not playing a role.
I’m just being me.”
Despite having achieved a comfortable
income, Howard practices the frugality he
preaches, and his media appearances and
books help to spread the gospel. His ninth
book, Clark Howard’s Living Large in Lean
Times, was getting ready to roll out when he
spoke on the phone with The Connection.

car-buying programs you will definitely get a low price. Probably cheaper than 80 percent to 90 percent of people are getting. To me that’s good enough.

CC: If you get a large infusion of cash, is it better to pay off debts completely or to invest that money?

CH: More often than not, extinguishing debt is a better thing than putting the money aside. If you’re paying an average credit-card interest rate of 12 percent, and you wipe that debt out, that’s fantastic, because you’re done paying that 12 percent. But if debts are relatively small, [you’re] probably better off building some form of investment portfolio for long-term needs.

The Costco Connection: What do you say to the person who says, “I don’t have time to go bargain hunting?”

Clark Howard: I would say, “Are you occupying every hour of your day every day of the week?” If you look at time as productive hours, the hours we’re awake, we’re truly not productive all of them. There’s downtime, there’s leisure time.... That’s time that we can productively put to work saving money.

CC: At what point do you say, I’ve done enough research; it’s time to buy?

CH: The first wave of research is really illuminating. The second wave of research is really confusing. People will get to where they overthink it. If you have done your homework and you have compared prices, and you feel reasonably confident that the item you’re buying is a good selection, go ahead and do it. And don’t sweat the fact of whether you could have gotten something 3 percent cheaper or 5 percent or 10 percent; the big news is the 90 or 95 percent that you saved.

CC: Is it OK to walk away from an underwater mortgage?

CH: Worst-case scenario, you say, “I’m done with this, here are the keys, I’m going away.” How much would it cost you to live in an equivalent property, renting? More often than not, you’ll find there’s not a huge savings from walking away. Then we move on to the moral equation: How do you feel walking away from an obligation? Added to the moral equation is whether ... the IRS may tax you. Here is the deal: If your mortgage(s) ... were just for buying the home or improving it, you get full tax forgiveness. However, if you did a cash out refi or borrowed other money against the house to buy stuff or take vacations, the money is taxed when you walk away.

CC: What about something like the Costco Auto Program, which promises that they do all the work so you don’t have to?

CH: The Costco Auto Program is great. For a lot of people, the car-buying process is horribly intimidating. And the Costco car-buying program is a great leveler. If you use

CC: What is the biggest obstacle to saving for the American consumer?

CH: It’s not [saving] as the first thing they do with their check. The key to developing a new habit is to save before you get your check. If you think about the mentality of modern banking, it’s about getting your kids to have a debit card in their hand, or a credit card. Not the idea of savings.