QA with Lisa Desjardins, author of 'Zombie Economics'
CNN reporter equates card debt with the undead in new book
If your financial situation feels like a horror movie, you'll appreciate the narrative thread behind "Zombie Economics: A Guide to Personal Finance." Lisa Desjardins, who reports on politics and the economy for CNN radio, talks about the new book she co-authored with Portland, Ore., broadcaster Rick Emerson.
|Lisa Desjardins, author,
'Zombie Economics: A Guide
to Personal Finance'
Lisa Desjardins covers politics and the economy
CreditCards.com: In your book, you call credit cards the "Zombie Economy incarnate." How big a zombie is credit card debt?
Lisa Desjardins: I think it's the ultimate zombie, and it could be out there forever. Spending on credit is an easy way for people to make huge mistakes before they've even realized what's happened. Personally, I think credit cards are more zombie than hero, because most people haven't been taught to use them responsibly.
CreditCards.com: Many of us start using them when we're young enough to see them as a magic thing that gets us anything we want.
Desjardins: Well, as any horror movie fan knows, a zombie looks like anybody else from behind or at a distance. You have to get close to see the maggots crawling out of its mouth. But we're seeing progress. People are realizing they can't just spend on credit cards forever. The numbers show that people have been able to pay down their credit card debt in the last couple years.
CreditCards.com: Do you think the recession has actually improved the problem because people are scared?
Desjardins: I do. Fear is a huge motivator. Things have gone pretty far with both our personal debt and our national debt. I think that really sobered some people up and made them look more clearly at their credit card debt and try to deal with it. It's inspired people to put more value on bringing down the debt on their cards than how much they can buy with them.
CreditCards.com: Your solution is simple: Pay off one card at a time, starting with the one with the highest APR, then keep applying the same amount every month, no matter the minimum.
Desjardins: For people who are really deep in credit card debt, it's easy to start panicking. We say, 'Don't panic. You can pay these things down.' Some credit cards are going to cost you more than others, so pay those down first. That will save you money in the long run and get you used to putting aside a set amount every month. Once you start seeing those balances go down, you feel stronger. You start to feel like a financial bad ass instead of just getting knocked around.
CreditCards.com: So you've put this theory into practice?
Desjardins: I have. I paid off two credit cards this way. Everything in the book either Rick or I or both of us have done. For people who are truly in a financial crisis and have no resources, we recommend putting your credit card away. Don't use it.
CreditCards.com: You actually suggest, if all else fails, freezing your credit card in a bowl of water.
Desjardins: We don't want people to necessarily cut the card up because they might need it in an emergency, but putting it in ice makes it impractical to use it impulsively.
CreditCards.com: Chipping or melting definitely cuts down on impulse spending.
Desjardins: And that is the main thing to cut: impulse spending. We also address long-term spending on things we don't need, but credit cards are such a force for impulse spending. They're right there. It's so easy.
CreditCards.com: What about online spending? Getting rid of the plastic doesn't do much to hinder that.
Desjardins: That's a good point. I wouldn't be surprised if in the next five years, that's going to be a bigger problem. You just have to know which sites you shop often and remove your information in one brilliant, sober day. We have a chapter called, "The Trench," with ideas for putting things in place that help you deal with your financial situation. One is enlisting a friend for accountability. Tell her your whole deal and then have her sit there when you take your numbers off that site.
CreditCards.com: What drives us to spend beyond our means?
Desjardins: There's been a message out there for the last 20 years that you should buy this because you deserve it. You deserve this cool jacket or this great trip. You probably do deserve it, but is it going to be good for you in the end or is it going to add to your stress? We've been programmed to think, 'I deserve to stop at Starbucks today,' and so you do, and then you do it again tomorrow.
CreditCards.com: How many credit cards are too many?
Desjardins: I really don't think you should have more than two unless you're operating a business. If you're good with finances and you pay off your balance every month, you can use your cards to earn points. But I don't think that describes most people. My ideal is to have just one.
CreditCards.com: You advise against store credit cards. Why?
Desjardins: Store credit cards are an open marketing ploy from the stores. It's rare that whatever percentage discount the store's offering you for this one time is going to lead to savings in the long run. Stores expect you to keep using their card, so they can sign you up for their various coupons. For most people, a store credit card is just a ploy to draw you into that store to spend more money.
CreditCards.com: You also suggest setting aside 10 percent of all income as savings before putting anything toward credit card debt.
Desjardins: If you have anything left after paying your absolute necessities -- and your minimum credit card payment is an absolute necessity -- put aside something for savings first, then put a little extra on the card with the highest APR.
If you don't have a shot at paying down your debt, you need to consider bankruptcy. We list questions to help you decide. But if you do have a shot, you need to start giving yourself a cushion so you're not always relying on credit cards. One way is to have your bank automatically put $50 a month into a savings account. If you don't have that, begin at $25. We think it's important to get into the habit of putting aside a few dollars a month before you deal with your credit cards. What this will do is to shrink is your discretionary spending.
CreditCards.com: What do you hope "Zombie Economics" accomplishes?
Desjardins: We want to change how people look at their money and start enjoying life more. We want people to give money the finger. Get past it. There are things you can do that don't cost money and might make you even happier.See related: 8 things you must know about credit card debt, Bankruptcy filings rise in early 2011, Retail credit cards survey 2010
- With balance transfers, watch your individual card utilization – If transfer will eat up available credit, expect a credit score hit ...
- Mixed credit files: How to avoid them, fix them – Every Jr., Sr. and Smith beware: People with similar or common names are at risk of having credit report mashups ...
- Find the reason for a sudden 100-point credit score drop – Start by reviewing ?credit score factors? listed on your report ...