The Man Who Makes Money Talk
award-winning financial guru Kevin McKinley speaks up about saving, spending – and smartphones
It’s shaping up be to be big year for Eau Claire financial advisor and public radio host Kevin McKinley: This fall, he marks 30 years as a financial advisor (“I’m starting to get the hang of it,” he quips), and last February he received the Governor’s Financial Literacy Award in the “Legacy” category. According to the office of Gov. Scott Walker, the Legacy award is akin to a lifetime achievement award “given to an organization, business, or individual whose purpose and heritage is ingrained in sustained financial literacy and capability.” But don’t worry, McKinley isn’t being put out to pasture – at least as far as he knows. “It was an honor to be honored,” says McKinley, who in addition to hosting the radio show, has written books, newspaper and magazine columns, and been quoted in publications such as The New York Times and The Wall Street Journal. “The Governor’s Financial Literacy Council has endured through several different governors’ terms, and is one of the reasons Wisconsin is one of the top states in educating its citizens on financial matters.” McKinley took time from his busy schedule (he’s still an actual investment adviser, after all) to answer a few money-related questions from Volume One. Here’s what he’s got to say about the cost of college, the chance of another mortgage crisis, and the benefits of investing in beer.
Volume One: You’ve been doing the On Your Money radio show for 15 years. What are the most common questions you get from listeners? Have these changed over time?
Kevin McKinley: Other than, “How did YOU of all people get a show on WPR??!!”, the questions most asked are “Should I pay my mortgage off faster than I have to?”, “Should I contribute to a Roth retirement account instead of my 401(k)?”, and “If I’m worried about losing money in the stock market, where should I invest instead?”. The answers are usually “No,” “no,” and “certificates of deposit.”
The cost of college has skyrocketed over the years, and we’re hearing more and more about the huge amounts of student loan debt that new graduates are saddled with. Financially speaking, is it still worth it to get a college degree?
Absolutely, as long as the student understands the payoff vs. the cost. If you owe $30,000 upon graduation from college, you can usually pay that loan off by making $300 monthly payments ($3,600 per year) for 10 years. That’s a good chunk of money, but after you’re done the benefits of the degree will hopefully continue to accrue to you long after the loan is paid off. And your income will likely exceed the $30,000 cost. Where people make mistakes is by going to schools that are too expensive, getting majors that don’t provide an economic benefit, and then not living cheaply enough in their first few years of adulthood.
Considering these rising costs, has the advice you give to parents (and students) changed over the years? Why or why not?
Not really – high school graduates usually aren’t very “valuable” (in terms of wages) in the job market right out of high school. So spending those years getting an education (two year school, four year school, whatever) is usually a good use of their time and money.
President Trump signed a huge tax overhaul at the end of last year. What is the real-world impact for most taxpayers? Should this change our saving or spending decisions on a day-to-day basis?
Most taxpayers won’t be affected, although they will be itemizing fewer deductions and more likely to take the new, larger standard deduction.
Speaking of national news, we’re hearing more and more about trade wars and tariffs these days. Should this change long-term investment decisions, such as saving for retirement?
The news about trade wars and tariffs is unlikely to have a severe initial affect on most individuals. But it could be one more obstacle to continued economic and investment growth, which could then affect investors. In the long term it shouldn’t be a worry. And if it is a worry for you and your investments in the short term, perhaps you should be more conservative.
Historically speaking, interest rates are still pretty low, but that won’t last forever. What should we be doing to take advantage of them?
Barring a cataclysmic change, interest rates are likely to remain relatively low. But homeowners should stop prepaying fixed rate mortgages, and save for other needs instead. Savers should look for other investments (like CDs) that pay more than liquid accounts, but are still relatively safe.
The housing market has been heating up in recent years, nationally as well as here and in the Chippewa Valley. Considering that what goes up must come down, are we headed for another 2007-style mortgage crisis?
Probably not, because the number of first-time homebuyers will help prop up the market. But if interest rates rise, many people will choose to stay in their current homes with their current low-rate mortgage, and it could make it harder to find homes to purchase, without a lot of new construction. That said, home prices will certainly decline at some point in the future, but you should be buying a home to live in, not as an investment.
If we’re lucky, every once in a while a little windfall comes our way: a bonus, an unexpected tax refund, etc. What’s your advice on making the best use of such money?
Pay off any high interest rate debt first (like credit cards), make sure you have at least three months’ worth of living expenses set aside, and then spend the rest on traveling, which usually provides consumers with the highest level of satisfaction. Or buy beer, which can provide some satisfaction, albeit of a temporary nature.
Everyone’s got a smartphone these days. How can we make sure we’re getting the best deal? How can we avoid getting stuck with an expensive, long-term contract?
Read the fine print – but most contracts are commodities, and similar from one provider to another. Instead of focusing only on cost, find a provider that gives you the best coverage where you will be using it. That said, put the phone down once in a while and have a face-to-face conversation with a real live human being (and while you’re at it, get off my lawn).
While we’re on the subject of smartphones, are there any personal finance apps that you really like that can help people spend less and/or have more?
If you’re comfortable letting a provider have access to your financial situation, Mint.com helps you track your spending so you know where your money is going, and what you can cut. If you’re in a committed relationship with another person, he or she will also be more than happy to tell you where you waste your money.
Eager for more McKinley? Check out his website, onyourmoney.com. Wisconsin Public Radio recently announced it will end production of his “On Your Money” program effective July 31, 2018. Until then, you can catch the program as the 8am segment on Tuesdays on “The Morning Show” on Wisconsin Public Radio’s Ideas Network (88.3 WHWC-FM in the Chippewa Valley). It’s rebroadcast at noon on Saturdays on the Ideas Network.