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YOUR BOTTOM LINE

How You Can Get Rid of Debt, Improve Your Credit and Start to Save; Getting Your Career on Track; Open Enrollment and What It Means; Real Estate Market for 2010

Aired January 2, 2010 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


GERRI WILLIS, CNN HOST: Happy New Year. I'm Gerri Willis and this is YOUR BOTTOM LINE the show that will save you money in 2010.

From your house to your job, savings and your debt and health care, we're here to help you make the very best financial decisions for you and your family. YOUR BOTTOM LINE starts right now.

No doubt, you've had to deal with your credit card company in the past year about raising interest rate, lowering your credit limit as you try to pay down the debt. So, with the New Year, how can you rid yourself of debt, get your credit tip-top shape and start to save? Let's go straight to our panel of experts.

Ryan Mack the president of Optimum Capital Management, Donna Rosato is a senior writer with "Money" magazine, and Jeff Gardere, clinical psychologist, he's also a licensed real estate broker and developer.

Welcome all, good to see you guys. Let's start with credit cards, because I think that this is what has people so upset this year. You know, they've got such bad terms of their credit cards, Donna, is there any hope in 2010 that this situation will improve?

DONNA ROSATO, MONEY MAGAZINE: Well, definitely. In February of 2010 a new law will go into effect where credit card companies are not allowed to raise your interest rate on existing balances and there's a host of predatory practices that are not going to be allowed to do.

But what's happening in past year is that in advance of that law, a lot of people have seen their credit card rates go up significantly. So, there's hope for the future, but right now, people are really feeling squeezed by their credit card companies.

WILLIS: We should say in these next few weeks you really need to be looking at your credit card statements, anything from your credit card company, for clues about what they're going to do the next year. It's critical to do that.

Jeff, when I talk to people about their credit card debt, the emotional journey for people who are in over their heads is so tough. What's your advice to people right now, first quarter out of the gate, what do you tell them?

JEFF GARDERE, CLINICAL PSYCHOLOGIST: Stay on top of your statements, know exactly what's going on, and most importantly, don't personalize it, treat it as a business, because that's exactly what the credit card companies are doing. If you personalize it, then all of your emotions are involved and when we use our emotions to make decisions we always make the wrong decisions.

WILLIS: The wrong decisions. I think that's absolutely right.

Ryan, let's get to debt overall. Like, what do you tell people who have a lot of debt, right now? Maybe it's credit card debt. You know, maybe they have a second mortgage on their house and they're trying to desperately to pay all of this off. What would you tell them?

RYAN MACK, OPTIMUM CAPITAL MGMT.: Well, the first thing you have to start doing is stop borrowing from tomorrow for the things that you want today. So, we have to stop adding to the debt. Look at your debt, work out exactly how much you have, write it down. And it's amazing how few actually write down exactly what they have. It's almost like trying to drive a car blindfolded. You don't know where the heck you're go or where you need to turn.

Write it out, organize it from smallest debt to largest debt. Start paying it off. Use the snowballing method. Look at the interest rates, start calling those companies, negotiate on these interest rates and then start going to annualcreditreport.com at least twice a year, get the free one first, and then go back and pay for the second one and make sure you're avoiding identity theft and do all those things of making sure you're cleaning your credit regularly.

WILLIS: That's going a long way, obviously with your credit card debt, but of course we're also thinking about mortgages right now.

Donna, you've seen mortgage rates. In the last few weeks they've been at 40-year lows. I mean, this is a fantastic time to either be getting I a new mortgage or reupping on an old one. What's your advice to people right now who may feel like I've got to have a new mortgage?

ROSATO: Well, homes are so affordable right now and one of the reasons is mortgage rates are extremely low. But mortgage rates are going to be going up. Now, you have to make sure, as Ryan said, that you have good credit to qualify for those kind of low rates. It's great that the average mortgage rate is pretty low, but if you don't have a good credit score, and I'm saying probably 720 or higher, it's going to be hard for you to qualify for that.

So first, as Ryan said, get your credit score, see where you stand. If it's not in that 720 or higher mark, do what you can to clean it up. You know, pay your bills on time, start reducing some of the debt that you've got. And then, the other thing to know, it's going to take a long time.

If you want to get a new mortgage, or going to refinance, these things are taking months and months to do because a lot of people want to take advantage of this, as you do. So, start the process now and be a little patient. WILLIS: It is the one bright spot in all of this is that mortgage rates are so low.

But Jeff, I want to talk to you. You know, if look, even if you have a job, you're fully employed, things are going pretty well, your home's lost value. What kind of psychological pressure is that on people?

GARDERE: Well, that's a lot of psychological pressures, because we tie in a lot of our self-esteem as to where we're living, how we're able to maintain where we're living and even making out payments. And the great recession that we saw last year, certainly people were very much afraid and became victim to that.

I like to tell people empower yourselves. Do exactly we have spoken about, here. Know what your financial picture is and what it is that you need to do. But the most important thing is to talk to the banks, have a relationship. Sometimes you'll get a customer representatives who don't know what the heck they're talking about, they'll give you a hard time.

If you're having a tough time with them, tell them you'd like to speak with a supervisor, if that doesn't happen, then politely hang up, dial again, you'll get someone who's a little bit more empathetic as to what's going on. But, be in charge of what's happening in your life. Manage your stress when it comes to these mortgages, don't let your stress manage you.

WILLIS: You know we talked about homes, we've talked about credit cards. Another important thing for homeowners, of course, is also their 401(k) and their savings for retirement.

Ryan, I want to turn to you. You know, we had such a bad year, last year. And now, people are starting to say, hey, the stock market's turning up, now I can start looking at my 401(k) again. Is that right thing to say?

MACK: Never. Never. You know, it's amazes me how individuals look at market and how the market's going topsy-turvy and they almost gauge emotionally, wrongfully emotionally, on what to do with 401(k) averages.

The same advice I was giving back in 2000, same advice in 2004 when the market was down, the same advice in 2007 when it was back up again, we have to make at least twice a year we looking at our 401(k)s, looking at all of your statements every single month to see if we need to adjust our asset allocation.

Do we need to start putting more money? Are you too heavily weighted in stocks if you're 55 years old and only have five years left of retirement, 80 percent stocks, should you adjust to maybe more of a conservative type portfolio? All of these questions, at least once a year, we should be addressing and answering to make sure we're in the right direction.

WILLIS: Donna, is there any set it and forget it? There's not. You have to constantly check in.

ROSATO: There is no set it and forget it. And Ryan brings up such an excellent point. T. Rowe Price actually reverently did a study that I was looking at that folks who rebalance their portfolio once a year, definitely come out ahead. They're portfolios tend to be at least four or five percent larger over the long run than people who set it and forget it.

WILLIS: I like that.

ROSATO: Yeah, and as Ryan said, you know, the rally was great, with this rally, you probably are too heavy on stocks, right now, so you need to come back and look at asset allocation.

GARDERE: You know, one of the things we've learned last year from this recession is that we were asleep at the wheel. We let everybody else make the decisions. We hired folks who made decisions. We let our government make decisions.

This year the New Year's resolution should be let me be on top of my portfolio, my finances, what's go on with people who are billing me, let me balance my bank accounts a lot of people don't even look at their statements to make sure that they're not being misbilled, charges are coming out.

One of the things that we've got to learn is that even though we're afraid of mathematics, we're afraid of finances get through that by being empowered by being on top of what's happening to you and your family, financially. Once you do it, once you start, and you learn how to do Excel then you're going to have an easier time at it.

WILLIS: You're going to make me learn Excel?

(LAUGHTER)

WILLIS: Great responses, fascinating conversation. Donna, Ryan, Jeff, stick around. Up next, we're talking jobs in 2010, where to find one, how to train for a new one and maybe just how to hold on to the one you've got.

(COMMERCIAL BREAK)

WILLIS: So, if you've got a job, if you're looking for one, or if you fear you're going to lose the one you have, what can you do to make sure your career gets back on track this year? Back with an action plan is our panel, Ryan Mack, Donna Rosato and Jeff Gardere.

Ryan, I want to start with you, here. Look, the unemployment rate, 10 percent, a tragedy. It's taking 27 months for people to find a new job, a very long time indeed. What is your advice to people out there who are actually pounding the pavement looking for a job?

MACK: Well, first of all we have to be optimistic. And I just want to remind everybody what does Microsoft, IHOP, Facebook and CNN all have in common? They were all started...

WILLIS: No, that's a good question. I never thought of that.

MACK: They were all started in times of recession. And over half of the S&P 500 are companies that were formed during times of recession. We need good ideas for the individual who do have jobs, right now, to be saving their money just in case they get laid off, to have the emergency funds.

We need to make sure they're going to local community colleges get retrained and certified. We need to be expanding our social networking using LinkedIn, FaceBook, MySpace, BlackPlanet, whatever you need to use to make sure we can tough people who are in different industries to start looking at advertising...

(CROSSTALK)

WILLIS: Reach out, reach out.

MACK: Exactly.

WILLIS: Donna, a lot of people still have their job, but they've been forced to scale back, maybe they're working less hours, they're making less money. Tell me about the money in 2010. Tell me there's going to be more.

ROSATO: The good news in 2009 people were getting furloughs, pay cuts, pay freezes. The picture's a little bit better for 2010. People will be getting pay raises, they'll still be pretty skimpy, but for the best performing workers the average pay increase will be 4.8 percent.

WILLIS: That's a lot.

ROSATO: It is compared to 2.7 percent for the average worker. So, you need to make sure you're standing out on the job. It's not enough just to do your job and stick your nose to the grindstone. You have to actively participate in meetings, make sure you're doing high- profile assignments. You know, staffs are slim these days. So, what you want to do is make sure you're volunteering for more responsibility, the opportunities are usually there.

WILLIS: Jeff, Ryan says they have to be optimistic. How do you do that in this market where all of the news seems to be negative? How do you keep your spirits up?

GARDERE. Well, I work with people in therapy who are going through many of these issues. And what we talk about is reassessing the situation. You really have to be a cockeye to optimist, is the glass half empty or half full? And the glass is half full.

If you have a job right now, you're absolutely correct, what you need to do is be invaluable on the job. It's no more of this 9:00 to 5:00, I'm just going to go in and do the bare minimum. You have to empower yourself to love what it is that you do, it's all about perception at the end of the day. And you have to be empowered to do the best that you can do so that even if you get laid off, you may be invited back, you can't have the woe is me attitude. You have to do what we like to say in Brooklyn, scrapple at the apple.

You have to look at ways -- yeah, absolutely. You have look at ways to go out there and hustle and make that money and one more very trite saying there should be no shame in your game. If you have to be a baby-sitter, even though you're an executive, if you have to go out there and sell newspapers on the streets, whatever you do to survive you should have pride if that because it is about survival making that money.

ROSATO: Jeff is right. There is a lot of project work out there, today. And a lot or people are holding out for the same job that they had at same salary. So, you may have to take a job at a lower salary, but there's a lot of temporary work out there, too.

GARDERE: That's right.

ROSATO: And I think people need to take advantage of that kind of stuff and think a little bit outside the box, especially if you're not working.

MACK: And the bottom line is if you give me $50, you take $10, go to amazon.com read how to start a weatherization company and take your $40 and go to Home Depot and get some caulk gun and the material, you can have successful weatherization company with millions of dollars are going into this green industry and one of the most fastest growing industries in the country for 50 bucks or less.

These are the type of ideas that need to start coming up with. You need to be brave enough to dare and get into these fast-growing industries to make the money for yourself.

GARDERE: That's right, you have to get out of the comfort zone, the emotional comfort zone that we have where we like to stay in the same place. Now, it is about re-creating yourself and taking yourself to the next level.

WILLIS: Donna, you know, we talk about being an entrepreneur, whether a caulk gun in your hand or a computer or whatever, how realistic is it that you can start a company in this environment?

ROSATO: Well actually, this is often a good time to start a company, as Ryan pointed out. You know, I mean, labor is cheap. Office space is cheap. You can usually do things now where now in other times it's more expensive. So, this is not a bad time. But I also want to say, I mean, it's good to be entrepreneurial, but there's a lot of industries that are actually doing OK, too. You can be a consultant, professional services; I was looking at some numbers from the BLS that project...

WILLIS: Bureau of Labor Statistics.

ROSATO: Bureau of Labor Statistics. The strongest job growth over the next 10 years is going to be, of course, things like health care, education, federal government jobs, but there's a lot of other places, professional services and that's a lot of individuals who are doing consulting, employment services to try to help businesses be more competitive. There's a lot of things you can do.

So, just try to think outside of the box and you can probably, as Ryan said, you know, rely on yourself. We're all free agents these days. Even if you've got a job, it's a free agent nation and you've really got to take care of yourself.

GARDERE: That's right. And you can go online, you can reeducate yourself. You can get -- now the online degrees are considered to be much more acceptable. So, you can prepare for if something does happen where you can go out there and do something different, but better yet, do it at the same time.

WILLIS: All right, guys, I'm going to have to wrap you now. Sorry, but great ideas, great information, really appreciate your help.

What changes can you expect to see in 2010 when it comes to health care? We'll break it all down for you, next.

(COMMERCIAL BREAK)

WILLIS: Health care reform is a topic that's being debated from the living room to the oval office. So, what changes can you expect in this New Year and what should you keep an eye out for?

Still with us clinical psychologist, Jeff Gardere and joining us is Andrew Rubin, he is the vice president for Medical Center Clinical Affairs at the NYU Longone Medical Center. Andrew is also the host of "Health Care Connect" on Sirius XM Doctor Radio.

Welcome both.

You know Andrew, you and I have talked so much about open enrollment and how it's changing this year. I mean, I think a lot of people are out there really worried about their health care in 2010. What would you tell them?

ANDREW RUBIN, NYU LANGONE MEDICAL CTR.: I would tell them to save a little money, because they're going to have higher co-payments, higher co-insurance amounts as we've been talking all about open enrollment season and be prepared to have some higher medical bills that you're going to have to pay for out of pocket. So, it's all about what's in your wallet next year, not necessarily what your employer is doing for you.

Jeff, I want to turn to you, because you say it's all about preventative care. What do you mean?

GARDERE: Well, absolutely. So many people pay these very high insurance premiums because they're afraid something catastrophic may happen, it's not about the day-to-day doctor day-to-day doctor's or visits for their kids, which they end up paying out of pocket anyway for their favorite doctors.

So, I think if you spent more time taking care of yourself physically, emotionally, but especially physically, working out, doing exercises at home and so on, it might take off some of that pressure that you have to pay that insurance, have that insurance, making sure that it's in place and taking care of what you need to do right now, which is staying away from the doctor.

WILLIS: Staying away from the doctor. That's always -- I guess that's good advice, if you're healthy and you keep yourself healthy by working out.

GARDERE: That's right.

WILLIS: You know, one of the questions out there, Andrew, I think is how are we going to end up paying for all of this? Is this ultimately going to come back to me in higher taxes? What's your outlook for health care costs overall?

RUBIN: Well, listen, we're going to -- it's, health care costs in the near term are going to go up because we're going to be insuring a lot more Americans out there and the cost control provisions are going to take some time to get under control. We have to figure out where we're going to find the costs to cut.

And taxes will -- there will be more taxes, fees, assessments, whatever you want to call them. They don't start until a couple years down the road. So, I would say in the short term, higher costs, longer term, hopefully lower costs. If we can't get the costs down, you know, we're going to have a big problem in this country.

WILLIS: I was really hoping for a silver lining, here. Is there a silver lining, Andrew?

RUBIN: I actually think there is a silver lining. I think this country has made a decision that we have to insure more Americans and we have to get our cost structure under control, and no matter what happens and what it looks like in the future, you're going to see some changes in that direction.

WILLIS: One thing we never talk about and we probably should, is mental health.

GARDERE: Yes.

WILLIS: Jeff, you know, this has been a tough year for people. People aren't just suffering physically, they're also suffering mentally.

GARDERE: That's right.

WILLIS: What would you tell them?

GARDERE: Well, when we suffer mentally, we suffer physically, too, because we have an emotional breakdown, which invites more disease in. I would tell them if nothing else, if you don't have the insurance to talk to someone about your mental health issues, there are free groups, there are support groups, there are groups where interns are providing mental health services through the colleges and so on. But don't just sit on a lot of that emotional pain, and we have a lot of it coming up this year. But also more importantly, talk about it, let it out, have your informal support groups, but don't be afraid to discuss the issues.

WILLIS: Andrew, action plan here, for next year. What would you say, including this mental health issue, to people who are concerned as they come into the New Year here about what's going to happen? Give me just three steps to take.

RUBIN: Listen, again, save some money for health care. I think on mental health and primary care you're going to see a big focus on that next year so there will be a lot more access to that. We're going to see some money spent on primary care physicians, mental health...

GARDERE: And take advantage of it.

RUBIN: And mental health providers, and to absolutely take advantage of that. And make sure you're prepared. Listen, a lot of people still aren't prepared, a lot of people still don't have insurance. Try and get some sort of protection lined up for yourself.

WILLIS: You need protection, that's for sure. Andrew, Jeff, thank you so much.

RUBIN: Good to be here.

GARDERE: Thank you.

WILLIS: Your No. 1 investment, your home. So, what can we expect from the real estate market this year? We'll tell you, next.

(COMMERCIAL BREAK)

WILLIS: 2009 was a rough year for the housing market and well, maybe for you, too. So, what do you have to look forward to when it comes to your No. 1 investment? Annalisa Burgos is the senior editor of HDTV's Frontdoor.com.

Good to see you, today.

ANNALISA BURGOS, FRONTDOOR.COM: Good to see you, Gerri, thanks for having me.

WILLIS: So, I want to start by talking about whether this free- fall in housing is it over?

BURGOS: I honestly don't think so. We've seen that home values are each month continuing to fall. And although more people are more aware of it, I think it still has a ways to go.

WILLIS: So, you think we've got more downside, here. I want to talk about some of the basics of the market, like lending standards. You know, one of the reasons we haven't been able to see a rebound in the market is because you can't get a loan for a house. Is that going to get better in 2010?

BURGOS: A little bit. I think more people are aware of what needs to be shown, you know, the W-2s, the paychecks and just having their ducks in a row, the credit and everything.

WILLIS: But it's the bankers, it's not us.

BURGOS: Yeah, I agree, but I think we've also ingrained in our own thought process that it's easy to get a loan. That shouldn't really be the case. I'm on the other side where I think it should be a little bit challenging to get a loan. You don't want to give out free money to just anyone. They have to make a good case for it.

WILLIS: But, do you think that lenders will actually be writing loans? I mean, the problem has been that, you know, people are showing up at the table with what they need, but they're still not getting the loan. The requirements for those loans have gone up, up, up.

Do you think that lenders will actually, as the president has tried to get them to do, come to the table and make loans?

BURGOS: I think so. I think, you know, there's more incentives for them, you know, the Obama administration has created more of these programs like Making Home Affordable, it's still a question as to how successful that is, but still at least they're doing a lot to increase incentives for lenders.

WILLIS: Now, I understand you think there will be more buyers for next year. That's certainly good news for people trying to save their homes

BURGOS: Definitely, you know, the tax credit has been expanded so that includes existing home buyers now as opposed to just first timers, and also the income limits have been raised, so, now they're up to $225,000 per couple and then $125,000 for individual.

WILLIS: All right, and so, more buyers, obviously. Interesting you think that short sales may be easier next year. Why?

BURGOS: Well, I think now that they are -- more people are aware of short sales, it was a big buzz phrase this year, everyone wanted to avoid foreclosure. It's the one option that they have that they don't need to have, a huge ding on their credit, you know. It still dings it a little bit, but it's not as bad as foreclosure.

So, at least, you know, but they were finding that when the were going through the short sale process, lenders were not amenable to actually approving these just because, you know, might as well just go with the foreclosure. And no one really had some standards to go by. Now the foreclosure alternatives program that was just announced is going to start in April, those are going to apply to the conventional loans, not FHA per se.

WILLIS: So, if you're one of those people out there and you haven't been able to sell your house and it's worth less now than what you paid for it, you might be looking into the short sale, you might actually get your bank to work with you.

Now, look forward into 2010 and as the year goes on here, do you think that people have really got their arms around the fact that, you know, housing values don't necessarily go up forever?

BURGOS: Definitely. I think it was -- 2009 was a huge wake-up call for a lot of people, 2010 will continue to be challenging, but I think more sellers, for example, are going to know that their home values be more conservative and manage their expectations. You know what I mean? Because in 2009 as a buyer it's really hard to kind of convince sellers that their values aren't what they used to be.

WILLIS: Annalisa, thanks for that. We appreciate it.

BURGOS: Thanks for having me.

WILLIS: As always, we thank you for spending part of your Saturday with us. YOUR BOTTOM LINE will be back next week right here on CNN.

You can also catch us on HLN every Saturday and Sunday at 3:30 p.m. Eastern Time. And you can hear much more about the impact of this week's on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.

Don't go anywhere. Your top stories are next in the CNN NEWSROOM. Have a great weekend.