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What Does It Take to Land That Job?; Crunch Time for Taxes: How to Avoid Being Audited; Tips on How to Keep Your Home Healthier; How to Help Your Children Understand the Basics of Personal Finance

Aired April 3, 2010 - 09:30   ET


STEPHANIE ELAM, CNN HOST: Good morning. I'm Stephanie Elam and this is YOUR BOTTOM LINE. It's financial literacy month and issue No. 1 still the economy. Your house, your job, your savings and your debt. This morning we're tackling all four. So, grab a cup of coffee, get a pen, some paper. The show that saves you money, it starts right now.

All right, let's begin this morning with the state of your job. After all, you can't dig out of debt or build up your savings if you're not bringing any money in. So what does it take to land that job? And what extra steps will college and high schoolers need to take to snag a summer gig this year? Charles Purdy is a senior editor with Yahoo! Hot Jobs and he joins us now from San Francisco.

Charles, thanks so much for being here with us this morning.

CHARLES PURDY, YAHOO! HOT JOBS: Thank you for having me. It's great to be here.

ELAM: All right, so tell me this. You're kind of from the social networking hub I think, of San Francisco, everyone thinks of all the technology out there. Is this a really good way for people to go about finding a job and heading to their social network?

PURDY: You know, it's a great tool for finding a job, but it can't be the only way you look for a job. Simply telling your FaceBook friends that you're looking for work and then going back and playing Mafia Wars is not an effective job search, but it's a great tool in addition to some other things that you need to have. You know, the great well-crafted resume, using online job boards, and nothing can replace a face-to-face networking.

ELAM: Yeah, that's definitely true, but I think about people out there, it seems like there might be some dangers to trolling through your friends and trying to see if they can hook you up with a job, at least a contact, right?

PURDY: That's definitely true. The important thing to remember about social networks and the professional networks is that you really have to give as much as you expect to get. You can't just join LinkedIn, connect to people and start asking them for leads or asking for introductions to the hiring managers at they're companies. You have to become someone who participates in your network as well. Even if all you have to give is, say, a friendly ear or tweeting out interesting articles that you find online that are relevant to your industry.

ELAM: Yeah, that's one thing I found a little disturbing when people where asking me to recommend them, but I haven't seen them since '95 or something when I was in college. It seems like a little jarring when someone comes to you that way. So, what is the correct way, then, to say to a friend, or say to a contact, this is what I'm looking to do, and get that information out there?

PURDY: Well, the best way to do it is not to make the request a direct request. It's a good way to simply catch up with someone, let them know what you're up to, what you've been doing. You're absolute right that after you haven't seen someone for 10 years it's very inappropriate to ask them for a recommendation or a referral.

For one thing, that recommendation won't seem sincere because they really don't know you very well. But, if after you've established a relationship that person will offer to perhaps give you a recommendation or introduce you to someone at his or her company.

ELAM: All right, you have 5.5 million Americans vying for one job out there right now, chances are you're going to hear a lot of no. But you say the way you respond to that no is really the key, right?

PURDY: Absolutely. Like you say, because so many people are applying for jobs right now, even if an interview goes great you might not get the job. So, it's important firstly, that you don't take it too personally. It could simply be a matter of someone else being better connected, and often hiring companies do interview people even after they've already pretty much decided on a candidate. So don't take it too personally. Look at it as a learning experience.

ELAM: Charles Purdy, thank you so much for your great advice, this morning, so that we can help some people out there who are looking to get a job, here.

All right, lots more ahead this morning, including dramatic new options in paying for a higher education. Should you even bother saving for college anymore?

And up next, crunch time for taxes. We'll show you how to avoid an audit fair and square.


ELAM: We all know doing tour axes is hassle enough and the last thing anyone wants is to be scrutinized by an audit. And here to tell us what factors can trigger that dirty five-letter word, is Turbo Tax's "Tax Deductionista," Lauren Young.

Lauren, thanks so much for being here.


ELAM: All right, so what are really the odds of getting audits?

YOUNG: They're pretty low. I mean, I think there's a fear factor, a lot of people are really nervous about being audited. Push comes to shove, out of 149 million taxpayers, less than one percent are audited.

ELAM: Less than one percent. So that fear keeping us in line. So, let's talk about what are some basic audit triggers that really get the IRS going.

YOUNG: Well, there are definitely some things that raise the red flag with the IRS. The first thing for sure is mass mistakes. OK? If you paper file, the chances are that you're going to have a 20 percent mistake on your return. If you e-file, if you use something like Turbo Tax software, chance less are than one percent, so don't make any mistakes.

ELAM: Because the math is checked that way.

YOUNG: Do your math, definitely.

ELAM: So, what about if someone that got laid off in the economy, started off their own business, what should they be aware of?

YOUNG: Well, self-employment income, anyone who is filing a Schedule C. If you're getting 1099s from people, people who are giving you miscellaneous income throughout the year, the IRS keeps track of those things and you might not keep track of them. So it is so crucial to keep track of that stuff, and to report that income.

ELAM: And then there's also this fine line it seems, for some of what's a hobby and what's actual lay job. Right? That could be a flag?

YOUNG: I think people definitely push the envelope here, too. OK, so if you're a painter, you love to paint, you want to deduct your painting supplies, your brushes, great, if you're showing yourself in a gallery and selling it, fantastic. If giving it away to family members at holiday time...

ELAM: Not so much.

YOUNG: Not so much.

ELAM: All right, and then the other big one, is charitable donations. A lot of people gave to Haiti, a lot of people gave to Chile this year. There's also people who just donate stuff to Goodwill and Salvation Army. When is too much, too much?

YOUNG: Well, so you can donate up to 50 percent of your adjusted gross income, not that's a lot of donations. That's a lot of donations, OK? But when push comes to shove, most don't do that. If you're contributing cash over $250, keep track. The charities will send you actual forms telling what you donated. Now, when you donate stuff, cars, clothes, a lot more tricky and you really want to be careful about how you value that stuff.

ELAM: And another tricky one is if somebody else is claiming your dependents as dependents. That can cause problems, too, right? YOUNG: Right. And that's a big red flag, too, for the IRS. And it's happening more because the bad economy. A lot of people are helping out family members right now, and so great, if you're going to mom and dad for some extra help. But just be really careful about that when push comes to shove and it's tax time.

ELAM: All right. Some basics, what are basic ways just to make sure that you avoid being audited altogether? Like, what are just some things we just keep in mind?

YOUNG: I cannot stress enough how important it is to do the math, to e-file. It will make your life so much easier and make sure you've got really, really meticulous records. You know, put all of your tax receipts in an actual file folder instead of letting it float all over the house.

ELAM: So, be organized throughout the year and then it might just make it better. And then if they come knocking you've got all your documentation right there.

YOUNG: They're not coming knocking. Those chances are pretty slim. Only 4,000 people actually get criminally prosecuted. Less than half go to jail.

ELAM: So it's not -- and if they do, they're actually going to send you something through the mail?

YOUNG: You're going to get a letter.

ELAM: They're really not going to knock.


Lauren Young, thanks so much for joining us right now to give us this information.

All right, what's better than free advice? Next Saturday morning, the last weekend before your taxes are due, I might add, we're going to are fielding your tax questions. So, send an e-mail to YOUR BOTTOM LINE at and we'll do our very best to get an answer to you.

But up next, right here, this morning, the cost of college. The price tag gets higher and higher every year with new rules that forgive student loan debt, should you even bother saving for it in the first place?


ELAM: So, with the average student loan debt around $23,000, paying off that college education can be a rough lesson in budgeting for so many people out there. But, this week a new education bill was signed into law giving you more options on how you repay your loan. And here with all details Ryan Mack, he's president of Optimum Capital Management. He's going to help us make sense of this.

Ryan, thanks so much for being here.

RYAN MACK, OPTIMUM CAPITAL MGMT.: Thank you for having me.

All right, before we get started, I just want to run through what's in this bill so we can talk about it a little bit.


ELAM: So, first off, this is really going to apply for students who enrolled 2414 or later. This is what we're looking at, here. So, you're going to limit payments to 10 percent of income. There'll be forgiving remaining debt after 20 years and forgiving debt in 10 years if you go into a job in the public service. So, those are some of the basics. What are your thoughts on this? Is that a change for the better?

MACK: I think it's definitely a change for the better. Essentially, in order for us to be more of a product oriented industry, where we're actually make things as opposed to being service oriented, we have to focus on education. This is a great long-term investment.

So, I think making -- should individuals -- like one of those things investing $2 million into community colleges, six million individuals are in commune colleges across the country trying to get additional education, additional training. That gives access to -- by the time 2020, 2021 school year, there'll be 820,000 additional Pell Grants awarded because they actually are increasing the maximum amount of reward for the Pell Grants, as well.

ELAM: Well, let's talk about this one point, though, because this is the one question I've been asked the most. If it's going to be forgiven after 20 years, then a lot of people are like, why am I bothering to save to pay for college?

MACK: Well, simply, we still have to worry about our credit score. I mean, you have high risk debt and low-risk debt, secured debt is actually the highest impact on your credit score, so when you decide not to pay your student loans or auto loans and your mortgages, your FICO score actually suffers the most. And they still have access to garnishing your wages and trying to get access to your capital, anyway, so why go through the hassle of trying to not pay them money when they still have access to your capital and then your FICO score is going to be messed up, as well.

ELAM: So, you're 20 years out of college, you may want to buy a house. You won't be able to. You have to take care of that. What about if you have an existing loan?

MACK: Well, if you have and existing loans, these things -- well, one thing about it, you might be able to maybe refinance into a loan, because as of July 1, 2010, they are taking the middleman out, so allowing these individuals banks in the private industry -- the easiest way to borrow money from the government, it's free, it's low interest rates, and the private industry understands that. So now we're take taking them out of the mix and is simply saving $68 million in taxpayer dollars by not subsidizing these banks just to give us loans at higher interest rates. So, you might be able to even refinance and get in some of these low interest rate loans if you have a loan currently.

ELAM: And just to be clear, this is something that's not starting right way. So if you've got a kid going to school this fall, this doesn't apply to you?

MACK: Well, July 1, the subsidies in terms of the banks being out of the middleman -- the middleman out of the mix, July 1, 2010 it starts July 1, 2014, that's when the income goes from 15 percent down to 10 percent of your income.

ELAM: Ryan Mack, as always, thanks for breaking it down. So glad you were here to do that for us. Thanks so much.

All right, still ahead, clean your house for a healthier home. And the money rules every kid should learn before it's too late.


ELAM: A new poll out just this week shows perhaps not too surprisingly our houses have a major affect on our happiness. That makes sense to me. More than half of homeowners say this impacts their overall happiness, 74 percent say they're happy with their homes and three quarters of homeowners who have done projects in their homes claim to be happier than those who have not.

So, from a very happy home to a healthy home, our next guest has a room-by-room hassle-free guide to keeping your family healthy in your humble abode. Deb Snoonian is a senior editor with "This Old House."

And Deb, thank you so much for joining us, here to just to help break this down for us. So, let's start off by talking about what you should do before you really even get (INAUDIBLE) to your house?

DEB SNOONIAN, THIS OLD HOUSE: Right. Well, one thing just to keep in mind is this is a very normal for things like pesticides and chemicals that we don't want in our homes to get in our homes. So, we canvas experts all over the country and they came up with about 70 different tips that you can find in our April issue.

The first thing is we talk about, as soon as you get home with your dry cleaning take the bags off the clothing, because the bags will trap a chemical called perchloroethylene, that's a suspected cancer-causing chemical. So, you don't want to trap the gas in there. If you just pull it off and let the clothes air out, that's much healthier, you're not going to bring that into the house.

ELAM: So, basically don't take your clothes and just stuff them in your closet, hanging up in the bags, take them out?

SNOONIAN: Especially if you're keeping it for a season. ELAM: For a season, all right. So, that's one thing that has to do with plastic. Another thing that has to do with plastic is plastic containers. Should we use these at all? Should we just toss them all? How do you tell?

SNOONIAN: Well, there are marks usually on the underside of plastic containers, recycling mark that looks like a triangle. If it has the number three, six or seven in it, that is means it contain as chemical called BPA. And that's a suspected -- what we call an endocrine disruptor, and that can be damping especially to kids whose endocrine systems are not fully developed.

So we always recommend just getting rid of anything with the number three, six or seven that has BPA in it. there are two alternatives, you can use plastic that are BPA free, they're usually labeled, or you can use glass containers for storing food and drink.

ELAM: And those BPA free ones, you can microwave them and everything and not worry about it?

SNOONIAN: You can microwave them and not worry about it. But if you're really worried, use glass instead.

ELAM: All right, so the other thing is, the sort of need of where you keep your printer. You've got your printers, you've got your copiers. You're saying keep them out of the bedroom. Why?

SNOONIAN: Keep them out of the bedroom because they actually release lung irritants and you're in your bed sleeping seven or eight hours a night. If you have any kind of asthma or allergies, it can really trigger that. Plus let's face it, it's stressful to work where you're trying to sleep. So, you know, keep a workstation in a more well-be ventilated area of the home.

ELAM: And just keep a happy separated bedroom. I think it's a good idea.

Now, this one is probably one of the things that people may know, but they don't realize how bad it is, the germ factor with our electronics. So, you've got your remotes and everyone picks them up at various different times with things on their hands.

SNOONIAN: Exactly, kids have a runny nose or you have a cold or a flu. These can harbor more germs than a toilet seat. So, we really recommend disinfecting it with a disinfecting wipe or even just a hot wabwater rub down every couple days, especially if somebody in the household is sick. You don't want to be spreading germs because you're on the sofa trying to recover and watching your favorite movie.

ELAM: So everyone at home right now go get that disinfectant wipe and do that.

SNOONIAN: Exactly.

ELAM: One other thing we want to talk about to is the fresheners. You're saying don't use air fresheners. I'm sure a lot of people think if I want my house to smell clean, that's what I want to do.

SNOONIAN: Yeah, it's sort of an oxymoron. You actually -- air fresheners can contain chemicals that are potential health hazards, one are called phthalates, some are called volatile organic compounds, and also you don't want to mask those mold and mildew odors, because if you have those problems in your house, you want to fix them. so, if you're in a musty area of the house like the basement, put on a fan or use a dehumidifier or open a window instead to freshen the air.

ELAM: And one other thing, one little quick tip you have too, is that you can go to the plants to help you keep the air clean, right?

SNOONIAN: Exactly. Plants filter pollutants. A lot of people don't know that. Not only do they give up oxygen, but they can filter pollutants like formaldehyde, which are found in a lot of furniture products. Benzene, which is found in some paint products. So things like aloe vera, spider plants, English ivy are good choices if you feel it's a little stuffy inside. So, these are all really simple things that you can do on an everyday basis to keep your home healthier.

ELAM: So who knew? Houseplants do more than just look pretty. Deb Snoonian, thank so much.

SNOONIAN: Thank you.

ELAM: All right and from our friends at CNN Money, a reminder that you have less than a month left before the home buyer tax credit expires. First time home buyers may qualify for up to $8,000 while those who are trading up could get as much as $6,500. But, either way buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.

So now that your house is in order, it's time to teach your children and teach them well. The nonprofit Jump$tart Coalition for Personal Financial Literacy estimates that only 10 percent of 12th graders understand the basic of personal finance. What are the essential lessons they need to learn? We've got the list coming right up.


ELAM: The U.S. Department of Agriculture reports the cost of raising a child to the age of 17 more than $290,000. According to us, the cost of raising a child who is financially responsibility? Priceless. So, what are the lessons our kids need to learn before it's too late? Jeff Opdyke covers personal finance and investing for the "Wall Street Journal" and he's also the author of "Piggy Banking: Preparing Your Financial Life for Kids and Your Kids for Financial Life." He joins us not from Baton Rouge.

Jeff, thank you so much for being here this morning.


ELAM: All right, so tell me, how early should you start teaching your kids about money?

OPDYKE: As soon as they start asking for things at the store. I mean, that tends to be a really good time. I mean, part of that they really don't understand the concept of money and buying stuff. They just see you sort of interacting. But, the minute they start watching those Saturday morning cartoons that masquerade as entertainment but are really sort of, you know, pitches to kids to go by products, they start asking for those things, you kind of want to start working with them on understanding, you know, personal finance because now they want to spend.

ELAM: They want to spend things. All right, but you say though that kids should not earn their allowance. Explain that to me.

OPDYKE: you know, it's not like you're going to send your child off into the streets to start working until he's 14, 15, 16, whatever, but I don't think kids need to be earning money in terms of chores and school. You don't pay your kids for chores. You don't pay your kids for school. Those things are part of the price of being a family. They're part of the price of growing up and learning the educational system you (INAUDIBLE) learn.

I advocate the idea that kids should be given money as part of simply being in the family. I mean, mom and dad earn money, you should share some of that money with your children in terms of an allowance.

ELAM: OK, so how do you decide then what's a good amount of money for an allowance for a child?

OPDYKE: That's going to depend upon the socioeconomic factors of your family and the community you live in. I mean, my child, he's 13 years old, he gets $1 a week per age. So, he gets $13 a week. Some people are going to think that's outrageous, some people are going to think that's too cheap.

It really depends on the kinds of circles your child runs in. You know, if everybody in his school is getting $1 a week per age and you're paying 25 cents, well, you know pretty much your child's pretty much a pauper among peers. If you're paying $5, then your child can afford every single he or she wants then it's just completely useless to do it that way.

ELAM: So then, how do you go about teaching the lessons behind saving versus spending and getting that lesson to your kids?

OPDYKE: Well, that's sort of a childhood-long process. I mean, it starts when they are just beginning to ask those questions about wanting to spend, and it goes all the way through the time they run off to college and during that period you've got to teach them spending, saving, you have to help them understand the world of investing.

You got to help them understand donations and what they should be donating to and how they should be donating and how much. I mean, it's entire -- a childhood-long process you are going to work with the minute they start asking to spend money.

ELAM: All right and then, of course, the big thing they're going to want as they get older is a debit card. How do you go about introducing that into their whole world?

OPDYKE: You know, debit cards are really good for parents to use with their children because it allows you great control. They have the freedom to spend as they wish within the confines of the family, but you get to watch what's going on.

So you get to see, you know, every week or every day or how often you want to look at it, where those expenses are taking place, and it allows you that opportunity to step in as sort of the voice of reason, the parental voice, and talk about where your child is spending, how much they're overspending at places.

You know, gives you a lot of freedom. I think every kid once they get to be in about 10th, 11th grade should probably be given a debit card as part of their allowance so that you can begin tracking how they actually spend their money when they're away from you.

ELAM: And it allows them to make the mistakes while they're still near you and then they learn from that and move on. So Jeff Opdyke, thanks so much for joining us today and giving us those tips.

OPDYKE: Sure thing.

ELAM: All right. Last but not least for us, as always, our "Free for All. Many of the changes put into place by the Credit Card Act of 2009 went into effect in February. Well, one additional part of the crackdown went into effect just this week. Companies have market-free credit reports as a means to lure you into a subscription service now have to disclose what they're offering.

Is it really free after all? The free credit report rule requires prominent online disclosures on Web site that advertise free credit reports but require consumers to sign up for monthly credit monitoring subscriptions or other services in exchange for the report.

Remember, that under U.S. law you're entitled to one free credit report every year from each of the three credit reporting bureaus. That's Equifax, Experian, and Transunion at

All right, that's it. We'll see you right here next week for YOUR BOTTOM LINE, the show that saves you money, same time 9:30 a.m. Eastern on Saturday. And don't miss Christine Romans and CNN chief business correspondent Ali Velshi on "YOUR MONEY" today at 1:00 p.m. Eastern and tomorrow at 3:00. But, right now it's time to check your top stories. That's in the CNN "NEWSROOM." Have a good weekend.