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YOUR BOTTOM LINE

Money Management, Money Myths, Backyard Safety, Summer Travel Deals, Summer Skin Protection

Aired May 22, 2010 - 09:30   ET

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


POPPY HARLOW, CNN NEWS ANCHOR: Well, good morning, everybody. We've got a lot in store for you this morning. On tap, paying down your debt -- we've got a plan of action for you and your family. And come on, don't buy the bull. We're going to debunk some of the most common money myths. Plus backyard safety -- ahead of a Memorial Day weekend before you fire up the grill for friends and family, you're going to want to listen to this. YOUR BOTTOM LINE starts right now.

All right, so listen to this good news. Americans apparently are shedding debt like crazy. Since October of 2008 we have paid off $626 billion of our debt. Our home mortgage debt burden, that is down five percent, credit card debt is actually down 12 percent, but unfortunately student loan debt, that is up a whopping 50 percent.

And when you talk about credit scores, the average credit score, according to Equifax, is better too at 704. So it's good to see people are starting to manage their money better, but it's easy to get off track. So, we've got some experts here to help keep us on track this morning. Lynnette Khalfani-Cox, a personal finance author and columnist for WalletPop.com.

And joining us from Atlanta John Ulzhiemer, president of consumer education for Credit.com.

Guys, thanks for being here. Appreciate it.

LYNNETTE KHALFANI-COX, PERSONAL FINANCE AUTHOR: Thanks.

JOHN ULZHEIMER, CREDIT.COM: Thank you.

HARLOW: All right, we're going to start with a few different scenarios. So, let's start off first with this scenario. Single in the city, someone's 25 years old, living in a big metro area, they make about $45,000 a year, they rent an apartment. They've got, of course, student loan debt, about $30,000 worth and $3,000 in credit card debt on three cards.

So, Lynette let's start with you. What do they do? Because, actually even at 25 you've got to start saving for retirement?

KHALFANI-COX: Right, you have to do a lot of things right early as possible, or you're going to suffer the consequences in your 30s, 40s and beyond.

I think the student loan debt sounds like something for this person to tackle, $30,000 is a big nut to kind of crack there. What I would do if that person was having trouble making ends meet, having difficulty saving for retirement, is make sure you have the right student loan repayment program. If you've got federal student loans, there's four different options. The standard loan repayment program is the one where you pay off those loans in 10 years. If you have cash flow problems, though, and can't do that you might think about the Income Contingent Plan, the Extended Loan Repayment Plan or the Graduated Loan Repayment, that will give you more flexibility.

HARLOW: What do you think, John on that? I mean, she's also got this credit card debt on three different cards. What's your opinion there when it comes to paying off that credit card debt?

ULZHEIMER: Yeah, I actually have a contrarian view on that one. The student loan debt is installment debt and installment debt tends to be stable debt and it's an investment in the future because you're going to be able to use your education to make more money in the future.

She's got 40-plus years to go before she needs to actually retire. So, compounding savings today is going to lead to significant retirement saving in the future. I think that she should focus her energy and money on credit card debt. Because first off, the interest is not tax deductible, but the interest on the student loan debt is tax deductible, and if that $3,000 living in a metro area making $40,000 a year can quickly turn into 15,000 if they're not careful.

HARLOW: Sure. All right, so that's single in the city. What about the growing family? When you add kids to the equation, it gets a lot more expensive, although life gets a lot better. But look, you're 37 years old, let's say two kids under the age of five, living the suburbs, the income's about $90,000. You've got a stay-at-home mom. They own a home, they've got an eight percent 30-year fixed mortgage, $10,000 in credit card debt on six different cards, and they haven't started saving for their kids' college.

So John, you first, what should they pay off first? Again, is it credit cards?

ULZHEIMER: Yeah, it's got to be the credit card debt. Look, an eight percent interest rate on a mortgage loan is not a good interest rates. It sounds like a good interest rate, it's actually quite high, with good credit, their interest rate could be as low as four percent. So, what I would suggest that they do is knock out that credit card debt as quickly as they possibly can.

Their retirement is going to come much, much sooner than their kids' retirement's going to come. So, I would focus on their own future. Get rid of the credit card debt, that's going to lead to a higher credit score and allow them to refinance that mortgage, get them down to like four percent to five percent, depending on loan to value, and then they're going to have an immense amount of extra income every single month and then they can start throwing it away to the 529 plan for the kids.

HARLOW: All right, 529 he's talking about college savings for the kids. Lynnette, I mean, can this couple realistically save for their kids right now?

KHALFANI-COX: They're probably cash strapped, you know, in practical terms. I would probably take a different approach. I would attack the mortgage first. Eight percent, as John said, is very high right now. If you get that loan, I don't know if anybody's going to get a four percent mortgage, but certainly maybe five percent to six percent because bank standards are a lot tougher these days, depending how much home equity they have in the house that they want to refinance, that's going to play a big role.

But you talk about somebody who could save $500, $600 perhaps or more if they refinance that mortgage, they could take that savings, that $500 a month and then knock that towards the credit card debt of the kids' savings.

HARLOW: And mortgage rates are pretty low, right now. You can refinance, you're got to do it.

All right, finally, so many people that were ready to retire, sorry, they're not able to because their 401(k)s or IRAs have been hit so much in the crisis. Take a 58-year-old living in Colorado, they declared bankruptcy five years ago. The husband lost his job, the wife, she's a substitute teacher, so work is sort of sporadic. They don't have health insurance, a big problem for a lot of folks. They make $125,000 in combined income. Lynnette, how do they bounce back from the bankruptcy filing?

KHALFANI-COX: Well, if it happened five years ago, it's doing less damage to their credit rating than it was, say, right after. You know, but one of the things I think people have to realize is that in the past, you know, you might have thought, I filed bankruptcy, I'm a pariah, nobody wants it touch me for 10 years. Let's be real, you know, bankruptcy is a serious thing and it has major implications for your credit, but things have changed. You know? You can get now an FHA loan a year after a bankruptcy, after a Chapter 13 bankruptcy filing. A lot of people who are doing short sales indeed and lose, they're getting, they're eligible now under new Fannie Mae guidelines for a new mortgage two years after they do a short sale. So, those kind of things you actually can recover. You got to pay all those bills on time, that's key.

HARLOW: Right. Bankruptcy is never a great option, but it's a reality for some.

John, looking at that, and they're in this sticky situation, should they pull money from their 401(k)?

UNLHEIMER: Absolutely not. The 401(k) is protected from the bankruptcy, which was why all that money is still there. I would not touch that unless it was a life or death situation. The bankrupt will remain on credit reports another five years, but most of them stay on for a full 10 years. The good news, as Lynnette pointed out, is that it's not damaging credit as much as it was when it was a much newer bankruptcy. They should actually think about jumping back in the credit market and reestablishing credit and doing it better this time. Keep the balances on the credit cards very, very low and manageable and absolutely do not miss any payments and you'll be very, very surprised how quickly your credit score can recover from a bankruptcy.

HARLOW: That's good news. Very welcome news. All right, guys, thanks so much. John and Lynnette, appreciate it. Thanks guys.

ULZHEIMER: You bet.

HARLOW: All right, straight ahead, money myths. Our next guest says don't buy the bull. We're going to show you how to avoid it in 90 seconds.

(COMMERCIAL BREAK)

HARLOW: You know, there's so much advice out there when it comes to what you should do with your money. Our next guest, though, says there are some money myths, they don't hold true anymore. Cassandra Toroian is the author of "Don't Buy the Bull." She's here to talk tol us about her take on it all.

Thanks for being here.

CASSANDRA TOROIAN, author: Oh, thanks for having me.

HARLOW: You have got a lot of experience in financial services. You've been doing this for years, you just wrote your book. You talk a lot about the myth that people should just stay put, stay invested, even when we have the roller coaster ride, the swings of volatility in the market. Why is that a myth?

TOROIAN: Well, look what's going on in the last two years. And if you stayed long and stayed invested you probably still have a portfolio that's down quite a bit. And the reality is, sometimes it's better to just get out of a stock after you've made some money and sit on the sidelines for a while. We're in a very volatile market and that's clearly going to continue.

HARLOW: I think the hard part about that is, you don't -- you can't call the lows and you can't call the high, you don't know when to get out or necessarily when to get in. You talk about the importance in this book about -- of gut checks, of really being honest with yourself about what you can afford to do. Explain that.

TOROIAN: When you have money in the market, you still have a personal decision to make about what kind of risk you're willing to sleep with at night, and only you can answer that question for yourself, and even though you may want to be in for the long term to save for retirement, you still have to take a look and see what's on the news every day and say, am I still comfortable with this?

HARLOW: You know, when you look at cars, you've got mortgages, a huge expense, peoples cars, et cetera and there's often this thought that you should buy a car, don't lease a car, you're throwing away your money. You disagree with that?

TOROIAN: Well, again, it's not one size fits all for everybody. And so for some people, maybe small business owners, it does makes sense to lease a car versus purchase it. My thing is, you shouldn't buy a new car. If you're going to buy a car, you should buy car that actually is maybe a year or two old. You don't get that full new sticker price, you know, discount that way, you can you do bet are for yourself.

HARLOW: And get the little hanging tree with the new car smell.

TOROIAN: Right, exactly.

HARLOW: Smells like the new car.

TOROIAN: Spray new scent in there.

HARLOW: True. What about your mortgages, interest-only loans are something that personality I would just say stay away from. Not so much, you say? I mean, these are the loans, let's be clear, that got us into this mess.

TOROIAN: Well, not all of them got us into this mess. It's actually a mortgage structure that works for certain people. Again, not one size fits all.

HARLOW: Who does it work for?

TOROIAN: Well, if you're in a sales role or you're somebody that has a small base salary and you get a bonus at the end of the year, it's a way for you to keep your monthly cash flows down and then you can put some big chunks down on your mortgage and pay it off. You have to be disciplined about using this approach, but it can work very well for you, if you have somebody with lumpy income.

HARLOW: One of the most important thing, and you write about this, is talking about your 401(k) plan and a former boss of yours told you invest until it hurts.

TOROIAN: That's right. That was the best advice I got when I was young. Invest until it hurts. You won't miss it once it's out of your paycheck, but you have to start, and pay attention to the 401(k).

HARLOW: Right, don't just let the experts do it. Watch your own money, right?

TOROIAN: That's exactly right.

HARLOW: Cassandra, thanks so much.

TOROIAN: Thanks for having me. Thank you.

HARLOW: We appreciate it. Thanks so much.

All right, up next, is your yard ready for a party Memorial Day weekend? Just a week away, we've got your safety checklist. But right now, logon to CNNmoney.com, check out our must-read article of the week all about mortgage delinquencies hitting 10 percent. Also on CNNmoney.com, some good advice about what you can do if you or someone you know is facing foreclosure. It's all right there.

(COMMERCIAL BREAK)

HARLOW: Do you have any big plans for Memorial Day? Well, if do you and if you're thinking of having a barbecue before you invite friends and family over we've got a weekend project for you. We want to make sure your backyard is safe and ready for all of your guests. Mike Rimoldi is from FASH, the Federal Alliance for Safe Homes. He joins us now from Tampa.

Mike, thanks for being here.

MIKE RIMOLDI, INTERNATIOAL CODE COUNCIL FOUNDATION: Hi, Poppy. Great to be here.

HARLOW: One of the big issues here is decks and deck safety. So, talk to us about why that's so important. I mean, clearly it's important, but what do folks have to look out for in terms of their deck?

RIMOLDI: Sure, Poppy. Well, May is the International Co-Code Council Foundation Building Safety Month, and some of the things we're looking for on decks is the primary failure for decks is poor construction, unfortunately. You know, nails were used when anchors or bolts should have been used and, you know, they weren't built to code.

HARLOW: And what can people do about that, I mean, let's say you're looking around your own deck. How do you know, you probably didn't build it yourself, how do you know if it's built well enough and what can you do?

RIMOLDI: Yeah, exactly. They need to, you know, they need to do a little mini inspection of their own deck. See if all the fasteners are as tight as they should be. You know, just the common things. Shake the handrail, walk on it, you know, replace rotten or damped wood. Another big thing is loads. You know, that deck may have only been built for you know, 10 or 15 people. And you have a party and you got 30 people on there, you've exceed the weight limit of that deck.

HARLOW: Then that can be disastrous. I mean, can't even imagine what happens there.

RIMOLDI: Sure.

HARLOW: And what about your grill? A lot of folks have their grill way for the winter, they're pulling it out now. Whether it's a gas grill or just charcoal what do people have to look out for when it comes to safety with their grill?

RIMOLDI: Well, one of the big things is don't use that grill on a combustible surface like that deck we just talked about. You know, and then common sense things. Don't move the grill while it's hot and have a fire extinguisher, some means of fire suppression handy. You know, folks like to say you're paranoid if you have that, but you know a $20 fire extinguisher can prevent a lot of problems down the road.

HARLOW: Yeah, you're not paranoid, you're just smart.

RIMOLDI: Exactly. I'd rather be called paranoid, but at least I know I'm safe.

HARLOW: Yeah, exactly. And you know, pools. Pools, people love to have them, but these are a big liability, they can lead to lawsuits, et cetera, because look, look, you're responsible for the pool in your backyard.

RIMOLDI: Right, and you're responsible for all the kids that might be in that neighborhood, as well. So, you know, we look at having a fence around the swimming pool with a self-closing and self-latching gate. Have things like a life ring, maybe, you know, the shepherd's hook, the life saving devices handy. They're not a code requirement, but once again, it's a best practice, and folks can't forget about the spas or the hot tubs, because although it's a smaller item, a smaller body of water, it's still an contractive nuisance, particularly for children.

HARLOW: You know, and when you've got a lot of families over, the kids go play together in the pool, the parents are by the barbecue, they're drinking, someone has to be looking out at all times at the pool, at the hot tub for those kids.

RIMOLDI: Exactly. You need some kind of supervision. Because just like you mentioned, you know, during the party, you get busy, you get distracted and you know, those little kids are still roaming around and they need to be watched over.

HARLOW: Yeah. Great tips, we appreciate it, Mike. Thanks a lot.

RIMOLDI: Thank you.

HARLOW: All right, have a good weekend.

And looking for a great summer travel deal? Where going to show you where hotel prices have dropped the most. That's coming right up.

(COMMERCIAL BREAK)

HARLOW: All right, so if you're thinking of planning a summer vacation, whether it's a family getaway or just a week or just a weekend trip, it really does not have to cost you a fortune. Our good friend Mark Orwoll from "Travel & Leisure" is here to help us out, find some of the best deals.

Thanks for being here, appreciate it Mark.

MARK ORWOLL, TRAVEL & LEISURE: Thanks a lot for having me.

HARLOW: So, hotels, right, you had the real estate bust and you had people tightening their purse strings. A lot of excess hotel rooms on the market. So, you can get some great discounts on hotel rooms, right? I mean, in certain cities, though?

ORWOLL: Well, that's true. Look, we've got a couple things going on. Across the country hotel prices are starting to come back, but there are a lot of cities where the prices have not yet hit rock bottom, they're dropping. There's -- I think we have graphics waiting to show 10 of them. but, I mean, for example, in Chicago, you can -- the average room rate there is now like about $92 a night. In Chicago.

HARLOW: Really?

ORWOLL: Yes. So, I mean, this is an amazing thing. So while the trend is going to be going back up for prices, you can still take advantage of those lower prices that we're seeing, especially in some major destinations. Orlando...

HARLOW: Yeah, Phoenix, Tampa, St. Petersburg. Really the prices are down.

ORWOLL: Great, great places to ge on vacation, and spend less money.

HARLOW: Why is that in these particular cities, do you think?

ORWOLL: Well, a lot of it is because they had new build hotels that either opened up just before the great recession or during the recession in places where there already were a lot of hotel rooms. They need to fill those rooms and the only way to do it is to lower the prices.

HARLOW: And clearly some good deals out there. But what do you think, Mark, I mean, have hotel prices hit rock bottom?

ORWOLL: They are still dropping a bit in some of these markets. I think these 10 markets are the places where you might still be able to get even better bargains than we saw up there.

HARLOW: And we talked about it, you can always sort of try to negotiate and haggle and get the best hotel deal.

ORWOLL: Of course.

HARLOW: But, you know, in terms hotel upgrades, I always check in and I ask, do you have a nicer room? It's worth asking, right? You can get some upgrades.

ORWOLL: Ask when you make your reservation, ask at the time you arrive.

HARLOW: OK.

ORWOLL: Your chances of getting that upgrade, though, are better if you follow certain pieces of advice.

HARLOW: What about credit cards? Because the credit cards can help you not only get free rooms, discounts and also upgrades?

ORWOLL: Absolutely, there's a couple ways of doing that. If you had a hotel branded credit card, whether it's MasterCard or Visa. If you have a gold, pardon me, platinum or a centurion card with American Express. Any of those things can help you get automatic upgrades with certain hotel chains. No question about it. So, be sure you check that you're using the right credit card. If you have it, use it to get an upgrade.

HARLOW: And I think folks often think that summer is the most expensive time for them to travel, so maybe they just stay at home for the summer, don't go on vacation, but this is showing us it's not necessarily true, right?

ORWOLL: Well, it's not necessarily true, although I will say that when it comes to upgrades, if you go in the off-season or shoulder season, when people traditionally are less likely to book a suite, your chance of getting upgraded to a suite are even better.

HARLOW: All right, good to know. All good tips. Cheap hotel rooms, we all love that. Mark, thanks so much.

ORWOLL: And get that upgrade.

HARLOW: Get that upgrade.

ORWOLL: Just ask.

HARLOW: Just ask. Just do it.

All right, and folks, if you're going on one of those vacations and you're going to the beach, before you go, make sure you stock up on your sunscreen. But the big question is, which ones are the best ones, and how can you not get ripped off? We're going to tell you, straight ahead.

(COMMERCIAL BREAK)

HARLOW: All right, so the weather is getting warmer and we're taking you to the beach today. We're all excited to get outside and enjoy the weather, but that also comes with a responsibility of protecting our skin, and there are so many sunscreens out there on the market, some more expensive than others and others things to do to protect your skin. So what should you do? Dr. Gary Goldenberg is here to sort through all of it. and we've got a lot of props, here.

Thanks for being here. Appreciate it.

DR GARY GOLDENBERG, DERMATOLOGIST: Thanks for having me.

HARLOW: Let's start out with this. This is my favorites. Something I haven't seen until this morning. This is a wrist band that you can wear, it's UVSunScence. All right, folks, you see that? Tell us why this is important?

GOLDENBERG: This is important because patients always ask, how do I know when a have to reapply sunscreen. And this wristband actually tells you. So, put it on, you put some sunscreen on it while you're applying it to your skin and then it turns colors to tell you when you have to reapply your sunscreen.

HARLOW: And it sort of a gradually becomes different colors and then -- you see it on your screen there, so then it will tell you have the most exposure to the sun. You need to put more sunscreen on. Looking at the sunscreens that are out there, we've got sort of a range of them here, but they really vary in price. There's the store brands, then there is the medium range and then there's the really expensive ones. Do you need to spend a lot of money on sunscreen?

GOLDENBERG: Well, we're talking about protecting yourself from skin cancer. So, y You don't want to necessarily buy the most expensive brand, but you don't want to buy the cheapest one, either. So you kind of want to find something in the middle. And it's really important to use a high SPF sunscreen. So you want to use something that says SPF 50 and above. And these are the brands that I usually recommend to my patients.

HARLOW: Anyone should use 50 and above?

GOLDENBERG: Anyone should use 50 and above.

HARLOW: So, the four that I have is not going to cut it.

GOLDENBERG: It's not going to do anything.

HARLOW: I mean, you often hear, and I've heard that SPF 30 or above is all the same. That's a myth?

GOLDENBERG: Well, the way SPF gets measured is in a laboratory, it's not sort of what you do in real life. So, if you were to use it as you would in a lab, yeah, it would work. But most people don't apply enough, so the higher the number, the more protection you're getting.

HARLOW: They go in and out of the water all day.

GOLDENBERG: Exactly.

HARLOW: All right, kids, this is very important. My 6-year-old nephew wears one of these. And these are these swim shirt. You need to wear these as kids, right, because their skin is even more sensitive.

GOLDENBERG: Well, not only kids, but adults and these are great for your whole family. And you know, they keep you cool and then they protect you from the sun. it's not enough to just - you know, you wear sunscreen, you want to physically block the sun and that's what the shirts do.

HARLOW: And these shirts, not just regular t-shirts.

GOLDENBERG: Exactly. Because the sunlight just goes right through a cotton shirt.

HARLOW: So, it's useless?

GOLDENBERG: Well, it's better than nothing, but it's not as good as these shirts that specifically protect you from U.V. rays.

HARLOW: And then, your face, I mean, my face, if I get burnt, that's what gets burnt first. So, hats, these are critical, right, sun hats?

GOLDENBERG: Absolutely, so it's not good enough to just wear a baseball cap, because if you look at a baseball cap, it only presenting the middle of your forehead and the middle of your nose, so your temples and your cheeks, your ears are all exposed, your neck. You really want to get a hat with a wide brim like these. And these have a protective factor so the sun doesn't get through and they protect your whole face as well as your neck.

HARLOW: I got to remember it's not about fashion at the beach.

GOLDENBERG: Well, these are not so bad.

HARLOW: Do you think so? Do you want to wear one?

GOLDENBERG: Sure, I'd love to.

HARLOW: OK. Here you go.

GOLDENBERG: Here we go. Perfect.

HARLOW: There, I think I'll look great in this one. All right, folks, very nice. I like it. A doctor that takes risks and tries these on. You need hats at the beach.

GOLDENBERG: For sure.

HARLOW: Thanks so much. Appreciate it.

GOLDENBERG: Thanks so much for having me.

HARLOW: That's for joining us. All right, that brings us to this week's "Free for All." For a free skin cancer screening in your area by the American Academy of Dermatology, you can head to AAD.org, type in your zip code to find screening location closest to you and you don't have to have health insurance for this one, it is completely a free program. You can also download online information on how to perform a self-examination of your skin for any signs of melanoma. That is of course, very important.

All right, well, we'll see you back here next week for YOUR BOTTOM LINE, the show that saves you money, same time, same place, 9:30 a.m. Eastern, right here on CNN on Saturday and don't miss Christine Romans and Ali Velshi on YOUR MONEY today at 1:00 p.m. Eastern and tomorrow at 3:00. But right now, let's get a check of your top stories in the CNN NEWSROOM with T.J. Holmes.