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Budgeting; Home Value; Health Care Bankruptcy; Small Businesses

Aired September 4, 2010 - 09:30   ET


STEPHANIE ELAM, HOST: Good morning. I'm Stephanie Elam and this is a very special edition of YOUR BOTTOM LINE.

We've team up with the fine folks from CNN iReport to bring you an in-depth look at how the economy is impacting lives all across the country and how you can learn from it.

This morning we're taking America's pulse through our iReporters. We've been following people from around the country who just like you, have had to react to the changing economy. You've got questions. We've got answers.

The show that saves you money starts right now.

Let's get into it because we've got a lot of great advice for you and your family this morning. And by the end of this half hour, you'll be armed with the information you need to make smarter financial decisions. Here with us for the entire show is clinical psychologist Jeff Gardere and personal financial author, Carmen Wong- Ulrich and also joining us as well is Doug Flynn of Flynn-Zito Capital Management. Thanks so much for joining us here.

I want to go ahead and start this morning with a bit about budgeting. It's a big one. No one wants to talk about it, but we really need to. And I think a lot of folks really underestimate how important it is. So, let's get the conversation started. In the Midwest, let's listen to this iReport from Wisconsin.


MIKE STOUFFER, CNN IREPORTER: You guys rely on tax time more than any time of the year?

GUY DANIELS, EXPRESSIONS INK: Yeah, that's like our Christmas season for our retail store.


ELAM: Christmas season for a retail store. Well, Guy Daniels, the owner of Expressions Ink, a tattoo shop, he's joining us now via Skype.

Guy, glad you could be here. So, tell us, tax time, it's way behind us now, so what is business looking like these days? It tends to slow down about this time of year because people are spending money for their children's school supplies and school clothes. But, we still stay steady. It's just not as busy as it is during tax season.

ELAM: So then, does this mean then you've had to sort of pad your budget so that you can make it through the rest of the year?

DANIELS: Yeah, we alter our budget a little bit, maybe during tax season we stock up on supplies a little bit, so we can help make it through the slow time.

ELAM: All right, so, Doug, when you hear a story like this, where you've got a guy who has a sort of a seasonal business, right, people get their tax return, they're like whoohoo, I've always wanted that butterfly on my shoulder and they go out and do that, right? If that's the case, what can you do to really keep that going throughout the year?

DOUG FLYNN, FLYNN-ZITO CAPITAL MGMT: Sure, well people who have fluctuating incomes, especially self-employed people and business owners, do have to plan more than person who has a steady paycheck week to week. So typically, what you'll do is you'll want to have a little bit of a extra cash reserved built up because there could be a point in time where you're going to have to pull from that and during a time when you have a little bit of extra money, he's doing the right thing, stocking up and putting a little bit away so that you can even out your cash flow to the business. Those are some of the things you need to do when you're a business owner.

ELMA: Yeah, and you know, when I think about this, Jeff, you think about the pressures of being your own boss, right? No matter what the business may be, maybe it's tattoos, maybe you make, you know, flower arrangements, whatever it is. What are some things you can do to fortify, not just yourself, but also your employees?

JEFF GARDERE, CLINICAL PSYCHOLOGIST: Well, I think the important thing in adding on to what Doug has said, make a plan. Yes, as consultants just as Guy, we're in that position where a lot of times we're not in control of our lives, especially when it comes to income coming in here and there and so on. So, if you can make that plan and be able to save, and almost track it if not even predict the trends as to where things are going, that can give us more power, empower us to be more in control of our lives and of our businesses.

ELAM: Yeah. And when you take a look at all those things and if you have a little bit of extra money and you want to invest it, Guy, that's why Guy has been saying, what should he do -- Carmen.

CARMAN WONG-ULRICH, PERSONAL FINANCE AUTHOR: Yeah, here's the thing, folks like Guy and everybody who's self-employed right, just understand that first, you know, like you said, Doug, you've got to make sure to have the cash reserves. Even though you may feel like you're losing money, and you know what, we are losing money when we put our cash into savings accounts, between taxes and the fact that we're not earning much, you're actually losing money, but don't worry about it because you need to protect that cash because the cash is going to protect you down the road. For example, when it's not tax time, when people aren't getting their tattoos, but also in terms of investing. Remember when you're self-employed that you have tools at your disposal to get tax-friendly investing like a SEP, a simplified employee pension.

So, think about definitely, absolutely always setting that up first rather than just putting your money into certain stock investments. You need to protect it from tax reasons.

ELMA: And Guy, just tell us, how do you feel you've done overall with the economy as it's been? How has your business held up in the long view of things?

DANIELS: I think we've done all right because we've been around so long. I do have a steady customer base, so I think we'll make it through even if it does get a little bit worse because of my reputation.

ELAM: And reputation is huge, Guy. That's really a big deal and that's something to bank on, as well. We wish you the best of luck with your business and thanks so much for join us, today. And thank you, Doug, for joining us as well.

FLYNN: Thank you very much.

ELAM: All right. Up next, meet a man who says sometimes you need to take matters into your own hands.


MIKE ANDREWS, HOMEOWNER: Just being daring and I think that when times are as rough as they are now with the economy, you really have to, you know, rely on yourself to, you know, to take the extra leap.


ELAM: He hasn't gotten a raise or a big bonus check, but he's got big plans for himself and his family. You will meet him, next.



OMETOGO DBONGA (PH), IREPORTER: And how has the economy affected you?

ANDREWS: The economy has affected me in the hardest way I feel it is in the price of our home.


ELAM: And he's probably not alone on that one. Mike Andrews bought his home at the height of the housing boom, but now his home has lost value so he's waiting for the market to turn around before he sells. Mike is joining us now from our Washington bureau. And also with us is Yahoo! finance columnist, Laura Rowley.

Thank you so much for both being here, because this is something that I'm sure a lot of people throughout the country are dealing with. And Mike, tell me rite right now, what is your work situation like, because that could be a big problem if you're looking at your home investment.

ANDREWS: Absolutely. Work situation, I work at a public university in Maryland. And as a higher education administrator and In the past three years there have been, you know, just your normal cost of living increases, there's been none of that, no merit increases. You know, looking at the budget at the state of Maryland. So, we're dealing with what we have. You know, whatever you made three years ago is what you're making now. On top of that there's a furlough, so we're actually losing our salary as well. So, you know, it's difficult.

ELAM: All right, well let's see if we can get you some advice, here. Laura, let's take a look at this one. You know, they're looking at the situation, they bought the house probably the worst time possible in Maryland. Should they go ahead and try and sell their house now?

LAURA ROWLEY, YAHOO! FINANCE COLUMNIST: Well, I think you have to look at the bigger picture, he is in a low crime community, family oriented, good schools. If there's not an immediate need to move, especially of a school issue, I would stay put. I mean, you see a lot of, because state budgets have been cut, universities cutting back, the job situation is not secure for a lot of people, right now. So, I think it's good idea to stay put, for now.

ELAM: Stay put for now. And what about this, Mike, tell me, have you been putting a lot of money into the property?

ANDREWS: We have -- we kind of stopped two years ago, but back in maybe 2006 and seven when we received our tax refund check we would, you know, put in hardwood floors, we would put in ceiling fans. We were trying to do things at the time thinking, OK, in a few years we're going to be leaving here, to invest back in the house. So, we've put some resources back in, but we've stopped that over the past year or two.

ELAM: OK, so Carmen, tell us about that. Because a lot of people feel like they have to do a lot of fixing up in order to sell their house. So, what's the situation?

WONG-ULRICH: Well, Mike, stop fixing up. Just keep it in great shape, but don't put any more money in the house. I mean, here's the thing, even if you're looking to buy right now, and of course it's a great buyer's market. Coming up against two very tight things, one which is they don't have a lot of equity in the home to sell, it manned up the short sale. And on the other end when it comes to borrowing, because the income level is where it's at and not a ton of savings right now, lenders may not want to lend. But the thing is, I know Mike has another business, too, Five Nikes, right? He does another -- he does speaking engagements and stuff. Really go out and find some money there and really encourage people who are finding that their full-time job is not giving them enough money to look at these other was to bring in money on their free time.

ELAM: Yeah, that's a good thing for everyone to do, if they can do it. And Jeff, what about the psychological thing, when you're sitting there going, I want to move, I want to move, I want to move, I want to more, I want to go and you can't go. Would it be best for them to just kind of go, this is it?

GARDERE: And this is what I like what Mike has done. By the way, I hope he doesn't have multiple personalities with Five Mikes.


But, what's important here, he's not a victim. I can't tell you how many people sit in my therapy office say we're stuck in this house, we paid the highest price and now we want to sell it, we can't sell it. What he's saying is, you know what, I like this situation, we're here now, we'll put some value in -- stop putting value in right now, but we'll put value in and enjoy this and make it work for us. I like it. He's not thinking like a victim. He's thinking like someone who is a victor.

ELAM: All right, so you're feeling empowered -- Mike.


ELAM: All right.

ANDREWS: Thanks.

ELAM: They say you need just need one Mike, but you've got, so there you go.

ANDREWS: Absolutely.

ELAM: Thanks for join us. And good luck with your house and the little one and the wife. And Laura Rowley, thank you so much for joining us, as well.

ANDREWS: Thank you.

ROWLEY: Thank you.

ELAM: All right, big dreams and a big lesson for our next guest.


BRUCE POLLARD, UNEMPLOYED: What I would really like to do is go teach in the high school and contribute, but I can't afford to do that with my family and with two kids going to college and another one coming up.


ELAM: A tough situation. How do deal with being laid off, next. (COMMERCIAL BREAK)

ELAM: So, what do you do when you lose your job and your kids are counting on you to pay for college? That's the situation that Bruce Pollard via Skype. And here with us in the studio is Jack Otter, executive editor of

Let's get right into this one with you, Bruce. Besides the financial aspects, let's talk about it personally. What's been the hardest part about being unemployed?

POLLARD: Well, I think for me it's been a little bit of a shift because my wife has gone back to work and I've picked up some of the things my wife is doing. It's a difference in the job effort.

ELAM: I can only imagine. And, Jeff, you must see this in your dealings day to day for people. Is this a tough one for some couples?

GARDERE: It's a tough one for the guys because they define their ego and who they are, their self worth, by what it is they bring to the table by going out for the kill and bringing it back for people to eat. What I like with what Bruce is doing, he's able to redefine a role of what the man does in the family. He has teamwork with his wife and is willing to pick up some of the roles that have been traditionally female or that his wife is even ascribing to him trying.

ELAM: Yeah, in fact, let's take a listen because Bruce really did open up to our iReporter about this situation. Let's take a listen to what he had to say.


POLLARD: I don't really know what depression is. I mean, I definitely feel different. I definitely maybe have a little bit bigger problem getting up in the morning.


ELAM: I mean, that's so honest, Bruce. Can you tell us, besides that that part of it, which is a huge part of it, being unemployed, you still have costs, so what is your No. 1 concern?

POLLARD: I actually have -- I think we have the short-term costs under control. For me it's the longer term costs of the burn rate of my kids' college education and then, also, will I have enough money to retire and not have to go out and find a large high-paying job for the rest of my career, here.

ELAM: Yeah. So Jack, let's take a look at that. What does he need to do to make sure that he's OK?

JACK OTTER, MONEYWATCH.COM: Sure, I think the very first thing is he's got to get a number. It sounds like he's floating out there, he's wondering. We need confidence, even if it's an ugly number at least he knows what he's got to hit. So, there's all sorts of online calculators. They're not 100 percent accurate. You have to put inputs in like what is your return going to be on the retirement account. Well, he doesn't know. I don't know. Let's say six percent, just to get him somewhere. And then figure out what he needs and then he's got to get a plan for how he's going to get there, how far off is he from that number. He's got to -- I know that the burn rate is his main concern right now, he's got to pay the mortgage, he's got to feed his family. But in 20 years it's going to be a lot harder to do that, so how can he get enough money to retire comfortably?

ELAM: And I guess, Carmen, in this case, may require being a little bit more creative for Bruce, right?

WONG-ULRICH: And here's the thing, I would love for Bruce to stop worrying so much about the kids' college. Please.

ELAM: Why should he stop? Those are his kids.

WONG-ULRICH: There are too, too many parents here because they're caught between worry about the retirement and the college. And here's the things, kids, you guys have a lot more years to work off debt and to basically get that college degree than dad has to take care of himself.

So the question is, do you want to take care of dad in the future or do you want to take care of him now? I think Bruce needs to focus on himself and on his retirement and securing that and really the kids can get creative with college and put some of the burden on them instead.

ELAM: Bruce, I hope you got something from this. Thank you so much for sharing your story with us and being so honest.

And Jack Otter, thanks for bringing your expertise with us, today, and enjoy a birthday weekend.

OTTER: Thanks.

POLLARD: Thank you.

ELAM: Your health is important, that's so true, but also, it's really expensive. So, how the you balance your medical bills with your bottom line? We'll have the for you right after this.


ELAM: Here's a sad fact for you. Health care costs are the No. 1 reason people go bankrupt in this country. So, imagine racking up tens of thousands of dollars of medical bills after losing your job.


JAMIE SMITH, UNEMPLOYED: That threw a lot, not only physically but emotionally. So, I've lost my confidence and that's been hard to deal with.

(END VIDEO CLIP) ELAM: Jamie Smith and her husband is working to dig themselves out of that very situation. Jamie is joining us now on the phone from Bentonville, Arkansas, and we also have Ryan Mack here with us, he's the president of Optimum Capital Management to discuss this situation. Jamie, let me just ask you, what has happened since you've lost your job and these health care costs? Have you been able to manage those bills?

SMITH: We basically have stuck with the wise decisions that we were decisions that we were trying to make before I call it the economy -- before the recession and everything happened. We make payments in small increments. We've made arrangements with every single provider to whom we owe money and we are making regular payments and if we knew if we kept it small, it would satisfy them that we were trying to pay off the account. And as we pay the smaller ones off, we're adding that amount to the bigger accounts and just trying to kind of steamroll that a little bit...

ELAM: Jamie, I just want to point out something that you said that was really important and it's probably the overarching theme here, Ryan. She is saying that she and her husband have been proactive about working out paying these bills. And I think a lot of people when they're dealing with these health care issues don't do that and that's where they end up take a big hit. Isn't this a great move for her?

RYAN MACK, OPTIMUM CAPITAL MGMT: Well, definitely on front side, when looking at her budget, she's obviously budgeted very well to make sure that she knew exactly how much she could afford to pay on these bills and then she organized them to figured out what is my smallest amount that we have to owe, let me pay my entire surplus of home budget and commit it to that health care -- to that bill, and then put it to the next piece and then continue to move forward and that (INAUDIBLE) fashion. So I definitely think she's being very responsible.

And another thing, on the other side, what sort of programs do they have in your area. I know that down in Arkansas they have that comprehensive health insurance pool that or dot org, rather, that I actually found out by going onto and figuring out by your state what sort of plans that they have in your area that makes sure you can kind of cope with these health care expenses that you have going on.

ELAM: Yeah. And Jamie, you can tell us also, as far as bringing in money, what else have you been doing to find ways to generate revenue?

SMITH: Well, actually, since I got sick, I've not really being doing it, but I was doing some freelance writing and event planning, just trying to do my skills in a variety of ways. But, also, I mean, obviously I am looking for a full-time job, but just trying to do a little bit of freelance work. Which I was also doing while I was employed, by the way, I've just. When you no longer have a job, you have more time for freelance, I guess you could put it that way. ELAM: Yeah. So someone in Carman, someone in Jamie's situation with what she's been trying to do, what are some of the other things that she can help pad herself, here?

WONG-ULRICH: She's utilizing all the right things, and things that a lot of folks really need to realize. When you get a bill from the doctor or from the hospital, do not pay what it says there on the bill. You don't have to. You need to negotiate with them, negotiate that bill down.

ELAM: Insurance companies do.

WONG-ULRICH: And that's exactly what she did. There's different rates. They actually charge different rates based if you have insurance, if you have MediCare or if you don't. And if you don't of course they're going to charge you the most, so you really have a lot of room to negotiate, here. And what she's doing right to is that she's working with them to have a payment plan that works with their budget, right now. Never charge any of this, never put any of this on your credit cards. And that's all she can do right now is really manage the debts wisely and stay on top of it. Don't be afraid to talk to them to try to get a more manageable payment system down. You will get out eventually, but it's all negotiable.

ELAM: Yeah, and right now health care reform is not going to help her as much because it's not until 2013.

Jeff, what should she do to keep her spirits up and those of her husband?

GARDERE: You see, and I love that question because it is about keeping your spirits up so you can keep your emotional immune system going. She already has health issues. She's already sick. So, what she's doing is by talking to the people she owes money, she's staying on top of this situation and keeping that incredible stress that could make her even sicker, she's keeping that at a minimum by being in charge of a situation and being a player in her own financial issues.

ELAM: So Jamie, keep it up. is where you've been writing, I know. So, keep up what you've been doing and best of luck to you and your husband as you deal with this.

Ryan Mack, thanks for joining us, as well, there...

MACK: Thank you.

ELAM: Get some information out there.

All right, are you having a hard it time finding a job? Well, starting your own business could be the solution. A secret plan to smart business success, next.


ELAM: Unemployment is sky-high. We all know that. And in times like these, the American economy needs small businesses to help bring us back from the brink. One husband and wife team, they think they've got it all figured out.


SUSAN NETHERO, INTIMACY: That we provide a very valuable service and it's all about our people. And if our service isn't immaculate and perfect, then we feel that, you know, we can't serve the customer the way we'd like to.


ELAM: So, along with his wife, David Nethero started a line of lingerie stores called "Intimacy" and he joins uses now via Skype. We also have Rod Kurtz. He's here with us, he's the executive editor of AOL Small Business.

And I need to know, this is the big question, David, how the heck have you guys been able to grow despite what's been going on with the economy?

DAVID NETHERO, INTIMACY: Well, that's a good question. You know, what happened, it was about 10 years ago, it was about 2001, I had been working for a fortune 500 company and they gave me an ultimatum, we were living in Atlanta, Georgia, to move to Singapore and my oldest daughter was just about to be a senior in high school and hey, it just wasn't possible. So, my wife, who had started Intimacy about 10 years earlier, said why don't we work together and really try and make something out of this. And I've always been passionate about being an entrepreneur and, you know, it's the entrepreneurial spirit that made America great to begin with that I really wanted to be part of bringing that back to the landscape of America.

So the two of us really paired up and, you know, what really made it a difference for us and I encourage all other entrepreneurs across the country is that as a husband and wife team, my wife started the business, she was the founder, so when I came onboard, she was already running the show, but you can't really build the business excellence you want if you're kind of a one man show. And while she had some employees, she really needed a partner and so...

ELAM: So, let's stop there, because I want to point out some of the things that you said that are really good things. And I think what we're hearing, Rod, is that they found out what were their strengths and what they were good at so that they could really focus on that.

ROD KURTZ, AOL SMALL BUSINESS: And I think we're also hearing that lingerie is recession proof as you see with their expansion because women like wearing nice lingerie and guys like women wearing nice lingerie. But, you know, they're hitting on important points, as you mention. I think service is essential, especially in a down economy where consumers need no extra excuse not to shop someplace. So, I think that's very important. It's also -- I talk to a lot of entrepreneurs, it's a great time to expand. If business is good, you have a good business model, real estate is cheaper, employees, they are more employees available, often for cheaper, so I think they're doing a lot of great things, here.

ELAM: Yeah, and you know, and you take a look at it, people like to think that those behemoth companies are the ones that employer America, but really it's small business that's driving it. David says he's opening up their 13th store.

WONG-ULRICH: Yeah, this is about half the country that's employed by small businesses. But here's the thing, I just want to caution David a little bit and I love all the confidence, I love that things going great, but as a small business owner, you really have to be careful about making sure to put away a lot of cash. We're talking about a year's worth of cash or so.

For example, my brother is a small business owner, he put away a ton of cash, thank goodness, because he's had pay his employees out of it and run his business for a year.

ELAM: And you say put away cash for the business.

WONG-ULRICH: For the business. You may not be able to pay yourself, even, but you really want to keep the business going, you got to really be careful with that cash and protect it. And also be careful about overextending too much, getting too excited about the business. Try to go in small steps, if you can, and really get some input, get some more advice on how you're doing.

ELAM: This is all good stuff. David, you're allowing us to end on a very positive note, here, so thank you for that. We wish you the best of luck with your stores and your family, there. Good luck to you.

And also, Rod, thank you for joining us and adding some good information to this.

KURTZ: Good to see you, as well.

ELAM: Good to see you guys, too. It was a really good show. And a big thank you to all of our CNN iReporters for helping us show us how real people are doing these days. And if you want to become part of the iReport community, it's so easy, just logon to and get started.

Of course, we're going to see you right back here next Saturday morning on the show that saves you money. But, let's you a check of the top stories in the CNN Newsroom. CNN SATURDAY continues, right now.