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YOUR BOTTOM LINE
Slow Employment Growth; Decreasing Home Prices; Baby Boomers Retirement Funds; Health Physical Shape Can Help Lead to Healthy Financial Wellbeing
Aired December 18, 2010 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: 2011, time for a fresh start. How we can all be smarter when it comes to our houses, our jobs, our savings, and our debt in the New Year?
YOUR BOTTOM LINE starts, right now.
A full three-quarters of Americans say they'll make at least one financial-related resolution for 2011, that's according to a TD Ameritrade New Year's resolution survey. That's good news. And even better news, if you can stick to those resolutions, we're here to help.
Jeff Gardere is a clinical psychologist and contributor to HealthGuru.com, Jean Chatzky is a personal finance author, Ryan Mack is the president of Optimum Capital Management and Rick Newman is back, he's the chief business correspondent for "U.S. News & World Report."
Rick, Fed Chairman Ben Bernanke recently said that, frankly, it could take four or five years for us to get back to where things were in terms of the unemployment rate. I think 2011's going to be the year that people who are newly unemployed are going to have a slightly easier time finding a job, but people who have been unemployed for a very long time is going to be a tough year. What do you think?
RICK NEWMAN, U.S. NEWS & WORLD REPORT: I think you're right about that. The statistics that economists look at are almost certainly going to get better in 2011. So for some people, it's going to feel like it's their job, their career, their home life is getting back to normal, if you will.
But we've got a huge number of people for whom life is not going to go back to normal, that's the long-term unemployed, the people who have been out of work for a long time. It's people who maybe are working in jobs that pay less or not really what they want to do, people who are in industries that are just shrinking.
I mean, that's one thing that happened during the recession is that a lot of things just got accelerated. Shrinking industries started to shrink a lot faster. And lots and lots of jobs are not coming back, so we've got a very bifurcated economy in 2011.
ROMANS: I would totally agree with that. And Jean and Ryan, from your perspectives, then, how, if you're one of those people, the six million unemployed, you know you might be still be getting a jobless check. But Jean, how are you supposed to navigate what's going to be a recovery year for some people if you've been unemployed for six months or longer?
JEAN CHATZKY, PERSONAL FINANCE AUTHOR: You have to look at two things, your financial life and your skill set. And when you're looking at that skill set, you have ask yourself, what are these people getting hired have and how do I get a little bit of that? And it could mean finding a new networking group, it could mean making a course that could refresh your skills a little bit, something new to put on the resume that you could talk about in a fresh way when you go out and you have an interview. But as far as your money is concerned, if you're not living on austerity already, it was time to start yesterday.
ROMANS: And Ryan, you talked about -- I you got to slash these bills.
RYAN MACK, OPTIMUM CAPITAL MGMT: I mean, bottom line is if 2010 was the year of waiting on your ship to come, 2011 has to be the year of swimming out to your ship, because we have to learn how to create opportunity.
I have to talk about my own cousin, my own family. He didn't graduate college, just barely graduated high school, but was able to create opportunity. He couldn't find a job for a long time. By going from Ohio, from a state, in order -- moved up to Detroit and took a program and focused hoped, because he found different training opportunity, he found opportunity and he learned how to create himself. Now he's in a full six month's training program, probably going to be working in D.C. for the government, full-time, federal benefits and everything. But these are the type of things we have to start learning ourselves how to do to create our own opportunity.
CHATZKY: What Ryan just said is really important. If you've been sitting in your hometown waiting for the next opportunity to open up --
UNIDENTIFIED MALE: Or sitting in your home waiting for something to open up.
CHATZKY: It may not be there. And it may require a drastic step like a move across the country or something else that actually puts you out there where the jobs happen to be. We were talking about the last batch of real estate numbers that came out and there are some cities, San Francisco and Austin and Portland that are actually looking pretty good because there are jobs there, so go to the job.
ROMANS: And look, we get the mail, I hear from people who say it's not as easy as that. We know that, we know that. But find what is it you do? What do you do well and you like to do? Now figure out how to make money on it. You know? I mean, that's something -- that's a really important piece of pie.
NEWMAN: At a pragmatic level, I would also add, you want to know if you're in an industry that's growing or a company that's growing or if you're targeting an industry or company that's growing, because it's very hard to get ahead when your company or industry is shrinking, that's when we get into the do more with lessism, pay cuts instead of pay increases. You can do this kind of research. If you're in a company, you can look around and you say is this a vibrant company that's going to bounce back? Or is this a shrinking company that's barely surviving?
ROMANS: The stem industries, the stem careers. If you've got a kid who's thinking about going to college next year, science, technology, engineering, math. Or what your skills are applying them to those industries because that's something that the economy is valuing right now. If you've got a job and you are in any industry, you could be in a lean industry, Jean, how do you ask for a raise? How do you move up in 2011 if you are employed today?
CHATZKY: By demonstrating your value to the bottom line. You have to be able to go in and make a case that you made the company money or saved the company money. Or that it would cost the company significantly more money to replace you. And a lot of people go into a negotiation over a salary with this attitude like, I need a raise, I'm due a raise. Well, get over it because those cases don't work anymore.
MACK: When they have the yearly review with their bosses. Ask the bosses, what are three problems you have in this company today that you want somebody to help you fix? Get to work a half hour before anybody else in your department and just focus on what are you going to do to focus on creating value and fixing those three problems in some form or another throughout your day. And that will actually tremendously be to your tangible benefits.
ROMANS: All three of us are sitting here with jobs. How do we get joy out of our job in 2011. If you are one of the millions of people who do have a job, we know that your job satisfaction is at an all-time low. How do you -- Jeff, how do you be happy at work?
JEFF GARDERE, CLINICAL PSYCHOLOGIST: Well, one of the most important things is to be grateful for all of the other things that you have and your job is able to provide for those things. You have to wake up and smell the coffee and say, where would I be without this job? Believe it or not, you will start appreciating that job when you know what it's like to not have it or speak to your friends who are not working. A job is important, not just for the money, but for the psychological benefit of being productive.
CHATZKY: It's very true. But I tell people, if you're not happy, you just fake it.
GARDERE: Well, that's a great technique and I talked about this with someone in the green room. Smile though your heart is breaking and believe it or not, the psychological benefit is that that smile will start going internal and you will start feeling better. So we agree on that.
ROMANS: Jeff, Jean, Ryan, Rick. Everyone stays. Stick around because we're going to tell you how to get out of credit card debt in three years, but first, the housing market. Buy, sell, hold, or rent? The answers may surprise you.
ROMANS: All right. Your house, it's your biggest debt, your biggest asset, your biggest investment -- 2010 was a year of mixed messages to say the very least. Rick, you know, 2011, home prices, Mark Zandi, chief economist at Moody's Analytics, he predicts a five percent to 10 percent decrease in home prices. Oh, just breaks your heart if you're a homeowner, right now. But maybe modest growth 2012, further out, what do you think?
NEWMAN: The price -- a decrease might also get your juices flowing if you're a buyer, I think. But I think there's a good case to be made that 2011 will be a year we do finally see a bottom in the housing market. No one's going to ring a bell when that happens, we're not going to know exactly when we hit the bottom of the housing market, but we are pretty much through this rundown for the most part, we're getting very close. And I think it's time for people to just start thinking about buying a house for the normal reasons they buy a house, and not timing the market. Interest rates are incredibly low. They're not going to stay there for very long and prices are almost near the bottom.
ROMANS: Interest rates are unbelievably low. They are so low.
NEWMAN: They have nowhere to go but up. But the other thing that's going to lead the charge back is jobs. When jobs come back to a particular community, the housing market is going to come back. If you look at population growth over the long-term, we actually don't have enough long-term supply to keep up with the population, eventually the tide will turn.
ROMANS: Eventually. But in the near term, it's -- a homeowner has been a painful experience, especially the people who took the money out of their house when it was way up there. I mean, that's a real problem. We saw some Zillo numbers recently that showed $9 trillion of wealth lost since the peak. I mean, that's incredible. I mean, how are you supposed to think about your house -- Jeff.
GARDERE: Well, what you need to do is hold on to it as much as possible and I think all the experts will tell you, now is not the time to sell, now is the time to buy, if you can get the bank to give you a loan. But the bottom line is, I work with so many patients who are depressed, and they do not take advantage of mortgage restructures. Their homes are going into foreclosure, they have that learned helplessness that we talk about. And there are many programs that are out there. You can save your home. You have to get the right rep, you have to get the right program, but you can do it and get that mortgage restructure. It can happen for you.
CHATZKY: It's true. It's very difficult. I mean, we are -- we are just seeing a reluctance to lend a reluctance to restructure. I'm a hoper that this will come back in a big way, but I think more realistic is to say what can I do to lower my cost of living in this house? If you haven't grieved your property taxes and the value of your house has come down, by all means, call a lawyer who will do it on contingency and file those forms.
ROMANS: Do that today. Do that today.
CHATZKY: I did it. I saved $6,000 a year. And if you haven't talked to -- my taxes are high -- if you haven't talked to your insurance agent about the fact that your house is worth less, maybe you can pay less for that, as well.
NEWMAN: You know, those hardships are also making us much smarter consumers and I think we're getting back to some basic values here which, for instance, your home is an expense. Yes, it will appreciate over time, if you hold on to it over time, but this idea that you're going to make a lot of money and this is going to be a great investment. I mean, people need to think about their home as a place as they live and buy accordingly. And save money on the side.
MACK: I think the bottom line is that the mortgage industry has been able to capitalize off of our irrational exuberance to try to get into a home, right now. OK, home prices have been going up exorbitantly for five, 10, 20 percent and two, three years at a time. That's not sustainable. I think right now, we're going back to a sanity, we're going back to regularity. It seems somewhat normal and it seems like we're going to sustain this for the long run. There's nothing wrong with saving until you get 20 percent down on a home before you buy.
ROMANS: All right, everyone stick with me. We've got a lot more to get through.
To lose weight in theory is simple, right? You eat less and exercise more. The same goes for your money. Spend less than you earn and you will grow your wealth. but like a diet, it's not as easy as it sounds unless you stay with us.
ROMANS: A record number of Americans say saving money is their top concern. And according to td Ameritrade's New Year's Resolution Survey, a majority of Americans said they planned to either have more fun or relax and reduce stress. Hmm, I know a great way to relax and reduce stress: Save more money and pay of your debt.
Ryan, I asked people on Facebook and Twitter what they were going to do. All of them said their goal for next year is to save more money. I mean, this is the beginning point of your financial recovery for 2011: saving.
MACK: You know, we have an energy bill, we have light bills, but we never have a "myself bill." I think for 2011, you need to create a "myself bill" that you need to pay first before you pay any other bill.
ROMANS: How much? How much of what you bring in then should you put -- pay to yourself?
MACK: At least 10 percent. At least 10 percent. ROMANS: We're not there. This country is like five percent or six percent.
CHATZKY: Which is a big improvement, by the way.
MACK: You don't necessarily have to start at 10 percent, start at five percent and gradually try to grow up in increments until you get to 10. And then treat your myself bill like any other credit card bill. If you miss it, it's a late fee.
GARDERE: I'm going to take it a step further, I'm going to say start at one percent because with New Year's resolutions, it's getting into the habit, get some sort of automatic --
ROMANS: Make it attainable.
GARDERE: Yes, make it attainable, reasonable, realistic, and the reward is that you're doing it, you're setting up that habit. You're seeing money in that dedicated savings account. It has to be a dedicated savings account that you don't touch. And as you get in that habit now, you're empowering yourself to go to the five percent, to the 10 percent, if you can.
CHATZKY: Let technology and your employer help you. We have over the past couple of years seen a lot of employers since 2006 roll out automatic enrollment, automatic escalation into your 401(k). Your 401(k) counts in that 10 percent, I mean, if you're 45 and you haven't started, you better shoot for 15, because 10 percent is not going to be enough. But do whatever you can to automate it so you only have to pull the switch once and it just happens.
GARDERE: That's right, absolutely.
NEWMAN: We've kind of gotten the message on this, but we're really struggling with self-discipline over it, so the savings rate has gone up a little bit, debt ratios have come down. But they've sort of plateaued and they're not where they need to be. And I think one of the biggest risks in 2011 is people are going to say, oh, things are getting better, I'm out of the woods. And I don't mean to be a scare monger, but there are a lot of things that still can go wrong. And if you need to talk yourself into saving more money, think that we could have another financial panic, which could spread from Europe. We could have a debt crisis in the United States. I mean, tell yourself all the things that could happen. We could have unemployment could get worse rather than better. And you need a big savings account to get through this.
ROMANS: Well, here's a number I want to tell you about: $190 a month. There's a Wells Fargo survey that showed that baby boomers have saved so little, that's what they'll have to live on in retirement, $190 a month. If you're in your 50s and your 60s, going into 2011, Jean, what should your plan for retirement?
And Ryan, I want you to weigh in on this after.
CHATZKY: Well, you need to figure out what it's going to cost you to retire, which means going to a Web site like ChooseToSave.org and running the retirement calculations, the ballpark retirement estimator. Less than half of people in this country have ever run numbers like this. Which is astonishing --
ROMANS: Most people guess.
CHATZKY: They just think oh, I'll be OK and by the way, I'll only live until 75, because that's my father did, well you're going to live to be 95 or 100 or 105 and you need the money --
ROMANS: This is why women obsess over these of things. I'm convinced.
CHATZKY: Yes, because we are going to live and they're all going to die.
GARDERE: We all work out.
MACK: But the best part is, again, I can't agree more with that, making sure you find out your magic number. How much it's going to -- people always say I want to work until I become financially independent. Well, what does that mean to be financially independent? How much can you afford to save before you don't have to work again another day and live off of your savings? Good calculators another one, FinCount.com (ph) and whatnot.
ROMANS: I want to go back to the self-discipline point you made, Rick, because it's so true. Already, you know, look, we have just gone through the height of the consumer season for Americans. You know, and the retailers want you to spend your money. And the banks are already sending -- they can identify people with credit scores that are just starting to get a little bit better. We want you to spend more money, we want you to -- here's a zero interest loan to take out more money. I mean, Americans -- Americans can be tempted very easily and fall off the wagon very easily.
NEWMAN: And the way I think of this is that debt makes everything harder. It constrains your flexibility when you have to make a career decision, if you need to make a move, too much debt makes it hard or impossible to move. And you just get stuck and that's what we have seen over the last three years. We have seen millions of Americans who are just stuck. They have too much debt, they don't have enough flexibility and when you're thinking about should I buy that toaster or appliance or car because my car is three years old and I just want a new one, ask yourselves, are you willing to take the risk that in two or three years you could end up really stuck.
ROMANS: Look, bottom line is we have to pay off the live we've already lived before we can start living and save for the life we want to have and that's something everyone can think about for 2011.
Rick Newman, thank you so much, "U.S. News & World Report," thank you so much. And all of you guys are going to stay, because we have a couple of other things we want to get through here. What's a show about New Year's resolutions if you don't talk about the gym? Getting in shape can mean a smaller waist and a fatter wallet. I'll tell you how.
ROMANS: Every year it's the same sight. The gym gets packed with folks you've never seen before. Actually, I'm the one you have never seen before at the beginning of the year. You're determined this is the year to whip yourself into shape while your physical health is most important, your financial wellbeing isn't far behind. And there's interesting similarities, more than you would think.
Peter Moore is the editor of "Men's Health" and co-author of "The Lean Belly Prescription." Health resolutions, all in the beginning of the year. This the time the diet books and financial books sell, quite frankly, because people have good intentions, but they fall off the wagon, don't they? So, you've got some pretty easy ways that people can set the bar and save some money and get in good health, right away.
PETER MOORE, MEN'S HEALTH: Well, when you think about it, you can save money in the short term just by making some good choices, but you also save money long term on your health bills, and we know that that's a huge parts of how much Americans spend.
ROMANS: Oh yes, and we were just talking about your retirement savings. People don't have enough save for retirement, part of that is for health care costs. You want to be as healthy as you can when you head into that. So, what are the ways -- it seems pretty low maintenance: drink water.
MOORE: Well, it's the simplest thing you can do, actually, to lose weight in a year. Most of us take in about 450 calories a day drinking sweetened beverages. You swap water for those sweetened beverages and there you are, minus almost 500 calories a day.
ROMANS: Oh my gosh, that says -- put that back up, it says 182,500 calories a year. Oh, my gosh, you could -- a village could survive on those calories.
MOORE: What we calculated was that if you drink ice water instead of soda, you'll lose about 26 pounds in a year. That would be, you know, for a person of a certain weight, but that's pretty significant.
ROMANS: That is significant. All right, another one, play team sports. Gym fees, equipment -- you can play team sports and save some money on hitting the gym.
MOORE: Well, exactly. You hit on it perfectly. You know, that stair stepper that you're going to buy and put in the basement, the stair stepper doesn't love you back, but your teammates count on you. And I'm talking about, you know, if you sign up for a walk-a-thon and train for six months for that, it can be the fitness centerpiece for your year. ROMANS: Yes, can I just ask you, how many of you people out there have a stair stepper or a treadmill in your basement that has your laundry drying from it? I know you do. I know you do, because a lot of people do and that's also a big waste of money.
MOORE: You wouldn't throw laundry on top of your teammates.
ROMANS: No, no, of course you wouldn't. You wouldn't.
MOORE: That's another reason to have teammates.
ROMANS: Also active vacations. When you're going on vacation, try to get moving.
MOORE: Well, a lot of people think a luxury vacation is the goal, here. But when you think about a luxury vacation, what you're actually doing is paying a lot of money to be sedentary and to be fed lots of food. An active vacation, like the one I recently took with my family to the Grand Canyon, if you hiked for four hours in the morning, you'll burn about 2,500 calories. That can make a major dent in any weight problem that you have. So again, plan the vacation now, take it mid-year and get in shape for it all the way until July.
ROMANS: Hiking for four hours and four hours of marguerites and Mello-Yellow poolside. I can see that. I can see that. Home-cooked meals, save on groceries and added bonus with your families, too.
MOORE: It's better for you.
ROMANS: It's better for you.
MOORE: So, you actually save about a third of a cost of what you would spend in a restaurant and also a third of the calories just by cooking it at home. The time is about a wash, but if you can save in those two ways, why wouldn't you do it?
ROMANS: Get a dog? How is getting a dog going to make me richer and skinnier?
MOORE: OK, now listen, so you're going to buy the HD-TV, right. So, 49 percent of the time overweight people spend their leisure time watching television, 29 percent for lean people, is how long they spend watching TV. So, if we can replace some of that TV time with exercise time, do that and the dog is the perfect excuse. The dog will not let you not go for a walk.
ROMANS: That's very good. And I like how you say "lean" and not "skinny."
You say, Jean, you made a great point, that going on a diet and being into your finances and a remake of your finances is the same -- your head has to be in.
CHATZKY: You have to, first of all, be ready, because if you're not ready you're going to be one of those people who gives up by mid- January or early February. But more interesting, we have this whole new body of research that shows that if can make one change, then the other change will follow and that for the sake of your willpower, which you only have a limited amount of, you should really focus on one challenge at a time. It's why you shouldn't try to not shop when you're also trying to not have a cocktail, because you can't do both at once. You have limited reserves. Pick your goal, focus on it, accomplish it, and then move on.
ROMANS: You want to make goals that are attainable.
GARDERE: That's right. You want to take incremental steps. You need to be reasonable; you need to be realistic in what you're doing. Take it a small step at a time and build on that and also reward yourself, and I'll also say, when it comes to the gym, we spend a lot of money there and it's great, but a lot of people don't stay, as you said, so instead of going every day, maybe two or three times a week, but try this, I call it the prison workout. That means, sit-ups, pull-ups, chin-ups, you know, whatever it takes, you can do that in your home. Get yourself in shape. As you start getting in shape with your prison workout, that means a free workout, then you can get to the gym and you'll stay there because you'll be in better shape.
ROMANS: Just stay out of prison to do that workout, for crying out loud.
GARDERE: Well, it originated in prison.
ROMANS: I know. Look, the bottom line here is that you got to make goals that are attainable and you've got to take control of your financial future. And whether it's a diet or whether it's your finances, it's the same kind of principle.
GARDERE: And by the way, I hate that word "diet." It's about a healthy eating plan.
MACK: Every plan that we ever make whether or not we're successful is determined before you start, and that determines your own mentality. A lot of individuals, when the start out, what, as a man thinketh in his heart, so is he. What a man thinks, he becomes. Gandhi said it best. So, we have to understand, it all is determined, the first step before you begin, are you able to do it? It starts in your mind. And we can start doing that for 2011 and making sure we have that attitude that I'm going to go. If you don't feel like going, go. Three days a week at least for 30 minutes a day for at least three days a week. I'm trying to do more.
ROMANS: But, if you don't -- you've talked about this before -- if don't use that gym membership, you need to get it out of your budget and run around the block.
MACK: Just jog. Just jog.
CHATZKY: And do it, like you said --
CHATZKY: You don't need a whole team. I have a running partner. The fact that I know that she's waiting for me on the corner now, you know, it gets me out of the door.
GARDERE: Take the stairs and stop using the elevators. There's so many things that you could do that are free, that are cardio --
ROMANS: Don't tell my son you say to get a dog, because now you're on the team with my -- oh, boy.
MACK: You got to walk that dog.
GARDERE: That's the best part about it.
ROMANS: Peter Moore, thanks so much, "Men's Health," and "Lean Belly Prescription" is the name of the book, a great read, I'm told. Thank you, sir.
That's going to wrap things up for this morning, but you can catch us here every Saturday morning for YOUR BOTTOM LINE.
I'll be back with Ali Velshi for YOUR MONEY, Saturdays at 1:00 p.m. Eastern, Sunday's at 3:00, right here on CNN.
Time now for a check on the top stories and this latest news. For that, we send it back down to the CNN Center for more "CNN SATURDAY."