America¿the Broke

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America¿the Broke

Thursday, March 6, 2008; 10:15 AM

My selection for March's Color of Money Book Club drew quite a bit of mail. If you missed the column, read it here. The book is an interesting look at why Americans can't hold on to their money. Many of you had an opinion about why.

Here's what some of you said:

Ellen Minkwitz, of Dover, Del., wrote: "As retirees, my husband and I are appalled at the direction our economy (and culture) is going, and at the consequences. I remember a saying 'use it up, wear it out, make it do, or do without?'"

"It seems that a lot of people feel that money, or at least spending it, will bring happiness," wrote John W. Kennerson Jr., of El Centro, Calif. "They are let down after the initial euphoria and need a new fix so they go out and buy something else to feel good again. The seniors that lived through the Great Depression are leaving us and it seems that the Americans that replace them don't feel the need to save for a rainy day."

Jim Hall, of New Mexico, wrote: "I think you correctly identified two sources of our debt crises. However, I think the third source is the financially irresponsible behavior of our political leaders. Increasing government debt is a major part of our increasing societal debt and further increases the risk and impact of financial upheavals."

"As a [part-time] worker with a husband who brings home what should be more than enough money each month to pay our bills and then some, it always seems like we're right on the brink of chaos," wrote Charlotte, N.C., resident K. Stephens. "I am the saver in this relationship, always worried about spending money we don't have or if we can afford things. My hubby believes that our debt is manageable and it'll all work out with his yearly bonuses."

But what if those bonuses don't come?

If you suffer from reckless spending, read "Lessons I've Learned From Being Broke" (Mar. 2). It's a piece from Kiplinger.com. Erin Burt, their contributing editor, offers some tips for staying out of the poorhouse:

* Identify your financial priorities.

* Treat debt as if it is your enemy.

* Life happens, so have a back up plan. Save for emergencies.

Find more tips "here.

Also, be careful about chasing after small business opportunities, which are increasing as more people try to find ways to make money in this declining economy. Read how to protect yourself. Don't let someone sucker you into making money for them.

Remember when talking about your money in public was taboo? Nowadays sharing intimate information is becoming more common. In "Wanna Talk Money?" (Mar. 2), Post staffer Nancy Trejos reports on personal finance Web sites such as, Geezeo.com, where participants brag, borrow and advise each other about money.

Invisible Fees Hit Your Wallet

Post reporter Tomoeh Murakami Tse wrote this week about a newly released report by the Government Accountability Office that found many banks are failing to disclose fees on checking and savings accounts, something that is required by law.

The report also focused on overdraft fees, which have increased 11 percent from 2000 to 2007 and are disproportionately affecting low-income consumers, according to GAO.

Read more in "Banking Fees Are Rising And Often Undisclosed" (Mar. 2).

Kiplinger.com also has some good information about banking fees in "Credit Unions Have the Best Deals" (Mar. 2).

Lend a Hand, Save a Mortgage

On Tuesday, Federal Reserve Chairman Ben Bernanke said that the effects of mortgage foreclosure will continue "for a while longer." The Fed chairman called for lenders to work with at-risk homeowners to renegotiate the mortgage amounts.

For example, a lender might reduce what a homeowner owes from $200,000 to $180,000, so the borrower could afford to make payments. That loss might be far less than the lender would incur if it foreclosed on the house and then sold it at auction," reports Neil Irwin. Check out "Bernanke Wants Banks To Rework Mortgages" (Mar. 5).

Also, David Cho and Renae Merle report on criticism of other bailout efforts in "Merits of New Mortgage Aid Are Debated" (Mar. 4). According to Cho and Merle, the Treasury Department has helped 45,000 distressed homeowners, but the relief may only be temporary.

School Cost Daze

The economic woes caused by the subprime mortgage crisis are spilling into other areas. A report in the Post about private schools in Washington Metro area found that enrollment is trending down in part because of rising tuition.

Has private school tuition reached the breaking point? Read about it in "Drop in Applications Tests D.C. Area Private Schools" (Mar. 5).

Parents and students paying for college have long felt the sting of ever-rising tuitions. Now some lenders are pulling back from the student loan market or raising the credit requirements and interest rates on private loans.

Reporters David Cho and Maria Glod report even those seeking guaranteed federal student loans might have to pay more in fees. What does this mean? Find out in "Credit Crisis May Make College Loans More Costly" (Mar. 3).

But there is some good news for those students pursuing higher education. At least some colleges are trying to get the best students by offering more financial aid, reports Susan Kinzie in "Colleges Chasing Potential Students" (Feb. 17).

Flying Tips

Joe Brancatelli of Portfolio.com offers some tips to navigate financial troubles in the airline industry. Here's how:

* Learn airline jargon. Airline employees may be more concerned about themselves (their job security) and less available to answer your questions. Instead of asking if the flight is on time, ask "Where's the equipment?"

* Protect your luggage. Lose the business card. Why? "The luggage guys know that those bags probably belong to high-yield, high-profit customers, the ones most likely to complain to airline management about their treatment," Brancatelli writes.

* Spend your miles. Your frequent flier miles may get lost in the merger shuffle. Cash-in now or risk loss.

Read more about how to make the best of your dollars in the friendly skies in "Travel in the Time of Merger" (Feb. 26).

Also, read this post by Cindy Loose in the Post travel blog, Insta-CoGo: Frequent-Flier Changes at US Airways (Feb. 29), for more information on frequent flier miles or my column, "Working the Frequent-Flier System" (Nov. 4).

Tax Tips 2008

Kiplinger.com offers advice on taxes in "It's Not Too Late To Take Advantage Of Tax Breaks" (Mar. 2). Personal finance expert Mary Beth Franklin gives a few tips on retirement plans and your taxes.

1. Contribute to a tax deductible IRA. This will trim your 2007 taxes. You can contribute up to $4000 or $5000 if you're 50 or older.

2. If your joint income is less than $103,000 or less, you can deduct all or some of your IRA contribution. For singles, it's $62,000 or less.

3. Claim the retirement savers tax credit. You can reduce your bill by as much as $1,000 for a $2,000 contribution to a traditional or Roth IRA, 401(k), or other work-based retirement account.