Do You Need To Talk?

Congress has passed the bailout, but there's still no improvement in the economy. If anything, things are getting worse. The global markets are imploding and Americans are despairing over their investment balances or worried their cash isn't even safe. With all that's going on, you may need some sound advice. So, let's chat.

Today, for my live online discussion, there is no guest. It'll just be you and me and your financial issues. Join me today at Noon ET.

If you can't join the discussion live, you can always submit your questions early or read the transcript.

Ask Not What Your Economy Can Do For You...

Throughout the Bush Administration's tenure, we have been encouraged to spend money.

In President Bush's post-9-11 address to airline employees at O'Hare International Airport in Chicago, he said:

"When they struck, they wanted to create an atmosphere of fear. And one of the great goals of this nation's war is to restore public confidence in the airline industry. It's to tell the traveling public: Get on board. Do your business around the country. Fly and enjoy America's great destination spots. Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed."

And just months ago, Bush had this to say about the economy and his stimulus package:

"Secondly, the growth package will provide tax rebates to more than 130 million American households. These rebates will begin reaching American families in May. And when the money reaches the American people, we expect they will use it to boost consumer spending, and that will spur job creation, as well."

Many people did head to the mall feeling it was their patriotic duty. Now, all we have to show for that is empty pockets and a struggling economy.

In his recent Outlook article He Told Us to Go Shopping. Now the Bill Is Due (Oct. 5), author and Boston University history and international relations professor Andrew J. Bacevich says that one of the biggest mistakes Bush made during his presidency was not calling on Americans to conserve their finances and pay more taxes during wartime. Instead, we were told to go on vacation and go shopping.

"So as the American soldier fought, the American consumer binged, encouraged by American banks offering easy credit," Bacevich wrote.

How's that working for us now?

Bailout Bill

Last week, I featured your comments on the bailout bill. I figured I'd let more of you weigh in this week too:

Glen Powell in Kearney, Neb., wrote, "It's like giving an alcoholic more booze to get [him] over the hangover. I wish we could single out struggling lower income individuals who had their dreams shattered by naively taking a loan under risky conditions."

"I suggest that each and every elected official that held the bill ransom until their private, pet projects were bankrolled should be voted out of office," says Anne Smith from Saint Peters, Mo.

Susan Justus of Allentown, Pa., says, "Bush, Bernanke and Paulson are a collective Chicken Little. What they don't realize is that the sky will fall if the dark clouds of correction aren't allowed to rain, washing out the bad and nourishing the good."

"There should be some provision to investigate every mortgage that was fraudulently given to each and every homeowner and led us into this mess," says Greg Moran of Jamestown, N.Y. "Somebody should go to jail."

Amen to that Greg.

Buying in the Downturn

There is a silver lining to this economic storm cloud. In an effort to get houses sold, lenders are pulling foreclosed properties off the market and selling them at auctions.

As a result, would-be buyers are getting great home deals are getting great home deals, reports Post staffer Dina ElBoghdady in Foreclosed Houses Unloaded at Auction (Oct 5). Thirty-four-year-old Trisha Bayles got a steal when she outbid several other people to acquire a home in Laurel, Md. The home sold for about $465,000 a year ago and was listed at $285,000 a few days ago. Bayles got it for $200,000.

She finished the paperwork at the auction and put up a down payment of a little over 11 percent.

Watching Your Investment Portfolio

Worried about the money you have in the market? Kiplinger editor Fred W. Frailey offers tips on things you can do while Washington and Wall Street work out this whole mess. Among his suggestions: don't look at your investment account balances.

Find out what else Frailey recommends in 6 Things To Do While The World Ends (Oct. 1).

Also take a look at You Can Weather the Economic Storm (Oct. 3) by Dennis Romero of entrepreneur.com.

Romero writes about what small business owners can do to cope with shifting spending habits as more customers tighten their belts during the downturn.

Buckling Down to Save a Buck

If you're looking for ways that you can cut costs in this declining economy, read 20 Steps to Toughen Up Against Hard Times (Oct. 5) by Elizabeth Razzi. Here are a few of her suggestions:

-- Take a break from prepaying your mortgage and save the cash.

-- Sign up for Netflix or a cable movie plan to cut back on entertainment expenses.

-- Shop around for insurance. You might be overpaying for your policies.

-- Use your kitchen for cooking, not remodeling.

If you're looking for tech-saving tips, check out Rob Pegoraro's Tech Tactics for Hard Times (Oct. 2). He advises consumers to:

-- Reconsider your satellite or cable subscription. Do you really need all of those channels?

-- Get rid of your home phone. If you can't, cut call waiting and added features.

-- Don't make long distance calls from your landline. Use your cell phone after 9 pm.

-- Don't buy extended warranties, fancy cables, or other "upsells" when you make a big purchase.

You should also talk to your children about your cutbacks says Kiplinger's Deputy Editor Janet Bodnar in Talking to Your Kids About the Financial Crisis (Oct. 2).

You Asked

Here are some left over questions from my most recent online discussion:

Q: I have about $30,000 in school loans. I am making $55,000 a year. Is it better to build up a large nest egg for emergencies, or should I focus all my energy on paying back my loans quickly? The interest rates on the loans (Sallie Mae) are 6%.

A: Whatever the state of the economy, I always recommend you have some emergency money. Even if you can't muster the minimum recommended three months of living expenses, save something. At the same time, you should definitely be aggressively paying down that $30,000 in debt. So for example, if you have an extra $100 a month and not a dime saved up for emergencies, I would put an extra $50 toward the debt and $50 toward building up an emergency fund. After you have at least three months of expenses saved up then take the entire $100 and apply it to the student loan debt.

Q: My debt is weighing me down. We are carrying $28,000 on five credit cards. Due to late payments, four of the 5 cards have interest rates around 29%. I pay more than the minimum each month, but the downward progression is slow. We're homeowners. No other debts or loans, just the credit cards. Moving balances to other low-interest cards is time consuming and confusing (and sometimes costly with transfer fees) In phone conversations, credit card companies do not appear interested in lowering our interest rates, even after paying on time consistently for months. Spending has been significantly curbed, but most of our assets are in retirement accounts, which we are not touching. Do you have any advice?

A: I suggest consumers in this position make a list. List your credit card balances starting with the one with the lowest balance. Then list the card with the next lowest balance and so on. Then begin making aggressive payments on the card with the lowest balance. On the other four cards just make the minimum payment. With this method, you may not be attacking the card with the highest interest rate, but that's okay. What I've found is people end up paying off the cards much sooner than your method and reduce the amount of interest they pay anyway. You see, in your way you aren't getting any traction. That in turn doesn't motivate you to work harder and find more money from your budget to pay down your debt. If you could get a card with zero interest I would have suggested you take the time to transfer the balances (assuming there isn't an unreasonably high transfer fee). However, in this credit market, late payments, even ones a few months old, are probably enough to disqualify you for such deals. So use the lowest-to-highest balance payoff method. I've tried this numerous times with others and those who follow the plan do get rid of the debt quickly.

Q: My co-worker, who told me she has a salary of about $40,000, bought a $750,000 house on a no-interest loan 3 years ago. She says she's not worried about foreclosure when the rates go up next month because she believes the government will bail her out. Is she dreaming? And how in the world did anyone qualify for a loan that was almost 20 times their salary?

A: I'll respond to your last question first. How did people like your friend get such a loan?

Greed. Irresponsibility. Stupidity.

Now for your second question. Yes, she's dreaming, and her American dream of owning a home is going to be a nightmare soon. All you can do now is start looking in the back of your supermarket for empty boxes to help her pack when they kick her to the curb. Although some borrowers are being helped to stay in their homes even if they can't afford them, it's highly unlikely her lender is going to rewrite her loan terms to allow her to afford that home on a $40,000 salary. People in far better positions than her are being foreclosed on.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Charity Brown contributed to this e-letter.