Our Relationship With The Mall

I have another way to describe that big, never-ending place where sales are king.

I call the mall a "den of iniquity" because it is often a place where immoral shopping goes on. And by that I mean people buy things they don't need with money they don't have and may never have.

I will admit that I was a mall rat at one time. I lived to find bargains. I loved going to the mall and hunting for sales. But then I had an epiphany. I realized that you never save when you spend. No matter how much of a sale you find at the mall, you are not saving money. You are spending less, but you are not saving.

So, I'll confess I'm not terribly troubled by all the retail failures or store closings. I'm a wee bit happy that the "mallworld" is collapsing as Post Style reporter Hank Stuever wrote recently.

In an essay, Stuever calls these times "shopocalypse."

"Across the land, it's heebie-jeebie vibes in the homogenous habitat," Stuever writes. "Bennigan's, Sharper Image, Bombay Co, Linens 'N Things. RIP. It's a series of harbingers. It's the end of things 'N things."

As with any failed relationship, you reminisce about the good times -- bumming around the mall as a teenager with nothing else to do or bringing your kids there to play. But there are also feelings of guilt and regret -- the buyer's remorse and debt accumulated from mall visits.

Stuever says we're told that it could be a tough year for sales and "that instead of making hundreds of billions of dollars in sales, retailers would only make...hundreds of billions of dollars in sales. Every year we spent more, and every year it never seemed to be good enough."

The news about the troubled retail industry plays out like a tragic Christmas comedy. Here's how Stuever imagines one dialogue passage in this play might go:

Economy: "You never get me what I want."

Consumer: "What? I buy you everything you ask for! Every year!"

Economy: "I still feel empty."

Where will this play end? None of us are sure, but if you're feeling blue about all the store closings read more about our relationship with the mall in Stuever's essay A Pall on the Mall (Nov. 28).

At least the layaway is making a comeback reports retail writer Ylan Q. Mui. It's one of the few options consumers still have as credit tightens. Read Back to Buying Bit by Bit (Nov. 30).

Is Knowledge The Best Gift?

As part of the Holiday Guide 2008, Michael Dirda gives 10 Commandments of Book Giving (Dec. 7).

Here are a few suggestions on selecting the right book:

* Stay away from bestsellers. It shows no imagination on your gift giving part and the person probably already has the book.

* Classic books are a good idea, especially if they have a beat up version of the book.

I had the same idea as Dirda, so I didn't recommend a book for the December Color of Money Book Club. Instead I highlighted some of my favorite picks from this past year, including:

* "Isn't It Their Turn to Pick Up the Check?" by Jeanne Fleming and Leonard Schwarz (Free Press) which was profiled in January.

* "Changing Your Course: The 5-Step Guide to Getting the Life You Want," by Robert and Melinda Blanchard (Sterling) which was featured in June.

Check out all of the Color of Money Book Club selections for 2008.

Pinching Traveling Pennies

Leisure travel has been hit hard in this recession, but the downturn could mean lower prices and deals for consumers.

For help finding bargains read Joe Brancatelli's How to Cut Travel Costs (Dec. 2). His column Seat 2B offers advice to business travelers, but the helpful hints in this column can apply to anyone on the go.

Here are some ways to cut traveling costs:

* Plan Ahead. You can reduce airfare costs by up to 70 percent if you book in advance.

* Do you really need all the amenities at the Hilton? Try its lower priced cousin -- the Hampton Inn.

* Stay away from the mini-bar. Stock up at a local grocery store for snacks.

* Fill up the tank of the rental car at a gas station near the airport.

What's Your True Calling?

Larry Ford was a successful financial planner working on Wall Street, but he couldn't escape the feeling that the life he was leading was illusory and that he was destined for some higher purpose. He unplugged from the mainstream, studied to became a shaman and now helps people tap into their spirituality.

Read about how he balances the worlds of finance and spiritual healing in Voodoo Economics (Dec. 7) by Laura Blumenfeld. Check out a video of Ford performing spiritual healing and read a transcript of Blumenfeld's online chat on the story.

You Asked

Here are leftover questions from my most recent online chat. (Don't forget to join me for my last chat of the year on Thursday, December 18 at noon ET):

Q: I am 29 years old, have a credit score in the upper 700s with no debt. Grad school loan is paid off, car is paid off and no credit card debt. I make in the upper $60,000 a year, and still live at home with my parents. I have almost $50,000 saved up for a new place. I am just worried about getting in over my head considering the financial situation the economy is in. Can you give me advice on if you think this is a good time to buy a house? And what price range would you recommend me looking at? Any advice would help.

A: People ask me all the time about whether or not it's the right time to buy a house given the current economy. And my answer is always the same. The right time to buy is when you can afford to buy. Sounds simple but it isn't. Many people are in trouble now because they bought too much house or they used their home as an ATM.

But don't let fear stop you from being a homeowner. Instead, consider the stability of your own job. If you're relatively confident that you won't face a job loss, look at how much house you can afford by crunching some numbers.

The old rule of thumb was you shouldn't buy a home that was more than three times your gross annual salary. That would mean you shouldn't buy a home that costs more than $180,000. In the Washington metro area that won't get you much.

Mortgage lenders have tightened their lending standards. To determine if you qualify for a loan, they will consider your credit history, your monthly gross income, other debt obligations and how much cash you have for a down payment. These days that downpayment requirement can be as much as 20 percent.

By eliminating debt you've put yourself in a great position to qualify for a good mortgage.

So the only question is how much house? The bank will allow you to borrow a certain amount factoring in your debt and gross income. Using this information, the bank determines your debt-to-income ratio. Lenders will look at your total-debt-to-income ratio (all your debt obligations including your mortgage payment) to determine whether you are able to handle a home loan. Lenders generally require that your monthly mortgage payment (principal, interest, property taxes and insurance) not be more than 25 percent to 28 percent of your gross monthly income.

Personally, I don't go by what the lender says I can afford. I look at what percentage of my net pay each month will go toward my mortgage. Generally, you should aim to keep your mortgage payment between 25 and 36 percent of your take home pay. That percentage should include property taxes, any homeowner association fee or condo fee and homeowner insurance. It's important to use the net pay figure and not your gross income because unless you are cheating on your taxes, you don't live off your gross pay. Keeping within these limits gives you flexibility to save and invest and prevents you from becoming a slave to your mortgage payment.

Q: Here is my situation: I have a balance of $1,980 at 8.08 percent on one credit card, and a balance of $5,300 at 3.04 percent on another (both locked in for the life of the balance). My strategy is to pay the minimum on the one with the lower APR, and all I possibly can above the minimum for the card with the higher APR. This makes sense to me, and has been working so far, as I have been really putting a dent in my debts. The wrench in my plans is that I have a student loan balance of $9,300 at 5.3 percent. After the debt of $1,980 is taken care of, do I funnel extra payments to the student loan debt since the APR is higher, or to the other credit card (w/ APR of 3.04%) since credit card debt is considered "bad" debt? I have read different opinions on this. To me, it makes sense to tackle the student loan debt next, since the APR is higher.

A: First of all, any debt is bad, whether it's mortgage, credit card, car loan, student loan, etc. Some debt is necessary like your home loan, but it's all bad because it makes you a slave to the lender.

Second, if you read the fine print of your credit card terms you will find no interest rate is locked in for life. They typically reserve the right to hike that rate for no reason or any reason. They just have to give you notice.

The strategy I've found works best for paying down debt is to forget about the interest rate on the debt and concentrate on paying off whichever debt has the lowest balance, in your case the credit card with $1,980. Make the minimum payments on the other debts. When you pay off the debt with the lowest balance, move on to the debt with the next lowest balance. I think you will find if you throw all of your extra money at the card with the lowest balance you will make quick progress and be even more motivated to get out of debt completely.

The following wasn't a question, but made a good point about following what is right for you.

Q: I am hoping that two of the outcomes of this financial mess is the understanding that debt really is a bad idea and an understanding that investment risk is REAL.

My husband and I are in our 60s/50s. We have used a local brokerage and their "financial planner" has clucked at us like a mother hen on the importance of staying heavily in stocks because of inflation risk and adopting a more "sophisticated" approach to retirement of keeping the mortgage and letting your retirement income cover it. "Hey you don't want to lose that home interest deduction," he would tell us.

But we retired the mortgage and kept over 50 percent of our assets in fixed income. The market is a mess and our retirement plans are still on track. We sleep through the night. Thanks for the good advice.

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.