washingtonpost.com
Color of Money Book Club

Michelle Singletary
Washington Post Columnist
Thursday, January 29, 2009 12:00 PM

Personal finance columnist Michelle Singletary hosted an online discussion with Mitchell Zuckoff, the author of "Ponzi's Scheme: The True Story of a Financial Legend," on Thursday, Jan. 29 at Noon ET.

To help readers better understand the Bernard L. Madoff case, and to keep others from falling victim, Michelle wrote that she chose this book because "Zuckoff doesn't glorify or crucify Ponzi. Instead, he's written an engrossing biography explaining how someone from humble roots could so easily dupe thousands of people."

The transcript follows.

Read Michelle's past Color of Money columns or check out her past Book Club picks.

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Michelle Singletary: Welcome everyone. WOW, so many questions already. Guess the sign of the times. So let's get started. And don't forget this is mostly about the book, so pepper my guest with questions about Ponzi, the man and the scheme. Did you guys see the story about the other money managers running from the law after alledgely taking investors' money?

What a shame.

Anyway, let's get started.

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Laurel: There was an op-ed in the Post when the Madoff scandal first broke by Len Fisher, which took the view that you can't cheat an honest man. i.e. Madoff's investors must have known he was doing something crooked; they just figured THEY weren't the ones being cheated.

Is it likely that most of Ponzi's victims must have known they were participating in a scam?

washingtonpost.com: Madoff's Willing Partners

Mitchell Zuckoff: For the most part, Ponzi's victims were less sophisticated than Madoff's, so I don't think a majority of them "knew" they were participating in a scam. But let's face it -- they weren't stupid. They were being offered 5 percent annually on their deposits in local banks, or double their money in 90 days with Ponzi. I'm pretty sure most at least wondered if this was legit. So they went in a little at a time -- maybe $100 or so at first. And then, when Ponzi paid off the first few rounds of "investors," confidence rose and the number of interested investors snowballed. In fact, that's a classic element of any Ponzi scheme.

Michelle Singletary: As for Madoff's victims, some probably fit the "can't cheat an honest man." But there were some who had no clue their money was iwth Madoff. Are some victims greedy. Yes.

Do they still deserve to be cheated because of that?

No.

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Harrisburg, Pa.: How long did Madoff and Ponzi keep up their schemes? If the key is to keep getting more and more investors until the whole scheme falls apart, what was the secret to keeping the schemes going for as long as they did? Also, did either have a real exit plan or did each hope to keep the schemes going indefinitely? Surely they both realized this couldn't last forever and eventually it would collapse?

Mitchell Zuckoff: This is one of the key differences between Ponzi and Madoff. Ponzi was only able to keep the ball rolling for about nine months, from December 1919 to August 1920. The fascinating thing about what's alleged regarding Madoff is that his operation apparently went on for many years. I suspect that one factor in his longevity was his ability to attract stable investments -- such as endowments, foundations, charities and very wealthy individuals -- who could be counted on not to make sudden large withdrawals. Then all he had to do was keep replenishing the small number of withdrawals and he could keep it going indefinitely.

As for an exit strategy, I'm certain that Ponzi didn't have one. He was putting down roots when it came crashing down, and he really didn't have time to find a way out (though he did start to diversify near the end, hoping that legitimate investments would allow him to transition from his "business" to a real business). As for Madoff, that's a question that's been keeping me up nights. I wonder if he thought he could take his secret to the grave, and then when he was gone and the truth came out there would be no one to punish directly. But that's just speculation.

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Lanham: Mr. Zuckoff, the Madoff enterprise had taken in a large number of Jewish clients; and the subprime crisis was empowered partly by affinity marketing in minority neighborhoods.

Did the Ponzi scheme attract a disproportionate number of Italian-Americans (who would have been familiar with postal reply coupons)?

Mitchell Zuckoff: That's a great question. Yes, Ponzi found his first -- and most ardent -- investors among fellow Italian-Americans. We often see "affinities" as a foundation of these kind of scams because people tend to be more likely to let down their guard when they're dealing with someone they can identify with. A smart con man knows that's an easy way to build up trust and, of course, confidence.

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Please reconsider your advice regarding $7500 home buyer credit: I am a regular reader of this discussion, and to be honest I frequently disagree with your advice (specifically, the influence your moral beliefs have on what would otherwise be -good- financial decisions).

Several weeks ago I posted a comment explaining how I planned to responsibly leverage the $7500 first time home buyer tax credit in a manner that would ultimately save me money in the long run. I believe your response was something along the lines of "fine, be hard headed".

I think it is your responsibility to make sure that all of your readers know that there are potential changes to this tax credit in Obama's economic stimulus plan that could impact their decision of whether or not to apply for the credit. The proposed change would essentially change this from an "interest free loan" to a true tax credit that does not need to be repaid. There was a Washington post article on this topic on Saturday, perhaps your producer can provide a link ("A Tax Credit Worthy of the Name").

I am hoping that you will reconsider your absolute opposition to this tax credit. It would be horrible for someone to miss out on a free $7500 because Michelle Singletary said it would be "hard headed" to do so.

At a minimum, please suggest that people not rush to file their taxes (even if they are getting a refund)...and at least wait until the stimulus bill passes and see how/if the rules of this tax credit was changed. If the stimulus bill does not pass by April 1, people will be faced with a decision. If you file your taxes don't apply for the credit, then you risk missing out on free money should the rules change after April 1. If you file your taxes and do apply for the credit, then you risk ending up with $7500 that you need to pay back if the rules don't change. I think I know which option you'd suggest...but we'll deal with that issue when/if we get there.

washingtonpost.com: A Home-Buyer Tax Credit Worthy of the Name

Michelle Singletary: I totally and completely stick to my orginial opinion that I would NOT advise people to take this loan if it does not become a true credit. When I wrote about this there was no discussion to turn it into a credit (perhaps the powers that be do read me and listen to me)

If you are so smart I don't know why you can't use your cash or savings to do what you want instead of taking on more debt.

I hate this tax credit/loan because once again it sends the message that you can get what you want with more DEBT. This time debt that you owe to the IRS for 15 years!

I mentioned Ken's column in Saturday's paper because I do agree with him that if in fact the $7,500 loan becomes a credit and people don't have to pay it back, then yes go for it. At that point it's a positive because it's a true credit meaning you don't have to pay it back and it knocks off what you owe the government. Otherwise if it stays as a loan, stay away!

Oh and I'll ignore your comment about morality, etc.

I give good financial advice that's also moral. If you're grown and hardheaded you can CHOSE to ignore it.

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ARLINGTON, VA: Michelle WHOO HOO! Paid off one of my credit cards on Monday. Still have debt, but I'm officially marking this card off the list! Thanks for all your support!

Michelle Singletary: WHOO HOO right back at you.

I tell you I LOVE, LOVE getting notes like yours. The path to prosperity and being debt free starts with just one step.

Bravo or Brava to you!

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Hyattsville: Love this topic! What is the mindset of people like Madoff? Is having money their only goal, therefore doing anything to anyone is just fine with them? Also, typically, does the spouse know and is willing to support the scheme? My friends and I just wonder what drives people like this? We consider them evil to take from others and devastate their lives (financially) which leads to other problems.

I also feel that these highly paid corporate heads (Wall Street) have little care for others and that's why they can take money so easily (besides astronomical salaries, also golden parachutes). Seems there is no regard for lesser paid employees or the average worker. Do they have hearts?

Mitchell Zuckoff: Thanks for the question. That's what motiviated me to study this subject in the first place -- trying to understand what makes folks like this tick. It's hard to overgeneralize, especially since I think Ponzi was more a dreamer and a self-deluding striver than a truly evil guy. On the other hand, in my experience people who create schemes like this tend to have certain sociopathic tendencies -- a lack of empathy, the absence of conscience, a narcissistic personality -- on top of an overpowering desire for money. A dangerous combination, especially for folks who get pulled into their orbits.

Michelle Singletary: Like the Good Book says, it's the love of money that will ruin you. In reading Mitchell's book that's what I got about Ponzi. He loved the idea of having money so much that throughout his life he went from one scheme to the other trying to get rich quick. And it seems he didn't really have a purpose for the wealth. He didn't want to help others or build hospitals or cure some illness. He was selfish and that allowed him to forget that behind this scheme were a lot of people who were just trying to make the life for their family a bit better.

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Newport News Virginia: So much conflicting financial advice out there. It's easier than I thought to fall victim for a Madoff/Ponzi scam.

For years I had a 750 plus credit rating. Guarded every measure of credit worthiness. Consumer debt grew, consolidated with equity line, credit rating drops to 671!

My financial adviser tells me an equity line was the reason, and it is the worst vehicle for working out debt. Is the current market also causing a tougher score review? I feel like I could have been the next victim to a Madoff type guru.

Michelle Singletary: In your case you fell for what the world says, which is get out of debt trouble with more debt. So in a way it is a ponzi scheme!

It's not the economy that tanked your score, it was listening to whomever told you to use debt to get out of debt.

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Temple Hills, Md.: Hi Michelle, Love your column... I'm so happy you're discussing this book after the Bernie Madoff catastrophe. It seems in hind-sight that the people who fall for these types of schemes are either crazy or stupid, but I beg to differ. I think they are intelligent, hard working ambitious folks who were just trying to get their own piece of the American pie. Its unfortunate that they chose poorly and now must face the consequences. I have to say though, I think a "Ponzi scheme" could probably work on most of us if offered from the right person. What do you think Michelle???

Mitchell Zuckoff: I know you were asking this of Michelle, but I can't resist jumping in. I think you've put your finger on something here. While I certainly think gullibility and greed go a long way toward explaining why people get involved with these kinds of schemes, that's not the whole answer by a long shot. We're all aware of the culture of money, the "consume now" urgings of advertisers, and the "good life" media arrayed before us. We also read stories about folks who, legitimately, got rich quick, either through skill, luck, timing or all three. So yes, that's a contributing factor here, the desire shared by many of us to enjoy the good life.

Michelle Singletary: I agree with Mitchell. It's so easy to look at this case and blame the victims and think it could never happen to you.

But it can. As for me, I won't say I can't fall for a scheme but you do have a tougher time with me because I look at every pitch to make money with a healthy dose of skeptiscism I got from my grandmother, Big Mama, a woman I without a doubt KNOW could never be cheated.

Like my grandmother I wouldn't have fallen for Madoff's scheme if I had directly invested with him because I couldn't understand what the heck he was doing. And to this respect I follow something Peter Lynch, the money manager once said, never invest in anything you can't illustrate with a crayon. Like with the original Ponzi scheme people didn't understand how the money was being made and that my friends is the path to being scammed.

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Boston, Mass.: I'm very sad for the people who lost lots of money and their life savings. But we all must remember, you don't get "something" for "nothing." If it sounds too good to be true, then it probably is.

Mitchell Zuckoff: Well said. And yet, no matter how many times we say it, some people still need to hear it repeated.

Michelle Singletary: But please keep in mind at least with Madoff the returns were very, very reasonable so it didn't send off bells in people's heads.

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One more about the $7500 "credit": But when will we know if this is in fact changed? My husband and I weren't going to take it as a loan, but heck yes we'll take it as a gift! I like to get my taxes done early, so how long should I wait? Thanks. And P.S. I agree with you on everything, from emergency savings to life happens savings to tithing.

Michelle Singletary: Who knows when this will pass but probably soon if President Obama has his way. So hold off a bit to see. If not you can always amend your tax return.

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Mystic, Conn.: Is this an attempt to deflect blame or attention for Maddoff's crimes to some Italian person who lived 90 years ago? This book is irrelevant to today's world.

Mitchell Zuckoff: Ah Mystic, why so cynical? You've actually got it backward. Rather than trying to deflect blame from Madoff, we're trying to help people understand the mindset that underlies a scheme like this.

Michelle Singletary: Did you even read the book?

It absolutely applies to today! The idea of the Ponzi scheme lives on and on an on. But reading this book helps you understand how it may get started and gives you clues on what you can do to avoid it.

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Washington, D.C.: Hi Michelle--wonder if I could squeeze in a mortgage question? I have a 5/1 interest only ARM due to reset in 2 years. I'd like to seek a modification. Do you think I should wait to see whether the new administration signs legislation that will facilitate this process or do what I can to modify my loan into a fixed rate term now?

Michelle Singletary: If you can't handle the mortgage payment or suspect you can't when it resets start asking now to get a fixed rate.

The lender may not modify your loan but you could check to see if you qualify to refinance.

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Washington, D.C.: Michelle, a quick reminder to readers to use those credit cards once in a while (paying them off immediately, of course) just to keep them active. My two oldest cards were both closed by their respective banks within the past month because of inactivity.

And a related question. I had diligently paid the cards off and was keeping the accounts open as I plan to buy a house this year (hopefully this summer). Will the account closures affect my FICO score? It seems that the history will stay on the credit report, but I am afraid my score will go down and I don't want to jeopardize my ability to qualify for the best interest rates. Thanks!

Michelle Singletary: You should be fine IF you don't have a lot of other outstanding debt on other cards.

When an account is closed it can affect the ratio between debt outstanding and available credit. But if you pay off your cards on time, you should be fine.

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Philadelphia, Pa.: I don't expect you to explain Madoff's behavior, yet I found it especially upsetting, almost inhumane, that Madoff took funds from charities. Even the great robber barons had their charitable side: Madoff on the other hand stole from charities. Did Ponzi knowingly take any funds from charities, and was he a charitable person?

Mitchell Zuckoff: I'm so happy you asked this question, Philadelphia! First, I'll own up to the fact that I have a certain amount of affection for Ponzi (sorry for the shameless plug, but read the book and I think you'll understand why). Not only didn't he take money from chartities as far as I know, at the height of his success he wrote a $100,000 check -- a huge amount of money in those days -- as a donation for a Boston orphanage, and he donated it in the name of his late mother-in-law. Believe me, I'm not nominating Ponzi for sainthood by any means. But based on what's alleged against Madoff, he seems to be a far worse character.

Michelle Singletary: I see where Mitchell is going with Ponzi's donation story.

BUT lest not forget it's not so hard to donate money you've stolen! You can be so generous when it's not your money. And in many respects isn't that what Madoff did too. He gave to lots of charities but if he is found guilty, then he gave what wasn't his to give. That's just wrong and not worthy of admiration.

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Marietta, Ohio: I agree with you on the $7500 credit/loan. I closed on my house on Friday, April 4th. Although I didn't qualify because it was 4 day too soon I was sorely tempted to try anyways because my carpet is nasty and needs replaced (mostly because it's making my allergies worse) and that amount would be more than enough to replace all the carpet with hardwood floors. But I didn't. My income will not be increasing this year (I'm a librarian-not even a cost of living adjustment) and with deductions etc. I still do not owe any federal tax so why would I want to pay it back? Thanks for the common sense advice.

Michelle Singletary: Thanks so much. And good for you for thinking this thru and not drinking the kool aid.

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James, Arlington, Va.: I find it amazing that our 'experts' are not experts at all. I was in the WP years ago warning about the housing bubble and we also did a serious about how many others and my friends told me I was insane for not getting 'in' on the housing market because real estate was the only sure investment, etc...blah blah. I warned them that all of this was a facade and that we'd have a disaster on our hands. Experts blindly leading the blind. It's like hearing people talk about renting vs owning. The last time I checked being in 'Debt' for anything was never good. There is just too much bad information out there and too many uninformed buyers and those that got suckered into buying because it was the 'sure thing' or the 'right thing' to do.

Michelle Singletary: There were a lot of us, myself, included who have been singing this song for a LONG time.

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Atlanta, Ga.: My boyfriend of 2 years has never learned how to manage money. We have talked about marriage but I've expressed my fear that he will drive us to the poor house. I make $80k and he makes $50k. He has no retirement saved and I have over $100k. I feel like I'm being duped, should I run even if he's a good man who doesn't have any money management skill?

Michelle Singletary: Rather than run, help him learn. You are right to be concerned and I wouldn't marry the guy until he showed som real change and progress but see if he's willing to change.

Take a premarital class that incorporates several good lessons on money management. See if he will take some basic money management classes with you. If he bulks at any of this or your calm, nice, loving efforts to show him how to handle his money better than YUP kick him to the curb.

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Baton Rouge, La.: What's the difference between what Bernie did and Social Security?

Mitchell Zuckoff: I'm always reluctant to wade into the Social Security-Ponzi scheme comparison, but of course there's a huge difference. For one, Social Security -- for all its structural problems -- is not misleading anyone. It doesn't pretend to be anything other than what it is -- a transfer payment system under which taxes from current workers are used to provide basic benefits for retirees, the disabled and the survivors of deceased workers. I know that plenty of folks have issues with Social Security, but I'd urge them to confront it on its own terms. Calling it a Ponzi scheme is misleading and does more to cloud the issue than it does to illuminate it. And yes, I do know that unless changes are made, the current system is unsustainable. But that doesn't mean it's fraud.

Michelle Singletary: OOOh so loving you Mitchell.

Amen. Amen. Amen.

And let me add this. I like Social Security. There I said. And trust me I will probably NEVER collect as much as I put in. But I have compassion for the folks who are getting by and avoid poverty because of it. It's not a perfect system but it helps those among us who are at the lowest rung of th economic ladder. And for that it deserves more respect.

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It's like hearing people talk about renting vs owning. The last time I checked being in 'Debt' for anything was never good.: Is this person saying renting is always better than owning? I agreed with the first part of his post, but the second part I don't know. If you buy within your means, intend to stay for a reasonable amount of time, and treat a home as a place to live rather than an investment or ATM as so many have been doing, home ownership is a good thing. And in 30 years (or less if you make additional payments, have a 15 year mortgage, etc.), you have a home that's paid off. I am anti-debt and plan to pay off my mortgage (only about 35% of the home's price) as soon as possible, but home ownership can be a very good thing.

Michelle Singletary: I think the person was saying if you rent you are NOT a financial failure. There are many paths to prosperity and homeownership is just one. Not everyone can or should be a homeowner thu for them renting is just fine.

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dc: Did Ponzi really invent this sort of scheme or had it been tried before? Why did his name attach to it rather than, say a "pyramid scheme"?

Mitchell Zuckoff: Although it bears Ponzi's name, no, he wasn't the first. It had been around for decades, perhaps even centuries, before he came along in 1920. Before him, it was called "robbing Peter to pay Paul," which comes from a Bible passage. My favorite pre-Ponzi schemer was known as "520 Percent Miller" because he promised 10 percent returns a week, or 520 percent a year. Of course he was just using new investors' money to pay old investors, and soon he was on the lam. The main reason we call it a Ponzi scheme is because he was so (briefly) successful at it, and also because he received so much press attention. It was easy afterward to use Ponzi as a shorthand for this kind of fraud. Also, there's something about his name that just works, don't you think. I mean, would you really want to call it a "Miller Scheme"? Where's the fun in that? On the other hand, Madoff (pronounced "made-off," as in, made off with the money) might eventually replace Ponzi, I fear.

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Rockville: Simple really. The average house has to have a price that the average person can pay. Where else will you get buyers? Mars?

Michelle Singletary: LOL.

And yet so true.

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Debt to get out of debt?: I was like the other person, i consolidated my debt to have a structured pay off plan, $750 minimum payments versus $650 set payment with 4 year pay off! The credit score and reporting does not make sense. I save and have more cash available, I see the end of the rainbow, etc. Other than my mortgage this is my only debt.

The one good thing I have learned is NO MORE DEBT!!!

Michelle Singletary: The thing about this using debt to pay off debt it does work for some. But many others do this and then are right back in debt having put their home in jeopardy. It's part of the reason we are in the mess that we are in.

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DC: The most important question in my mind: Where did the $50 billion go? A lot was put back to the "investors" ahead in the scheme, but honestly: Show me the money!

Mitchell Zuckoff: This is a great point. I think we're likely to learn that $50 billion is an exaggerated figure. Yes, certainly some of the money Madoff collected went back to his investors. So my guess is that the losses will be significant but unlikely to reach anywhere near $50 billion. For instance, if someone invested $10 million and saw it double and triple and quadruple in Madoff's hands over a period of years (on paper at least) they feel as though they've lost perhaps $100 million, when in fact their real losses are nowhere near that.

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Fear of money: Hi Michelle, This isn't about the book, but I was hoping you could advise me on how to deal with my issues I have about money. I always fear not having enough, yet I don't know what is "enough". I believe that this stems from my parents always fighting about money and lack there of, when I was growing up. My grandfather talking about the Depression, etc. I like the fact that I am a saver and get a kick out of a good deal, but I tend to get uptight about spending it. I recognize it as a problem and don't want it to cause issues in my marriage. How can I loosen up a bit?

Michelle Singletary: I completely understand where you are coming from. The way I got over my fear was to have a purpose and plan for all my money. And a budget. So if I save for something and I've been good about living within my means, I can go ahead and spend on whatever I saved for.

You have to have faith that you are doing the right thing with your money -- saving, investing, giving. If you are, then enjoy your hard work. Spend some of that money. Live.

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baltimore, md: Excellent book!! what is your next writing project?

Mitchell Zuckoff: Thanks for asking. My next book is a story of another outsize personality, but a legitimate one! I've written a biography of the director Robert Altman, and it'll be published by Knopf in October. Hope you like it. (Oh, and considering the topic here, I'll tell you that Bob Altman was a brilliant director but lousy with money! He had a gambler's mentality in every way, which made for great art and bad finance!)

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Washington, D.C.: Dear Michelle,

Due to a job loss, months without pay, and a current job that I had to take a pay cut to get, I find myself about 11K in debt between my credit card and home equity line of credit. I have been scrimping everywhere I can, not going out, making my lunch at home and bringing it to work, and working a weekend job. I am about to move in with my boyfriend and that will provide an opportunity to save about 600 dollars a month on my housing costs. I know I need to knock out the debt, starting with the credit card, which has a higher interest rate, but I am nervous because my "rainy day/emergency funds" are currently non-existent. It has been hard getting back on top of things after going through the small savings I had and then adding some debt. I want to be saving as well and also contributing to my 401K. Any suggestions as to how to allot the additional funds I will have per month due to my new housing situation? Thanks!

Michelle Singletary: First, don't move in with your boyfriend.

Can't you move in with your parents, relatives???

What happens if you break up, then what?

Try to find a living arrangement that will allow you to skip paying rent for awhile so that you can dig yourself out of this whole. Don't base your gettng of debt plan with saving money by living with just a boyfriend.

Short of that (and not shacking up), can you get a second job?

Finally and most importantly, don't be so hard on yourself. You can get out of this. For now, just save enough for an emergency. Don't try to save for retirement when you have so much debt.

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Easy way to save money: Why oh why don't people quit smoking when they're facing rough financial times? Considering the cost of a pack of cigarettes, it's serious money over the course of a year.

Michelle Singletary: Why don't people stop smoking, period during any economic time?

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Nashville, Tenn.: According to news accounts I have ready, very wealthy friends and investors of Madoff were actually mortgaging their multi-million homes in Palm Beach (and I'm sure other parts of the country) to put MORE money into his control. If that's not miserable greed, I don't know what is.

Mitchell Zuckoff: This question gets to an issue I've thought a lot about lately. I think the tremendous interest in Madoff is that this is one of the rare cases where, for the most part, rich people suffered. There's a lot of anger out there -- about the mortgage meltdown, the drop in the S&P index, the banking crisis, etc. But people don't know where to focus their anger. Madoff -- and his victims -- are a convenient target. Most people were completely untouched by Madoff, yet the amount of vitriol toward him is palpable. I can't help thinking it's a little bit as a result of the factors I've cited above. People can let off steam, knowing that this is one time when the tornado missed the trailer park and wiped out the big houses on the hill.

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Alexandria, Va.: Hi Michelle, My partner and I have been together for two years. I already own a condo and we are considering purchasing a home together. Michelle together we make around $150k a year. I'm hesitant about the house because I'm a bit more conservative financially. I drive an old car that is almost paid off, I have limited student loans, and have no credit card debt. He on the other hand just bought a new car (he loves cars and will probably always be buying a new car), has nearly $50k in student loans, a credit card that he is still paying on with an unknown amount. He even recently mentioned buying a big screen t.v. for the new house. Michelle I have one 19-inch t.v. and choose not to have cable! I make less than he does but feel like I am in a better position financially with a stellar credit rating. The market looks good for buying but I don't know that I want to leave my comfortable condo and below means lifestyle to buy a house right now. What is your thoughts on this?

Michelle Singletary: You really have your answer, you just don't want to believe your gut.

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James, Arlington, Va.: Regarding: Rent vs Own

When we did the article, series, it was about renting vs owning and that everyone was saying renting was throwing your money away and that if you rented, you were financially stupid or not cool.

The point of the articles in the WP was that 'financially wise' buyers were not getting caught up in the real estate facade and that most of these gains were nothing more then that...on paper and a facade.

In the end, I've got more money saved then ever why my friends and those that got in now have houses that are worth less then what they bought them for, are in debt, can't enjoy life because every ounce of their savings is going into the house. Also another point was buying something not within your means.

In the end, I'm getting the last laugh (bitter but still sweet).

Michelle Singletary: Honestly, none of us can afford to laugh.

You and I may have been right, but we all are suffering.

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I think the person was saying if you rent you are NOT a financial failure. : Oh, thanks for clearing that up. Totally agree with you there.

Michelle Singletary: No problem. Glad to clear it up.

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I'll tell you that Bob Altman was a brilliant director but lousy with money!: Yes, I've read his got (next too?) nothing adapting the MASH movie to TV. His son gets more royalties from the theme music he wrote. I guess Altman didn't take TV seriously enough. He was a great story teller.

Mitchell Zuckoff: You're right. Bob Altman got nothing from the TV series M*A*S*H, and the royalties for the theme song went to his oldest son, Michael, who wrote it as a 15-year-old poet! But that's a story for another day. Of course, here's the point for this chat: Be sure to protect your financial rights.

Michelle Singletary: Again, Amen!

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Takoma Park, Md.: Michelle, my husband and I own a home, save for retirement, and have a reasonable amount of money socked away in savings. We're thinking about renovating our old (1936) bathroom, but the current state of the economy is giving me pause. While we have enough in savings to do it comfortably, it would certainly be better to have that money should one of us lose our job (which doesn't seem likely at this point, but who ever knows for sure?). On the other hand, it feels like a good thing to support local contractors by giving them business during these hard times. What do you think?

Michelle Singletary: I just built a deck. Saved for it for four years.

I was nervous at first but like you all other bases are covered -- emergency fund, life happens fund, college funds (although hit hard), retirment savings (ditto ot college savings), living below our means, married well (federal worker), still tithing, giving....

So my point is live. Get that bathroom done. Nothing like pooping in a nice surrounding.

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Planning for the future: When my husband and I bought life insurance, it was to pay off the mortgage. Then he bought more so I'd have money if needed. Now he's dead. The initial life insurance policy won't buy a house (we left that house in 1992 and have rented since). Do I follow our initial plan or do something else?

Michelle Singletary: First, I'm so sorry for you loss.

Depending on when your husband died, take some time before you do anything. And if we are talking about a large sum of money get advice from a fee-only planner to help you figure out how to make the money last as long as you would like.

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Anonymous: Ponzi schemes or whatever, I think the truth is our systems are broken and all that has really worked is greed. the housing boom was illogical. I too knew people losing houses 4-5 years ago. I saw people on MY staff buying houses I could not afford when i bought let alone the prices they paid. The problem/truth is everyone cashed out! From the builders developers, to the loan officers/brokers, house flippers, etc.

Mitchell Zuckoff: I know we'll be seeing a lot of books on Madoff (no, I don't plan to write one), but the book I'd really like to see addresses your point. We've suffered a "Ponzification" of the economy in recent years, as bubbles have built up and then burst, and each time we act as though it's the first time.

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Michelle Day: Hi Michelle, Just wanted to let you know that I copied the chatter from a few weeks ago and also pay more on my student loans on Michelle Chat Days. It feels good! Also, I got a small inheritance after my grandpa passed away and put 90 percent of it to paying off completely one of my three student loans. Woohoo!!!

Michelle Singletary: A lot of Woohoos today.

I have to say I'm loving this Michelle Day thing. If others join, let me know.

So very cool, not that it's name after me but that you and others have found a fun way to get rid of debt.

It's not about me. It's ALL about you.

So woohoo again!

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fear of not having enough: I am just like the previous poster. How did you get over that fear of not having enough or that some disaster was around the corner ready to put you into debt.

Michelle Singletary: I married a wonderful, wonderful man who has a lot of faith.

He and by faith have helped me replace my fear with faith.

You see I know you can't protect yourself from every financial crisis. As much as we've saved it might not be enough if we are every hit with something major. But we've done our best to hedge against most things.

So we -- I -- choose not to live in fear. It's hard. But I can't take the money with me.

Yesterday my kids played on that deck throwing snowballs and just sat and enjoyed the outdoors. I was so glad I let go of the fear and had it built even in this bad economy. It was so worth it!

And the bonus. I helped a local contractor stay in business.

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Fairfax, Va.: Without naming them, some business opportunities seem to use a Ponzi-like system. I know it's legal, but what do you think of these businesses and is it really an opportunity for each participant?

Mitchell Zuckoff: In most cases, whether legal or not, it's a game of musical chairs. At some point the music stops and someone finds themselves crumpled in a lump on the floor. If it uses a Ponzi-like system, I urge you in the strongest way to stay away.

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Is it likely that most of Ponzi's victims must have known they were participating in a scam?: I don't think they knew they were participating in a scam, but as long as they were getting returns, I don't think they were worried about the "how".

Mitchell Zuckoff: Michelle addressed this very well earlier, but I think we should keep in mind that the best confidence men are really good at what they do. In Madoff's case, he struck the perfect balance between exclusivity and stability -- not accepting all investors and then returning strong but not ridiculous returns year in and year out. Add to that his stature as a NASDAQ chairman, etc., and you've got a very con-vincing (yes, I hyphenated that on purpose, the emphasize the con!) picture.

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Baltimore, Md.: Regarding Atlanta, Ga., and others. So do you think it might be viable to teach a premarital class on finances?

Michelle Singletary: I don't teach one personally, although I incorporate some of the things in a ministry I run at my church.

But having said that my church (First Baptist Church of Glenarden) has a GREAT premarital program.

If you aren't local to, check the organization and churches in your area many also have good programs. Just make sure it's not just one two-hour class. It should really have you spend some time talking about this finance stuff with the person you want to marry.

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Temple Hills, Md.: I'm feeling really stupid because my husband and I are involved in a hedgefund scheme by someone we put trust in. We are not sophisticated investors, but spent a lot of time with the scammer who was working out of a very nice office in Largo and appeared to be well informed about investing. He offers free dinners at area restaurants. He is currently under criminal investigation and has changed the name of his business and is still doing free dinners -- this time to do something with mortgages. There were several seniors involved and after losing all our money in 2006, we have not gotten any information about a settlement that supposedly happened before the scheduled Dec. 1 court case. Is there any relief like the Securities Investment Protection Corp. seems to be providing to all those millionaires that lost their money in the Ponzi scheme?

Mitchell Zuckoff: I'm so sorry to hear this. You're describing the classic "affinity" scam, in which a person grows close to you, gains your trust and then destroys your finances. You should get in touch with the Secretary of State's office. They will tell you who in your state regulates cases like these. They also should help you get in touch with whoever was overseeing the settlement you describe, so you can contact them directly. Ultimately, it might be best for you to consider hiring your own lawyer to protect your interests and seek whatever relief (financially) is available. I wish you well.

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Denver, Colo.: Hi Michelle,

I expect to lose my job in the next three months as 70% already laid off in my office. I am refinancing my house to 5% 30 year fixed to reduce monthly payments. I have gone to both the doctor and dentist (COBRA is $500 month!!) and have about $50k in savings to last me through. I am looking for a new job now. What else should I do for my finances with the anticipation of being out of work?

Michelle Singletary: You've already done a really, really good job of preparing. Good for you. And so sorry that you have to go thu this.

I would also stop any retirement contributions IF you think the $50,000 won't last for at least six months to a year.

Also if you have debt and you were making extra payments, stop that too if you are pretty sure you will be losing your job.

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Leesburg, Va.: I had the good fortune to attend a seminar hosted by Michelle and her husband this weekend. I believe she was right on when she likened our entire financial crisis to a mass Ponzi scheme. I also agree that many of us, including myself, took advantage of the "free" money without thinking through the truth - we assumed debt we could not afford. We are determined to save and payoff debt and be grateful that we have the means to make these choices.

Michelle Singletary: Thank you so much. The poster is talking about a workshop by husband and I gave at a wonderful, wonderful churh, St. James' Espicopal Church in Leesburg. Great, loving crowd (they laughed at all my jokes).

But you are so right! Part of the reason we are were we are in this economy was taking on too much debt.

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NWDC needs help fast: Hi Michelle & Mitchell... I hope you can answer this for me. I'm torn and frustrated about this: I currently have a 4.85% rate on my 15-year mortgage with 45K balance. I need more monthly cash right away to keep up with expenses after a divorce last month. I have the house and children. I want to refinance at 30 year and the best rate I've been given is 6.25% -- my mortgage would be reduced greatly and I'm ready to go for it. Please tell me your opinion -- is it a bad idea? I won't be leaving this house because of my change in lifestyle. I want to pay down debt and go to college. I teach fitness part-time and have a good paying full-time career but no college degree. I want to do it and I'll be able to handle my financial commitments with no worry. I value your opinion. thanks!!!!!

Michelle Singletary: This is such a hard call. But if you are at risk of losing the home and you truly "need" the room in your budget (meaning you have truly cut as much as you can) go for the 30.

But I will say this do not, do not take on debt to go to college.

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Michelle Singletary: I so wish I could stay and answer more questions but I have to go.

Thank you so very, very much for joining the discussion. Thanks also to Mitchell. And if you haven't gotten the book, please do. It's a great read.

I wish you all well and peace.

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