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Personal Finance  Thursday, March 10, 2011

Many NFL players living paycheck to paycheck

As I've said over and over again, more money doesn't mean your money problems go away. Take the possible lockout of National Football League players, who are in a contract dispute with team owners. If there is a lockout, many players, despite hefty annual incomes, would struggle to pay their bills.

It seems more than 20 percent of players live paycheck to paycheck, failing to save much at all, according to a report on msnbc.com.

Now consider this. The average player salary for the 2009-10 season is $1.8 million. Of course, that number is skewed because it also includes the gigantic earnings of the league's superstars. Still the minimum salary for a rookie is $320,000.

In anticipation of a possible lockout, the NFL Players Association has been urging its members to stockpile cash for two years. One would think this wouldn't be so hard if you're making a very high six-figure salary, right?


"Young guys in the locker room see what the older guys have, and they're not there yet," veteran Jets player Bart Scott told msnbc.com. "They're trying to keep up with the Joneses."

There go the Joneses again, setting the standard that's keeping so many people broke.

Celebrity Cash: A Duchess In Debt

Sarah Ferguson, the Duchess of York is in a money mess, again. Ferguson made headlines this week for taking money from a wealthy convicted sex offender to help get rid of her hefty debt.

Jeffrey Epstein pleaded guilty in 2008 to two prostitution offenses in Florida and was sentenced to 18 months in prison and a further year under house arrest. Prosecutors said Epstein paid several girls younger than 18 for naked massages that sometimes became sexual encounters, the Associated Press reported.

Ferguson admitted that she took $24,000 from Epstein to settle a debt to her former personal assistant. Here's a clue that you are acting richer than you are: You have a personal assistant you can't afford.

The duchess has had money in the past, but it seems she can't hold onto her fortunes. Last year, she was caught on tape telling a London tabloid reporter that she could get them access to her husband in exchange for $724,000.

Then, as she did with the latest controversy, Ferguson said she was sorry. After the tabloid incident she said: "It is true that my financial situation is under stress, however, that is no excuse for a serious lapse in judgment."

Live Talk and Text Today

At 11:45, tune in to my live video chat. I'll be highlighting another Debt Defeater.

Right after the video chat, join me at noon ET where I'll be talking taxes in my text chat. My guest today is IRS spokesman Jim Dupree. He'll be taking your basic tax questions.

If you are unable to log in, send your questions and comments early or read the transcript later.

Debit Card Debate

I hope you've been following the debate about debit cards, because its results will certainly impact your wallet.

If you don't have clue what I'm talking about, read my column today.

Here's the issue. When merchants or service providers accept a credit card or debit card, they have to pay what's called an interchange, or swipe, fee. This can average 2 to 3 percent of the purchase's price for credit cards and 1 to 2 percent for debit cards each time a card is used in a transaction. Merchants hate the fee. Bankers love it. In 2009, debit card interchange fees totaled more than $16 billion.

Congress decided, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to require the Federal Reserve to set standards to lower the fees. As the Post's Ylan Q. Mui reported, the proposed rules would cap the swipe fee at 12 cents - a roughly 70 percent reduction.

To recoup lost revenue from lower swipe fees, financial institutions say they may have to charge you more to use your debit card, or increase fees on other banking services.

Here's this week's Color of Money Question: Would you change your debit card usage if you had to pay more to use it? Send you responses to colorofmoney@washpost.com. Put "Debit Card Debate" in the subject line. Be sure to include your full name, city and state.

Debt Defeaters

Are you ready to show off your newfound financial freedom wearing your Debt Defeaters t-shirt? Send your Debt Defeater stories to colorofmoney@washpost.com and tell me how you paid off your debts.

Be sure to include full name, where you live, how much debt you got rid of, how long it took to pay off and how it feels being debt free. Put "Debt Defeaters" in the e-mail subject line.

Financial Frenemies

For last week's Color of Money Question, I wanted to know if you have ever had a friend who has led you down the wrong financial path. It was a question spawned by a story on Creditcards.com about how friends can lead you astray financially.

Suzanne Thomas of Detroit shared a story of how she was lead to believe she deserved better.

"I allowed myself to be pressured into buying a car that I could not afford almost 10 years ago," Thomas wrote. "My boss told me that I was making big bucks now and did not have to cut coupons anymore."

That advice took her to a bad place.

"I convinced myself that I have always denied myself the very best of things and as usual, I ignored my better judgment and decided to go purchase another vehicle," Thomas said. "I told the car dealer that I did not want a monthly payment larger than $350 a month and yet I let them stick me with one for $496 a month. The car was repossessed three years later and I am still paying on it now in addition to student loans and credit card debt."

Thomas's story provides a couple of lessons. First, don't let anyone make you feel cheap for being frugal. Making big bucks doesn't mean you don't have big expenses or priorities that still require you to live frugally. And, don't be persuaded to spend more than you can afford.

Tia Lewis contributed to this e-letter.

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.

-Michelle Singletary
Today's Color of Money
In the battle over debit card swipe fees, consumers will lose
Banks and retailers are battling over swipe fees, and debit card holders should pay attention.
Sunday's Column
Let the 401(k) investor beware
A new report from the Government Accountability Office warns employees to watch out for biased investment guidance from the financial companies paid to set up and run their 401(k) plans.
More Personal Finance News
State and local workers: Gone but not off the books as pensions drain funds
Cities and states across the country are grappling with potentially crushing health and pension obligations for their current and future retirees.
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