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Open House

It is Official: We Are in a Recession; Your Year-End Healthcare Checkup; Holiday Spending Traps and How to Avoid Them; Going Green to Save Some Cash

Aired December 06, 2008 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.
A little later in the program, your year-end healthcare checkup, holiday spending traps and how to avoid them. Plus going green to save some cash.

But first, it is official. We are in a recession. According to the National Bureau of Economic Research, we've been in one since December 2007. Now, you're not shocked by the headline, you've probably been feeling the pinch for quite some time.

So, what can you do right now to protect your job, your house, your savings? Here with advice that you need is Greg McBride with Bankrate.com, Hilary Kramer, AOL money coach and author of "Ahead of the Curve."

OK guys, I took it as good news that we've already been in a recession for a year, because I figured if it's going to be -- that means we're further into it, quicker out of it. What do you say about how long this could be?

GREG MCBRIDE, BANKRATE.COM: You know, that's an optimistic view to say, well, if we're this far into it we must be that much closer to the end.

WILLIS: I always see the glass half full.

MCBRIDE: As do I. At times like this that makes sense. I mean, the reality of it is 2009 is not going to be a whole lot of fun, either. You know, much like 2008, and it's not a news flash for consumers to hear that, yes, we've been in a recession for a year. Look at the job losses over the course of the last year, that's certainly testament enough to the fact that we're in a recession and likely to continue through next year.

WILLIS: Yes, a million layoffs, absolutely.

Hillary, let's talk about how much longer you think this is going to last.

HILARY KRAMER, AUTHOR, AHEAD OF THE CURVE: Well, we could see the recession go on for another 24 months, Gerri. But the good news...

WILLIS: Two years?

KRAMER: It could be two years, but this is the catch...

WILLIS: A three-year recession, you're predicting?

KRAMER: Absolutely, because of the job losses. However, there are certain aspects of the market that will recover, such as the stock market, which is a leading indicator, we're already starting to see that, although we may not have seen the actual bottom.

WILLIS: And good news for 401(k) savers if that happens. Let's talk about jobs, because you're really focused on that. Tell me, what do you see in your crystal ball about jobs? Does it get worse? We've had a million layoffs this year, the numbers are really excruciating.

KRAMER: Only for a short amount of time. The good news is, especially with the American economy, it has the ability to rejuvenate itself. And there are always areas that are growing, whether it might be alternative energy. We're talking $500 billion for infrastructure, there's a number of infrastructure companies and also there'll higher on the municipal level to manage those projects.

And there's specific areas in a recession that do well, for example, auctioneers, they're hiring. I understand that Avis is hiring thousands of workers for the holidays. So, there are opportunities in specific areas of the country.

WILLIS: We always hear that healthcare is a good area, teaching.

Greg, when are these layoffs going to stop? Do you have any feel for when we'll start getting these daily layoff notices?

MCBRIDE: Well, unfortunately, the labor market is a lagging indicator and so what happens is that very often you continue to see job losses even after the economy's bottomed and once the economy begins to rebound it takes some time before employers feel comfortable to begin adding to the payrolls.

I think what might be a little bit different this time is we may hit the bottom quicker because employers are not dragging their feet on cutting the payrolls, they know the economic outlook is pretty dour and they're not wasting any time in cutting jobs.

WILLIS: What about education? You say that's key to getting a job.

MCBRIDE: It really is. Let's look at the unemployment rate by level of educational attainment. I mean, if you lack a high school diploma, the unemployment rate is 10 percent. For those with a high school diploma, the unemployment rate is six percent. And for those with at least a four-year college degree, the unemployment rate is three percent...

KRAMER: Oh, OK, but, see, Greg, there is an area I disagree with that in terms of recession and that's that I think it's very sector- specific. So, if you work at a retailer, whether you are the head of merchandising and a vice president or you're a clerk, for example, at one of these retailers that are really struggling right now, like Aeropostal or Gap, you're going to lose your job.

If you're in healthcare, whether you're a surgeon or technician in the hospital, you're going to keep your job. So, yes, education's important, but it's also spector-specific and keeping your eyes open, I believe, for those opportunities.

MCBRIDE: Oh, it certainly is. I mean, there are a lot of well- educated investment bankers that are unemployed right now, no doubt about it. The point there is, you know, if we're going to be in a recession for another 12 or 24 months, it's a good opportunity to maybe pick up some additional classes, give yourself the credentials you need to maybe insulate yourself from a layoff, but then also make yourself more marketable if you do get the pink slip.

WILLIS: Let's move on to another topic, because I wanted to cover a lot in this conversation, today, and I want to talk a little bit about housing. You know, mortgage rates went down to 5.47 percent, that's according to the Mortgage Bankers Association. So, if you really want to buy or sell right now, do you have an edge in this market?

KRAMER: Well, it depends on your credit rating and that's the problem. Credit is still very tight, but for those who are able to qualify, it's a great opportunity to refinance. It's a great opportunity to move your home, if you've decided to downsize or go the other direction. But whatever it might be, this is the right time. Remember, when it comes to buying or selling anything, it's all about the right price. And there's a buyer for any price.

WILLIS: Right. Well, that's just the problem for some folks out there.

Greg, I want you to talk a little bit about credit cards. I know you feel strongly that this is the key for so many consumers out there who are struggling with debt, they really need to get a handle on it. What do they need to do?

MCBRIDE: Well, as consumers we have to be on our game because card issuers playing defense. They're quick to scale back credit lines or raise interest rates even through no fault of your own. So, by all means, read those statements, read the statement inserts very carefully and be on your guard. If you have good credit, now is a very good time to be shopping around to get a lower rate offer so you can accelerate your did it repayment.

WILLIS: Interesting advice, great conversation. Thanks to both my guests today for helping us out.

Up next, what you can do right now to get the most out of your 2008 healthcare benefits before the year ends.

(COMMERCIAL BREAK)

WILLIS: The bailout of the auto industry could help hourly union employees and retirees keep their benefits, but it could come too late to save the health insurance of salaried retirees at General Motors. Come January, tens of thousands of these retirees, some who worked decades at the company, will be forced to turn to Medicare to replace their health benefits.

(BEGIN VIDEOTAPE)

JACK DICKINSON, OVERTHEHILLCARPEOPLE.COM: That's going to be a nice little getaway.

WILLIS (voice-over): After 34 years as a sales executive at General Motors, Jack Dickinson and his wife, Kathy (ph), were enjoying a comfortable retirement.

J. DICKINSON: I think I moved a total of 11 times. They didn't leave -- or let much moss grow under me.

WILLIS: But Jack and Kathy's peace of mind was shattered when, like over 100,000 other white collar GM retirees, they were told their healthcare benefits would end at the first of the year.

J. DICKINSON: It was very shocking to, to say the least.

WILLIS: Shocking and expensive. He estimates his own out of pocket costs at several hundred a month, over and above a GM monthly allotment aimed at helping retirees bridge the gap.

J. DICKINSON: I have always considered my healthcare and my pension benefits as part of my compensation for doing the job that they asked of me day in, day out, for 34 years. I had the opportunity to go with another corporation, leave General Motors, and at a higher wage of pay.

WILLIS: But Jack didn't leave because of his confidence that his retirement benefits would make his golden years comfortable, and he's not alone. A total of 1.6 million retires from companies all over the company will move from private health insurance coverage to Medicare starting in 2009. Karyn Blake, a consultant, advises many of them.

KARYN BLAKE, MYPARTDUSA.ORG: Oh, we have hundreds of people contacting us every single day to get information that they need about Medicare because Medicare is more confusing and overwhelming than at any other time in history.

J. DICKINSON: This is the end result.

WILLIS: Jack isn't getting mad anymore, he's getting even, reaching out and helping retirees, some in nursing homes, making the transition through his Web site Over the Hill Car People, which he started back in 2003.

J. DICKINSON: I'm spending approximately six to eight hours a day involved in some form or fashion of this Web site.

WILLIS: He says each state has close to 50 insurance providers and each of those has three plans for a total of 150 plans to be sorted through. His site helps retirees navigate the plans and choose the best for them, so that retirees can make a choice by December 31, before losing health care coverage.

KATHY DICKINSON, WIFE: To Over the Hill.

DICKINSON: Cheers.

(END VIDEOTAPE)

WILLIS: All right. CNN's medical correspondent, Elizabeth Cohen, joins me now from Atlanta.

Elizabeth, these retire years have to make a lot of decisions by the end of the month. Let's talk about how they're going to do it -- 150 plans, it's just overwhelming for those folks.

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Right, and, Gerri, remember, unlike other retirees who have to make this decision, some of these people are in their 70s or 80s or 90s and having to make this decision for the first time. Imagine laying in a nursing home trying to figure out one plan out of 150. So, Jack's Web site has certainly, I'm sure, been a help to many of them.

And I'm going to give two 800 numbers which can also be helpful. The first one is for a group called My Part D USA, that's their Web site, 866-752-1795 is their toll free number. Also the government, some people say, does really a pretty good job of helping people sort through some of the options, 1-800-633-4227. So, there are some options for people.

WILLIS: Excellent advice. And if you are Web savvy, I know a lot of older folks don't like the Web, but maybe your kids are helping you this year. Go to Destinationrx.com. It's a great Web site to help out.

Let's move on to healthcare more generally. You know, there are things you need to do at the end of the year, even if you're not retired, to make sure you're maximizing your benefits.

COHEN: That's right. There are a couple of little tricks you need to know, things you need to take care of in the next couple of weeks or else it's going to be too late. So, let's go over what some of those things are.

First of all, what you want to do is if you've already met your deductible for prescription drugs or for doctors' visits, stock up on those drugs and those visits now because you're only just going to have to pay a little co-payment, if you wait until January you're going to have to start all over again and start trying to meet that deductible.

Also, don't get annual exams twice. If you had your annual mammogram in January, don't have it again in December, they might not pay for it. It's in the same calendar year.

Also, use up your flexible spending account. That's the money that you set aside, you said I'm going to spend that in this calendar year. If you don't spend it, they take it away from you, you don't get it back. So, spend that money.

WILLIS: I know. And I'm one of those people who had some money left over this year. It's a great way to shelter some dough, make sure you're not paying taxes on money you're using for healthcare. I love that. That saves, but what are you allowed to claim? It's so confusing.

COHEN: Absolutely. Some people think, oh, I can only use this to pay for prescription drugs, but that is not true at all. You can use your FSA money to pay for band aids, to pay for cough drops, in some cases you can even use it to pay for dues for your health club membership.

So, that's really important to remember. And we've got a Web site, Gerri, that you can go to. It has the full list of everything that your FSA will cover. It is FSAfeds.gov, FSAfeds.gov. Go there and you can scroll down, click on the list and you'll click on the eligible expenses link and you'll see the whole list.

WILLIS: Elizabeth Cohen, I love that. I just wrote down that Web site. Thank you so much.

COHEN: Oh, good. Thanks.

WILLIS: It's that time of year again, time to shop, that is. How can you avoid those holiday spending traps?

(COMMERCIAL BREAK)

WILLIS: Fifty-five percent of consumers are planning to cut back this holiday season, that's according to a new survey. Now, while you may be set to spend less, once you get to the store it can be a whole different story. Here to help you avoid the traps of holiday spending is Gerri Detweiler, she's an advisor with Credit.com.

Good to see you, Gerri.

GERRI DETWEILER, CREDIT.COM: You too, Gerri.

WILLIS: All right, so the average family has seven credit cards. When they go to the mall, you don't want to take all those credit cards with you, right?

DETWEILER: Absolutely not. So easy to spread out the balances and lose track of what you're spending. So, max two pieces of plastic in your wallet. One might be your debit card or a credit card you pay in full, the other, maybe a low rate card for something you have to have you can pay off in the next couple of months.

WILLIS: All right, now you want to cut down that debt so when you get to January, February, March you're not looking at a big holiday bill. It's always so depressing when you're still paying for Christmas at Easter. Let's talk about buying for yourself, because a lot of people, they go out there, you're spending all this time thinking about other people, and you think, well, maybe I should pick up a little something for myself.

DETWEILER: Especially with all the bargains out there, right? It's really tempting. So, this year is the time not to play your own Santa. If you stick to your budget and you do a good job, then you can treat yourself day after Christmas, take advantage of the bargains and buy yourself something then. But otherwise, I'd hold off and wait.

WILLIS: Yes, that's a great idea, because there'll be even better deals, then. Let's talk about cutting back the best way on your spending because. Let's face it, part of this is sort of guilt spending, too. You want to make sure you're buying enough for the people you love. You don't want to seem cheap.

DETWEILER: Yes, you look at those presents right before Christmas, right, you say I didn't buy enough for the kids. So, you do want to set your priorities. I know with my friends, we've already had the conversation. We're not going to exchange adult gifts this year, just the kids. It's OK to open up that dialogue and say, look, I'm cutting back this year, I'm not going to be ailing to do this.

WILLIS: That's a great idea.

DETWEILER: Well, let's do something together after the holidays.

WILLIS: I love that. And that makes so much sense. Everybody out there wants to save, too. You may be bringing up something that somebody else is too embarrassed to say.

DETWEILER: Exactly.

WILLIS: All right, now, there are traps out there. And I think the credit card companies are as guilty as anybody else, setting traps for consumers to spend more. One is offering big discounts on goods if you get the credit card. Is it worth it?

DETWEILER: Yes, you know, those offers, you have to be really careful this year because two reasons, one is the interest rates are high. So, let's say you buy something at a discount, by the time you pay the 20 percent interest, you've overpaid for it.

And the second thing is, it drops your credit score, every new credit account. And what we're seeing now is that credit card issuers want to see high credit scores. So, you open up a bunch of department store cards, new balances, your score could drop and then your other credit card issuers could raise your rate or lower your limits. It just has a downhill effect.

WILLIS: We have been talking a lot about lay-offs, too. And there are people out there who are saying, oh, this is a great idea. But there are fees involved and the whole idea of not paying for it right now doesn't really appeal to me, if you can. DETWEILER: Yes, and they offer those deals because they know a lot of people are not going to pay it off in the 90-day, interest-free period, for example. So the interest gets back dated to day-one. So those buy now pay later deals just aren't what they're cracked up to be.

WILLIS: That sounds like something people really ought to know about. That's great information. OK, you got some great ideas too, if you get home, you unload the car from the mall and you say, wow, I have simply spent too much money. What am I going to do? What do I do then? What is the answer to people who have that second-day getting home fear that they've really spent more than they should have?

DETWEILER: Well, first of all, keep your receipts. You might be able to return some of the items. I wouldn't count on it, because retailers are getting more strict about returns. But, if you keep your receipts, you have a good chance of that. And then if you end the holidays and you realize you're in trouble, talk to a credit counselor. You know, that's your next line of defense in order to act proactively rather than waiting for your credit card issuers to raise your interest rates to 36 percent.

WILLIS: And budget, budget, budget, start out knowing how much you're going to spend before you spend it. Gerri Detweiler, great ideas. Thanks for helping us out, today.

DETWEILER: Thank you.

WILLIS: And let's not forget about the kids. Santa has been getting his regular requests, but the reality is, for many kids, because of the downturn in the economy, this is going to be a very different Christmas.

Our Ted Rowlands reports.

(BEGIN VIDEOTAPE)

SANTA CLAUS: So, what should Santa bring you on Christmas Eve?

UNIDENTIFIED GIRL: A cupcake maker.

SANTA CLAUS: A cupcake maker.

TED ROWLANDS, CNN CORRESPONDENT (voice-over): In malls across the country, kids are making their annual climb onto Santa's lap asking for Christmas presents.

SANTA CLAUS: What do you want Santa bring you for Christmas?

UNIDENTIFIED GIRL: A bicycle.

SANTA CLAUS: A bicycle.

ROWLANDS: But what do you do if your child really wants something you just can't afford? SANTA CLAUS: What would you like for Christmas this year, young lady?

UNIDENTIFIED GIRL: A horse.

SANTA CLAUS: A horse.

ROWLANDS: A horse, unfortunately, is probably not in the cards for Amanda Brenner. Her mother says the family business is a little off this year, so like many families, they plan to cut back on gifts. She says they've told the kids not to expect a lot.

CODIE BRENNER, MOTHER: We want our kids to understand that -- to be content if we have and if we have not. They know that they're loved, whether we have money or not.

SANTA CLAUS: What should Santa bring you this year for Christmas?

UNIDENTIFIED GIRL: Everything that's at Target.

SANTA CLAUS: Everything that's at Target.

ROWLANDS: Many parents are talking to their kids now to avoid any disappointment on Christmas morning, like Ralphie felt here in "A Christmas Story."

UNIDENTIFIED FEMALE: We've talked to the kids a little bit about what to expect. Hopefully, Santa brings everything but everyone kind of knows that it might be a little lighter year, this year.

ROWLANDS: Experts like MomCentral.com founder Stacy Debroff says with older kids, especially, be honest. It's the younger ones you may have to get a little creative with.

STACY DEBROFF, MOMCENTRAL.COM: The last thing anybody wants is to see a look of disappointment as kids open their presents and they say, oh, that's all you got me?

ROWLANDS (on camera): But they think Santa can do anything. How do you handle that?

DEBROFF: Well, I think that this year, Santa is going to be on a bit of a budget.

ROWLANDS (voice-over): Debroff says kids get it. And if you bring them into the discussion, they'll help come up with something you can afford that will also, hopefully, make them as happy as the YouTube kid on Christmas morning.

UNIDENTIFIED CHILD: Yes! Yes!

ROWLANDS: Ted Rowland, CNN, Los Angeles.

(END VIDEOTAPE)

WILLIS: So cute. Up next, some quick and easy ways you can green your home and save some cash.

(COMMERCIAL BREAK)

WILLIS: Those are some low mortgage rates. Well, can you go green and save green at the same time? In search of the answer, I met up with Stephen Whittle, a green expert with "Better Homes & Gardens" to get a tour of the living green home exhibit.

(BEGIN VIDEOTAPE)

WILLIS: So, Steve, let's save some water, let's save some money. The average consumer uses about 100 gallons of water a day. Let's get that number lower. How do we do it?

STEPHEN WHITTLE, BETTER HOMES & GARDENS: Well, you do it two ways: habits or technology.

WILLIS: Let's do habits, because it is cheaper.

WHITTLE: Habits. Absolutely. Over here, in these faucets, three-quarters of a gallon a minute going through them, so when you're brushing your teeth and shaving, just remember to turn the faucet off.

WILLIS: Turn it off.

WHITTLE: It could add some drastic savings.

WILLIS: Save up to eight gallons a day if you turn it off when you are brushing your teeth. What about the shower heads? That's another way to save, right?

WHITTLE: In showerheads, if you were to replace your old shower head of four gallons or more with a new low-flow shower head, you can save eight gallons, 12 gallons, multiples, with each shower.

WILLIS: Fantastic. OK, I want to talk about light bulbs for just a second because I know that's a really great way to save. You've got all kinds of ingenious ways to do it. Let's talk about light bulbs. We've got the old-fashioned kind.

WHITTLE: We've got the old-fashioned kind, 75 watts, costs $1, lasts 1,000 hours.

WILLIS: Now, I talk about CFLs all the time, but there are problems with CFLs.

WHITTLE: There are problems with CFLs. It does have mercury vapor inside of it. It does last five to 10,000 hours and only uses 25 kilowatts of electricity.

WILLIS: There's a better option.

WHITTLE: This guy right here is an LED light bulb. It will last 50,000 to 100,000 hours. It uses two to four watts of electricity and the cost, anywhere from 15 to $40. WILLIS: It is. But it's like going from a paper plate to a heavy duty paper plate to a ceramic dish. It's going from a consumable to a piece of hardware.

WILLIS: Isn't the real savings in insulation, fixing your windows?

WHITTLE: You can look at it short term or long-term. Long-term is, what's the resale value going to be. Short-term, how can I make my house as energy efficient as possible? So, doing things like making sure that the insulation is good in your walls and in your ceilings. Checking the see how the seals are around your window casings.

WILLIS: Important stuff.

WHITTLE: Yes. Making sure your windows aren't single pane.

WILLIS: Of course, one way you can find out is just simply if you feel the air coming through, or you can get an energy audit, which is a great thing.

WHITTLE: I tell people, after you have done all your homework, all of the, what I call the easy stuff, the stuff that any do-it- yourselfer can do, get an energy audit. It costs anywhere from $350 to $600. Have a trained professional come through with a camera that see the differences in temperature, an infrared camera.

And they'll actually be able to figure out where you're losing heat, where you might have a little leak, where the electrical contractor moved some insulation out of the way and never moved it back. It is like taking an x-ray of your house to see what's going on behind the walls.

(END VIDEOTAPE)

WILLIS: Great stuff. With Energy Star throughout the home, the typical homeowner can save more than 30 percent or $700 on annual energy bills, all the while giving a gift to the environment by reducing greenhouse gas emissions.

As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week right here on CNN. You can catch us on "Headline News" every Saturday and Sunday at 3:30 p.m. Eastern time. And you can hear much more about the impact of this week's news on your money on "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern, and Sundays at 3:00, right here on CNN.

Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.