Return to Transcripts main page

CNN Live Saturday

"Dollar Signs" Starting Out Right

Aired August 23, 2003 - 16:31   ET

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

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


RENAY SAN MIGUEL, CNN ANCHOR: And welcome to "Dollar Signs," where we help you make the most of your money. Today we'll tackle the subject of starting out right, on a firm financial footing. Our financial correspondent, Ali Velshi, introduces us to one recent grad who is beating the odds.
(BEGIN VIDEOTAPE)

SARA DEITSCH, RECENT COLLEGE GRADUATE: I think if someone came to me and asked me some financial goals, I would tell them to try not to move out of the house right away, but if they have to, then to really plan out a budget.

ALI VELSHI, CNN FINANCIAL CORRESPONDENT: Sarah Deitsch graduated from college in May and moved right back in with her parents. She commutes an hour each way to her job in an Italian fashion house in New York where she earns a little more than the $29,000 a year average salary for a recent liberal arts graduate.

DEITSCH: I kind of map out a budget every month of what I want to spend on my clothes, my entertainment and my gym membership, my cell phone, things like that.

VELSHI: Moving back home keeps costs down and helps her stay within her budget.

DEITSCH: If you don't keep stuff in your savings account and just live off the money you make every week or every two weeks, then -- and you spend it all, then you're really not getting anywhere.

GREG MCBRIDE, FINANCIAL ANALYST: Get into a habit of saving systematically, going forward, to build up positive net worth. As long as you do it in conjunction with paying down these bills.

VELSHI: Sarah just started budgeting her money and has no credit card debt. Not bad, since according to one of the nation's largest student loan providers, 83 percent of college students have a credit card with the average balance at graduation of $2300.

RAYMOND DEWE, FINANCIAL CONSULTANT: Probably the biggest major pitfall are credit cards. It's real easy to get that little piece of plastic and go out and everybody will take it. And the next thing you know, you owe people thousands and thousands of dollars.

VELSHI: The danger comes if you pay just the monthly minimum on your credit card bills, or worse, you don't even do that.

MCBRIDE: Poor credit can impact your ability to get a job, to rent an apartment, it can even affect your auto insurance rates.

VELSHI: But credit cards can work for you. If you pay the entire balance off each month, you're effectively borrowing money at no cost and establishing good credit at the same time. Better yet, don't spend the money, save it.

DEITSCH: I've been trying to save $1,000 a month. I have done that so far since I started working. I've done it two months in a row.

VELSHI: Assuming a 6 percent rate of return if Sarah puts away $500 a month, in ten years she'll have $80,000. By the time she's in her 60s, she could have just over $1 million.

Time is on Sarah's side. Not only is she not carrying credit card debt, but she also got a job right out of college. Now jobs come and go in this economy. So financial planners say, try to have at least three months of experiences saved up in case you hit a rough patch along the road. For Dollar Signs, I'm Ali Velshi, CNN financial news, New York.

(END VIDEOTAPE)

SAN MIGUEL: There are a number of pitfalls that can sidetrack young people when they are trying to get their finances in order. The book "Welcome to your Financial Future" offers tips. Its author, Virginia Morrism, and Lauren Young from "Smartmoney" magazine are both joining us from New York today.

Ladies, thanks for being with us today. We appreciate your time.

VIGINIA MORRIS, AUTHOR: Thanks.

SAN MIGUEL: You know, I can -- I'm pretty sure at one time I was in my early 20s. I mean, it's hazy, but I think I was at that point. The last thing I was thinking about was saving money. Any money that I had, I immediately just spent.

We've got some graphics we want to put up that are five things that can help the young people of today do that can help you get off to a good start. We want to start off with consolidate your loans. Lauren, why don't you tackle this one, because, you know, depending on what your major was and how long you were in school, this can look like a mountain of debt you're facing.

LAUREN YOUNG, "SMARTMONEY" MAGAZINE: It's true. People are walking away from college -- credit card debt, $2300 big deal when Ivy League schools are costing about $35,000 a year. This is a great time to consolidate your loans. The rate to consolidate is actually the lowest it's been, I think, in history.

So how do you consolidate? The best thing to do is go to the lender. And the reason why you want to do that is you just have one payment. Typically people borrow maybe from three different places. So, it makes it easy to make that one payment a month. You are going to be maybe stretching out the loan. There's different ways to consolidate. So you really want to weigh your options. Go on the Web. Check out the calculators that will help you figure out what makes sense for you.

SAN MIGUEL: Put it all into one loan and lock in that low rate is what you're saying.

YOUNG: That's right.

Virginia, we want you to talk about paying off credit cards. When you get a credit card, when you get it as a gift from a parent or whatever and you're in college, you can run it up in such a, you know, a short period of time. Talk a little bit about how important it is to get those paid off and get rid of that 19, 20 percent interest you're paying on that.

MORRIS: Well, it's absolutely critical to pay off your credit card debt. I mean, I think that the card companies are guilty because they say this is your minimum amount due. And they don't go far enough to explain what the consequences of not paying are. I think that the idea of budgeting to pay off what you charge is essential.

SAN MIGUEL: We want to go to some e-mails right now and leave the tips that you have for getting off to a good start for just a second. Andre in Covino, California writes in "I'm 26 years old and have regularly invested in a monthly plan in mutual funds and stocks for several years now. Is this still the right approach to invest and build my retirement account?" Lauren, what do you think?

YOUNG: Andre, congratulations. Good job. You got started young. We saw on the chart with Sarah, in the segment before the young woman who started saving, when she's 65, I think she's going to have $1 million at the rate she's going now.

The power of compounding is a beautiful thing. Funds are a great way to save especially for retirement. Now one thing he might want to consider is a Roth I.R.A. With a Roth I.R.A., you're paying your taxes up front, but you can use the money after a certain time to buy your first home. And that's why that's always a very good savings vehicle.

But taking out money every month is the best thing you can do. Good job. Keep up the good work.

SAN MIGUEL: You don't have to think about it. Somebody else is dealing with that. At some point you won't even miss it. Mike writes in, "I'm a new college graduate with $52,000 in student loan debt, averaging 6 percent APR. What's the best way to manage my money now that I have a job? I've been putting 10 percent of my pretax income away in a 401k plan, but want to know if I should use that money instead to help pay off my student loans faster." You had dealt with this earlier -- both of you have dealt with this earlier, but Virginia, what do you think about what he might want to do here?

YOUNG: No, I think that because the student loan rate is reasonable, and he can pay that off regularly, the more important thing is to put money in the retirement account because eventually this student loan will be paid off but down the road, the retirement money will be an invaluable source. And he can use it for other things if he wants. But I wouldn't rush to pay off the college loan debt.

SAN MIGUEL: Okay. And Lauren, I see you nodding your head as well. We'll take that as a consensus. We'll be back with Virginia Morris and Lauren Young in just a minute. But we'll gather your calls and e-mails next as well. The topic, of course, getting off to a strong financial start. We want you to send your questions to dollarsigns@CNN.com or call in. You see the number there. 1-800-807- 2620. Stay with us. We'll be right back.

(COMMERCIAL BREAK)

SAN MIGUEL: Welcome back to Dollar Signs. we're talking about how young adults can make sure they have a sound financial futurer. Financial Planner Virginia Morris and Lauren Young are with us taking your calls and e-mails. We want to go back to some of these tips that you both have for young people to get a good start. No. 3 on this point list is, build an emergency fund. Lauren, why don't you take that one. You know, maybe three months' pay should do it?

YOUNG: Three months to six months is kind of the rule of thumb. Now when you're getting started, I realize it's probably hard to do that because you're just, you know, you're paying off that credit card debt and pay off the student loans. But the woman, Sarah, who moved in with her parents from the first segment, she's saving $1,000 a month. That's a great idea. Because, hopefully within three to six months time, she'll be able to build up a cushion and you want to be able to pay your expenses with that emergency fund: your rent, you phone bill, whatever it is, your gas.

So it is a really good idea to have the cushion. But you have to be realistic and realize it might take you maybe even a year to get that cushion set up.

SAN MIGUEL: All right. Point well taken.

We have a phone call right now from Gresford in Virginia. Welcome to Dollar Signs. What's your question?

CALLER: Yes. Good afternoon. I was wondering if it would be worthwhile to take out a loan so that I can maximum out my 401k plan this year and then when I get my bonus in February, I can pay off my loan.

SAN MIGUEL: Virginia, what do you think?

MORRIS: I would think that there are better things to do with your money. I think that to borrow when you really -- against an expectation of income is a very risky business. I think that if you put money in a 401k or a Roth I.R.A. on a regular basis, that's great. But I think borrowing to invest at this stage doesn't make a lot of sense. SAN MIGUEL: Okay. We have Howard on the phone from New York. Howard, what is your question?

CALLER: Yes. I'm trying to actually find out -- I have problems with my...

SAN MIGUEL: Okay. I think we're having some trouble on the phone with Howard from Brooklyn, so we'll move on here to an e-mail from Jessica. She says, "I just finished graduate school and starting a new job at the age of 27. I feel completely overwhelmed with the idea of figuring out what to do with my new income. This is really the first time that I will be making enough money to actually do something worthwhile with it and I really want to be doing the right thing (i.e. saving, investing, etc.) The problem is that I have no idea where I should start. What should I be doing." Lauren, what do you think she ought to be doing?

YOUNG: Jessica, I would run out and buy Virginia's new book. And I have to see, I mean, it's a shameless plug, but it's really good. It has great information. Also, it sounds like, when you're really overwhelmed with something, if you can't sleep at night, time to talk to a professional.

I would highly recommend talking to a financial adviser, ask your friends, ask your family, get three recommendations, talk to different people, and it would be really good for you to right now, you're getting started, so great you're thinking about it, to set yourself up on a budget and a plan and start saving for retirement, all those things. It sounds like you're thinking about it, which is really important.

SAN MIGUEL: That's the first battle right there. Are there any -- do colleges, when you're on the way out of college, do they able to provide you with some financial advice? Is there somebody there that can get you ready for life outside and what you need to do?

YOUNG: Wouldn't that be great? Absolutely not. You know, that's why we have so many problems with kids graduating from college and taking all these credit cards and walking out and having absolutely no idea. It would be so wonderful if there was something mandatory. Not only as at the college level but also at high school and maybe even elementary school. So kids really did learn a lot more about money.

The things we learn, maybe we pick up from our parents. Maybe we pick up from the financial press, but there's no national good education program out there to learn about money, and it's a big problem.

SAN MIGUEL: All right. Fernando is calling from San Francisco. Fernando, what is your question?

CALLER: Yes. Me and my wife are planning to buy a house. Unfortunately we don't have money to put as the first down payment. And this loan broker is asking me to do, like, 80/20 or 100 percent loan. Which one is better? SAN MIGUEL: Virginia, why don't you handle that one. This is, you know, a first-time buyer. This is what, you know, the economy needs right now. But there are a lot of -- I mean you have to negotiate a thicket of all these potential deals. If you don't have the money to put a downpayment.

MORRIS: There are a lot of programs in the states or through the federal government that are available to people who are buying new homes. I think there's a great sense that homeownership is important. I think that it pays to talk to more than one lender. Any lender may have an agenda about what's best there. But I think if you go to two or three banks or other people to find out what your alternatives are and then really take a careful calculation about what it's going to cost and whether you can afford it. You can make a reasonable decision.

SAN MIGUEL: Lauren, are those -- you know the kind of information you can get on the Internet about home loans, I mean, is that an option as well?

YOUNG: Yes. Actually, in the earlier segment they quoted somebody from a Web site called bankrate.com. It's my favorite Web site for information about credit cards as well as mortgages. They'll give you kind of what all the national rates are. But they have so many good tips on how to get information and great links on information for first-time buyers.

SAN MIGUEL: And part of the shopping you need to do, shop around to see about getting the first rate.

We want to go on now to No. 4 on the list of tips to get off to a good start. If you're just getting out of college and wondering what to do with the rest of your live life as it were. Contribute at work. Take advantage of tax breaks and company matches and employer- sponsored plans. This would seem, Virginia, to be a no-brainer. I've been told since -- for the last 10 years, this is like free money. You've got to get in on this.

MORRIS: Absolutely. I couldn't agree more. And I think one of the problems here is that young people don't always recognize just how valuable that free money is. I mean, it's a gift. And why would you ever turn it down?

But just as the colleges don't do a really good job educating graduates about managing their money, I think plan sponsors don't always do a great job explaining just how important putting money away can be.

SAN MIGUEL: Lauren, what do you think about it?

YOUNG: I think it actually takes something like the typical person to get started in their 401ks something like three years. Granted some places have a waiting period. But people just don't rush out and take that free money. I think you really do need to kind of get on the ball and take the bull by the horns because believe me, no one's going to come begging, please start investing in your 401k. SAN MIGUEL: That's a good way to put it. Lauren and Virginia, stand by. We'll be back with you in just a second. We'll also be taking more of your calls and e-mails after the break. We'll be right back.

(COMMERCIAL BREAK)

SAN MIGUEL: Welcome back to Dollar Signs. Virginia Morris and Lauren Young are with me today, answering your financial questions. We want to go to an e-mail from Deven in Washington, D.C., "I'm a young guy with a steady income and good health." I'm already jealous of this guy. "I am planning to have a family in the future. Which life insurance plan would be best for the interest of my family over the long haul, a whole term policy, or a regular term policy?" Virginia, let's give this one to you.

MORRIS: Well, I think until he has the wife and family, he probably doesn't have to think about the insurance just yet. But I think it really has to do with what he's trying to do, whether he's trying to find a plan that will cover his needs, should something happen to him when his child is young, or whether he wants to use the insurance as a saving plan.

The term plan is generally cheaper, and many advisers think that it makes more sense for young people to do that. Others say, well, you're going to need insurance your whole life. You might as well do whole life. My own guess, term.

SAN MIGUEL: Okay. Lauren, I wanted to ask you about whether or not disability insurance should at least be an option for somebody who is young and has a steady income like this gentleman.

YOUNG: Absolutely. Actually, when you enter the working world, one of the best investments you can make is disability. I mean, people never think something's going to happen to them but especially when you're young and you do have loans and credit card debt to pay back, if you -- if something happens to you and you are not getting your full salary, it's going to be really hard to pay back those loans.

So definitely consider disability insurance. Have I emphasized that you definitely, definitely need it.

SAN MIGUEL: I definitely get the -- get the emphasis there. Thanks. Salina from New Jersey has a question. Salina, welcome to Dollar Signs. What's your question?

CALLER: Thank you, hello. I just recently graduated from college and I'm starting law school this month. And I have loans, and I was wondering whether it's smart to pay them while they're in deferment or just to wait until after I graduate.

SAN MIGUEL: Virginia, what do you think?

MORRIS: Well, if you're taking additional loans while you're in school, it probably makes sense to put it off or to pay a small amount if you can. I mean, certainly the longer you have the loans, the more they're going to cost. But I think that you need to concentrate on getting your education done and then repaying the loans. Talk to your lender, and they will advise you what the different options are.

SAN MIGUEL: Now we go to another call from Dan. Dan, what's your question?

CALLER: Hi. I'm 23 years old, and I have two Roth I.R.A.s from two different sources. And I wanted to know if it would be smarter to just have one Roth I.R.A. Where I'm putting in $100 in rather than two where I put $50 in a month.

SAN MIGUEL: Lauran, what do you think?

YOUNG: Diversification is so key. So, hopefully the two I.R.A's that you have are investing in different things. It would be great, for example, when you're young, we recommend investing in small company stocks because they do tend to grow the fastest. They are also more volatile. So that's why when you're young, they are better to invest in.

So, maybe if you could keep one I.R.A. in a smaller type company vehicle and then in larger company stocks like G.E and Coke, then you have diversification. I would say keep them separate for now.

SAN MIGUEL: Ladies, we're getting some calls from some folks who want clarification on something you had talked about, recommending a 6 percent return. Can you -- on some kind of investment opportunity here. Do you recall what that was?

YOUNG: That was the chart that they showed for Sarah. It was a projected chart of if she was saving over a certain amount of time, that $1,000 she's putting away every month, the projected return was 6 percent. Over the long haul, since World War I, even with the recent downturn, markets have been returning about 8 percent on average. So 6 percent's actually very conservative.

And when I say markets, I'm talking about investing equities overall.

SAN MIGUEL: OK, thanks for clearing that up. We want to thank both of you nor joining us. We're out of time. Virginia Morris is author of "Welcome to your Financial Future." She is a financial planner. And Lauren Young, is editor of "Smartmoney" magazine. Thanks. We appreciate your time.

YOUNG: Thank you, renay.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired August 23, 2003 - 16:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RENAY SAN MIGUEL, CNN ANCHOR: And welcome to "Dollar Signs," where we help you make the most of your money. Today we'll tackle the subject of starting out right, on a firm financial footing. Our financial correspondent, Ali Velshi, introduces us to one recent grad who is beating the odds.
(BEGIN VIDEOTAPE)

SARA DEITSCH, RECENT COLLEGE GRADUATE: I think if someone came to me and asked me some financial goals, I would tell them to try not to move out of the house right away, but if they have to, then to really plan out a budget.

ALI VELSHI, CNN FINANCIAL CORRESPONDENT: Sarah Deitsch graduated from college in May and moved right back in with her parents. She commutes an hour each way to her job in an Italian fashion house in New York where she earns a little more than the $29,000 a year average salary for a recent liberal arts graduate.

DEITSCH: I kind of map out a budget every month of what I want to spend on my clothes, my entertainment and my gym membership, my cell phone, things like that.

VELSHI: Moving back home keeps costs down and helps her stay within her budget.

DEITSCH: If you don't keep stuff in your savings account and just live off the money you make every week or every two weeks, then -- and you spend it all, then you're really not getting anywhere.

GREG MCBRIDE, FINANCIAL ANALYST: Get into a habit of saving systematically, going forward, to build up positive net worth. As long as you do it in conjunction with paying down these bills.

VELSHI: Sarah just started budgeting her money and has no credit card debt. Not bad, since according to one of the nation's largest student loan providers, 83 percent of college students have a credit card with the average balance at graduation of $2300.

RAYMOND DEWE, FINANCIAL CONSULTANT: Probably the biggest major pitfall are credit cards. It's real easy to get that little piece of plastic and go out and everybody will take it. And the next thing you know, you owe people thousands and thousands of dollars.

VELSHI: The danger comes if you pay just the monthly minimum on your credit card bills, or worse, you don't even do that.

MCBRIDE: Poor credit can impact your ability to get a job, to rent an apartment, it can even affect your auto insurance rates.

VELSHI: But credit cards can work for you. If you pay the entire balance off each month, you're effectively borrowing money at no cost and establishing good credit at the same time. Better yet, don't spend the money, save it.

DEITSCH: I've been trying to save $1,000 a month. I have done that so far since I started working. I've done it two months in a row.

VELSHI: Assuming a 6 percent rate of return if Sarah puts away $500 a month, in ten years she'll have $80,000. By the time she's in her 60s, she could have just over $1 million.

Time is on Sarah's side. Not only is she not carrying credit card debt, but she also got a job right out of college. Now jobs come and go in this economy. So financial planners say, try to have at least three months of experiences saved up in case you hit a rough patch along the road. For Dollar Signs, I'm Ali Velshi, CNN financial news, New York.

(END VIDEOTAPE)

SAN MIGUEL: There are a number of pitfalls that can sidetrack young people when they are trying to get their finances in order. The book "Welcome to your Financial Future" offers tips. Its author, Virginia Morrism, and Lauren Young from "Smartmoney" magazine are both joining us from New York today.

Ladies, thanks for being with us today. We appreciate your time.

VIGINIA MORRIS, AUTHOR: Thanks.

SAN MIGUEL: You know, I can -- I'm pretty sure at one time I was in my early 20s. I mean, it's hazy, but I think I was at that point. The last thing I was thinking about was saving money. Any money that I had, I immediately just spent.

We've got some graphics we want to put up that are five things that can help the young people of today do that can help you get off to a good start. We want to start off with consolidate your loans. Lauren, why don't you tackle this one, because, you know, depending on what your major was and how long you were in school, this can look like a mountain of debt you're facing.

LAUREN YOUNG, "SMARTMONEY" MAGAZINE: It's true. People are walking away from college -- credit card debt, $2300 big deal when Ivy League schools are costing about $35,000 a year. This is a great time to consolidate your loans. The rate to consolidate is actually the lowest it's been, I think, in history.

So how do you consolidate? The best thing to do is go to the lender. And the reason why you want to do that is you just have one payment. Typically people borrow maybe from three different places. So, it makes it easy to make that one payment a month. You are going to be maybe stretching out the loan. There's different ways to consolidate. So you really want to weigh your options. Go on the Web. Check out the calculators that will help you figure out what makes sense for you.

SAN MIGUEL: Put it all into one loan and lock in that low rate is what you're saying.

YOUNG: That's right.

Virginia, we want you to talk about paying off credit cards. When you get a credit card, when you get it as a gift from a parent or whatever and you're in college, you can run it up in such a, you know, a short period of time. Talk a little bit about how important it is to get those paid off and get rid of that 19, 20 percent interest you're paying on that.

MORRIS: Well, it's absolutely critical to pay off your credit card debt. I mean, I think that the card companies are guilty because they say this is your minimum amount due. And they don't go far enough to explain what the consequences of not paying are. I think that the idea of budgeting to pay off what you charge is essential.

SAN MIGUEL: We want to go to some e-mails right now and leave the tips that you have for getting off to a good start for just a second. Andre in Covino, California writes in "I'm 26 years old and have regularly invested in a monthly plan in mutual funds and stocks for several years now. Is this still the right approach to invest and build my retirement account?" Lauren, what do you think?

YOUNG: Andre, congratulations. Good job. You got started young. We saw on the chart with Sarah, in the segment before the young woman who started saving, when she's 65, I think she's going to have $1 million at the rate she's going now.

The power of compounding is a beautiful thing. Funds are a great way to save especially for retirement. Now one thing he might want to consider is a Roth I.R.A. With a Roth I.R.A., you're paying your taxes up front, but you can use the money after a certain time to buy your first home. And that's why that's always a very good savings vehicle.

But taking out money every month is the best thing you can do. Good job. Keep up the good work.

SAN MIGUEL: You don't have to think about it. Somebody else is dealing with that. At some point you won't even miss it. Mike writes in, "I'm a new college graduate with $52,000 in student loan debt, averaging 6 percent APR. What's the best way to manage my money now that I have a job? I've been putting 10 percent of my pretax income away in a 401k plan, but want to know if I should use that money instead to help pay off my student loans faster." You had dealt with this earlier -- both of you have dealt with this earlier, but Virginia, what do you think about what he might want to do here?

YOUNG: No, I think that because the student loan rate is reasonable, and he can pay that off regularly, the more important thing is to put money in the retirement account because eventually this student loan will be paid off but down the road, the retirement money will be an invaluable source. And he can use it for other things if he wants. But I wouldn't rush to pay off the college loan debt.

SAN MIGUEL: Okay. And Lauren, I see you nodding your head as well. We'll take that as a consensus. We'll be back with Virginia Morris and Lauren Young in just a minute. But we'll gather your calls and e-mails next as well. The topic, of course, getting off to a strong financial start. We want you to send your questions to dollarsigns@CNN.com or call in. You see the number there. 1-800-807- 2620. Stay with us. We'll be right back.

(COMMERCIAL BREAK)

SAN MIGUEL: Welcome back to Dollar Signs. we're talking about how young adults can make sure they have a sound financial futurer. Financial Planner Virginia Morris and Lauren Young are with us taking your calls and e-mails. We want to go back to some of these tips that you both have for young people to get a good start. No. 3 on this point list is, build an emergency fund. Lauren, why don't you take that one. You know, maybe three months' pay should do it?

YOUNG: Three months to six months is kind of the rule of thumb. Now when you're getting started, I realize it's probably hard to do that because you're just, you know, you're paying off that credit card debt and pay off the student loans. But the woman, Sarah, who moved in with her parents from the first segment, she's saving $1,000 a month. That's a great idea. Because, hopefully within three to six months time, she'll be able to build up a cushion and you want to be able to pay your expenses with that emergency fund: your rent, you phone bill, whatever it is, your gas.

So it is a really good idea to have the cushion. But you have to be realistic and realize it might take you maybe even a year to get that cushion set up.

SAN MIGUEL: All right. Point well taken.

We have a phone call right now from Gresford in Virginia. Welcome to Dollar Signs. What's your question?

CALLER: Yes. Good afternoon. I was wondering if it would be worthwhile to take out a loan so that I can maximum out my 401k plan this year and then when I get my bonus in February, I can pay off my loan.

SAN MIGUEL: Virginia, what do you think?

MORRIS: I would think that there are better things to do with your money. I think that to borrow when you really -- against an expectation of income is a very risky business. I think that if you put money in a 401k or a Roth I.R.A. on a regular basis, that's great. But I think borrowing to invest at this stage doesn't make a lot of sense. SAN MIGUEL: Okay. We have Howard on the phone from New York. Howard, what is your question?

CALLER: Yes. I'm trying to actually find out -- I have problems with my...

SAN MIGUEL: Okay. I think we're having some trouble on the phone with Howard from Brooklyn, so we'll move on here to an e-mail from Jessica. She says, "I just finished graduate school and starting a new job at the age of 27. I feel completely overwhelmed with the idea of figuring out what to do with my new income. This is really the first time that I will be making enough money to actually do something worthwhile with it and I really want to be doing the right thing (i.e. saving, investing, etc.) The problem is that I have no idea where I should start. What should I be doing." Lauren, what do you think she ought to be doing?

YOUNG: Jessica, I would run out and buy Virginia's new book. And I have to see, I mean, it's a shameless plug, but it's really good. It has great information. Also, it sounds like, when you're really overwhelmed with something, if you can't sleep at night, time to talk to a professional.

I would highly recommend talking to a financial adviser, ask your friends, ask your family, get three recommendations, talk to different people, and it would be really good for you to right now, you're getting started, so great you're thinking about it, to set yourself up on a budget and a plan and start saving for retirement, all those things. It sounds like you're thinking about it, which is really important.

SAN MIGUEL: That's the first battle right there. Are there any -- do colleges, when you're on the way out of college, do they able to provide you with some financial advice? Is there somebody there that can get you ready for life outside and what you need to do?

YOUNG: Wouldn't that be great? Absolutely not. You know, that's why we have so many problems with kids graduating from college and taking all these credit cards and walking out and having absolutely no idea. It would be so wonderful if there was something mandatory. Not only as at the college level but also at high school and maybe even elementary school. So kids really did learn a lot more about money.

The things we learn, maybe we pick up from our parents. Maybe we pick up from the financial press, but there's no national good education program out there to learn about money, and it's a big problem.

SAN MIGUEL: All right. Fernando is calling from San Francisco. Fernando, what is your question?

CALLER: Yes. Me and my wife are planning to buy a house. Unfortunately we don't have money to put as the first down payment. And this loan broker is asking me to do, like, 80/20 or 100 percent loan. Which one is better? SAN MIGUEL: Virginia, why don't you handle that one. This is, you know, a first-time buyer. This is what, you know, the economy needs right now. But there are a lot of -- I mean you have to negotiate a thicket of all these potential deals. If you don't have the money to put a downpayment.

MORRIS: There are a lot of programs in the states or through the federal government that are available to people who are buying new homes. I think there's a great sense that homeownership is important. I think that it pays to talk to more than one lender. Any lender may have an agenda about what's best there. But I think if you go to two or three banks or other people to find out what your alternatives are and then really take a careful calculation about what it's going to cost and whether you can afford it. You can make a reasonable decision.

SAN MIGUEL: Lauren, are those -- you know the kind of information you can get on the Internet about home loans, I mean, is that an option as well?

YOUNG: Yes. Actually, in the earlier segment they quoted somebody from a Web site called bankrate.com. It's my favorite Web site for information about credit cards as well as mortgages. They'll give you kind of what all the national rates are. But they have so many good tips on how to get information and great links on information for first-time buyers.

SAN MIGUEL: And part of the shopping you need to do, shop around to see about getting the first rate.

We want to go on now to No. 4 on the list of tips to get off to a good start. If you're just getting out of college and wondering what to do with the rest of your live life as it were. Contribute at work. Take advantage of tax breaks and company matches and employer- sponsored plans. This would seem, Virginia, to be a no-brainer. I've been told since -- for the last 10 years, this is like free money. You've got to get in on this.

MORRIS: Absolutely. I couldn't agree more. And I think one of the problems here is that young people don't always recognize just how valuable that free money is. I mean, it's a gift. And why would you ever turn it down?

But just as the colleges don't do a really good job educating graduates about managing their money, I think plan sponsors don't always do a great job explaining just how important putting money away can be.

SAN MIGUEL: Lauren, what do you think about it?

YOUNG: I think it actually takes something like the typical person to get started in their 401ks something like three years. Granted some places have a waiting period. But people just don't rush out and take that free money. I think you really do need to kind of get on the ball and take the bull by the horns because believe me, no one's going to come begging, please start investing in your 401k. SAN MIGUEL: That's a good way to put it. Lauren and Virginia, stand by. We'll be back with you in just a second. We'll also be taking more of your calls and e-mails after the break. We'll be right back.

(COMMERCIAL BREAK)

SAN MIGUEL: Welcome back to Dollar Signs. Virginia Morris and Lauren Young are with me today, answering your financial questions. We want to go to an e-mail from Deven in Washington, D.C., "I'm a young guy with a steady income and good health." I'm already jealous of this guy. "I am planning to have a family in the future. Which life insurance plan would be best for the interest of my family over the long haul, a whole term policy, or a regular term policy?" Virginia, let's give this one to you.

MORRIS: Well, I think until he has the wife and family, he probably doesn't have to think about the insurance just yet. But I think it really has to do with what he's trying to do, whether he's trying to find a plan that will cover his needs, should something happen to him when his child is young, or whether he wants to use the insurance as a saving plan.

The term plan is generally cheaper, and many advisers think that it makes more sense for young people to do that. Others say, well, you're going to need insurance your whole life. You might as well do whole life. My own guess, term.

SAN MIGUEL: Okay. Lauren, I wanted to ask you about whether or not disability insurance should at least be an option for somebody who is young and has a steady income like this gentleman.

YOUNG: Absolutely. Actually, when you enter the working world, one of the best investments you can make is disability. I mean, people never think something's going to happen to them but especially when you're young and you do have loans and credit card debt to pay back, if you -- if something happens to you and you are not getting your full salary, it's going to be really hard to pay back those loans.

So definitely consider disability insurance. Have I emphasized that you definitely, definitely need it.

SAN MIGUEL: I definitely get the -- get the emphasis there. Thanks. Salina from New Jersey has a question. Salina, welcome to Dollar Signs. What's your question?

CALLER: Thank you, hello. I just recently graduated from college and I'm starting law school this month. And I have loans, and I was wondering whether it's smart to pay them while they're in deferment or just to wait until after I graduate.

SAN MIGUEL: Virginia, what do you think?

MORRIS: Well, if you're taking additional loans while you're in school, it probably makes sense to put it off or to pay a small amount if you can. I mean, certainly the longer you have the loans, the more they're going to cost. But I think that you need to concentrate on getting your education done and then repaying the loans. Talk to your lender, and they will advise you what the different options are.

SAN MIGUEL: Now we go to another call from Dan. Dan, what's your question?

CALLER: Hi. I'm 23 years old, and I have two Roth I.R.A.s from two different sources. And I wanted to know if it would be smarter to just have one Roth I.R.A. Where I'm putting in $100 in rather than two where I put $50 in a month.

SAN MIGUEL: Lauran, what do you think?

YOUNG: Diversification is so key. So, hopefully the two I.R.A's that you have are investing in different things. It would be great, for example, when you're young, we recommend investing in small company stocks because they do tend to grow the fastest. They are also more volatile. So that's why when you're young, they are better to invest in.

So, maybe if you could keep one I.R.A. in a smaller type company vehicle and then in larger company stocks like G.E and Coke, then you have diversification. I would say keep them separate for now.

SAN MIGUEL: Ladies, we're getting some calls from some folks who want clarification on something you had talked about, recommending a 6 percent return. Can you -- on some kind of investment opportunity here. Do you recall what that was?

YOUNG: That was the chart that they showed for Sarah. It was a projected chart of if she was saving over a certain amount of time, that $1,000 she's putting away every month, the projected return was 6 percent. Over the long haul, since World War I, even with the recent downturn, markets have been returning about 8 percent on average. So 6 percent's actually very conservative.

And when I say markets, I'm talking about investing equities overall.

SAN MIGUEL: OK, thanks for clearing that up. We want to thank both of you nor joining us. We're out of time. Virginia Morris is author of "Welcome to your Financial Future." She is a financial planner. And Lauren Young, is editor of "Smartmoney" magazine. Thanks. We appreciate your time.

YOUNG: Thank you, renay.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com