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CNN Live Saturday

"Dollar Signs": How To Make A Million

Aired March 20, 2004 - 16:30   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.


FREDERICKA WHITFIELD, CNN ANCHOR: "Dollar Signs" is straight ahead, but first here what's happening at this hour.
After a fierce battle on the Afghan border, Pakistani forces have captured 100 suspected al-Qaeda members. It's unclear weather Ayman al-Zawahiri, the terrorist groups' second in command, is still in the area.

The power of protest: thousands of people are marching today in anti-war demonstrations. Protests in New York, London, Japan and Australia come after yesterday's one-year mark of the start of the Iraq war.

A call to investigate allegations of corruption in Iraq's oil for food program. U.N. secretary-general Kofi Annan is suggesting an independent probe to look for possible wrongdoing after reports this week that Saddam Hussein illegally reaped billions from the program. The U.N. established the oil for today fram program in 1996 to provide limited oil sales to provide humanitarian needs for Iraqis.

Calls for a recount in Taiwan's razor close election. President Chen Shui-Bian was reelected just 1 day after surviving an assassination attempt. His opponent suggests the attempt on his life gave the president sympathy votes and that the entire race should be nullified.

As Spain mulls its future role in Iraq, the U.S. reflects on lives lost in combat over the past year. One of the first soldiers killed in Iraq received his U.S. citizenship posthumously. Here's Frank Buckley.

(BEGIN VIDEOTAPE)

FRANK BUCKLEY, CNN CORRESPONDENT: A year ago, when the military officers came to the front door of this home in Southern California, Nora Mosquera just knew.

NORA MOSQUERA, FOSTER MOTHER: They didn't have to tell me what it was, I knew that one of the two casualties of that day, one of them was my son. And it was very sad.

BUCKLEY: Lance corporal Jose Gutierrez was killed in action in one of the first engagements of the war.

LILLIAN CARDNES, FOSTER SISTER: Why was it him? And why at the beginning. BUCKLEY: Marine Corps officials later confirmed that Gutierrez was killed by friendly fire. His family members accept that as an accident of war. And they are proud of how Gutierrez came to fight as a U.S. Marine, because he wasn't even from the United States.

ENGRACIA PAZ, BIOLOGICAL SISTER, (through translator): Because he came to give his life for a country that was not his.

BUCKLEY: Engracia Paz was Jose's sister in their native Guatemala. This is the foster family that took him in in America. Jose Gutierrez died on a battlefield far away from either home.

(on camera): His long journey to Iraq began here, in central America. This is where he was born, in Guatemala City, whereby all accounts, he had a very difficult life. His parents died when he was a boy. He was poor. At one point, he literally lived on the streets of this city.

(voice-over): The story of the boy who made it to America only to die in Iraq was front page news in Guatemala. Louise ARodrigez of "Prensa Libre" says one reason readers were so interested, their loved ones are also in America.

LUISA RODRIGUEZ, PRENSA LIBRA: For every ten Guatemalans, four of them has a family in the United States.

BUCKLEY: In Jose's case, he hitchhiked and hopped trains across 2,000 miles to get to the U.S. As a teenager in the care of Casa Alienza, the Central American branch of Covenant House, someone told him that America was the land of opportunity.

MOSQUERA: He came to the United States and he found out that everything that this social worker, American social worker in Guatemala had told him was really true and even more, he was so grateful.

BUCKLEY: Joining the Marine Corps was a job, but family members say, it was also about serving his new country.

CARDNES: He never forgot where he came from, but at the same time, he gave back to the place that gave him so much.

BUCKLEY: He also knew that combat would be dangerous, and before he shipped out, Jose made arrangements.

UNIDENTIFIED FEMALE: He told me that in the event anything bad happened, he wanted to be buried with his parents, in his homeland.

BUCKLEY: And that's why at this dignified cemetery in Guatemala, there is one U.S. Marine who is finally home. Frank Buckley, CNN, Guatemala City.

(END VIDEOTAPE)

WHIFIELD: As out of work Americans look for jobs, analysts are cautiously optimistic. Economic reports this week show there's hope out there, hiring might be picking up. Kathleen Hays has more on employment prospects.

(BEGIN VIDEOTAPE)

KATLEEN HAYS, CNN FINANCIAL CORRESPONDENT: From the factor floor to the trading floor, from college grads to kids who never got out of high school diploma, it seems everyone is worried about finding a job or keeping the one they have. The economy created 360,000 jobs since August but it lost 2.4 million over the past three years. Worker advocates say even people who have jobs are running scared.

ANDREW STETTERN, ANTL. EMPLOYMENT LAW PROJECT: There's a sense of boy, I'm lucky, but if I lost work, I know someone next to me who hasn't been able to get anything but consulting or temp work.

HAYS: The nation's unemployment rate stands at 5.6 percent, just over half the 10.8 percent high hit in December of '82. And the number of people applying for first-time unemployment benefits hit its lowest level in three years, a sign experts say that layoffs are declining, but big pockets of weakness remain.

Eight million are unemployed compared to 5.58 million four years ago, according to the labor department. Four million are working part-time, not because they want to, but because they want find full- time jobs and nearly half a million people are so discouraged they have simply stopped looking for work.

It now takes nearly five months on average to find a job once you've been laid off. Back in 2000 it, took just 3.35 months.

(on camera): It's not just a blue collar problem. Over the past three years, the number of people out of a job for more than five months is up 260 percent in manufacturing, but long-term unemployment is up 350 percent in the once high-flying information technology industry.

(voice-over): There are some bright spots, hire something expected to pick up at small businesses where half of all private sector jobs are created.

WILLIAM DUNKELBERG, NATL. FED. OF INDEPENDENT BUSINESS: They're expecting a lot of sales increases coming over the next six months and they'll need more people to handle that.

HAYS: But it's slow going.

ANDY BUSCH, BANK OF MONTREAL: They need to fill these positions, and yet no one's hiring just yet. So many companies are rebuilding their balance sheet, they're jacking their earnings and everybody's being very, very cautious.

HAYS: So the economy is moving, but...

UNIDENTIFIED MALE: I don't see the jobs market really having turned a convincing corner. It's a train that's moving out of the station but pretty slow.

HAYS: So it looks like it may be awhile before it's all aboard for the American worker. Kathleen Hays, CNN, New York.

(END VIDEOTAPE)

WHITFIELD: Your calls and e-mails next on "Dollar Signs." And, of course, you can still send your questions to dollarsigns@CNN.com, or you can call in, that number is 1-800-807-2620. How to make a million. We'll be right back.

(COMMERCIAL BREAK)

WHITFIELD: Welcome to "Dollars Signs" where we help you make the most of your money. You're expecting a tax refund if you're like millions of Americans. Recent tax cuts are expected to send a record $195 billion in refunds into the wallets and pocket books of Americans. The average refund this year, so far is more than $2,100. That's up 4.4 percent over last year.

While many of you may be already daydreaming about plunking that money down on a flat screen TV or maybe take a cruise to Belize, well there may be better things to do with your cash. Do you know if you start saving $3,000 a year at the age of 26, by the time you retire, you'll be a millionaire?

It's not as difficult as you might think. Our guest today is going to explain how. David Bach is the host of his own radio program called Live Rich With David Bach," and he's the author of the new best seller "The Automatic Millionaire." And David, so glad you're able to be on the phone with us. Sorry we're not able to see you, simply because there's a nasty traffic problem in New York.

RICHARD BACH, AUTHOR: I'm taking the elevator up right now in the CNN building.

WHITFIELD: Good. Well, hopefully, we'll keep you on the line then, during that elevator ride. You know, President Bush is encouraging those who are getting refunds to spend the money, help the economy. You say you need to save it.

BACH: You really do. Of course, they want you to spend the money, but the reality is some of these people who are watching and listening, you need to save the money. And there's two places you need to save it. One, if you're in credit card debt right now, and we know the average family has $10,000 in credit card debt, if you are assuming credit card debt at a 20 percent interest rate, the first place you need to put that money is at least half of it towards the debt and the other half needs to go towards savings. Instead of running out and spending that money, the first person you need to pay is yourself, you need to pay yourself first.

WHITFIELD: Now you need to make a decision on perhaps which credit cards in which to try to put half of that money down on. Do you try to eliminate, if you've got more than one credit card that's high, do you try to eliminate the balance of one altoghether, or do you spread that out over the credit card debt that you have?

BACH: The first thing you do -- and here I am they're running me to the camera right now -- the first thing you do, is you start with what is the highest interest rate credit card. I mean, that's the obvious thing and -- sorry about that.

WHITFIELD: We're trying to put a mike on you, I'm sure, as you're trying to talk on the phone with us.

BACH: You start with the highest rate credit card. Again, shockingly enough, some people who are actually watching right now are going to find out that their credit cards are as high as 29 percent. The first thing is you pay down the debt with that. And now can I officially go off the cellphone, here?

WHITFIELD: I don't know, let's stick with you. Let's wait until we actually see you, because I don't see you yet.

BACH: 29 percent interest, the first thing is focus on those cards. Focus on the cards with the highest interest.

Second thing I'll tell you, this is critical, consolidate these credit cards on to one card. Right now if people are watching they can go to a Web site for example, lowermybills.com, there's a list of credit card companies that will consolidate your debt down to 0 percent interest for the first year. That makes it a lot easier to get out of debt. If you're got credit card at 20 percent, and you're paying the minimum payment, it can take you as much as 40 years to pay that credit card debt off.

WHITFIELD: That's depressing. All right, the other half of the money you said, you need to go straight into savings. But then there's the quandary of what type of savings do I need to get into, a regular savings account, we're looking at 2 percent interest these days.

BACH: The answer is, you need to pay yourself first.

WHITFIELD: Yay! There you are. We're glad to see you now.

BACH: You need to pay yourself first. And the way you pay yourself first is very simple, you go into your benefits department on Monday and you say I want you to take the first hour a day of my income right out of my paycheck, move that directly into my retirement account.

Now, for those people who are getting tax refunds, it's simpler. They can take part of that refund check, they walk down to a bank or a brokerage firm, they can put it in an IRA account.

Now they've done two things, they're paying themselves first, they're saving for the future and they're getting a new tax deduction for the next year. So you're actually getting a tax refund and now you're able to use it as a tax deduction for the next year.

WHITFIELD: And it's $3,000 you can put in an I.R.A. now.

BACH: That's right. And for some people, if you get it early, because you filed early you have until April 15 to fund an I.R.A. account for last year. So, that might even increase your deduction more, you may get more tax refund by taking your current check, funding that deductible IRA account and then next year, you can always amend the tax return and get money back for last year.

WHITFIELD: Wow! And David, you say all of our habits really do add up. It can be as simple as eliminating those $3 lattes everyday. Instead, banking that money and eventually you will accumulate some wealth you though you never had.

BACH: Yes, we call it the magic latte factor. And it really can be lattes, it can be cigarettes, it can be bottled water. I just was actually on "Oprah." We did a show where we showed the latte factor and how it adds up to hundreds of thousands of dollars. In many cases, it can be over a million dollars over your lifetime.

And I got an e-mail yesterday morning from a gentleman who said he smoked for 30 years and still, he's young. This guy started smoking in his teens. He's in his mid 40s now. And he said he sat down with his wife and they figured out if they stopped smoking a pack a day each, which they're smoking now, not only will they live longer, but they'll put this money in a retirement account, they can have an extra $500,000 in savings by the time they retire. Hopefully they'll live long enough to reach that age.

WHITFIELD: And there are other ways that people gamble with their money. Peter from Washington is on the telephone with a question about an expensive habit -- Peter.

CALLER: Yes, what I was talking about was I raised nine children when I was -- I got married when I was pretty close to 16 years of age and in the 1950s, you know, we had children, you know no, every year. And I got a divorce, and I haven't seen my children in 30 years. They moved. And I have been single. And I've always been thinking of how I can make some money.

WHITFIELD: So Peter, do you end up playing the Lottery to try and make some money fast? Is that?

CALLER: Yes, I play the Lottery.

WHITFIELD: So, David, what's your advice on that? Is that a good move?

BACH: Unfortunately in America right now, many people are putting money in Lottery ticks instead of putting money into retirement accounts. The likelihood of you winning the Lottery is slim, very, very slim. Yes, we read about these people and see them on Tv, we read about them in the newspaper.

Many people who actually win the Lottery are broke and bankrupt within five years. I will tell you that the Lottery is not the answer. We've seen over $500 billion go into Lottery tickets since it was started back in the '70s. Had that money gone to pay yourself first into retirement accounts automatically, we'd have a country that has trillions of dollars in additional savings. Unfortunately, people are trying to get rich quick. You go poor slowly. It doesn't work. WHITFIELD: All right, David Bach, we're so glad to have you. Hold on a minute. We're going to take a short break and then we're continue with our discussion on how to make a million by retirement.

(COMMERCIAL BREAK)

WHITFIELD: We're talking about turning your money into a million and who better to give advice on that, free advice no less, from the author, David Bach of "The Automatic Millionaire," a bestseller. And David Jack from Illinois is on the telephone. He has a question about his CDs.

BACH: OK, great. Hi, Jack.

CALLER: Hi. I might as well start out and be quick about. I'm about 75 years old. I have all my money in CDs, because I have the philosophy, if you can't afford to lose, to keep out of the stock market. So actually, after what happened several years ago, I guess I picked the right place. I got about 40,000 in CDs now. Fortunately, they've all got a good rate for five years but they're all becoming due next year. What do I do with it?

BACH: They're all coming due at one time?

CALLER: May, April, May and June.

BACH: Here's the truth. The rates are very, very low right now. Obviously, you're a very conservative investor, which is why you've been in Cds. So, the question becomes, what can you do to get a good rate on CDs right now. The answer is not much. They're anywhere from 3, 4, 5 percent.

By the time your CDs come due, however, which is next year, April, May June of next year, my instinct and my gut tells me that we're going to see rates higher, even though Alan Greenspan is holding tight on rates right now, when the election is over, I think you're going to see rates go up. It's possible rates will be higher.

I would also tell you that if you want to be conservative, and we think we're going to see inflation over the next few year, that you can look at what are called Inflation Bonds, I Bonds and also the treasury has inflation bonds. And these are bonds that will hike up, based on whether or not we see inflation. So, those are a very conservative route for you.

But the honest to god truth is there's not a lot to be found in terms of yield. We can't find good rates right now on anything. Corporate bonds, treasure bonds, CDs, Money Market Accounts for the most part are all paying less than 6 percent. If you want to stay conservative with your CDs, the thing to do is hold tight till April, see where rates are.

Great location to go for rates so you can shop rates is a Web site called www.bankrate.com. On that Web site, you can put in your state and you can shop all the rates all over the country but also on your state right now.

WHITFIELD: Good advice. All right, Jack, thanks a lot.

Lindon in New York has a question about debt.

CALLER: Hello?

WHITFIELD: Welcome to the show.

CALLER: I had a question about getting out of debt. I am 31 years old. I lost my job about five months ago. I am maxed out on my credit cards to about $15,000 to $16,000. My rate's at around 29 percent.

BACH: Yikes.

CALLER: Wondering if it works in my favor just to cash out my 401(k). It's the only thing I did in my favor for the last few years. Would I have enough time to start anew and start fresh.

BACH: First of all, my heart goes out to you. I hate to hear this. No, you don't. If you've got any choice, don't cash out your 401(k) plan for a couple of reasons. One, whatever you take out of your 401(k) plan, let's use the example of $10,000, you're 31 years old, you're going to be hit with a penalty fee of 10 percent plus you're going to pay taxes. So, if you take $10,000 out to pay your debt, you really only end up with about five grand and you've lost the next 30 years of compound interest. So it could cost you over 6 figures during your lifetime. That's not your first choice.

Your first choice is to call your credit card company and negotiate with them. 29 percent is highway robbery. We just had a woman call my radio show. She was at 29 percent. We got them to lower her interest rate to 17.5 percent with one phone call. We then called back the next week and got them to take it from 17 percent down to 12. So, the thing to do, call your credit card company. Speak with a supervisor. Do the best you can and negotiate. I think you'll be able to cut your rate in half by simply asking.

WHITFIELD: And David, sometimes it's as simple as when you call the bank, or that creditor you can tell them, you know what I saw XYZ Company who was offering this, can you match this. If not, I'm thinking about consolidating, or moving over to them.

BACH: It really is that simple. And the thing is you want to use XYZ. You want to have a specific name. So, I tell people hold on to your junk mail, hold on to these credit card applications. They're sending a trillion credit card applications a year. Hold on to them, open them up, use those names.

The reason a person gets 29 percent interest is what they're doing is when you pay one day late now they hike you up. So, if you're 18 percent, they hike you up to 22 percent. Pay one day late the next month, they hike you up again. Again, they're taking advantage of you. Don't let them do this. WHITFIELD: Wow, that's a big penalty. All right, let's talk about getting started. Althea in Bloomington, Illinois writes, "what advice do you have for recent college graduates with respect to savings in the years to come?"

BACH: You have to pay yourself first. And the secret is to pay yourself first automatically. You're not going to do it through budgeting, you're not going to it through discipline. The easiest way to honestly get rich in America is when you get your first job, you pay yourself first.

The first hour day of your income, you have that money automatically taken out of your paycheck right into a savings account, a 401(k) plan or a deductible IRA account. If you take the first hour a day off your income, you will be rich and if you start in your 20s or 30s, you can be a multimillionaire.

WHITFIELD: David Bach, thanks so much for joining us and for dodging the traffic, being on the cellphone with us and now boom, we got you on camera, as well.

The book is "The Automatic Millionaire." Just in case all of you have more questions, you can read this book and find out how to make your money turn into millions. Thanks to David Bach, appreciate it -- having you on.

Well, that's all we will have time for right now. Up next on "PEOPLE IN THE NEWS," two of the world's most wanted men, Osama bin Laden and Ayman al-Zawahiri.

Then at 6:00 pm Easter, on "CNN LIVE SATURDAY," remember the movie "Hoosiers," well we're going to talk to the player who made that winning last shot 50 years ago.

And at 7:00 Easterner, "THE CAPITAL GANG" discusses the war on terror a year after the Iraq war again.

And I'll be back after a quick break with a look at the top storise.

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 March 20, 2004 - 16:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDERICKA WHITFIELD, CNN ANCHOR: "Dollar Signs" is straight ahead, but first here what's happening at this hour.
After a fierce battle on the Afghan border, Pakistani forces have captured 100 suspected al-Qaeda members. It's unclear weather Ayman al-Zawahiri, the terrorist groups' second in command, is still in the area.

The power of protest: thousands of people are marching today in anti-war demonstrations. Protests in New York, London, Japan and Australia come after yesterday's one-year mark of the start of the Iraq war.

A call to investigate allegations of corruption in Iraq's oil for food program. U.N. secretary-general Kofi Annan is suggesting an independent probe to look for possible wrongdoing after reports this week that Saddam Hussein illegally reaped billions from the program. The U.N. established the oil for today fram program in 1996 to provide limited oil sales to provide humanitarian needs for Iraqis.

Calls for a recount in Taiwan's razor close election. President Chen Shui-Bian was reelected just 1 day after surviving an assassination attempt. His opponent suggests the attempt on his life gave the president sympathy votes and that the entire race should be nullified.

As Spain mulls its future role in Iraq, the U.S. reflects on lives lost in combat over the past year. One of the first soldiers killed in Iraq received his U.S. citizenship posthumously. Here's Frank Buckley.

(BEGIN VIDEOTAPE)

FRANK BUCKLEY, CNN CORRESPONDENT: A year ago, when the military officers came to the front door of this home in Southern California, Nora Mosquera just knew.

NORA MOSQUERA, FOSTER MOTHER: They didn't have to tell me what it was, I knew that one of the two casualties of that day, one of them was my son. And it was very sad.

BUCKLEY: Lance corporal Jose Gutierrez was killed in action in one of the first engagements of the war.

LILLIAN CARDNES, FOSTER SISTER: Why was it him? And why at the beginning. BUCKLEY: Marine Corps officials later confirmed that Gutierrez was killed by friendly fire. His family members accept that as an accident of war. And they are proud of how Gutierrez came to fight as a U.S. Marine, because he wasn't even from the United States.

ENGRACIA PAZ, BIOLOGICAL SISTER, (through translator): Because he came to give his life for a country that was not his.

BUCKLEY: Engracia Paz was Jose's sister in their native Guatemala. This is the foster family that took him in in America. Jose Gutierrez died on a battlefield far away from either home.

(on camera): His long journey to Iraq began here, in central America. This is where he was born, in Guatemala City, whereby all accounts, he had a very difficult life. His parents died when he was a boy. He was poor. At one point, he literally lived on the streets of this city.

(voice-over): The story of the boy who made it to America only to die in Iraq was front page news in Guatemala. Louise ARodrigez of "Prensa Libre" says one reason readers were so interested, their loved ones are also in America.

LUISA RODRIGUEZ, PRENSA LIBRA: For every ten Guatemalans, four of them has a family in the United States.

BUCKLEY: In Jose's case, he hitchhiked and hopped trains across 2,000 miles to get to the U.S. As a teenager in the care of Casa Alienza, the Central American branch of Covenant House, someone told him that America was the land of opportunity.

MOSQUERA: He came to the United States and he found out that everything that this social worker, American social worker in Guatemala had told him was really true and even more, he was so grateful.

BUCKLEY: Joining the Marine Corps was a job, but family members say, it was also about serving his new country.

CARDNES: He never forgot where he came from, but at the same time, he gave back to the place that gave him so much.

BUCKLEY: He also knew that combat would be dangerous, and before he shipped out, Jose made arrangements.

UNIDENTIFIED FEMALE: He told me that in the event anything bad happened, he wanted to be buried with his parents, in his homeland.

BUCKLEY: And that's why at this dignified cemetery in Guatemala, there is one U.S. Marine who is finally home. Frank Buckley, CNN, Guatemala City.

(END VIDEOTAPE)

WHIFIELD: As out of work Americans look for jobs, analysts are cautiously optimistic. Economic reports this week show there's hope out there, hiring might be picking up. Kathleen Hays has more on employment prospects.

(BEGIN VIDEOTAPE)

KATLEEN HAYS, CNN FINANCIAL CORRESPONDENT: From the factor floor to the trading floor, from college grads to kids who never got out of high school diploma, it seems everyone is worried about finding a job or keeping the one they have. The economy created 360,000 jobs since August but it lost 2.4 million over the past three years. Worker advocates say even people who have jobs are running scared.

ANDREW STETTERN, ANTL. EMPLOYMENT LAW PROJECT: There's a sense of boy, I'm lucky, but if I lost work, I know someone next to me who hasn't been able to get anything but consulting or temp work.

HAYS: The nation's unemployment rate stands at 5.6 percent, just over half the 10.8 percent high hit in December of '82. And the number of people applying for first-time unemployment benefits hit its lowest level in three years, a sign experts say that layoffs are declining, but big pockets of weakness remain.

Eight million are unemployed compared to 5.58 million four years ago, according to the labor department. Four million are working part-time, not because they want to, but because they want find full- time jobs and nearly half a million people are so discouraged they have simply stopped looking for work.

It now takes nearly five months on average to find a job once you've been laid off. Back in 2000 it, took just 3.35 months.

(on camera): It's not just a blue collar problem. Over the past three years, the number of people out of a job for more than five months is up 260 percent in manufacturing, but long-term unemployment is up 350 percent in the once high-flying information technology industry.

(voice-over): There are some bright spots, hire something expected to pick up at small businesses where half of all private sector jobs are created.

WILLIAM DUNKELBERG, NATL. FED. OF INDEPENDENT BUSINESS: They're expecting a lot of sales increases coming over the next six months and they'll need more people to handle that.

HAYS: But it's slow going.

ANDY BUSCH, BANK OF MONTREAL: They need to fill these positions, and yet no one's hiring just yet. So many companies are rebuilding their balance sheet, they're jacking their earnings and everybody's being very, very cautious.

HAYS: So the economy is moving, but...

UNIDENTIFIED MALE: I don't see the jobs market really having turned a convincing corner. It's a train that's moving out of the station but pretty slow.

HAYS: So it looks like it may be awhile before it's all aboard for the American worker. Kathleen Hays, CNN, New York.

(END VIDEOTAPE)

WHITFIELD: Your calls and e-mails next on "Dollar Signs." And, of course, you can still send your questions to dollarsigns@CNN.com, or you can call in, that number is 1-800-807-2620. How to make a million. We'll be right back.

(COMMERCIAL BREAK)

WHITFIELD: Welcome to "Dollars Signs" where we help you make the most of your money. You're expecting a tax refund if you're like millions of Americans. Recent tax cuts are expected to send a record $195 billion in refunds into the wallets and pocket books of Americans. The average refund this year, so far is more than $2,100. That's up 4.4 percent over last year.

While many of you may be already daydreaming about plunking that money down on a flat screen TV or maybe take a cruise to Belize, well there may be better things to do with your cash. Do you know if you start saving $3,000 a year at the age of 26, by the time you retire, you'll be a millionaire?

It's not as difficult as you might think. Our guest today is going to explain how. David Bach is the host of his own radio program called Live Rich With David Bach," and he's the author of the new best seller "The Automatic Millionaire." And David, so glad you're able to be on the phone with us. Sorry we're not able to see you, simply because there's a nasty traffic problem in New York.

RICHARD BACH, AUTHOR: I'm taking the elevator up right now in the CNN building.

WHITFIELD: Good. Well, hopefully, we'll keep you on the line then, during that elevator ride. You know, President Bush is encouraging those who are getting refunds to spend the money, help the economy. You say you need to save it.

BACH: You really do. Of course, they want you to spend the money, but the reality is some of these people who are watching and listening, you need to save the money. And there's two places you need to save it. One, if you're in credit card debt right now, and we know the average family has $10,000 in credit card debt, if you are assuming credit card debt at a 20 percent interest rate, the first place you need to put that money is at least half of it towards the debt and the other half needs to go towards savings. Instead of running out and spending that money, the first person you need to pay is yourself, you need to pay yourself first.

WHITFIELD: Now you need to make a decision on perhaps which credit cards in which to try to put half of that money down on. Do you try to eliminate, if you've got more than one credit card that's high, do you try to eliminate the balance of one altoghether, or do you spread that out over the credit card debt that you have?

BACH: The first thing you do -- and here I am they're running me to the camera right now -- the first thing you do, is you start with what is the highest interest rate credit card. I mean, that's the obvious thing and -- sorry about that.

WHITFIELD: We're trying to put a mike on you, I'm sure, as you're trying to talk on the phone with us.

BACH: You start with the highest rate credit card. Again, shockingly enough, some people who are actually watching right now are going to find out that their credit cards are as high as 29 percent. The first thing is you pay down the debt with that. And now can I officially go off the cellphone, here?

WHITFIELD: I don't know, let's stick with you. Let's wait until we actually see you, because I don't see you yet.

BACH: 29 percent interest, the first thing is focus on those cards. Focus on the cards with the highest interest.

Second thing I'll tell you, this is critical, consolidate these credit cards on to one card. Right now if people are watching they can go to a Web site for example, lowermybills.com, there's a list of credit card companies that will consolidate your debt down to 0 percent interest for the first year. That makes it a lot easier to get out of debt. If you're got credit card at 20 percent, and you're paying the minimum payment, it can take you as much as 40 years to pay that credit card debt off.

WHITFIELD: That's depressing. All right, the other half of the money you said, you need to go straight into savings. But then there's the quandary of what type of savings do I need to get into, a regular savings account, we're looking at 2 percent interest these days.

BACH: The answer is, you need to pay yourself first.

WHITFIELD: Yay! There you are. We're glad to see you now.

BACH: You need to pay yourself first. And the way you pay yourself first is very simple, you go into your benefits department on Monday and you say I want you to take the first hour a day of my income right out of my paycheck, move that directly into my retirement account.

Now, for those people who are getting tax refunds, it's simpler. They can take part of that refund check, they walk down to a bank or a brokerage firm, they can put it in an IRA account.

Now they've done two things, they're paying themselves first, they're saving for the future and they're getting a new tax deduction for the next year. So you're actually getting a tax refund and now you're able to use it as a tax deduction for the next year.

WHITFIELD: And it's $3,000 you can put in an I.R.A. now.

BACH: That's right. And for some people, if you get it early, because you filed early you have until April 15 to fund an I.R.A. account for last year. So, that might even increase your deduction more, you may get more tax refund by taking your current check, funding that deductible IRA account and then next year, you can always amend the tax return and get money back for last year.

WHITFIELD: Wow! And David, you say all of our habits really do add up. It can be as simple as eliminating those $3 lattes everyday. Instead, banking that money and eventually you will accumulate some wealth you though you never had.

BACH: Yes, we call it the magic latte factor. And it really can be lattes, it can be cigarettes, it can be bottled water. I just was actually on "Oprah." We did a show where we showed the latte factor and how it adds up to hundreds of thousands of dollars. In many cases, it can be over a million dollars over your lifetime.

And I got an e-mail yesterday morning from a gentleman who said he smoked for 30 years and still, he's young. This guy started smoking in his teens. He's in his mid 40s now. And he said he sat down with his wife and they figured out if they stopped smoking a pack a day each, which they're smoking now, not only will they live longer, but they'll put this money in a retirement account, they can have an extra $500,000 in savings by the time they retire. Hopefully they'll live long enough to reach that age.

WHITFIELD: And there are other ways that people gamble with their money. Peter from Washington is on the telephone with a question about an expensive habit -- Peter.

CALLER: Yes, what I was talking about was I raised nine children when I was -- I got married when I was pretty close to 16 years of age and in the 1950s, you know, we had children, you know no, every year. And I got a divorce, and I haven't seen my children in 30 years. They moved. And I have been single. And I've always been thinking of how I can make some money.

WHITFIELD: So Peter, do you end up playing the Lottery to try and make some money fast? Is that?

CALLER: Yes, I play the Lottery.

WHITFIELD: So, David, what's your advice on that? Is that a good move?

BACH: Unfortunately in America right now, many people are putting money in Lottery ticks instead of putting money into retirement accounts. The likelihood of you winning the Lottery is slim, very, very slim. Yes, we read about these people and see them on Tv, we read about them in the newspaper.

Many people who actually win the Lottery are broke and bankrupt within five years. I will tell you that the Lottery is not the answer. We've seen over $500 billion go into Lottery tickets since it was started back in the '70s. Had that money gone to pay yourself first into retirement accounts automatically, we'd have a country that has trillions of dollars in additional savings. Unfortunately, people are trying to get rich quick. You go poor slowly. It doesn't work. WHITFIELD: All right, David Bach, we're so glad to have you. Hold on a minute. We're going to take a short break and then we're continue with our discussion on how to make a million by retirement.

(COMMERCIAL BREAK)

WHITFIELD: We're talking about turning your money into a million and who better to give advice on that, free advice no less, from the author, David Bach of "The Automatic Millionaire," a bestseller. And David Jack from Illinois is on the telephone. He has a question about his CDs.

BACH: OK, great. Hi, Jack.

CALLER: Hi. I might as well start out and be quick about. I'm about 75 years old. I have all my money in CDs, because I have the philosophy, if you can't afford to lose, to keep out of the stock market. So actually, after what happened several years ago, I guess I picked the right place. I got about 40,000 in CDs now. Fortunately, they've all got a good rate for five years but they're all becoming due next year. What do I do with it?

BACH: They're all coming due at one time?

CALLER: May, April, May and June.

BACH: Here's the truth. The rates are very, very low right now. Obviously, you're a very conservative investor, which is why you've been in Cds. So, the question becomes, what can you do to get a good rate on CDs right now. The answer is not much. They're anywhere from 3, 4, 5 percent.

By the time your CDs come due, however, which is next year, April, May June of next year, my instinct and my gut tells me that we're going to see rates higher, even though Alan Greenspan is holding tight on rates right now, when the election is over, I think you're going to see rates go up. It's possible rates will be higher.

I would also tell you that if you want to be conservative, and we think we're going to see inflation over the next few year, that you can look at what are called Inflation Bonds, I Bonds and also the treasury has inflation bonds. And these are bonds that will hike up, based on whether or not we see inflation. So, those are a very conservative route for you.

But the honest to god truth is there's not a lot to be found in terms of yield. We can't find good rates right now on anything. Corporate bonds, treasure bonds, CDs, Money Market Accounts for the most part are all paying less than 6 percent. If you want to stay conservative with your CDs, the thing to do is hold tight till April, see where rates are.

Great location to go for rates so you can shop rates is a Web site called www.bankrate.com. On that Web site, you can put in your state and you can shop all the rates all over the country but also on your state right now.

WHITFIELD: Good advice. All right, Jack, thanks a lot.

Lindon in New York has a question about debt.

CALLER: Hello?

WHITFIELD: Welcome to the show.

CALLER: I had a question about getting out of debt. I am 31 years old. I lost my job about five months ago. I am maxed out on my credit cards to about $15,000 to $16,000. My rate's at around 29 percent.

BACH: Yikes.

CALLER: Wondering if it works in my favor just to cash out my 401(k). It's the only thing I did in my favor for the last few years. Would I have enough time to start anew and start fresh.

BACH: First of all, my heart goes out to you. I hate to hear this. No, you don't. If you've got any choice, don't cash out your 401(k) plan for a couple of reasons. One, whatever you take out of your 401(k) plan, let's use the example of $10,000, you're 31 years old, you're going to be hit with a penalty fee of 10 percent plus you're going to pay taxes. So, if you take $10,000 out to pay your debt, you really only end up with about five grand and you've lost the next 30 years of compound interest. So it could cost you over 6 figures during your lifetime. That's not your first choice.

Your first choice is to call your credit card company and negotiate with them. 29 percent is highway robbery. We just had a woman call my radio show. She was at 29 percent. We got them to lower her interest rate to 17.5 percent with one phone call. We then called back the next week and got them to take it from 17 percent down to 12. So, the thing to do, call your credit card company. Speak with a supervisor. Do the best you can and negotiate. I think you'll be able to cut your rate in half by simply asking.

WHITFIELD: And David, sometimes it's as simple as when you call the bank, or that creditor you can tell them, you know what I saw XYZ Company who was offering this, can you match this. If not, I'm thinking about consolidating, or moving over to them.

BACH: It really is that simple. And the thing is you want to use XYZ. You want to have a specific name. So, I tell people hold on to your junk mail, hold on to these credit card applications. They're sending a trillion credit card applications a year. Hold on to them, open them up, use those names.

The reason a person gets 29 percent interest is what they're doing is when you pay one day late now they hike you up. So, if you're 18 percent, they hike you up to 22 percent. Pay one day late the next month, they hike you up again. Again, they're taking advantage of you. Don't let them do this. WHITFIELD: Wow, that's a big penalty. All right, let's talk about getting started. Althea in Bloomington, Illinois writes, "what advice do you have for recent college graduates with respect to savings in the years to come?"

BACH: You have to pay yourself first. And the secret is to pay yourself first automatically. You're not going to do it through budgeting, you're not going to it through discipline. The easiest way to honestly get rich in America is when you get your first job, you pay yourself first.

The first hour day of your income, you have that money automatically taken out of your paycheck right into a savings account, a 401(k) plan or a deductible IRA account. If you take the first hour a day off your income, you will be rich and if you start in your 20s or 30s, you can be a multimillionaire.

WHITFIELD: David Bach, thanks so much for joining us and for dodging the traffic, being on the cellphone with us and now boom, we got you on camera, as well.

The book is "The Automatic Millionaire." Just in case all of you have more questions, you can read this book and find out how to make your money turn into millions. Thanks to David Bach, appreciate it -- having you on.

Well, that's all we will have time for right now. Up next on "PEOPLE IN THE NEWS," two of the world's most wanted men, Osama bin Laden and Ayman al-Zawahiri.

Then at 6:00 pm Easter, on "CNN LIVE SATURDAY," remember the movie "Hoosiers," well we're going to talk to the player who made that winning last shot 50 years ago.

And at 7:00 Easterner, "THE CAPITAL GANG" discusses the war on terror a year after the Iraq war again.

And I'll be back after a quick break with a look at the top storise.

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