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CNN Live Event/Special
'Financial Security Watch'
Aired February 29, 2008 - 12:02 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, HOST: Welcome to CNN FINANCIAL SECURITY WATCH.
I'm Gerri Willis.
All this week during this hour we have been focusing on what really matters you and your money -- your house, your debt, your savings, your job. Over the next hour we'll give you the tools and the tips and the strategies that will help you make sense of your money. Best of all, call in and we'll answer your questions live.
CNN FINANCIAL SECURITY WATCH starts right now.
All right. You've probably noticed it's Leap Day. And with that extra day in February, CNN is bringing you an extra packed day of political coverage. So we got to thinking, hey, CNN is all about politics; FINANCIAL SECURITY WATCH is all about your money. We decided to mix the two and talk about what you say is the number one issue in this election -- that's the economy.
CNN Chief National Correspondent John King is part of the best political team on television. He's in Cincinnati, Ohio, just days ahead of the big contest there.
John, how are the candidates responding to the polls that say Americans' number one concern is the economy?
JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Gerri, there is no question that concern -- and it is a rising concern -- has dramatically changed the campaign for president. If we went back a year ago in time, Iraq was the number one issue for the voters and the war on terrorism. But the economy is now the dominant issue, not only in Midwestern states like Ohio, that are grappling with rising gas prices, the manufacturing crisis, but across the country voters are saying it is the economy that matters most to them.
Now, if you just listen to the headlines from the candidates, John McCain would tell you that, well, the Democrats would raise your taxes. And either Barack Obama or Hillary Clinton will tell you, especially over the last few weeks here in Ohio, that the Republicans will keep entering into these international trade deals that are costing Americans their jobs.
As you know, it is much, much more complicated than that. But whether the issue is taxes, whether the issue is the mortgage crisis, whether the issue is energy and gas prices, one of the big things we do know in this campaign, no matter who the Democratic candidate is, John McCain is likely to be the Republican candidate. There will be a huge debate about the role of government, how much should the government intervene, say, in the mortgage crisis. What is the government's role in taxes and spending?
It will be a defining issue from here to November, Gerri, without a doubt.
WILLIS: John King, thank you for that part of the best political team on television.
CNN has complete coverage from the March 45th contests in Ohio, Rhode Island, Texas and Vermont, more people covering more political stories than any other network. Stay with the best political team on television for all the results from the CNN Election Center starting at 7:00 p.m. Eastern on Tuesday.
And I'm joined now by Knight Kiplinger of Kiplinger's Personal Finance, and Hilary Kramer, AOL money coach and author of "Ahead of the Curve."
All right, Knight, let's start with you.
Have the candidates adequately addressed plans for the economy? Lots of questions out there.
KNIGHT KIPLINGER, EDITOR-IN-CHIEF, KIPLINGER'S PERSONAL FINANCE: At this stage in the race, candidates are trying very hard not to be too specific, because specificity will appeal to certain parts of the electorate and turn off other parts of the electorate. And taxes are a classic example.
It is quite clear that McCain would like to leave tax rates where they are right now for everybody, and it's also quite clear that Clinton and Obama would raise the tax rate for upper income people back to the 40 percent it used to be. They would like to raise the 15 percent rate on dividends and capital gains to the 20 to 25 percent range. Now, that will appeal to many middle income people who don't think wealthy people pay enough in taxes, but it will turn off a lot of highly motivated upper middle income and upper middle income voters at the same time.
WILLIS: All right, Knight. Is there any candidate out there who really stands out though as the consumer candidate for everybody?
KIPLINGER: No, there really isn't, because consumers are not a monolith. They are different in their political philosophies, they are different in their income levels by occupation.
Some Americans are doing exceptionally well in this economy because they are in strong sectors -- export-oriented sectors, aerospace, medical equipment, pharmaceuticals, chemicals. Other people, of course, are doing very badly because their employment sectors are doing badly. So it's very, very hard to generalize.
WILLIS: Hilary, a lot of these candidates come up with big plans for the entire nation when it comes to the economy, but which of these candidates are really talking to individuals? HILARY KRAMER, AUTHOR, "AHEAD OF THE CURVE": Well, it's obviously the Democrats. I mean, this is Hillary and Obama. They are so much more prepared and better to address this immediate crisis that's taking place in the country.
Now, yes, there many different issues for many different kinds of Americans, but everyone is feeling this economic crisis right now. And so, really, Hillary and Obama, with a $30 billion mortgage assistance package, or $250 tax incentives that can be deposited overnight, those are the kinds of incentives we need because it's an immediate, immediate issue facing Americans.
WILLIS: Well, speaking of the stimulus package, Knight, you know, it's an interesting question.
Bush yesterday, the president saying, well, hey, we want to wait and see whether the first stimulus package works before we go and put in place the second stimulus package.
Do you agree with that? Do you think this first stimulus package -- we should be getting those checks in mid-May. Is it enough to write the economy?
KRAMER: We need additional checks to be sent out. I mean, it was a good start, and I feel that it was the best -- I mean, it was very fast. It was a very fast move that was made, but we need more checks, and we need them quickly, and then we can worry, Gerri, about the long-term issues.
So McCain is thinking about cutting taxes on corporations. That's something for maybe a long-term fix. It's really the short term that we need.
WILLIS: Thank you, Hilary.
Thank you, Knight.
We're here to help answer some of your questions about money. Give us a call at 866-792-3399. Get out that pencil. It's 866-792- 3399.
Or you can send us an e-mail. We're getting tons of e-mail -- FSW@CNN.com.
We'll get to your phone calls a little later in the show. And everyone who we put on the program will receive a copy of my new book -- you're seeing it right there -- "Home Rich."
Coming up on CNN's FINANCIAL SECURITY WATCH, losing a job, it's a horrible experience. And so many Americans are going through it right now. But there is hope. We will check in with Rick Sanchez at an unemployment office.
And how to save money by keeping a diary. We'll talk to one woman who will tell you how to do just that.
WILLIS (voice over): From high unemployment to soaring foreclosure rates, "recession" is the word of the hour. But what does it mean?
According to the National Bureau of Economic Research, a recession is a broad-based economic decline that lasts more than a few months. The decline will be visible in our Gross Domestic Product, the GDP; income; industrial production; employment; and wholesale and retail sales.
But declaring a recession takes time. Six to 18 months, in fact, and whether we are in one is still being debated. We may not know until July at the earliest, but there a few good indicators.
The Fed's trend of lowering rates is a sign of an economic slowdown.
Is the economy producing jobs? Job loss is also a sign of economic weakness.
Is the American public saving more? If so, it usually means we are worried about the economy. The good news is, the past two recessions have lasted only eight months each. Some economists claim that's because the Federal Reserve has been more proactive and, given the recent rate cuts, that's some reassurance.
WILLIS: Welcome back to FINANCIAL SECURITY WATCH.
For a lot of folks, it doesn't get any worse than losing their job. It's scary. And a lot of people don't know where to turn.
CNN's Rick Sanchez is out and about all week for us feeling the pulse of America. And he is live at Georgia Department of Labor Career Center.
Good to see you, Rick.
RICK SANCHEZ, CNN CORRESPONDENT: Unfortunately, we have to start with some news, Gerri. The numbers are hot off the press, at least for the state of Georgia.
Unemployment has actually gone up. In fact, the numbers that we're being told are coming out just today seem to indicate, as a matter of fact, that they're seeing something they haven't seen in 16 years in Georgia. That's the biggest spread from one period to another, a one-point increase.
Joining us now is Michael Thurmond. He's the commissioner of labor for the state of Georgia.
This is not a good sign, is it? MICHAEL THURMOND, COMMISSIONER, GEORGIA DEPT. OF LABOR: No, not at all. This is a very difficult job market for Georgia job seekers as the credit crunch and the housing prices is having a negative impact on our state.
SANCHEZ: So what do you do here? And what are you telling people? And what kind of increase are you seeing in people coming to you saying, look, I'm out of a job, I've been laid off?
THURMOND: Well, here at the career center, first of all, we often encourage them and assistance to help people find new jobs or new careers. We make sure that they understand that even though some industries are suffering -- housing -- there are others that might present an opportunity.
SANCHEZ: Let me ask you a question about the people who are being laid off right now. I would guess because of the housing situation, you're going to see people in manufacturing that are getting hit really hard. Are you seeing that?
THURMOND: Manufacturing, also real estate, loan closings, mortgage services. Anything that's related to the housing industry is being slammed by the credit crunch.
SANCHEZ: Final question. Do you expect things are going to get better or worse between now and the end of the year?
THURMOND: Unfortunately, I think the tough times will be here for a while. It may be 12 to 18 months before we see a light at the end of the tunnel.
SANCHEZ: Commissioner, thank you so much for taking the time to talk to us.
THURMOND: Thank you, Rick.
SANCHEZ: We certainly appreciate it.
What we'll do in just a little bit, Gerri, is we're going to put a panel together of some of the folks who have actually come here who have been looking for work to really get a perspective from them on what they are going through.
Gerri, let me take it back to you.
WILLIS: Rick, thanks for that sobering news. And we look forward to seeing you later in the hour.
Now you get a chance to weigh in. For that, let's go over to Poppy Harlow on the money.com set for today's "Quick Vote" question.
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
Well, with jobless claims on the rise, as we just heard, and companies tightening their belts, it's getting really hard for Americans to find work. Recently, Macy's said it's cutting more than 2,500 jobs. Yahoo! and Starbucks are cutting jobs also.
So, not only is the U.S. economy facing a downturn and a credit crunch, but now more people are without jobs. So with all this bad news, we really want to know what you think.
So here's today's "Quick Vote" question.
Do you feel secure in your job? Yes or no?
Log on to cnnmoney.com to vote in our quick poll. We'll be back a little later in the show with your answer.
WILLIS: Thanks for that, Poppy. We'll see you a little later.
Now, the economy is the number one issue among voters. And break that down, in the number one issue within the economy, it is mortgages. Namely, the mortgage meltdown.
CNN's Allan Chernoff has more.
CHERNOFF (voice over): Jillian Simmons is a single mother with a big worry.
JILLIAN SIMMONS, HOMEOWNER: This is my home. This is my castle.
CHERNOFF: She is saddled with a mortgage she can barely afford, and her monthly payments are scheduled to jump higher this summer.
SIMMONS: Loosing my home, that is my biggest fear.
CHERNOFF: An unscrupulous broker put her into a risky mortgage. And yet another one refinanced her last year into a new loan that only added to her debt burden.
SIMMONS: As you see there, my payments went up.
CHERNOFF: Jillian, a U.S. citizen who emigrated from Trinidad is a classic victim of predatory lenders who have put tens of thousands of Americans in danger of losing their homes.
(on camera): The mortgage crisis may prove to be a very important issue in the presidential election. Among the states that had the highest foreclosure rates are California, Florida, Michigan, Ohio and Indiana. Together, they have nearly half the electoral votes needed to elect the next president.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We need more disclosure and accountability in the housing market.
CHERNOFF (voice over): Barack Obama and Hillary Clinton both endorsed a federal fund to support homeowners who are in over their heads. Senator Clinton also favors a foreclosure timeout, longer than the one-month grace period leading mortgage lenders recently announced.
SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: I'll have a moratorium for 90 days on foreclosures while we try to figure out what we're going to do to keep people in their homes.
CHERNOFF: One reason Jillian says she favors Senator Clinton.
SIMMONS: I think Hillary can do a terrific job. I think I have enough faith in her to turn things around.
CHERNOFF: Republican John McCain, as well as Mike Huckabee, prefer to see the private sector work out the mortgage mess rather than having government provide aid to borrowers in trouble.
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We want Americans to be able to afford their home loan mortgage. We want to be able to have the lender and the borrower sit down.
CHERNOFF: Major lenders say they're willing to sit down in trying to work out terms of customers to make it easier for them to afford their mortgages and remain in their homes. But that's only going to work with some homeowners.
Analysts estimate that 1.5 million American households will face a financial squeeze this year as their mortgage interest rates move upwards. So this issue could very well be a deciding factor to voters like Jillian Simmons, who are trapped in a very expensive mortgage -- Gerri.
WILLIS: It's a tough story. Thank you, Allan.
Coming up next on CNN's FINANCIAL SECURITY WATCH, we'll take your phone calls and your e-mails.
Plus, a great way to save some serious money. Here's a hint: it involves a diary. The full story when we come right back.
WILLIS: Time now to check back in with Natalie McNeal. Natalie's a reporter for "The Miami Herald," and when we spoke to her earlier this week, she told us how she's tracking every single dollar she is spending in the month of February, believe it or not.
Natalie, you have just a few hours left this month. What have you learned?
NATALIE MCNEAL, "MIAMI HERALD": I've learned that I can budget pretty well. You don't need all the extra things in life.
WILLIS: Well, that's impressive.
I've got to tell you, I think this is a great experiment that you have been doing, and I'm really impressed with how you're recording everything that's going on. What's the take away here? What did you learn?
MCNEAL: Basically, I learned that there's a lot of things I can do myself. I can, you know, do my hair at home. I can get a girlfriend to help me out, do my hair at home. I can just do a lot of different things without having to spend money to do it. And there's a lot of free things that you can do for fun.
WILLIS: Did you have weak moments any time when, you know, you might have spent a little more than you meant to?
MCNEAL: Well, one of my weak moments was this week when one of my favorite artists, Erykah Badu, had her CD drop, and I couldn't buy it. I was really hurt about that, you know, because you have to tell yourself, no, you are not spending any money on any extras. It was very bare bones this month. So...
WILLIS: Oh. Well, that's sad. Well, you might be able to borrow it from a friend or something.
WILLIS: OK. So, are you going to stick with this? Is this going to be a permanent part of your life?
MCNEAL: Yes, this is going to be pretty permanent. I think I'm going to start getting my hair done again. Maybe I'll go every six to eight weeks instead of every other month. But other than that, I enjoyed the way my bank account looked, and the tradeoff was worth it.
WILLIS: The tradeoff is worth it.
So, tell me, are you starting to put money aside? Have you moved on to that next stage where now you feel like you can really save?
MCNEAL: Exactly. Before I always felt a little bit stressed about my account, but I now I feel a lot more confident in it. And I can go ahead and just put extra money toward my credit card bill, or to other things, or to savings.
WILLIS: What about the "Frugalista Law?" I hear you now have some laws that other people can follow.
MCNEAL: Exactly. Well, we're still in the middle of crafting legislation, but basically what we're doing is saying, hey, you shouldn't pay to go into the club. And you should not go to vending machines. You should bring fruit with you everywhere you go.
So I want all the readers comment and let me know what we should say for Frugalista Law.
WILLIS: Hey, Natalie, did you have a question for me?
MCNEAL: I wanted to know -- I contribute 6 percent of my income to my 401(k). And I'm a little concerned about retirement because of my age group. People are saying I have to work until I'm 70. And I don't want to do that.
So can you help me with my 401(k) and what I should be doing?
WILLIS: Well, you just want to contribute the max. At your age, you can contribute just over $15,000 a year, $15,500.
Make sure you are doing it so you get all the free money from your employer. And I have to tell you, Natalie, a lot of folks in your situation are also saving outside of that as well, setting up a little money outside, because by the time you do retire, your health care costs will spiral.
So, if you get started now though, you're not going to have to worry about it. So just be consistent and set aside money each and every paycheck.
It was great talking to you this week. Keep in touch with us and let us know how this month is changing as you go forward.
Thanks so much, Natalie.
MCNEAL: Thanks, Gerri, for having me.
WILLIS: Coming up next on CNN's FINANCIAL SECURITY WATCH, we hear from real people about the very real issues they are dealing with. Ali Velshi is talking to Texans about their biggest money problems, and Rick Sanchez is talking to folks who have lost their jobs.
That and your phone calls right after your latest headlines.
DON LEMON, CNN CORRESPONDENT: She's hoping for wins there and in Ohio to help her make a comeback. More news at the top of the hour. Now time for CNN FINANCIAL SECURITY WATCH with Gerri Willis.
GERRI WILLIS, CNN ANCHOR: Thanks for that, Don.
As Don just told you, we are just four day away from the big March 4th primary. Texas is the big prize and CNN's Ali Velshi has spent the past week traveling all around the state in the CNN Election Express.
Ali, Americans say the economy is the number one issue. Is that what they're telling you there?
ALI VELSHI, CNN CORRESPONDENT: By a long shot, Gerri. Just like you've been doing this show every day this week at 12:00 Eastern, it's corresponded with such a big news week for people's money. This is what we've been hearing all week. We've been hearing about inflation. We're been hearing about gas prices. We've been hearing about the economy in general. And we've been asking people what they think, what they feel about, traveling with the CNN Election Express, as you can see over my shoulder.
One of the things that was most interesting is, as oil prices surge above $100 a barrel this week and set new records, we were asking people about how they feel it's affecting the entire economy. Then President Bush said that he didn't think that we were in a recession. He thought we were in a slowdown, not a recession. I ran into people here in the streets of San Antonio who disagreed with that. Here's what they told me.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Yes, I'm pretty sure it is in a recession, especially looking at the American dollar compared to the euro. And I think there many signs for America to be in a recession.
UNIDENTIFIED MALE: I think the economy is good so far. You know, recession means bad, huh.
UNIDENTIFIED MALE: It's going down the tubes. We're having, again, the same thing that we used to see in the 70s with a rough economy, a slower economy, loss of jobs and inflation at the same time.
UNIDENTIFIED MALE: And I agree with the president. We're not in a recession. All these people need to stop doom saying about the economy. The oil prices. Everything would be OK.
(END VIDEO CLIP)
VELSHI: I asked that last gentlemen whether he thought we're the problem, the media, because, you know, we've had criticism about this in the last few months about people saying it's the media talking about recession and economic downturns. I must say, Gerri, being out here, that doesn't seem to be the case. People are aware. They know that their milk, their bread, their cheese, their gasoline, all of that is costing them more than their increase in their salaries and they are making their own decision about pulling back on spending.
So that's an interesting fact, too, people seem to be very in touch with it. They're not really waiting for our reports on what inflation was last year or what the economy's actually doing.
WILLIS: As usual, consumers are ahead of the story.
Hey, Ali, what have you got coming up on "Your Money" this weekend?
VELSHI: Well, we're talking to T. Boone Pickens, the legendary oil man, about a major investment he's making right here in Texas with respect to wind energy. He thinks it's a great investment and he thinks that we are going to push toward more and more alternative energy. We're also going to talk to people about a topic you know very well, Gerri, and that is, what happens if your mortgage is more valuable than the price of your home. How do you get out from under that? What are your actual options? We'll be talking about the economy generally, but specifically how you can do something to help yourself out of a downturn in the economy.
WILLIS: Ali, thanks for that and we'll be looking forward to "Your Money."
All week Rick Sanchez has been talking to real people about the very real issues they're facing. Very few issues are tougher than losing your job. And a lot of folks are judging by the higher than expected jobless claims reported this week. Rick is at the Georgia Department of Labor Careers Center.
Hey there, Rick.
RICK SANCHEZ, CNN CORRESPONDENT: How are you, Gerri?
Well, 4.9 is the number for January in terms of unemployment for the entire country. And all signs seem to indicate that it's probably going to be eking up a little bit. That's not good.
But, you know, all week long we've been saying this. The numbers are one thing. The people are what really count with these stories. So we've amassed three people, Randy, Marveena (ph) and Paula, who are good enough to join us today to talk about their situation. All three of you are unemployed. Emotionally, is it tough?
UNIDENTIFIED FEMALE: Yes.
UNIDENTIFIED MALE: Yes.
UNIDENTIFIED FEMALE: Yes.
SANCHEZ: How so?
UNIDENTIFIED MALE: Well, if you're here, you didn't choose to be unemployed, more than likely. And when you're looking for work, sometimes you have to make choices to whether you're going to take something you think is beneath you or below you or below your skill set and sometimes that makes you question your abilities or your skills or what your career has lead you to.
SANCHEZ: Do you feel embarrassed?
UNIDENTIFIED FEMALE: Absolutely embarrassed.
UNIDENTIFIED FEMALE: Yes.
SANCHEZ: So, you know, it kind of takes some guts to come here and talk to a national audience about what you're going through, doesn't it?
UNIDENTIFIED FEMALE: Yes, because you have your family, your friends that may not even know that you're unemployed. Some of my friends don't even know that I'm unemployed.
SANCHEZ: And there, really, there's nothing to be ashamed of because it's obviously happening to an awful lot of people. And the fact that you're here means that you're trying to pick yourself back up, right?
UNIDENTIFIED FEMALE: Yes. Definitely.
SANCHEZ: What's the best tip that you could give to people who possibly are going through this situation right now who are watching this?
UNIDENTIFIED FEMALE: Be optimistic and have more than one resume.
UNIDENTIFIED FEMALE: I would say, never give up. Never give up.
UNIDENTIFIED FEMALE: Right.
UNIDENTIFIED MALE: Yes, and take advantage of any opportunities that you have, any networking opportunity and your resources available to you, whether it's through a government agency or a friend because . . .
SANCHEZ: What's it like that first day, by the way? I'm thinking as I'm listening to you, Randy, you've been working for a long, long time. Suddenly you wake up and you don't have a job. What's it like that day?
UNIDENTIFIED MALE: You can't feel your legs initially.
UNIDENTIFIED FEMALE: It's depressing.
UNIDENTIFIED MALE: Yes. And then after that, you kind of -- you go through like, you know, the stages of, like when you lose a loved one or something like that. You know, you get angry and you're depress and you're mad and, you know, depending on where you are in your job search.
SANCHEZ: And it's OK to go through that as long as you understand that it's a natural process that everyone's going to go through, right?
UNIDENTIFIED FEMALE: Exactly.
SANCHEZ: All right. Enough about the past. Let's talk about the future.
You come to this place. This used to be called that unemployment place, right? You'd come here, you'd put your name on the list and you'd pick up a check every week.
UNIDENTIFIED FEMALE: Right.
SANCHEZ: Not anymore.
UNIDENTIFIED FEMALE: No.
SANCHEZ: Now people like you come here all the time. You get on the computer. You're looking for work. You try to improve yourself, right?
UNIDENTIFIED FEMALE: That's correct.
SANCHEZ: How's that going for you, Marveena.
UNIDENTIFIED FEMALE: Well, I found it to be very helpful. The Department of Labor has been very helpful to me. They have given me access to a computer when I didn't have one, copying, faxing and helping me to find a new career as a paralegal.
SANCHEZ: You actually can improve your skills here, right?
UNIDENTIFIED FEMALE: Yes, that's right.
UNIDENTIFIED MALE: Sure. Sure.
SANCHEZ: Like what?
UNIDENTIFIED FEMALE: They teach you about how to use the resume for the proper kind of tool to use for your different jobs that you might be having. One type of resume might not work in one situation. So you tweak your resume to work for the position.
SANCHEZ: Do you talk to the counselors here at the beginning? They get you through some of the emotional stuff, get you back to the point where you know to look and how to be able to get in there?
UNIDENTIFIED MALE: And a lot of those guys have gone through the same thing themselves. They were looking for work before they got this job, a lot of them. They'll share their own personal experiences and they'll say, hey, listen, I was sitting in the exact same seat you were, you know, six months ago.
SANCHEZ: Final question. Angry at the situation, the government, the people who perhaps have created this situation?
UNIDENTIFIED FEMALE: Yes.
UNIDENTIFIED MALE: Talk about my employer.
SANCHEZ: Just your employer. Politicians? Washington? No?
UNIDENTIFIED FEMALE: No, not for me.
UNIDENTIFIED FEMALE: I want change.
SANCHEZ: You want change.
UNIDENTIFIED FEMALE: I'm like Obama says, I want change.
SANCHEZ: I kind of have a feeling who you may be talking about when you use that catch word. Thanks so much. It's very kind of you all. I wish you really the best of luck.
UNIDENTIFIED FEMALE: Thank you.
SANCHEZ: All right. Take care.
There you have it, Gerri. The people speak. And it's a tough situation. But as you see, they're smiling about it.
WILLIS: That's impressive. An impressive group of people. Love to see the fact that they're turning it all around and doing it on their own.
Coming up on CNN's FINANCIAL SECURITY WATCH, you, your phone calls, your e-mails. We're giving you answers to all your money troubles. The number, 866-792-3399. Stay with us.
WILLIS: CNN's FINANCIAL SECURITY WATCH is all about you and making sure you have the latest information on navigating the crazy world of managing your house, your job, your savings and your debt. So now with that in mind, we want to turn to your phone calls and your e-mails, bringing in Mark Zandi of Moody's economy.com, Knight Kiplinger of Kiplinger's Personal Finance and AOL money coach Hilary Kramer.
Thanks, guys, for being here.
Let's go to that first caller. We have Mark from North Dakota.
Mark, what's your question?
CALLER: Hello, Gerri. Well, my question is, that strangely enough I understand that it reflects negatively on an individual's credit rating when one closes a couple of credit cards that have not held an excessive balance. To what degree is that valid? If you close a few credit cards or something that you're not using, that do not currently have a balance without negatively impacting your adversely impacting your credit rating.
WILLIS: OK, Mark, let us answer your question here. I'm going to go to Hilary first?
What's your response, closing credit cards, good idea, bad idea?
HILARY KRAMER, AUTHOR, "AHEAD OF THE CURVE": Well, we all know that with the credit companies, the problem is, anything we do, even if we have a background check, it becomes part of our record. So what you can do, if it does become an issue and it looks like it's a credit problem, you can appeal and that process has become easier today because it's very important to have a clear credit rating.
WILLIS: You know, the one thing that I would say, Mark, that you want to pay attention to on this topic is, it's all about how long you've had credit. That's an issue here. So if you close an account that you've had for the longest part of your life, that's a negative. Yes, you can close credit accounts, but make sure they're paid off in full and make sure it's not the oldest credit card you have.
I want to read an e-mail. This one from Kay in Pennsylvania. She says, "I don't have great credit, but I refi'd two years ago and now it went to an ARM that is at an 11.25 percent." Very high. "I have made two years of on time payments. Where can I find help to refinance so I don't lose my home in the future. Everyone says there is help out there for people struggling, but I'm having a hard time finding it."
Knight, jump in here. You know, this isn't just Kay's question. A lot of people have this question.
KNIGHT KIPLINGER, EDITOR-IN-CHIEF, KIPLINGER'S PERSONAL FINANCE: It really -- it depends on how much equity she has in the house. If she has 10 to 20 percent equity, if her credit rating is satisfactory, there is mortgage money out there for these refinancings. But people are going to be looking much more cautiously at her ability to carry the mortgage. As we all know, the mortgage mess started when credit was extended to people who could not afford it or they bought too much house. They should not have bought that house in the first place. But if somebody has reasonable equity and good employment prospects and is current on other bills, there is good mortgage money out there.
WILLIS: And if you don't, I mean, 11.25 percent is a lot of money to be paying on a mortgage.
KIPLINGER: It's outrageous.
WILLIS: It's time to, you know, fix your credit rating and make sure you apply again for a mortgage if you're not getting what you like out there because that's just too much money to be paying. You need a better loan. I would say it's time to refi.
I just want to bring in Mark Zandi from economy.com. I know you've been looking so intensely at what's going on in the housing market, but now you're saying it's having carry over into credit cards. How so?
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: Well, obviously, a lot of households are having trouble making payments on their mortgages are having trouble making payments on everything else. Their auto loans and their credit cards. Many people who had been borrowing very heavily against their home through home equity lines of credit or closed end second mortgages can't do that now because of the tightening in credit standards and because of the fall in housing value. So now they're turning back to their credit cards and borrowing very aggressively on their cards. Hopefully they're being prudent, but I'm fearful that they're using the card as a way to pay for basic necessities. And ultimately that's going to be a problem. WILLIS: Well, we'll be addressing some of those questions coming up. Mark, Knight and Hilary, stick around. We're going to get right back to your phone calls and e-mails right after this break.
Plus, the results of your cnnmoney.com poll when CNN's FINANCIAL SECURITY WATCH comes right back.
RANDY DELLINGER, (singing): Inflation, inflation is wearing me down. My paycheck buys this (INAUDIBLE). Inflation, inflation that hidden taxation.
WILLIS: Can you believe that. Somebody sent us in a song. FINANCIAL SECURITY WATCH has been getting really a great response from viewers like this fellow, Randy Dellinger, who was so inspired by inflation, of all things, that he sent us a sample of his musical melancholy over money.
Well, let's get right back to your phone calls and your e-mails. Our first phone call is from Christine (ph) in Illinois and she's going to be helped by our panelist here, Mark Zandi, Knight Kiplinger and we have one more panelist, Hilary Kramer, my apologies.
Go right ahead, Christine.
CALLER: OK. I'll be getting 10 years of past Social Security disability in one lump sum. I have no retirement and I need to know what to do with the money. I want to invest half of it and possibly use half for like a monthly income.
WILLIS: All right. So, lump sum. What do you with it?
Knight, weigh in.
KIPLINGER: I would invest very conservatively. I would go for income right now. The yields on Treasuries and money market funds are so low, I would go with high quality, corporate bonds on which you can get a 5 percent coupon these days. But this is not money to do anything speculative with. There's a need here for income for the preservation of capital.
WILLIS: All right. Let's go to an e-mail here from David. He says, "I'm in the Air Force and will move to San Antonio this summer for two years. After this, I will leave the U.S. for another overseas tour. I have a 740 credit rating, no debt and make a good living as a flight surgeon. Since it's a buyer's market, should I buy only for the two year and then either sell or rent the house? My concern is I know I will be leaving the country after two years and will not return state side for at least six years. I wonder, hey, is it worth the risk."
Hilary, what do you think?
KRAMER: In my opinion, it's not worth the risk to buy for a two years. As a matter of fact, the rule of thumb has historically been, you only buy if you're going to live in a home for five years. It was just recently that everyone started speculating.
Basically our housing crisis and this bubble that's deflating could take five to 10 years for the cycle to come around. So it looks like a bargain with prices, let's say, down 8 percent to 12 percent. Could be a problem two years down the road.
WILLIS: Mark, what do you see in the market? I just have to ask you to pile on here because I think people have been living in these homes shorter and shorter periods of time. What do you see in your research?
ZANDI: Well, nationally, I think house prices are going to continue falling, at least through this year into next. They're down about 10 percent from their peak, which was two years ago, and I think they'll fall another 10 percent between now and next spring. Of course, that varies a lot by where you are in the country, but that's nationwide.
WILLIS: That's painful.
OK. Let's go to the next e-mail. Don in Oregon. "What do you think of reverse mortgages? My wife and I are in our 70s and do not choose to move but would like additional funds to spend during our final years.
Knight, what do you think of that?
KIPLINGER: I like reverse mortgages. Unfortunately, the closing costs and fees associated with the reverse mortgages are higher than they should be. But as more competition comes into this market, it will work. A reverse mortgage pays you money from your home equity. The money need never be paid back until you sell the home or you die. So for a lot of older people who need income, withdrawing that home equity in an order way makes a lot of sense.
WILLIS: I would just send people to aarp.org. They've got a great little primer (ph) on their web site about reverse mortgages and it will really help fill you in on the topic.
Let's go to the last e-mail, number three here, from Delephia in Georgia. She asks, "my husband makes over $90,000 a year. I made $35,000 last year selling real estate and I expect to make less than half of my income this year." Wow. We have about $10,000 in savings but about $20,000 in credit card debt. We literally live paycheck to paycheck and I'm always worried about money. Would it be better for us to take the savings and pay down credit card debt or to keep savings for emergency funds?"
OK. Well, this is the basic stuff here, Hilary. What do you say? What should she do?
KRAMER: You want to get debt-free. Pay down the debt. Make sure you don't have any debts overhead. You're still getting a paycheck going forward, but that money just adds up, those interest charges.
WILLIS: Absolutely. Couldn't agree more. Thank you for that.
Mark, Knight, thank you to you as well. Every caller we spoke to today will receive a copy of my new book, "Home Rich." For more on "Home Rich," log on to cnn.com/openhouse.
And, hey, if you didn't get through today, make sure to e-mail us at firstname.lastname@example.org.
Time now to get the results of our cnnmoney.com Quick Vote poll. Back now to the cnnmoney.com set and Poppy Harlow.
Poppy, what's the verdict?
POPPY HARLOW, CNN CORRESPONDENT: Hi, Gerri.
Well, the results are in. Here's what people think. When asked, do you feel secure in your job, yes or no, 55 percent of people said yes, 45 percent of people said no. So that's a little bit of encouraging news after all that weak job data that we got.
You can log on every day and vote in our Quick Poll at cnnmoney.com.
Gerri, back to you with that bright news.
WILLIS: All right. OK. Up next, CNN's FINANCIAL SECURITY WATCH. Put down the pen and paper. We're going to show you how some folks are turning to a higher power for their money troubles. The story when we come right back.
Plus, we are just minutes away from a rally at Harding High School in Marion, Ohio. Former President Bill Clinton set to speak on behalf of his wife, Senator Hillary Clinton. And Senator John Glen speaking to the crowd right now. We'll bring you the former president when he speaks.
WILLIS: Former President Bill Clinton is continuing his campaign for his wife, Senator Hillary Clinton. He's hosting a rally right now at Harding High School in Marion Ohio. Let's listen in.
BILL CLINTON, FORMER U.S. PRESIDENT: If you watch all these debates and all these advertisements, there's been an attempt by her opponent to set this race up as a choice between experienced and change. If that's a choice, we lose.
Hillary loses that debate because we need change bad. And, frankly, Vice President Cheney and some of the others have given experience a bad name. On the other hand, it's important not to denigrate experience.
I mean I was thinking about this the other day because about three years ago I had open heart surgery. And my surgeon sent me a book about the medical team that performed my surgery. It wasn't about me, it was about all the work they do and the miracles of medical science. And he said, the guy that did the research said, there is only one determinate that never varies all across America and how well people do in these serious surgeries. You know what it is? How many surgeries are performed at the hospital. The more you do, the better you get.
Magic Johnson endorsed Hillary for president and said, look, I know experience alone doesn't matter. But he said, I want to tell you something. When I left the NBA, I couldn't jump as high as I could when I got there. I couldn't run quite as fast. But I played the pressure games a lot better. And being president is one, long, pressure game. Experience does matter if it's the right kind.
So what you have to decide is, how do you choose between someone who says, I am the change. I embody change because I have not been involved in the struggles of the '90s or this decade and no one who was involved should possibly be president because we have to start all over again. Hillary says you ought to choose me because the experience I have is making change. I have been a change maker all my life. I believe I am called to make other people's lives better.
I think that's a better argument. And it's an argument that I have personal experience with. When I met Hillary, we were in law school. Everybody else couldn't wait to get out. Not her. She spent another year working at the hospital because at the time there were no protections in American law for children who were severely abused and neglected. And the work she and her friends did in that extra year she gave led to guidelines which were adopted. All across America now, every state in this country protects its children from severe child abuse and neglect. She was making changes in other people's lives.
And when she got out of law school, at that time there were very few women law graduates. Not like now where most of the graduates of law school are women. Then it was rare. She could have written her ticket, taken any big buck shot she wanted. She took a low-paying job at the Children's Defense Fund, to knock on the doors of poor people's houses in the state of Massachusetts to find out why the kids were dropping out of school.
And she and her young friends found that most of them were leaving because they had some sort of disability. A mental or a physical disability. Usually it was a very small one. But believe it or not, then our schools didn't have teachers trained even to teach kids with minor dyslexia problems. So the report she and her friends filed with the United States Congress led to the passage of the Individuals with Disabilities Education Act, which guaranteed an equal and appropriate public education to all of our children in America. Changing lives.
When I was a governor, she changed lives. She headed our school reform program. And when I ran for president, a national expert said that we had improved our schools more than any other state in the country, except one. She ran our rural health programs.
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