Eighty percent of Americans say they have been affected by the current financial crisis. It's no wonder people are frightened and confused about their money " the headlines are scary!
"We're going to answer your top seven money questions," Dr. Phil says. "You don't have to wheel and deal with Wall Street to feel the trickle-down effect on Main Street."
Joining Dr. Phil is economist and author of How to Ruin the United States of America, Ben Stein, personal finance expert and author of All Your Worth, Amelia Warren Tyagi, and joining the show via satellite from his Mad Money set in New York is Jim Cramer.
-- Homes " Short sales, foreclosures
-- Jobs " Losses
-- Credit " Freeze, rising rates
"If you're carrying a balance on your credit card, you've got to be paying it down because those credit card interest rates are going to be going up," Amelia says.
Jim says the credit freeze will affect employers. "I think people are going to have to lay people off dramatically. I think there will be downsizing. I've been predicting on my show double-digit unemployment. That would be a tragedy because you know a lot of people are going to get laid off, but we've got to prepare for it," he says.
-- Loans " Stricter standards, rising rates
-- Retirement " Evaporating, work longer
"I'm terribly worried about the retirement funds," Ben says. "If you have a pension plan that goes across your industry or goes across your union, it's entirely possible they'll come up short. Those pension plans pay you when you retire based on an assumption of how much they'll make in the stock market year in and year out. They're not going to be making that for awhile. We've had the stock market basically not move since 1998, which is a long time ago. They're not going to be making their assumptions, and people are going to be coming up short. You're going to have to live either closer to the bone or have more of your own savings. You're going to have to work through retirement. I question, Dr. Phil, about whether retirement as a concept is even going to exist in 10 years."
-- Stop spending now
-- Cut back expenses
-- Drive car longer
-- Pay off credit cards
-- Manage expectations
-- Talk to your kids
-- Manage stress
-- Create an emergency fund
3. If the crisis and credit freeze continues, am I apt to lose my job? What then?
Close to 160,000 American jobs were lost in September this year alone. That was the ninth straight month of job losses across the nation and the worst single month in five years.
Simple ways to save on cash:
-- Use cash " Stop overspending on credit
-- Shop simple " Generic brands are cheaper
-- Reduce credit card rate " Call your credit card company and negotiate a better deal
-- Eat in and car pool
-- Have a cell phone? Lose your landline
-- Rent a room in your house
-- Stay liquid " Cash on hand for the short run
-- 401K " Do not cash out
-- Keep equity in home
-- Insured accounts
-- Let stocks rebound
-- Government-backed treasury bonds
Ben also says, unless it's a last measure, do not get a second mortgage on your house. "Losing your house in foreclosure is an incredibly, unbelievably traumatic event," he says. "I would say start dipping slowly and carefully in your retirement accounts before you mortgage your house again. I would never jeopardize my entire retirement account or even a large chunk of it, but if it's just a little bit, compared to mortgaging your house, I would do it."
Dr. Phil explains that it's not good news, but the reality is people are going to have to keep working and rebuild the nest egg.
Jim says insurance should be a priority. "All insurance, because you must be sure and prepare for the worst. Home insurance, you've got to have the health insurance and disability. Once you take those off the table, then we can start worrying about a mortgage. There are programs being offered right now in this great country that will allow you to refinance your mortgage, get it to what is known as the FHA. Make those calls. Finally, call the credit agencies, call the debt collectors and tell them about your circumstances. They do not want you to default. It hurts them in the stock market. Make a deal with them, stretch out payments. They will be reasonable."
"So, in other words, don't stonewall people," Dr. Phil says. "Negotiate because it's not going to be a surprise that you're in trouble. I mean, the country is in trouble!"
Ben reiterates that the people on the other end of the phone are people who make money if you keep paying, even if it's not the full amount. He also says to keep unnecessary expenses down, like high-end electronics.
What do you pay first?
-- Pay mortgage
-- Pay credit cards
-- Pay bills
-- Cut out unnecessary expenses: cleaning lady, gym, eating out
Dr. Phil says people may have been complicit in this crisis by overspending and living beyond means, "but the truth is, a lot of it was done to you."
-- Forgive yourself/Don't buy into guilt
-- Manage reactions
-- Don't withdraw and isolate from others
"Talk about this. So many people are in the same boat," Dr. Phil says.
-- Recognize and deal with stress
-- Affirmatively make and execute a plan
-- Exercise/Sleep well
-- Avoid stimulants