>> there is no evidence of that at this juncture. but there is testing that has to be done by the medical examiner's office. >> you said you could lean toward certain things but you aren't going to draw any conclusions? does that mean you're leaning towards murder -- >> no. detectives have certain information available to them now. as far as where this case is going to end up, we don't know at this juncture. all options are remaining on the table. >> can you tell us a little bit more about a story of somebody walking past the two bodies in the kitchen, then returned. did he give you any indication how he could not have known what happened when he first opened the door? >> when mr. nealy arrived he used his key to get in and he saw mcnair and kazemi there in the living room area and he just walked on through the kitchen, probably believing they were asleep.

it was when he came out of the kitchen he saw the blood and he was greatly disturbed by what he saw and wound up calling a friend, robert getty. robert getty came to the scene. it was getty who called the police department at 1:35 on saturday afternoon. >> the story may not add up. if both had been shot in the head, presumably as much as 12 hours before they were discovered, there would have been plenty of blood all over the scene. right? >> i'm not going to discuss the scene. i'm not going to discuss the nature of the scene. >> as far as the weapon involved, it's my understanding that mr. mcnair was possibly a gun carry permit holder? was it his gun or can you rule out that it wasn't his gun? >> atf is working on tracing the weapon. we want to learn the initial purchaser and try to identify the trail of ownership, if there is a trail of ownership. all that is taking place. >> what about any neighbors? did anybody -- there were shots several times. anybody reportedly report

hearing any gunshots or fighting or anything like that? >> not that i'm aware of. [ inaudible question ] >> not in nashville. not aware of any record anywhere else but she did not have a history in nashville. [ inaudible question ] >> i do not. [ inaudible question ] >> i can't hear you, i'm sorry. not that we're aware of at the moment. >> any kind of toxicology reports back on either of the victims? >> oh, no. toxicology testing through a medical examiner's office typically takes weeks. >> you mention you're waiting on ballistics to determine whether the shot came from one gun or if there might be another shooter. obviously that would be something you'd expedite. is there a timetable? >> ballistics testing is being conducted. i can tell you from the information we have at present, the evidence at the scene is consistent with the gun that was recovered. but again, specific testing

still needs to be done. >> were there any illegal substances found at the scene? >> not that i'm aware of. >> you said he died early in the morning. [ inaudible ] >> no. the medical examiner's office believes that the two had been dead for a period of hours prior to the bodies being discovered. i can't give you a specific time as to when the shootings may have taken place. >> did you get any indication why he called a friend first and not 911? >> my conjecture would be that he was shocked and horrified by what he had just discovered and for some reason his inclination was to contact mr. getty, a close friend of mr. nealy's and a close friend, as you know, of mr. mcnair's. >> are there any surveillance tapes, security tapes, that you may be reviewing at this time? >> we have been checking the

surveillance cameras in the area. i am not aware of any tapes that we have available to release at this juncture. >> yesterday you told us that -- [ inaudible ] arrived in the early morning time frame. do you know what time she might have arrived? >> her vehicle according to a witness, the cadillac escalade, was already there. >> we don't know how soon before. it was my understanding that she had an apartment in the hermitage area. >> did she have any record with your department? >> other than the dui? >> yes. >> no. >> there is a picture of her tak taken.

we know that he went to at least two establishments. we'll be talking to the management and staffs of those two places to ascertain what he did, who he talked to, what was going on at those places. >> there's been some information that perhaps there's been several police stops at that apartment complex before this occurred. is there any knowledge of that, involving that? >> what apartment complex are you referring to? >> i'm mentioning the apartment where the shooting occurred. >> the condominium? >> the condominium. >> i'm not aware. >> not aware of he? >> no. the central predict commander said that area is very peaceful. >> if this turns out to be a murder-suicide, as you piece together the final hours of both lives, how much, if this is a lover's quarrel, how do you believe will you guys delve into what the two might have been squabbling over? >> we have already begun talking

to friends of miss kazemi and friends of mr. mcnair in an effort to ascertain were they having any squabbles, was one upset at the other, if so, why. that's a very important part of the investigation as we work to ultimately classify miss kazemi's death. again, it is important to resay that nothing has been ruled out at this juncture. we're leaving all options open. >> what you've been listening to is the pio of the nashville metropolitan police department talking about a very mysterious murder. long-time nfl quarterback steve mcnair, co--mvp in 2 2340u, found shot to death in his condo in downtown nashville just yesterday. he was found some time in the early afternoon on saturday. he was also found sitting near a woman, a woman by the name of sahel kazemi.

we were just hearing the initial reports, results from the autopsy. what we heard was that there was a pistol found near kazemi. she was shot once in the head but police have not yet classified her murder, was it a homicide, was it perhaps a suicide. they aren't sure just yet but they did say that mcnair was shot four different times, twice in the chest, twice in the side of his head. mcnair apparently the night before had been out to two separate bars in nashville, came to his home and the assumption is that sahel kazemi was already there. this is just the beginning of new information we're getting from the medical examiner. they said they'll still need to do ballistics testing, tissue testing. could still be a number of days before they begin to classify exactly how kazemi died. but they do tell us they aren't looking for any outside suspects in the case. we'll join "your money" in just a moment. back at 4:00 eastern time with "newsroom".

you know how healthy your personal finances are? if not, we can help you fine out right now. >> we really know more about our finances after the last year. what we can stress test ourselves, our friend at cnnmoney.com have come up with a pretty easy way to test the strength of in your money plan. this is more important for you, for the individual. >> it is less stressful to take the test. >> a little bit of stress involved when you look at housing costs at least here in new york city. it is my favorite tool on cnnmoney.com.

go to the personal finance tab, click on it. what it brings up is this page. we put in your age, we put in 40 years old, an annual income of $40,000. hit go. you'll see these different options. let's look at housing payments. what we put in for housing payments is $1,200 a month, that's either your mortgage or rent, including your property taxes, your insurance. click enter. on $50,000, be careful because you're spending too much on housing. this payment shouldn't exceed 28% of your gross income. that's hard in some cities but that's what you should know. when you look at debt, what we put in for this number is $1800 a month. that does include your mortgage if you have one. >> make sure not to double calculate. a mortgage in the other one. >> these are all independent readings. great point. so click enter. and there you go. danger. again on $50,000 a year, you're carrying too much debt. that payment, again, including your mortgage shouldn't exceed 36% of your gross income. this is an important one. where do your retirement savings

stand right now? a lot of people are pulling back from what they put in their 401(k), the market is so questionable. if you're making $50,000 a year, you have $75,000 put away as savings in the bank and putting away $500 every month on top of that, there's good news. you are on the right track for retirement. you can retire comfortably at this pace by age 65. very cool tool. personal finance section, right there, of cnnmoney.com. >> and a tab for emergency savings, a tab for diversification, your ira. or 401(k). i got to tell you i like the tools on money.com. i use them. i wrote about them in my book. i direct people there. this has to be one of my favorites. >> it's fantastic, because even if you're spending a little more than you can and not saving enough right now, better to know that. everyone says they don't open my 401(k) statement. you got to do it. you got to see where you stand. >> paying more for the housing, depending where you live, you can adjust someplace else to try to make it work out. what i don't like is how many times it says careful.

wait a second! i thought i was doing everything right. >> you want to get to that yourself, you really, really should, cnnmoney.com/financial health. a really great tool. once you know what financial shape you're in time to take charge. time to cut your spending, lower your debt and create a budget that actually does work for you. grab a pen and paper. >> a budget. that's right. ryan mack is the president of optimum capital management and liz is a financial adviser. author of "latino journey to financial greatness." thank you for joining us. ryan, you first. i can't count the number of times i heard you say the starting point you have got to figure out what's coming in and going but. start with a budget. that is the building block for everything that comes next in trying to figure out what to do. >> the budget is probably one of the most boring but most helpful things in the entire financial plan. you can't do anything without a budget. you can't figure out how long it's going to take to manage for your retirement. account without a budget. you can't figure out how long it's going to take to put away

funds for that vacation, purchase your first home. when you are managing for your budget. we need the budget. 60% of america is spending money in a deficit. just because they don't budget responsibly. >> some people wouldn't choose to be in deficit but they don't even know that they are. this is a big issue. even if you sit down, you decide this afternoon you want to do a budget, the reality is we miss most of the stuff we spend. a lot of us our spending is not stuff that would show up. why is that. >> absolutely. there are things you're not taking into consideration. if you have to pay your auto registration fees, you're not going to pay six months from now or taking say one day off to take your kids to some kind of amusement park. that's not in the budget. technically most miss about $1,000 a month on their budget when they don't take those things into consideration. also birthdays, celebrations, anniversaries, very few people take those into consideration in the budget. >> you say you can't change what you don't acknowledge. i think that's a really important point. you've got this great illustration, a debt dissolver on how to tackle this.

walk us through this. what do you mean? >> what happens is that again you can't change what you don't acknowledge. you have to be aware of all of your debt because if you're not doing that, you're going to have a lot of trouble dissolving that. what i do, i have you write down what debt you have, a mastercard, visa, then i'll sit down and the most important thing is you want to be aware of what interest rate you're paying on that debt. again, i sit down at the kitchen table, pull all of the statements out for the client, then take a look at -- i'll ask what is your interest rate on this credit card debt. most people don't even know. they tell you 13% when it's 24.9%. then you're going to write the amount that you owe on this credit card debt. it's really important to write down the amount. most people, again, think that they are owing a lot less. what i want people to do is write the amount that the limit that they have on the credit card debt. not on the credit card but how much money do they have left. available. we might use that if they have a lower interest rate card to transfer. >> in this case you got $15,000 balance on a $15,000 available

so you're maxed out. >> you're maxed out. >> you're probably likely to be hitting charges because you're going over your limit. >> absolutely. the next thing is we want to write down what the minimum payment is. i mean, because again, if you had a lower interest credit card, you would make the lowest payment there. if you had one with more like this one, you want to pay more. in this situation this person was paying the lowest minimum payment, that was per monthly payment. so, we want her to do, to make more than the minimum payment. otherwise they pay this debt forever. there's a lot of strategies. i have them write down strategies. we're not going to use this credit card anymore, maybe we're going to transfer some of this debt to a lower interest rate debt. there are so many things you can do. call the credit card company, see if they can lower the debt for us. sometimes we want to -- we don't realize all of the strategies that we can use. so i use this as a tool. just like we talk about the money, money.com tool you talked about, the stress test, this is a great tool.

right? >> fantastic. you can get this on many websites, including money.com. you can enter your credit cards and the interest rates. if you increase the minimum payment or decrease it, how much long ter will take. here's the thing, ryan. if somebody comes to you with this, that situation, where they are maxed out, only making minimum payments, first of all what are the strategies they can use to alleviate that? secondly, if they also don't have an emergency fund do you advocate paying that credit card down or parts of it first so you can use that as an emergency fund or you think the fund should be kept separately? >> first, when you talk about budgeting, three simple steps, write down your estimated budget, take the next 30 days and write down a spending diary to figure out where you're spending and where it's going. then the third step is put down an actual budget. now, once you figure out in this situation here, we have an individual who is maxed out, paying 25%, so in this interest rate is so high it's hard to defend putting money in an emergency fund you're only earning maybe 2% to 3% maybe in

this environment. but the psychic income that sometimes individuals might have by putting in, if you have $400 a month extra in your surplus, putting $350 toward that credit card debt, then maybe putting $50 in an emergency fund, you may not be getting the amount of return on that emergency fund but the psychic income that go get 'em attitude to say i have a little more in my emergency fund. >> louis calls that a confidence fund. you agree with that, sometimes you got to have a little money on the side? >> absolutely. what you want to do, you want to pay down the debt, you want to increase your savings, you want to work this muscle. make sure there is balance because you want to give people confidence. you want to give them a better future. all of this is about doing the budget, paying down the debt, we want to build people's self-esteem, we want to make sure their relationships are stronger. because we all know this financial stress of having too much debt and spending too much

is causing a lot of relationship problems across america. >> we have relationship problems you and i about money. >> but we set a regular date to sit and talk. >> we work it through in public therapy. two hours every weekend. gentlemen, stick with us. we'll talk more and ryan has credible stuff how to make sure you're not spending money when you are emotional. that can kind of blow a budget out the window. so we're going to talk about that. stick with us on that. you know your birthday, your social security number, hopefully you know your anniversary. do you know your credit score? >> i would say most say no. >> anniversary or the credit score? >> the credit score. >> it is your financial dna. we'll show you how to make it better. -hour sale. you only have 72 hours to declare your independence from interest payments for 6 full years, with 0% apr financing for 72 months on all 2009 pontiac models... 0% apr for 72 months going on now... during the pontiac 72-hour sale. visit pontiacdealer.com!

welcome home, man.

your employer, your bank, your credit card company will check your credit score at one point or another. but have you actually looked at it lately? >> it's time. having good credit is more important than ever. jerry is a credit adviser, also the author of reduce debt, reduce stress. >> that's what we're talking about. >> stress, the factor you can sleep at night and what your situation is.

>> good to see you. thank you for being with us. let's talk about the credit score. a lot of people are confused about the difference between the credit report and the credit score. which is more important? what's the story? >> the credit report is the ingredients and fico makes the recipe that produces the credit score. the credit score will be different depending which credit bureau supplied the underlying information. in addition, one important thing to keep in mind is many of the credit scores you get for free or you maybe get as a gift from one of your financial institutions, those are usually not fico scores. so you could appear to have an 800 credit score which is golden with fico but may be just so-so with one of these other credit scoring systems. >> what is the anatomy of a credit score? what goes in there that decides what my number is and all of these people want to know about. >> this is like the coke recipe. do we know how it's done?

>> i think it's in that vault with the coke recipe. it's pretty secretive. there's about three main things that go into your credit score. we know if you pay your bills late, have a collection account, bankruptcy, foreclosure, those are negative. that's about a third of your credit score, the negative information. another third of your credit score is the debt you carry. and what they are looking at there is how close are you to your credit limits on primarily your credit cards. so the closer you get to the credit limits, the lower your credit score. there's no set number, 50% is not perfect, 30% is not perfect. 10%, using 10% of your available credit is probably ideal. the other third is things like how old is your credit score, how many recent inquiries are there. those make up the other third. >> i have this card from 1992, and you know that people tell me never close it. use it, pay it on time but don't close it. it's good for your credit score. that's right, right? >> it's probably good advice.

unless they decide to charge you an annual fee for example because you're not profitable, not carrying a high enough balance you can close it. what you don't want to do is get your credit report see all of those old accounts you couldn't use anymore, close them all out because that typically will be lowering your score. >> make sure it's noted you closed it. tell me what's better. using 90% of your available credit, that's bad. they'll deem you to be using too much of your credit. if you are using none and you have too much available can that hurt you? >> no. having too much credit available will not hurt you with a fico score. they don't care. but i do recommend that you keep those accounts active. a lot of issuers are closing inactive credit cards. so pull it out, buy something you would buy, pay it off in full, keep the account active. that will help your credit score as well as reduce the likelihood they close the account on you. >> fascinating who looks at this score. >> more than you think. >> somebody who is looking at you for a job can look.

lenders, insurance companies, even your cell phone provider. >> can your potential employer or current employer look at it without your permission? >> the only person who has to get your written permission is an employer. they have to get your written permission. everybody else has to have a legal purpose for getting your credit score. and the cell phone example is a good one. i was behind a woman trying to get a cell phone. she got turned down for the plan she wanted because of something on her credit report so it's important to stay on top of it and make sure it's accurate and complete. >> does it hurt if you check your credit score yourself? does it show that you opened up the account yourself? you're always told don't do that too often because it makes it worse. >> that's a great question. it does not hurt your credit score to check your own credit report. that's a soft inquiry, nobody knows except you and the bureau. so don't worry. okay to monitor your credit. >> we have information on how it works. now we're going to come back and talk about how to fix it. that's the question people are giving us. how do you fix it.

should you pay someone to fix it for you. what's the safest way to go about fixing your credit score. if you are drowning in debt, you don't feel like there is anything you can do we have hope for you. we have a simple way to get started right now.

welcome back to a special edition of "your $$$$$" taking charge. it's critical to put yourself in a position to get out of debt. this show is going to help you with the tools you need to do just that. >> in addition to the ones we can give you there are options for credit counseling but you have to beware of scams. jerry is a credit adviser with credit.com and todd mark, the vice president of education at the consumer credit counseling service of greater dallas. welcome back. good to speak to you again. let's talk about a question we get a lot of. that is how do know when you need a credit counselor. how do you know when it's time to get outside help. gerri, start with you. >> i think if you find that you

cannot get ahead yourself, there's absolutely no harm in getting outside help from a credit counseling agency. the reason is it's confidential, the first consultation is probably free and at a minimum they can maybe help you find ways in your budget to cut back and put more money toward your debt. there is no down side to getting help. >> todd, you say you need to do risk assessment. if you have trouble paying credit card bills, fighting with your spouse or having trouble at home over concerns about bills, it's time to see a credit counselor. >> absolutely. we actually designed a risk assessment test with the dallas morning news last year and we were ahead of the curve before the federal reserve did a stress test for the banks we were doing it for consumer looking at are you behind on your mortgage or car, what's the level of credit card debt you have, and then going away from the financial risk, looking at are you fighting with your spouse, are you having trouble sleeping, are you having a rise in blood pressure. is your doctor telling you you

need to settle down. that's when you know it's time to see a credit counselor. >> where can people find the information on that test, by the way? how do they get something? >> they can go to dallasmorningnews.com. and search for dollarwise. you'll see the risk assessment test. >> you also have a bit of a calculation where you say if you take up your minimum payments on your credit cards, multiply by 20%, add that, so basically take up the total, add 20%, if you can't pay that off you have a problem. >> that's right. that's the calculation you use to determine whether you can get out of debt in your -- on your own in three to five years. minimum payments plus 20% of that total add it together. if you can pay that every month and not dig the hole deeper you can probably pay off your debt on your own. if you can't then you do need to talk to someone because you may need to reduce your interest rates, the monthly payments, you may be even in serious trouble and need to seek out the help of a bankruptcy attorney. >> how do we make sure you find somebody who is credible, a

counselor who can help. it's not somebody who is going to scam you. people have offered -- they think they're being scammed. >> yeah. how do you know whether it's honest and what should it cost you? >> well, i would say the first thing you want to do is go to your tried and true nonprofit credit counseling agency, generally a cccs in every city. you can find an agency locator. at nfcc.org. what you're looking for is this. find a credit counselor accredited by council for accreditation. you're looking for somebody who's certified. trained. ideally college educated. you want to make sure counseling should generally be free, all of our budget debt is free. >> should i be prepared for three months, six months, how long are you going to work with somebody? how long is it going to take? >> it depends on the situation. many people come to us one time for a budget and credit counseling assessment and go off and activate the action plan on their own. so it depends. if there's a lot of hand holding, if they are doing debt

management or we're negotiating with a lender for an option or their delinquent mortgage so it depends how long you're talking about. the initial assessment is generally 60 to 90 minutes and they look at three things. income, your monthly expenses and all of your debts. >> gerri, should you pay in advance and how do you determine what is a fair price to pay? >> generally with credit counseling your initial consultation is free, then the monthly payments are pretty low. but remember there's also a lot of people who are finding they have too much debt and they can't afford credit counseling so they are turning to debt settlement firms. the problem with some of the firms is they charge huge fees up front. we're talking $1,200, $3,000 up front, then they don't necessarily have the incentive to help a consumer settle their debts on the back end. those are the outfits you have to be careful about. >> both of you, can you use online tools? you mentioned the risk assessment.

is there help and everything we want to put on our website, we talked about different tools. we're going to put them on the website. is there anything you recommend? >> there's great budgeting and debt assessment tools, go to credit.com, we'll be happy to justthrive.com, many financial institutions have great budgeting tools, wells fargo, so absolutely there's great places to get information together and get on a budget. >> gerri, thank you, a credit adviser with credit.com, todd mark is the vice president of education in the consumer credit counseling service of greater dallas, he's going to talk a little about what to do if you think bankruptcy is your only option. this a list you need to pay attention to. your cell phone bill, medical insurance bill, the cost of auto insurance, home insurance, you can lower every one of those including silverado xfe. with an epa estimated 21 mpg highway.

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we'll give you the tools to take charge of your money, try and stay out of debt. we're going to give you steps to reduce your costs, just by asking. >> negotiate your cell phone plan, credit card interest rate, even medical bills can be negotiated. here to tell us how is the author of 1001 things they won't tell you.

also editor and chief at smart money magazine. >> fills itself with this information. >> you can negotiate for all of this stuff. >> yeah. let's start off with health. when you go to see your doctor. if you offer to pay in cash or with a check instead of credit card, you're going to save him on the fee he has to pay his credit card company. you can ask for part of that. we noticed with dentists when you ask for the procedure, if you are willing to do it in the middle of the week or in the summer when their business isn't booming they may give you a deal. >> just say hey, can i do this. >> just ask sounds simple. what do you do. i haven't gone to the dentist for a few years and i all of a sudden, i'm out of a job or my income is lower, i want to save, what do i say? >> it's not as easy as some magazines make it sound. what you want to do is find out who to talk to, probably won't be the doctor. usually the doctor's offices have a financial officer that deals with these things or front desk.

that's the place to start at first, i think. >> you know, i went to my dentist, i made an appointment and said how much is a procedure going to be so i need to know. can't tell you. i changed dentists as a result. >> one thing you might consider is combining procedures. i'm not saying if you have your appendix out throw in the tummy tuck at the same time. but having bunion surgery and both feet need it you save if you put it together. >> car insurance. you can negotiate this. you can take advantage of the discounts that are offered but you can research their competitors' plans and what you can call them up and say look, i'm driving less, i'm not driving as much. >> if your driving habits changed there are discounts for that on your premium. so if you move and your commute is less, or let's say you lose your job and you're not driving as much, they have hardship discounts, you just have to have documentation on how your habits have changed. >> it's a research driven industry. you really can compare and sometimes you can call your

insurer and say i can get a better deal somewhere else. >> we say shop around. but this is one industry where you can. there are good websites that list all of the prices and then you can say this is what this guy's offering. >> you see stories about the kids that pay $1,000 in texting fees. >> you know what i say? call somebody once in a while. stop texting. it's cheaper. >> you can test drive plans. you can ask for lower fees for texting. all you have to do is ask. >> people think cell phone companies are a nightmare to deal with. in fact, complaints to the fcc about cell phone companies are down like about 13% over the last five years, happen to have that memorized. so they are more negotiable than you might think. >> let's talk about credit cards. people call us and say what can i do? my rate's gone up. do i have any options? the credit card may -- we're learning they didn't do anything illegal. it was in the fine print that they can raise your rates for pretty much any reason they want. >> late fees is one thing you

can negotiate on because that's not as much a profit center for them. if you're late and they throw on a $20 bill you have better luck going after that first. >> i had luck doing that before. all of a sudden you missed by a day. a $39 charge. you call, you get transferred. you say look, i'm going to move my business someplace else. okay, we'll take it off. >> what about race? >> one thing with credit card companies don't wait for the wolves to come to the door. a lot of people get enormous bills and are afraid to even pay anything. call them up. the times have changed now. they know that. they are under pressure, you're under pressure. there is much more negotiation that can go on. >> they want your money. all of these people want your money, especially if we're talking about a hardship case. they want to be paid something because they are paying people, too. >> a little bit more than nothing. >> that's absolutely right. >> if only the banks thought about that before. >> we had a plastic surgeon who says plastic surgeons are even taking discounts because people are putting off cosmetic plastic

surgery. >> what should i get? nose? >> i think you're perfect. >> appreciate it. jonathan dahl. the author of "1001 things they won't tell you." filing for bankruptcy can ruin your credit. filing bankruptcy could be one of the hardest decisions you ever have to make. the gmc 72-hour sale. you only have 72 hours to declare your independence from interest payments for 6 full years, with 0% apr financing for 72 months on all 2009 sierra 1500s and yukon xl's... 0% apr for 72 months going on now... during the gmc 72-hour sale. visit gmcdealer.com!

filing for bankruptcy can ruin your credit. it will ruin your credit. it makes it harder to get a loan, insurance coverage, even your potential employer can see if you filed for bankruptcy. >> so you better be careful before you decide to do it. when is it necessary. todd marcus with the counseling service of greater dallas is back with us. when should you do this? this is a really big decision. once was 20 years ago, 30 years ago you decided to file for personal bankruptcy this was admitting failure.

now for some people the only way that they can restart, reshuffle the deck and start again and try to be a success in their financial life. how and when do you decide to do it? >> first off, that stigma you talked about for many years ago, that's gone. so i don't want people to be fearing that. the consumer protection of bankruptcy is very important. and today at cccs of greater dallas we're seeing a severity of crisis greater than we've seen. so when people come to us with debt three times their yearly income, it's obvious that getting help from a debt management or debt settlement, that's not going to help. they need to seek legal options. when people are worried about the loss of their home they can't worry about their credit cards, their unsecured debt so they need to focus on priorities. sometimes bankruptcy is part of that. >> tell us what the process means, because a lot of people think it means you don't have to pay anything. but that's changed recently. >> yeah. in 2005, the bankruptcy reform

act changed things but i don't want to scare people off and think they can't file chapter 7 or chapter 13. absolutely it is a right, it's a good and important consumer protection and more people are filing than ever before. right now in response to high unemployment and the housing crisis. >> what actually happens? what is different if i file than before i filed for bankruptcy and couldn't make my payments? >> the first thing believe it or not is you are required to seek credit counseling from a u.s. trustee approved credit counseling agency. they do pre-filing counseling and pre-discharge education. and the reason for this was, a, they were trying to root out abuses so the people that did have means of paying something toward their creditors weren't getting off scot-free through a chapter 7. but the real key to the credit counseling and education is it's a teachable moment. we're really here to help consumers emerge stronger as they go through bankruptcy. and really help them understand the ramifications, the credit impact and how it's going to be

living in a world maybe without credit or limited credit after the bankruptcy, living on cash existence and how long it is going to take to get into a home again. let's face it. tied to credit issues with the housing crisis and we have people filing bankruptcy to stave off foreclosure. they want to know how long is that bankruptcy going to keep me from getting into another affordable housing option. >> you talked about attending this special approved counseling. also you need to get a referral from a bankruptcy attorney. this is not critical. you have to determine whether you qualify for chapter 7 or chapter 13. define for us the distinctions between the two. >> well, once you have gone to a credit counselor you get a certificate, we'll refer not directly to an attorney but to your state or local bar, to the national association of consumer bankruptcy attorneys, and the attorneys themselves will help you go through a median income test. they're going to figure out where you fall within your state median income, if you're above or below that threshold, then

they have a test to see if your's judged expenses, what they predict your expenses would be would allow you to pay over the course of time through approved creditors. >> a clean slate? clean slate bankruptcy versus 13, which is reorganization and payment toward creditors. >> how long does it take to get your credit re-established? >> remember, practice bankruptcies are the one thing that can go beyond seven years on your credit report, they can last up to ten years. let's talk about the real impact f you are looking to get a conventional mortgage, generally for a chapter 13 you are going to have to wait at least two years. for a chapter 7, four years. but looking a at government program like fha, you are probably cutting that in half, one year for chapter 13, two for

chapter 7. let's remember that credit cards are a completely different issue, you may have a few cards that you keep out of the bankruptcy that you keep going, but generally, people are going to have to rebuild slowly their credit and you may be doing at a through secured cards to or just good practices of paying off on time and in full your credit that is one way to rebound and build your credit after bankruptcy. >> great conversation, todd, thanks for being with us. vice president of consumer counseling service of greater dallas. we have had phone calls on the radio show, get them from people in such distress, emotional and psychological distress over their financial situation. that is when i always say that is one test of when bankruptcy might be right for you, you just don't need to have this affect your -- you know, your health. >> certain ramifications to doing it a difficult process and it is a serious, serious matter. your heart goes to you the to people who have to make that decision and you just hope that you can start all over. >> rebuild. >> all right. save for a rainy day. your grandma was right. now for millions of americans, it's pouring.

we are going to tell where you to find an umbrella.

your financial stability only as secure as your rainy day fund. how long is yours, three months, six months? >> six. i think it needs to be longer. i truly think in this environment. i don't think for all of life. in an environment it is likely one could lose their job or something could happen you have to be more secure. >> i had a good rainy day fund. i was saving to buy a house. so then i was too nervous about having that money where it could get hit and so that turned out to be wise. there are a lot of people who were using their money in the markets. using money to make money. didn't keep money aside. now they are in a little bit of trouble. we're talking how long your emergency fund should be, save for a rainy day fund. >> the question people ask us, how do you start? there are ways to start building your emergency fund if you are on a tight budget. we were talking a little about this earlier. bring back president of optimum capital management, and a personal wealth adviser. ryan, what do you tell people? if they don't have an emergency fund, you and louis made the point earlier, it's

psychologically advantageous, even if it is not big or not paying off some of your debt somewhere else, you think an absolute necessity? >> the emergency fund one of the first things you should strive for. i remember from detroit, the teachers went on strike, three days later the lines were around the corner, teachers didn't have capital, didn't have an emergency fund. you have a leaky roof, car breaks down, driving around here in new york with all the potholes, having to purchase new tires. have to have emergency fund to make sure we have capital to last through the rainy days. the biggest thing about the emergency fund making sure you have the capital so you don't have to disturb your investment account. end of the day the account should remain stable. you don't want to tap into your account and take out fund that should be invested because you may have got laid off. >> paying a penalty on and things like that. louis, how much should it be? should it be a percentage of our income? what is the best way to save it so you don't tap into it. >> i hear three months, six

months, eight months. can you put a time frame? >> put as much as you possibly can. again, this type of economy, if you are losing your job. i mean, it might take you nine months to find another job. we had jobs where they were so safe and you think we would never lose a job, like teachers. teachers in california are losing their jobs. saving two months in reserves. now they're in deep trouble. here, i deal with human nature, practicality. set it up automatically. make sure you are taking money out of your checking and into your savings account. money in your job, putting it into a savings account through work. ideally, it should be saved in the bank. ideally, 10%. that's ideally. human nature says, you know what, put as much as you can. i always said never put it underneath the mattress. these days when nobody is saving, i don't care if it goes in the mattress or coffee can. doesn't really matter. >> less accessible the better. >> absolutely. >> ryan, 3% is what we as a nation are saving right now.

at the height of the recession in 1982, we were saving 13% of our income. louis is says he would like 10%. what is reasonable? >> 10%, at least 10%. go for more if possible. this is where the budget comes into play. you really don't know exactly how much you can save until you write down everything and put everything in, up front so you can see how much of a surplus you have to go into saving. >> where can you find the money to save? if you think i just can't. i am strapped. i have got a kid in college. i have the mortgage. i can't save any money. you say there are ways you can find the money by budgeting to save. >> i always say it is not necessarily not being able to save but having the lack of vision that says what you can save with. when you find that vision to say i can cut back on shopping, going out eating, having, maybe cutting my own hair every once in a while for college students out there. trying to shop less frequently. packing your bag lunch can save as much as $100 a week. we don't know how much we are spending with $10 lunches we are purchasing every day. sometimes coming home from work,

it's 5:00. don't have to pick the kids up till 6:00, bored, what do people like to do? let's go shopping. all those things that we do, we have to tone down and make sure that we are spending exactly what we have and journaling what we have. >> ali, the money you save from your hair, where does that go? >> i do that quite often. do my own hair. sometimes go to a barber. i can do that myself. after the conversation with rachel ray, buying groceries, eating out less. it does make a difference. >> thank you for fantastic advice. the bottom line. we need to save more. we need to save more. >> it's possible. that's great. the two guys are optimistic. deal with people in tough positions. >> louis, thank you for joining us. ryan, optimum capital management, thank you much, gentlemen. >> thank you for joining us for this special edition of "your money." follow us on facebook and twitter.