3 must-reads for right now

If you owe more on your mortgage than your home is worth, you have several options. Debt expert Gerri Detweiler walks you through them in this 6-part series for Credit.com.

If you’re hyperventilating over the latest market gyrations, read Ron Lieber’s latest post at the New York Times’ Bucks Blog: “People who should sell stocks now.”

Finally, check out “Never dumpster dive for plastic containers” at Donna Freedman’s Surviving and Thriving blog. Donna and I have both lost family members to colon cancer, so I hope you’ll take to heart the serious message wrapped inside Donna’s usual loopy humor.

Debt ceiling: What you should do now

A default is not Armaggedon.

We in the media need to make that clear. We’ve been excoriating Congressional bungling and inaction so loudly that many ordinary people are getting the impression the world is about to end.

It’s not. A default would have some seriously bad affects—including raising the interest rates on the national debt that everyone professes to care so much about. One of the basics of money management is that if you’re in debt, you want to keep your interest rates as low as possible to get out of debt faster. Doing something that makes your interest rates rise is just stupid. But right now, “stupid” is Congress’ middle name.

So what can you do with your own money to prepare in case we do default? My thoughts:

Move your cash from money markets to FDIC-insured bank accounts. The average interest rate on money market mutual funds is .25%, and they aren’t federally insured. The risk that money funds would “break the buck” and lose principle is probably minimal, but you’re not being compensated for taking any risk, so you’d be better off in an online bank account paying 1% or so.

Don’t invest in gold. Gold is a hugely speculative investment. The gold bubble has been growing for years, and the last time this happened the crash was pretty awful. In fact, the price of gold still hasn’t climbed back to its previous 1980 peak in inflation-adjusted terms. Buying gold or gold mining shares right now is gambling, not investing.

Make sure you’re diversified. Bailing out of the stock market isn’t a good choice. Congress will get its act together eventually. If it doesn’t do so before the default, it will do so quickly afterward, once the stock market plunges. Either way, if you’re out of the market you’ll miss the relief rally. In any case, trying to time the market is all but impossible. If you’re invested in a broadly-diversified mix of stock and bond mutual funds, you should be able to hang on for the bumpy ride. (One way to get quickly diversified is to put your money into a “lifestyle” or “target date” fund, that does all the diversification and rebalancing for you. Most workplace retirement plans and brokerages offer these.) But remember that money you’ll need within five years should be in a safe, easily accessible bank account, not invested in the stock market. That’s true under any market conditions, but if you’ve been taking chances you shouldn’t, now is the time to correct that.

Swearing.

A three-quarters Arabian horse taught me how to swear when I was 10. (Horse owners will understand exactly what I mean.) She was stubborn, dense and bent on destruction–of me and of herself.

We eventually reached detente, but I’ve struggled to control my tongue ever since. Many years working in newsrooms didn’t help. Becoming a mom did—at least when Dear Daughter is within earshot.

But lately I haven’t had much luck avoiding expletives when talking about Congress. Those yahoos seem determined to drive our already troubled economy into a tree.

Raising the debt ceiling may be distasteful, but defaulting on our obligations would be a disaster. The people who say otherwise need to take an Economics 101 course.

And there’s the root of the problem. The people who can do the most damage to our economy know the least about it. Economists have been trying to tell them, but economists have PhDs. Therefore, they are eggheads. Therefore, they are to be dismissed.

The reason the stock market hasn’t already crashed is that Wall Street can’t believe Congress would be so dumb as to let our government default. Wall Street gives our lawmakers way too much credit.

Do we know precisely what would happen if the government weren’t able to pay all its bills? No, because we’ve never been so irresponsible as to let it happen. The exact ramifications will depend on which government bills the Treasury decides not to pay. Do we stop paying soldiers and shut down air traffic control so Grandma can get her Social Security check? Or does Grandma go without so you can get your tax refund? Do we stiff our defense vendors, and set off massive layoffs? Do we pay investors the money we owe them on Treasuries, or let the financial system seize up because the safest investment in the world is no longer safe?

Before the Twin Towers fell, it would have been tough to predict exactly how many people would be killed and how much damage could be done by two jets slamming into the buildings on a September morning. Now we know.

Let’s hope we never have the same clarity about what happens when our government defaults.

Debt after life: When collectors call after someone dies

Debts don’t just disappear when someone dies, and figuring out who’s responsible can take some effort, as I wrote in my latest MSN column, “Stuck with the departed’s debts?”

But a Facebook fan pointed out that not all debt collection calls are based on a legitimate debt:

After my father died, my mother was contacted by someone falsely claiming he owed a medical bill, offering to process the payment over the phone. She knew it was false [because] she handled the bills, so she told them not to call again.

Survivors also should beware of calls from purported charities, claiming that the deceased promised them a donation of some kind.

When it comes to claims against an estate, you’ll want to see proof that the deceased owed the debt or made any kind of financial promise. Don’t take a caller’s word for it.

Check your prescriptions for the letters DAW

DAW means “dispense as written.” When a doctor writes a prescription for a brand-name drug, adding “DAW” could prevent you from getting a less expensive generic if one is available.

And the extra costs can be signficant, according to a recent article in the Washington Post. A 90-pill bottle of anti-cholestrol med Zocor costs $459.98, while 90 pills of simvastatin, the generic version of Zocor, are only $83.97. At pharmacies that have $4-a-month generic drug programs, such as Target and WalMart, you could shrink the cost to $12.

With a few exceptions, generics are essentially the same as their brand name counterparts, but many doctors still (not entirely rationally) distrust them, the Post noted. There are other reasons for insisting on brand names, the article goes on to say.

It is also habit. Brand names are the names doctors most easily remember. Drug samples left in physicians’ offices — seemingly a free gift for doctors to dispense and patients to receive — make them more memorable. Often, sales representatives will treat a physician and his staff to lunch, and leave behind an array of pens, coffee mugs and USB memory sticks branded with the name of their drugs.

Advertising also has an effect, both on doctors and on patients, who ask for specific drugs they’ve heard mentioned on TV.

Want to save money? Ask your pharmacist about generic versions of any drugs you’re prescribed, and question your doctor if DAW is on your prescription.