Alpha Consumer

Treasury Secretary Henry Paulson announced yesterday that the bailout will no longer involve buying up banks’ distressed assets. Now, the money will still go to banks, but the goal will be to more directly free up money for consumers.

In theory, that sounds like great news for anyone interested in a student loan, auto loan, or mortgage. But what does it really mean?

The details are still shrouded in mystery, at least partly because Treasury officials have been reluctant to speak at length to the press. They also say they are still working out the details themselves. But this much is clear: Congress wants the bailout money to help consumers who are currently unable to take out loans at reasonable rates, and Treasury is trying to figure out a way to do that.

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Michael Rubin, author of Beyond Paycheck to Paycheck, urges people to embrace activities that cost nothing, like exercise or playing with kids, and to connect "emotionally" with our money by using cash, not plastic, to make purchases. He recently responded to my questions about his book and overall approach to money. Excerpts:

Why did you write this book—what inspired you?
Generally, people never learn about money, either from school or from parents. Then, once you get into the real world, your sources for financial education are extremely limited. Because of monetary incentives, the large majority of financial advisers target affluent clients. They're not trying to work with regular folks who have credit card debts, student loans, and a couple of grand in their 401(k). Unfortunately, this leaves 99 percent of the population without an unbiased source of financial education.

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Over the weekend, I spoke with WTOP about how to take control of shopping addiction. Compulsive shopping—not to be confused with harmless "retail therapy" after a bad day—is a serious condition that leads people to spend more money than they should and often results in major debt. To help a friend or family member suffering from it, offer to take control of their checkbook for them or participate in activities far from the shopping mall, such as soccer or knitting. In some severe cases, therapy and medication can help.

While only about 5 percent of the population suffers from shopping addiction, experts believe a far greater number, perhaps as many as 1 in 10 consumers, experience a lesser form of it that involves spending more than they really want to.

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The Prime Time Money blogger responds to the question: How is the financial crisis affecting you?

My 401(k) balance has been temporarily affected. I'm a long time from retirement (30 years), so I think it might just be able to rebound by then. :) Still, it's not fun looking at the balance. But this hasn't caused me to alter my retirement contributions. If anything, it's made me want to contribute more, because I think stocks are on sale at these prices. In addition to my 401(k), I'm going to try to fully fund our 2008 IRAs before the rebound.  Overall, I think timing the market is a fool's game, but these are strange times where price declines don't seem to be rational. I may be wrong, but I doubt it.

My wife's school expenses were also affected. She attends a masters program at a state university that is normally fully funded by federal grants. This current fall semester the grants were not approved. I suspect (but don't really know) that this was caused by the crisis. We ended up having to pay more than $3,000 after initially thinking it would be free. The remainder of her program will likely go unfunded as well, so that stinks. We're simply planning to put back more short-term cash savings. With more savings required comes a little bit more living below our means.  This equals less dining out, smaller Christmas gifts (for each other), and no big vacation plans this winter.

Send in your thoughts—either a brief description or essay up to 600 words—to alphaconsumer@usnews.com. Please include your name and location.

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