May 28, 2009 -- America is going through a financial crisis not seen in a generation -- and a torrent of information about stocks, treasuries, bankruptcies, derivatives, confusing credit card and mortgage rates makes you feel like you need an MBA to open the newspaper.
But do you ever wish somebody would just explain the everyday stuff -- the basic "smarts" of dealing with money? ABC News financial contributor Mellody Hobson has teamed up with an all-star cast of celebrities for a one-hour special to air Friday to do just that.
Watch Mellody Hobson's special UN-BROKE: What You Need to Know About Money. Friday 9 p.m. Eastern.
It's an unconventional look at the fundamentals of everyday finance with all the facts about credit cards, mortgages, stocks and bonds, investing and 401(k)s, in a fresh new format combining information and humor.
Hobson and her guests have a number of tips, including getting rid of credit card debt -- "It's like a noose around your neck," said Hobson.
Other nuggets: how to buy a house you can afford, and this season's essential financial accessory: an emergency cash reserve fund. And you'll be popular at your next cocktail party: you'll be the one who actually knows the difference between stocks and bonds, and why the Nasdaq is not the same as the S & P 500. And who will give you all this info? Will Smith, Seth Green, The E*Trade babies, even the Jonas Brothers.
(The special also throws a few personal tidbits at us about Hobson. For instance, her principal diet: vitamins, nuts and chewing gum.)
Actor Will Smith said that up until now the financial talk hasn't been aimed at everyday Americans. Sitting in a room full of wonky financial experts, he asks them to explain the recession in simple terms. "Imagine I was a person. How would you talk to me?" he said. Smith said he and others want to know: Where are the jobs? Where did the money go?
"We need to know how to handle this crisis," Smith said. "People work hard for their money. Are banks an OK place to put it? Is the stock market even going to exist when I'm 50? Do average folks get to retire anymore? How do we still reach our dreams?"
"Can you imagine a life in which money did not cause you any worry, or confusion, or anxiety? A life in which you are in control of your money and your money is not in control of you. Imagine being unbroken," Hobson said.
The point of the show is not to judge people or make them feel bad or even place blame. Let's face it, Hobson said, most people don't have a good financial education.
"How would you know? It amazes me, you don't learn about money in school in America," Hobson said. "You can go to a high school in America today and take woodshop or auto but not a really good class on money and investing. That boggles the mind."
"We've all been handed the keys to our financial future and nobody's given us driver's ed," she added.
Actors Antonio Banderas and Marisa Tomei talk about children and the perils of their credit card debt. They also discuss the importance of an emergency cash reserve fund.
Cedric the Entertainer suggests using cash instead of credit cards. It's quick and simple while credit cards, he said, are like a "needy" girl in a relationship, asking for money all the time. The average American family now has $10,000 in credit card debt.
"The credit card people didn't put you in debt, but they're happy you're there," he said. "You don't need all those cards. All you need is one."
Actor Seth Green warned about keeping mortgages in check. He said that the payments should never be more than one-third of your gross monthly income. To keep in this range, you might have to buy a smaller home.
"I opted for a more modest crib that would help me to achieve my long-term financial goals," Green said, in a parody. He also has a fixed-rate mortgage with a 20 percent down payment that shrinks the risk of foreclosure if his house declines in value.
Within the house there are money-saving moves, too. For instance, he pretends to have just a 27-inch television and couch from Craigslist. Energy-star compliant appliances in the kitchen help tame his electric bill.
Touring his bedroom, Green said he bought a house within his means, adequate insurance and a rainy-day fund in case he loses his job.
"I feel financially secure. I'm worry-free. I sleep like a baby all night long," he said.
The biggest problem for many families is the lack of savings.
"Many people out there are living paycheck to paycheck. But there is one thing we know about this financial crisis, if there is one lesson that we've learned: everyone needs a safety net," Hobson said. "No one is immune from the rough patches that occur in life. Anyone could lose their job. Anyone could break their leg. That's why you need an emergency fund."
Grow Your Savings
Hobson recommends having three to six months in living expenses saved. That's a lot for many people, so she suggests starting by saving $1 a day for four months, then up the ante to $2 a day, then really push yourself and try to save $5 a day.
"In my experience, savings is addictive," Hobson said.
The e-Trade babies, featured in the brokerage commercials, and singers the Jonas Brothers help Hobson review what stocks and bonds are and sort out the Dow, NASDAQ and S&P 500.
No matter what, though, Hobson suggests keeping a long-term view of the market. "There's no such thing as getting rich quick when investing," she said.
Hobson tells the Muppets' Oscar the Grouch that when stocks are down, it's a good time to buy for your retirement.
"You don't want to live in a trash can for the rest of your life, do you?" she said.
"Someday I want own my own Dumpster," Oscar tells her.
If you don't have stocks in your portfolio, it's harder to reach that goal. Individual stocks sometimes go down but over the long term, the stock market has outperformed everything else.
"The biggest risk is not taking one," Hobson said.
Actors Christian Slater and Rosario Dawson chime in on 401(k)s, saying that over no 20-year period has the market gone down. Many companies match some of their workers' contributions, which is like "free money."
"Just like getting a raise for signing up," Slater said.
Actor Samuel L. Jackson, in a parody of the 1976 film "Network," tells the country that you must live within your means.
"I'm broke as hell," Jackson said, "and I'm not going to take it anymore."