Suze Orman, the personal finance guru, was on Oprah last week with her 2009 Action Plan to get people’s budgets and finances in order after last year’s horrible stock market and the increasing layoffs.

As usual- she laid out the reality of most people’s situations: they’re overspending and have nothing in savings.

What to do?

She lists three things to try now to start getting your budget in order:

1. Go one day without spending ANY money.

2. Go one with without charging anything.

3. Go one month without eating out at ANY restaurants.

If you didn’t see it- the Oprah audience was none too pleased about these options- especially the one about not eating out.

Is it really that hard to NOT eat out? Apparently so. But imagine how much money you’d save by making a frozen pizza instead of ordering Pizza Hut?

But if you follow the action plan, you’re not exactly helping the economy, are you?

So- there’s the conundrum. Fixing your own finances means it will damage the nation’s.

Three-fourths of GDP is consumer spending. If the consumer pulls in by even 5%, we’re in deep trouble. But we’re already in deep trouble and a consumer pullback is inevitable.

Suze laid out the reality to several of the guests on Oprah- they can’t keep spending like they are.

Can you?

If you try Suze’s action plan- let me know how it goes. I’m thinking it’s hard than it looks.

I’ll be posting a new article on Tuesday due to too many crazy holiday merry-making events this weekend.

But a few observations until then:

1. Retail still stinks.

The stores continue to see light traffic. I was in a prominent Target in Chicago on Saturday afternoon which normally would have been a zoo with only 12 days to go until Christmas and it was only mildly crowded.

The toy aisle had people, of course. But I didn’t have to wait long at the check-out (and they had all aisles open.)

Similarly- Lord & Taylor was advertising 25% off everything in the store through Tuesday of this week if you went to their website and printed off the “friends and family” coupon.

2. How can the stock markets be holding up with all this negative news?

No one can time the markets. They sometimes behave irrationally- but you should prepare yourself for further pain in the coming months as the economy continues to slow and earnings estimates are cut.

Not many stocks are actually “cheap.” Have patience.

3. Lots of rich people got taken for a ride in the $50 billion ponzi scheme.

I’m sure you’ve heard the story of Bernard Madoff and his alleged $50 billion ponzi investment scheme by now. It’s mainly affecting really rich people who thought they had solved the mystery of investing and found a “sure thing.”

That’s the problem with the stock market. No one can make money quarter after quarter, year after year, without ever seeing a loss. Not even the greatest investors.

If someone tells you they can- they’re lying.

So why did so many “smart” and “rich” investors get taken in? Just like you and me- they wanted to believe. They wanted the golden ticket to even more riches.

If you have to ask “how are they making that much money?” - then you shouldn’t be investing.

More on this market and what industries are holding up tomorrow.

Talking dogs are the king of the box office.

It’s a sign of the times.

For the second week in a row “Beverly Hills Chihuahua” beat out all other competitors in the box office sweepstakes, grossing $17 million for a total take of $52 million.

All from a movie that would not even allow reviewers to screen it before its debut last week (usually done when a movie is supposed to get terrible reviews- which it did.)

But who cares about reviews? The financial system is collapsing so Americans want their talking dogs.

It impressively beat out “Body of Lies”, the Leonardo DiCaprio and Russell Crowe movie that was getting buzz. Shockingly, Body of Lies only came in third on the weekend, with a miserable $13.1 million (does that even pay Crowe or DiCaprio???)

If you don’t know, Body of Lies is about Middle East terrorism.

Yep- something the public wants to see right about now. Makes us feel all warm and fuzzy inside.

Americans Escape to the Movies

Americans tend to go to the movies when they’re trying to escape. According to the LA Times, ticket sales were up 6% this weekend compared to a year ago.

That trend has played out during other times of crisis as well. From the LA Times:

People remember 1987 as the year the stock market suffered its largest one-day loss on Black Monday, Oct. 19. But the following weekend, with “Fatal Attraction” and “The Princess Bride” in theaters, ticket sales were up nearly 20% from the previous weekend, according to Box Office Mojo.

After the terrorist attacks of Sept. 11, 2001, there was so much concern that people would stop spending money that President Bush urged people to go out and buy things. Yet the weekend after Sept. 11 saw a 43% jump in ticket sales over the same weekend in 2000, despite a roster of quickly forgotten films such as Keanu Reeves’ baseball tale, “Hardball.” The next year, 2002, set the record for film attendance with nearly 1.6 billion tickets.

So the next time you’re stressing about your bills, the mortgage crisis, the financial chaos, the rescue plan and whatever else is going on…just let yourself go to the dogs.

You won’t be sorry.

The moral hazard argument has been dismissed in recent weeks as the financial crisis deepened. Basically, it’s so bad now we can’t be concerned about the moral hazards of the bailouts.

But should we be blowing off moral hazard?

Suggestions have been made, most recently by Senator McCain, to have the government buy all the “bad” mortgages and renegotiate them with homeowners so they can afford the payments.

It’s a nice idea in concept, right?

But if my neighbor is in trouble on his house payment and he gets to renegotiate, why can’t I?

If he paid $500k and I paid $500k for the house next door but now they’re both worth $400k- we’re both in trouble. If he renegotiates down to $400k - where he can “afford” the payment- what does that mean for me?

I’m screwed. I’m left with a $500k mortgage on a house that is worth much, much less.

I would then have the incentive to simply stop paying the mortgage, get into “trouble” and then renegotiate my own loan with the government.

Soon, it means that the government must bail out EVERYONE. The incentive to stop paying the mortgage would be too great.

What’s the cost of “Renegotiation”?

A second question to ask is- how would we afford this renegotiation? There are at least a trillion dollars of Alt-A mortgages- of which a big percentage will get into trouble.

How will the government pay for trillions of dollars of mortgages?

No one knows. No one says how we’d pay for it.

But nevermind. The country has endless money, doesn’t it?

Beware of the moral hazard. It can have unintended consequences.