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Money Saving Links: 11/30/08
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Thanksgiving is over. Black Friday has past. Before you know it, we'll be in 2009.
Since we're at the end of the month and almost the end of the year, it's time to start looking forward to your financial status when the calendar flips.
This week, we participated in two carnivals again: the Carnival of Personal Finance hosted by Living Almost Large and the Money Hacks Carnival at Steadfast Finances.
Check out a few of the great stories from the two carnivals:
Online Bank Accounts and More Savings Options To Keep Your Money Safe - The Digerati Life
In light of the current financial turmoil, many are exploring alternatives to the traditional brick and mortar bank for saving and securing their assets. Here are some of the options.
Ask the Readers: What are Your Favorite Internet Sites for Discounts (Revisited)? - Uncommon Cents
We’ve discussed Internet coupon sites here in the past (and of course, we’ve had the fabulous Kyle of Rather-Be-Shopping.com do a bunch of guest posts!), so they’re not new to us. But there are other sites out there and other ways to spend less or get rebates, and I’m wondering which do you like?
Is Your Cash Flowing on a Daily Basis? - Debt Free Destiny
As more and more people are creating budgets to stay on track in a turbulent economy, it is important for those people to recognize their own cash flow situation and seal with it. Even if, on paper, your income meets your needs for paying bills, you still may not be off the hook.
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Are You Thankful For What You Have?
Look around you. What do you have in your life to be thankful for?
It's probably more than you think.
So much of our society places an unneeded desire on material possessions, wealth and status. But that's not as important as you might think.
Believe it or not, you've got it good.
There are so many people in the world who have way less than you do. A lot less.
Even if you think you're in a bad situation, look at yourself through the eyes of the less-fortunate.
Whether it's family, a home to live in, or food on your table … you could have it a lot worse. And many people do.
So on this day of Thanksgiving, remember to be thankful for what you have. It's not all about the Fortune 500 job, the fancy new car or even being debt free. It's about taking a moment and putting your life into context.
There's always someone who has it much worse than you.
Be thankful for what you have. Have a happy Thanksgiving.
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Can Credit Ratings Be Trusted?
Many savers with a 401(k) or other investment account are probably familiar with the Standard & Poors, Moody's or other credit rating firms. Monthly statements usually include their ratings alongside a list of assets.
Lately though the credit rating firms have admitted to Congress [Washington Post, Credit-Rating Firms Grilled Over Conflicts, October 23, 2008] their ratings have been tainted by conflict of interest. Moody's and Standard & Poors are paid by the firms they rate.
The article quotes a memo written at Standard & Poors by someone who said "Let's hope we are all wealthy and retired by the time this house of cards falters."
Long before I read that anonymous statement, I wondered about credit ratings and whether they are good guides for savers and investors. Credit rating firms use past performance to rate future risk.
Forecasting the conditions in markets years ahead is hard enough, but the current wave of defaults on mortgage-backed securities has spread to other firms in a domino effect. The good management and triple A rating at one firm can be affected by defaults at other firms. Ratings cannot be given in isolation from the solvency of the larger financial system.
Since a bond is an enforceable contract just like a home mortgage, it is worth asking whether a failure to pay interest and principal on time is the important financial risk. As long as a defaulting institution remains after a default, then late payments can be recovered later.
For example, corporate bond holders risk losing interest and principal in a default, but a corporation can literally disappear in a bankruptcy. Cities, counties and states do not disappear. Even if they go into default they continue to have taxing authority to meet their legal pledge of full faith and credit to pay their bond obligations.
Furthermore, city and county governments are created and governed by state legislation, which makes state government responsible for city and country bond payments in the event of their default.
Following this logic, even small municipalities should have higher credit ratings than private sector corporations. Size and name recognition should not matter in credit ratings and the difference of market interest rates between government and corporate bonds may not reflect actual differences of risk.
Remember that non-federal government bonds and bond funds are not taxed as part of income.
The article did not tell readers if Congress wants to impose professional standards, or what if anything it intends to do about this newly reported conflict of interest.
In the mean time, remember governments are likely to be around to pay their bills.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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3 Ways to Avoid Black Friday Hype
This week, you'll be bombarded with commercials, blog posts and newspaper ads for Black Friday, the biggest day of the shopping year.
It's almost impossible to avoid hearing about the sales and specials and people who think it's a good idea to get up at 2 AM to go stand in line to buy stuff.
But you don't have to get caught up in the hype. Here are three ways to avoid it.
Remind Yourself: You Don't Need More Stuff
Have you ever found yourself buying something you really don't need? Black Friday is the day that will happen.
Avoiding more stuff is one of the central tenants of a frugal lifestyle. If you don't really need something, you shouldn't buy it. Even if it's such a great deal you can't pass it up, ask yourself this: are you just getting more stuff?
Disconnect From the Media
You can only be tempted into purchasing stuff if you allow yourself to be marketed to. Instead of sitting at the computer or watching TV, use the holiday for the right reason — to spend time with your family.
Unplug from the marketing and promotion machine. It's not worth it. For real.
If you don't let them talk to you, you won't be affected by them.
Consider the Alternative: Where Else Could Your Money Go?
It's almost the end of the month. If you're thinking about going shopping on Black Friday, consider how much you might spend. Wouldn't that be better placed in your savings onion?
When you've got money in your hand, take a second and think about what it's going to be doing for you. You want your money to work hard for you — is it better spent paying off your debt? How about saving for a house?
It's your decision to make.
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Money Saving Links: 11/23/08
It's been a pretty busy week around here — a guest column on the US dollar, results of a study on how people feel about online banking, and a look at how budgets are affecting the number of hours people work.
We also participated in 2 — yep, read it 2 — carnivals this week. In addition to the Carnival of Personal Finance, hosted by Money Ning, we were a part of the Money Hacks carnival, hosted by Moolanomy.
Fred's look at Circuit City's saving plan and my rant on E-Loan's online savings account were included in the carnivals.
A few of the highlights from the carnivals include:
Rate Chasing with High Yield Savings Accounts - My Dollar Plan
Chasing a rate when you have $500 in the bank doesn’t make much difference. However, if you have $50,000 in the bank, a few basis points can make a big difference.
12 Fun and Free Entertainment Websites - Fiscal Zen
The Internet has a lot to offer: communication, news, investment research, and money saving opportunities but to name a few. But sometimes, you just need to take a break and have a little fun. So with that in mind, I’ve put together a list of 12 fun and free websites that are great for entertainment.
6 Situations Where I Still Need Cash - Student Scrooge
The time has finally come — for the first time in almost two months, tomorrow I will be visiting an ATM. My local ATM and I used to be much better friends, but it just does not serve the same role in my life which it once did. Using my credit card (responsibly) has enabled me to pay most of my expenses over the past few weeks without cash, with added budget tracking benefits. As part of my build-up to tomorrow’s ATM visit, however, I want to take a moment and reflect on some of the expenses that still keep me using cash every now and then.
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The Violent Demise of the U.S. Dollar
"Your premium brand had better be delivering something special, or it's not going to get the business." — Warren Buffett
The U.S. Dollar is the premium brand of currency in the world. It's the standard against which all other currencies are measured and it's where the money goes when people want rock-solid security.
This has been true for decades, but in the last 35 years, the U.S. has gone from the largest creditor nation to the largest debtor. Our twin deficits combined with artificially low interest rates have left us with a $10 trillion national debt — $50 trillion if entitlement programs are included, as they should be.
We haven't been spending the money on factories or production. Instead we've been buying houses, cars, HDTV's, playing world cop, and dramatically overpaying for health care.
To put it bluntly, we are broke, both as a nation and as a set of individuals. The dirty secret is that our lifestyle of the last 20 years is unsustainable.
Why Saving, Not Spending is the Key
To fix this mess we've made, we need to tighten our belts and start saving money rather than borrowing to spend. That goes both for individuals and the government. In addition, we need to focus on producing goods that can be exported to other nations so that we can get money flowing back into this country rather than out of it.
Unfortunately, the government is determined to sustain consumption epidemic. Certainly consumption brings short-term pain relief, but it just makes the long-term imbalance worse, similar to giving a crack addict more crack to avoid withdrawal.
People keep saying the the bailouts will be paid for by our children, but the truth is that we'll have to pay the price ourselves. If the government continues its spending spree, which is even more likely now that we'll have a unified government of Democrats, inflation risk is very real.
Standard & Poor has already stated that the U.S. is at risk of losing its AAA bond rating.
If the dollar devaluation prediction comes true, the new financial capital of the world will be Asia. Asian countries have been effectively taxing themselves to subsidize U.S. consumption by buying and holding our bonds and thereby keeping our currency valuable.
If the U.S. economy collapses, Asia will decouple and begin to flourish on its own. They will be in excellent position with industrialized production, steady growth, and plenty of reserve savings.
What Happens if the Dollar Falls Apart?
If the U.S. dollar declined to 1/2, 1/4 or even 1/10th of its current value, chaos would ensue and a great number of people would be in deep trouble, especially retirees.
Are you prepared for such a contingency? Any bonds you hold would decline in value significantly, as would any cash.
According to the government numbers, inflation was around 4% this year, which means that any cash you had in a high-interest savings account has actually been declining in value at 1% rather than increasing by 3%.
If we're headed for dollar deflation, as some say, then it's a good idea to keep your cash. If you believe the inflation scenario, then you should buy some commodities such as gold. Or of course you could hedge your position and buy some gold while also keeping some cash on hand.
If you do decide to buy gold, it's a good idea to avoid futures and stick with real, physical gold or a fund that holds physical gold to avoid counterparty risk of the futures not being delivered.
If you want to take more risk and attempt to profit off the possibility of a falling dollar rather than simply maintaining your wealth, buy mining companies rather than physical gold, but still don't buy futures.
As for equities, Asia is a solid long-term investment but it will suffer in the short term along with the rest of the world.
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It's Time to Fix the Fair Labor Standards Act
The superintendent in my local school district has announced plans for upcoming layoffs to save money caused by a budget shortfall. He plans to layoff one member of the office staff and one of the janitorial staff at each school. They expect to enlarge class size to cut back on teachers.
Layoffs put people into the job market, adding to job seekers and making it easier for employers to offer lower wages. We might call that the obvious effect, but savings from layoffs have another effect: an increase in uncompensated work.
Teachers have never been hourly rated employees. Phrasing in teacher contracts assures long work hours. "Teacher shall perform such duties as deemed necessary, shall attend all assigned meetings, shall be present at school during school hours, shall be present at school or other location outside school hours as directed in connection with school events or activities."
With a contract clause like that, school officials can save money giving teachers more students and more work, like suggesting they may need to empty a few wastebaskets and fill out or file a few extra forms; work formally done by those laid off janitors and office staff.
Overtime pay rules in the Federal Fair Labor Standards Act, however, require time and a half pay for hourly rated employees working more than 40 hours a week. But, over the last 8 years many new exemptions and amendments were made to overtime work rules. Executive, administrative, professional and outside sales employees paid on a salary basis can be exempted from over time pay. The new rules can be found on the U.S. Department of Labor website.
The 40-hour work week has been the standard full time work week for more than eighty years, but pressuring people to work additional hours makes it easier to turn layoffs into a permanent loss of jobs.
The worst abuses are apparently in the managerial ranks, where the Bureau of Labor Statistics reports a decline of 2 million managerial jobs at establishments since 1999. Managerial jobs for 1999 are reported at 8,063,410; managerial jobs for 2007 are reported at 6,003,930. Three people working 40 hours a week is the same as two people working 60 hours a week but with a one-third savings in labor costs.
My superintendent's cost cutting plan comes right as the Congress debates billions of dollars in bailouts for defaulting homeowners, bankrupting car companies and failing banks. Maybe they could pass of few million along to my school district, but it will not matter much unless they get to the real problem: wages and employment.
They could start with the Fair Labor Standards Act and fix those destructive overtime rules.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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FNBO Direct Named Kiplinger's Best Online Savings Account
Kiplinger's has named FNBO Direct its best online savings account in its annual Best List roundup.
The magazine doesn't go deep into why it suggests FNBO as the best options, but it does offer up this:
Earn 3.5% on your FDIC-insured savings at www.fnbodirect.com. You pay just $1 to open an account with no maintenance fees and no minimum-balance requirements. You can link the account to as many as three others, including FNBO's bill-payment account. Use electronic transfers to move your funds and your ATM card to withdraw cash.
FNBO has shot on the scene in the past 18 months, launching with a 6.00% APY account and promoting a Pay Yourself First contest on YouTube.
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How Do You Feel About Online Banking?
Compete, a site that tracks traffic metrics and analyzes Internet trends, has a couple of new polls out on how consumers use online banking and what they think of it.
These are some interesting results — but, like Bankrate's recent survey, it's not entirely clear if this is discussing online banking from brick and mortar banks or online-only banks.
For example, easily more than 1% of those surveyed (probably) have opened a new account at an online-only bank. But at their brick and mortar's online site, they may not have.
How do these survey results compare to your online banking habits? Let us know in a comment below.
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Money Saving Links: 11/16/08
With Thanksgiving only one week away, one of the biggest shopping days of the year — Black Friday — is on the horizon.
Most years, I get caught up in the consumerism, but this year — there's just not that much that I need. Add in the fact that most deals aren't actually that great, and it just makes sense to save and not spend.
This week, we participated in the Carnival of Personal Finance, hosted by The Digerati Life. Fred's post on Alan Greenspan and economic regulation was included.
Check out some of the highlights from the carnival.
Investing vs. Paying Down Debt - Which Way Should You Go? - Personal Finance Analyst
Personal finance isn’t always crystal clear and making a decision between heftier debt payments and investment is a perfect example of that. In order to get the right answer, you’ll need to compare the actual “dollars and cents” value of each option and to assess that result in terms of your own personal outlook and money management skills.
Get a higher return for your money - Blogging Banks
Most individuals have money in regular checking accounts which they use for their regular day to day expenses and deposits. The main issue with these regular checking accounts at banks is that they pay very little in interest rates – sometimes lower than half a percentage point per year.
Free Online Personal Finance Tools - Hustler Money Blog
Here’s a complete free list of online account aggregation services for personal finance.
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