Are Lower Prices Encouraging People to Spend?

12.09.08 | Consumerism, Money | 2 Comments | by junger

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It is time for savers to pay more attention to prices. That assumes savers are still interested in saving, but frustrated with ever lower interest rates.

In a depressed economy like we have in the United States, low interest rates should increase borrowing, spending and then jobs.

It should, but it may not. For example, low interest rates may encourage existing home owners to refinance at lower interest rates rather than encouraging those who are renting to buy a new house. In the case of refinancing, there will be few jobs created; in the case of a new house there will be construction jobs.

Those who refinance and save with lower monthly payments have more money to spend which might add to new spending. I say might because lower interest rates mean lower earnings for savers, which will cut their income and discourage spending as well as saving.

Right now, lower interest rates are not generating much spending, just lots of talking and proposing.

Low interest rates need to finance borrowing where something actually happens like building a new factory or a new house. Lending transactions that generates more schemes to buy low and sell high will not generate jobs.

Low interest rates are only one potential change that can help revive spending. Lower prices on goods and services can do that as well.

Just as lower interest rates can put people to work, lower prices get people to buy more, which means more work, more production of goods and services, followed by more jobs and more income.

Lower prices also translate into personal savings. Low gas prices help us save as individuals, but also generate mass savings that supports spending in other sectors.

There is other regular and discretionary buying that has potential for savings. Try the grocery store where savings on week-in and week-out buying can easily translate into four figure savings over a year. I never buy cereal, chips, crackers, or most prepared food unless it's on sale.

Yesterday, the local grocery had an end of aisle display announcing chips at 2 for $7. Chips on sale are supposed to be 2 for $5, but worse I took a bag down to check the size and found 10.5 ounces instead of 11.5.

I walked away, which we all realize is a tiny gesture in a mass market, but I still have my $7 bucks. In a computer age, the wholesalers back at the warehouse know exactly what the larger market thinks of their new price.

If others pay more attention to pricing and show more resistance, it will translate into price cuts and personal savings. We can also realistically hope it will work to revive our declining economy.

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

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Is Tracking Your Spending as Good as Budgeting?

12.08.08 | Money Management | Comment? | by junger

Can you hit your financial goals without budgeting your spending each month? What about if you're tracking every penny you spend, but not setting aside certain amounts for each category?

For the past year or so, we've been tracking all of our purchases to find how much we are totalling at the end of the month, but not planning out how much we will spend for groceries, entertainment, and other expenses that fluctuate month-by-month.

Since we're automatically setting aside money for our retirement and short-term goals, we know we're saving — and pretty aggressively, too.

But would it be better to establish budgets for the expenses that change every month?

This month, we're trying it. (We used to do this when we first started saving money, but stopped after a while).

The past few months have been a bit expensive — our out-gos have been higher than our incomes. But since we treat savings as expenses, we're basically moving money from our cushion into savings.

Our paycheck to paycheck mentality makes our checking account levels relatively low, but this forces us to really watch what we spend.

What do you think: If you're automatically set to save money, is tracking your spending as good as budgeting?

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Money Saving Links: 12/7/08

12.07.08 | Savings Links | 1 Comment | by junger

With three weeks left in the year, have you started to plan out your 2009 finances? Where do you want to be in December of next year?

It's time to figure it out.

The best way to reach your goals is to plan for them. If you don't know where you're going, there's no way you're going to get there.

This week, we participated in 3 (count them, 3!) carnivals:

Check out some of the great posts, including:

FNBO Direct vs ING Direct - Reader Compares Online Savings Accounts - Money Smart Life

The main complaint I hear about FNBO Direct is that it’s user interface is a little behind the other online savings accounts available in terms of functionality. The reader seems to agree with this sentiment, preferring the ING Direct web site but he isn’t as pleased with their interest rates. I agree the interface isn’t as flashy but the FNBO Direct interest rates and customer service are better.

8 Money Management Tools for iGoogle - Financial Software

You probably already know that iGoogle pulls information from a wide variety of sources to give you a highly customizable online personal start page. Here are some of the best financial gadgets to add to your iGoogle pages.

How to Save Money on Your Monthly Technology Bills - Free Money Finance

Here are some thoughts from Kevin Brand, EarthLink's SVP of product marketing on how to save on tech bills.

  1. Assess your Needs
  2. Downgrade
  3. Take Advantage of Freebies
  4. Avoid Bundles
  5. Study your Bill
  6. Pay Smart

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Why You Shouldn't Refer Too Many ING Direct Customers

12.04.08 | Online Savings Accounts | 1 Comment | by junger

Did you know that ING Direct caps the number of referrals you can have — the $10 bonus the bank gives when you refer a new customer — at 25?

This guy found out the hard way.

ING Direct filed a civil suit against Breck Yunits in U.S. District Court last week, claiming the 2007 Duke University graduate used the ING trademark and potential customers’ e-mails to improperly gain close to $10,000 from the bank’s “Refer a Friend” program. …

In the suit, ING alleges Breck Yunits created a Web site with an address and domain name “” in May, a move that infringed on the corporate name and trademark, the lawsuit said.

Further, through the Web site, ING alleges Breck Yunits referred 918 new customers – far more than the limit of 25, resulting in a profit of $9,180, far in excess of the $250 limit, per the rules of the promotion, the lawsuit said.

While the suit is technically over the use of ING Direct's name in his site's promotion, Yuntis's brother alleges the bank paid out all of the referral bonuses — and then took them away from his account with no warning.

“They never, ever notified him, never sent a written notice, never told him to stop, never issued a cease and desist,” Conor Yunits said. “In fact, he had been getting phone calls from them all summer long, thanking him for the referrals.”

For a bank with such good customer service and technological foresight, it's surprising to hear that they would be sloppy enough to let any user use more than 25 referrals.

If you're looking to open an account with ING Direct, which I still recommend, you can use this link and feel comfortable that I won't get sued over it.

Massive hat tip: The Sun's Financial Diary

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Deploying Consumer Credit Isn't the Answer

12.03.08 | Money | Comment? | by Fred Siegmund

A recent headline from the Washington Post reads "U.S. Moves to Revive Consumer Lending."

The first line of the article tells readers "The government said yesterday that it will deploy up to $800 billion to make it cheaper for Americans to get a home mortgage, take out a car loan or borrow money through a credit card…"

The word "deploy" has never been a financial term in my memory. Troops get deployed, but money is typically saved or spent. Dollars need to be spent rather than deployed to revive the economy.

The article's use of the word deploy tells us the government knows Americans are short of more solid sources of money to spend: wages, salaries and savings. Instead they apparently hope consumers will return to their usual excess and borrow.

Spending our way to prosperity was the policy of Franklin Roosevelt in the 1930's and every president since, but a policy that deploys dollars for consumer loans differs from previous expansionary policies.

Will it work? As a saver, I believe there are many other savers like me who have matched percentage payments into defined contribution pension plans and 401(k) plans as well as other purchases of CD's, stocks and bonds. This fall's stock market and interest rate drops have caused a massive decline in purchasing power for this group.

As savers in a good economy, we were the least likely to use consumer loans or abuse consumer credit. In a bad economy, it is hard to think savers will be the ones most likely to resort to consumer borrowing. We are the group more able to postpone discretionary purchases like cars, clothes, electronics and vacations.

For the many others who defaulted on sub-prime loans and continue to struggle to pay credit card balances, it is hard to believe the government's plan will find them ready and able to borrow more and spend us out of recession.

When our government stops talking about consumer loans and starts discussing tax policy and the Federal Budget, there will be good reason for hope. If all they want to do is "deploy" consumer credit, expect another quarter of decline.

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

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WTDirect Giving Away Deposit Bonuses Up to $250

12.02.08 | Online Savings Accounts | 1 Comment | by junger

If you're thinking about opening up a new online savings account, WTDirect has a new bonus for you.

When you open a new account using this link and fund with an online transfer by December 22, 2008, you can earn up to a $250 bonus (depending on your deposit).

Here are the deposit amounts and the bonuses attached:
Balance            |            Bonus
$10,000                         $50
$20,000                         $100
$30,000                         $150
$40,000                         $200
$50,000                         $250

WTDirect says they will average the account balance between 1/1/09 and 2/28/09 to determine where you fall, and deposit the bonus in mid-March.

The bank's current APY is 3.06%.

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Instead of Spending, Sock That Cyber Money Away

12.01.08 | Consumerism, Online Savings Accounts | 3 Comments | by junger

One of the first things you should do after you get a raise at work or pay off a recurring debt is to continue to live at your existing levels.

Don't take that 'extra' money you now have and start to live larger. Instead, automatically transfer it to a savings account and watch your net worth grow.

Rather than accumulating extra stuff, you're increasing your savings without cutting back on your lifestyle. It's a win-win situation.

Today, on Cyber Monday, do the same thing. Instead of buying something you see online, take the price of the product and transfer that amount to your online savings account.

Spending money isn't bad. But wouldn't you rather spend money on yourself than on having more stuff?

The best gift you can give yourself is financial comfort. Today, make it happen.

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Money Saving Links: 11/30/08

11.30.08 | Money | 1 Comment | by junger

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 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?

11.27.08 | Money | 2 Comments | by junger

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?

11.26.08 | Online Investing | 2 Comments | by Fred Siegmund

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

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