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Are Lower Prices Encouraging People to Spend?
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 www.americanjobmarket.blogspot.com
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Instead of Spending, Sock That Cyber Money Away
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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4 Tips for Shopping at Thrift Stores (Or How Not to Spend Like Sarah Palin)
The Washington Post ran an article on Vice Presidential candidate Sarah Palin titled After a $150,000 Makeover, Sarah Palin Has an Image Problem.
The article reports $75,000 bills at Neiman Marcus and $50,000 bills at Saks Fifth Avenue along with a $10,000 handbag among recent purchases, none of which goes well with her efforts to have an "Ah shucks," hockey mom image.
I think it's fair to assume savers on this blog share at least some of my annoyance, but I decided to curb that and let her excess be an opportunity to report a modest but pleasing savings I made just three days before on a pair of $175 Nunn-Bush shoes. I got them for $7.99 at a Goodwill thrift shop.
Better yet they were absolutely 100 percent new; not a scratch, not a scuff, on the tops, on the soles, anywhere.
Finding a brand new pair of shoes at Goodwill is lucky, but there is more to it than luck. Savings at thrift stores comes with strategy and patience. Never shop at a thrift store if you need something right away.
If it's Friday afternoon and you have to get new and respectable shoes for your sister's wedding, then it's not the time to go to Goodwill or any thrift.
Savings at thrift stores is a long-term process requiring regular, but short visits. At Goodwill stores and Salvation Army stores, especially in big metropolitan areas, the good stuff turns over very fast. That is important because infrequent visits mean lots of good stuff will come and go and you'll never see it.
- Frequent visits make it easier to spot the good stuff.
- Plan to stay twenty minutes to a half an hour, but never longer.
- Have a departmental route: pants, shirts, shoes, furniture, electronics, sporting goods, books and so on.
- Don't linger. If the bargain is there, you will see it. If you stay too long you'll get depressed looking at worn out stuff and begin thinking thrift shops are hopeless when they are not.
Thrift shops are a special preserve for those who like a challenge, but they pay off, especially when you find something you might not buy otherwise. The above mentioned shoes are only one of many fun buys.
Include new to nearly new Ralph Lauren, Tommy Hilfiger, Bill Blass and Brooks Brothers shirts, Jos. A Banks pants, 3 all leather belts, New & Lingwood sweaters, a Harris Tweed sports coat, all bought for a song. Take that Sarah Palin.
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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How to Easily Overcome Your Bad Financial Choices
Personal finance is about 95 percent mental and 5 percent physical. Once you've put the right system into place, you just have to block out all the noise and plow ahead.
So as much as you may have been led to believe otherwise, the biggest thing blocking your success is you.
You are your biggest investment — and sometimes you make the wrong decisions. That's simply human nature.
The 7 Psychological Money Traps
Bankrate has a great story about 7 'psycho' money traps and how to beat them, highlighting how we cause ourselves problems.
Their seven mental money traps:
1. The lure of 'free'
2. The 'anchor-price' persuasion
3. The instant-gratification attraction
4. The dollars-to-donuts decoy
5. The separate-buckets blunder
6. The 'sacred-fund' slip-up
7. The lost-money fallacyThese are all great examples of how we naturally make poor financial decisions. You're not the only person who's ever made these mistakes. But you can easily overcome them.
Use Automation to Remove the Human Element
If you want to ensure that you aren't blocking your own financial success, automate the processes.
Want to save for a new car? Set it and forget it.
Leave your paycheck sitting around instead of cashing it? Get direct deposit.
Working hard to time the stock market? Automate your investments and you'll benefit from dollar-cost averaging.
When you take the 5 percent action required, you've set yourself up for financial success. Turn around your bad habits and start to feel comfortable with your decisions.
When Technology Can't Help You
Online banking and the Internet can do a lot to improve your money management shortcomings, but they can't do it all.
No one's going to stop you from buying that videogame you don't really need.
No one's going to stop you from living beyond your means (except maybe the bank, and you don't want to go there).
No one's going to stop you from being lazy and putting off the process to your financial freedom.
You've got to be the one who steps in and makes smart decisions. The tools are all there, but you need to make it happen.
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How Government Spending Cuts Will Lead to Job Losses
Recently the two presidential candidates and their two parties started arguing about a government project called "The Bridge to Nowhere."
From Wikipedia:
The Gravina Island Bridge, also known as the "Bridge to Nowhere", was a proposed bridge to replace the ferry that currently connects Ketchikan, Alaska, to the Ketchikan International Airport on Gravina Island. The bridge was projected to cost $398 million. Members of the Alaskan congressional delegation, particularly Rep. Don Young and Sen. Ted Stevens, were the bridge's biggest advocates in Congress, and helped push for federal funding. The project encountered fierce opposition outside of Alaska as a symbol of pork barrel spending and is labeled as one of the more prominent "bridges to nowhere".
Both sides now agree the project was wasteful government spending, but both sides claim their opposition to the project shows their commitment to save the taxpayer's money and cut government spending. It is easy to be against wasteful government spending, but neither side has much to say about the role of government in America's jobs or what might happen if government starts saving instead of spending.
Starting in December 2007, seasonally adjusted national establishment employment is down 605,000 jobs. The decline was a mixture of
- 590,000 jobs gone in manufacturing, construction and mining
- a 168,000 decrease in private sector service jobs
- a 153,000 increase in government services employment, including education
If we back up a whole year to August 2007 and look at change over the last 12 months, national employment is down 283,000 jobs but government employment is up 274,000 jobs.
If we back up two years to August 2006 and look at change for the last 24 months, then national employment is up 1.1 million jobs, but government employment is up 476,000. The government increase in jobs is offsetting losses in manufacturing and construction that are not made up by new jobs in private services.
Actually, 22.5 million people work on government payrolls in local, state and federal governments, but many more work on private payrolls as part of government sponsored and government funded projects like the Bridge to Nowhere. The terms "government contractor," "outsourcing" and "privatization" all signify private businesses, but they are private businesses doing government funded and government sponsored work.
Government employment added to government sponsored employment is more than a mere 22 million: much more.
America puts a heavy burden on its jobs by funding social security, Medicare, workman's compensation, unemployment insurance, and health insurance as a cost of employment. The personal income tax requires a higher rate on wages than on corporate dividends.
Both candidates say they will create jobs and we hope they do. It would be a better campaign if the candidates would suggest some new policies toward work and pay.
Right now, and for the foreseeable future, cuts in government spending will cause an unacceptable loss of jobs. The candidates want us to think they can manage the government to save, but without some new attitudes and new policies our government cannot save, it must spend.
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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What Can You Do Without Spending Money?
Since we're in full-on savings mode in preparation for our vacation to California, our weekend was kind of … well, quiet.
Not that that's a bad thing — Debbie was under the weather, but we didn't really have any plans. For us, not having plans is a bad thing.
When we don't have any plans, we tend to do the one thing we definitely do not need to be doing now — spending money. Whether it's going to the mall, going out to eat, or frivolously shopping, we spend money.
So with no major plans but no desire to spend money, what do you do?
Obviously, there's a lot that can be done. We cleaned the house, watched a movie, spent time with family, played some Wii, planned our trip, and more. Yes, it's not that exciting, but it doesn't have to be.
We managed to have an enjoyable weekend without doing any damage to our bank account.
Then next time you're sitting around with nothing to do, think about all the things you could be doing without spending money. Maybe it's going outside for a walk, spending time with your family, blogging, playing a game, taking a nap, cleaning your house …
The list goes on and on.
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Why Paying Cash For Everything is a Misnomer
One of the bigger "disagreements" in the personal finance blogosphere is whether or not it's better to pay for everything with cash, use a debit card, or rack up rewards on your credit card (if you pay your balance off each month).
My personal spending habits are to use my debit card for everything. If I purchase something with my debit card, I know that I can see the transaction online, which carries over to my Yodlee monthly spending reports. I rarely carry cash because I rarely go the ATM (or maybe it's the other way around).
Others say that you should only use cash — specifically, what you have in your wallet. Once you see it leaving, you realize you don't have it any more.
The discrepancy in advice doesn't necessarily mean that some folks are wrong and some folks are right — everyone is working toward the same goal: spend less than you earn.
When you spend less than you earn, you're only buying things with money you actually have. That's "cash" in hand, whether it comes on paper or from your debit card.
Your preference — using cash or debit — depends on your ability to manage your spending. You need to figure out what works best for you.
The only wrong answer is spending beyond your means.
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What Are You Doing With Your Tax Rebate?
We're not getting much of a tax rebate this year — which is a good thing, by the way — so the $132 will either go toward our upcoming vacation or housing fund.
MSNBC.com recently polled some of its readers, asking them what they plan to do with their tax rebates.
In a sign of either a slowing economy or a return to personal finance best practices (unfortunately, I think it's the former), nearly all of the published responses focused on paying bills or adding to savings funds.
A few of the responses:
I should just sign the check over to Exxon Mobil. It’s all going to cover higher gas prices anyway.
Jim Smith, Sebastian, Fla.Spend? You must be kidding! No way! It is going in my savings account.
Alex deCastro, Klawock, AlaskaIf I get a rebate, I will add it to my grandkids’ college funds. They will have to have a good education to exist, much less thrive.
Sue North, Howell, Mich.I am putting it aside to use on my family's summer vacation.
Martha Davidson, Mechanicsville, Va.I am paying down my credit cards. It is useless to do what the president says in regards to spending the money. He obviously does not know how money-strapped the working class is.
Chez Escudero, Virginia Beach, Va.If you're getting a tax rebate this year, we want to know: what are you doing with it?
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Paycheck to Paycheck On Purpose: It Works
One of the most popular posts here covered why living on a paycheck to paycheck mentality works. (Despite the lack of comments, a number of readers flocked to it.)
Single Ma from Fabulous Financials has a post up over at Consumerism Commentary on how she lives paycheck to paycheck, but is saving money through automatic deductions and taking money off the top.
By the time I receive my “real” paycheck, it’s less than half of what I actually earned, which is ok with me. All of my financial priorities are accounted for, so I have fewer things to worry about. Automation also locks in the funds to make sure I achieve my financial goals (e.g. max out 401k, IRA, and tax deductible college savings).
Having all of your investments, savings and tax-favored spending accounts (FSA, etc.) filled before you get a chance to spend it on impulse purchases is the easiest way to save.
You don't always feel like you're saving because so little work is involved, but you're doing better than if you waited until the end of the month to scrounge up whatever is leftover to put away.
Unless your paycheck is way out of proportion with your spending (on the positive side), try living with a paycheck to paycheck mentality. It works.
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The Secret to Stopping Impulse Buying
Everyone has impulses. For a lot of us, those impulses tell us to buy things that we want but don't necessarily need.
Right now, I really want either a PlayStation 3 or an Xbox 360 — partially to play Rock Band but also to get a Blu-ray player (now that it has won the format war).
I even had to spend an hour in Best Buy — twice! — in the past two weeks while I was getting new speakers put into my car (the old ones blew). To top it off, I spent most of that time playing the in-store demo of — you guessed it — Rock Band.
But I didn't walk out of there with any extra purchases.
Every time I consider hopping onto Amazon.com and buying something or picking up a gadget at Best Buy, I think about what I'm saving for — and I stop. We're saving for a home, and any big impulse purchase I make before then is going to take away money from that goal.
To stop your impulse buying, always remind yourself what you are saving for. It may help you to carry something physical — say, a picture of a house or photo of your kids.
How much is your impulse purchase going to hurt your savings goal? Don't let it.
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