Feb

8

The Federal Reserve and the Banks are keeping Americans from being able to save. I recently got a “act quick” from Ameritrade. If I put $25,000 into a CD I could get 2.2%. Whoah, where do I sign-up.

Current savings rates for accounts under $10,000 are between 1.2 and 1.4%.

Inflation is currently over 5%. Putting your money into a savings account at these rates is not really an option. Given the volitility of the stock market I would not recommend putting your money there unless you have time to pay very close attention to it (which I have been doing, and it has been a fair amount of work.)

What are you supposed to do?

Well, if you have credit card debt start paying it off. With interest rates at outrageous levels (even for folks with good credit) paying off this debt is really a good investment.

Pay down your mortgage. Make payments towards the principle. Doing this can save you a ton of money.

Think about creating a pantry with a few months of food staples that you can rotate through. With rising food prices this is not a bad investment at the moment.

You can buy Series I savings bonds which are paying 3.36%.

Keep in mind it is always good to have a few months of living expenses in the bank. Just do not expect to get much of a return on that money.

 

Jan

6

We recently purchased a new car. Our credit is good. I had no doubt walking in that we would be approved and we were. If your credit is good you can borrow money.

Banks have begun lending to people and businesses that are a good credit risk. This is a good thing. People in debt are paying off their debts. This is a very good thing. Savings rates which were actually zero have dramatically gone up in the past 14 months. This is actually a good thing as banks are allowed to loan money based upon a multiplier (this is called leverage) based upon the deposits they have on  hand.  Manufacturing is up which is a good thing.

They call all this capitalism, something we have failed to practice in the last decade. 

On the flip-side. Most the banks have paid the government TARP money back. They have done this based upon these 0 interest rate loans that they invested back into the stock market that is now up. Unfortunately they still are holding many of these stocks. If the market takes another dip, guess what? We are back in the same boat.

The behavior of wall street is still reckless. We still have a mortgage crisis in both the commercial and residential sectors. This is not so good. We need to kick some ass and take names on this front.

We are still fighting and paying for two wars, this is not good.

Government deficits are out of control with no end in sight. To add to this we are between a rock and hard place in the respect that to get out of this mess for the next few years we need to keep spending more than we have. This is not good.

The biggest challenge we face is medicare and medicade expenditures. This is why healthcare reform is so damn important. The Democrats less the blue-dogs holding the party hostage actually have the 51 votes in Congress to pass real reform that will help us reign in costs in both the short term and for the future. Unfortunately the Democrats are too stupid to use reconciliation. They say doing so would take to long. Hmmmmmm, you mean like the Republicans did to you to get through tax cuts during the Bush administration when we were running two wars. They seemed to be able to do it pretty quick. For those of you with short memories Dick “Lucifer” Cheney cast the deciding vote to break the 50-50 deadlock. Hmmmmm, Tea-party people where was your outrage back then on this?

To be fair here are the republicans that voted no.

Olympia Snowe and Susan Collins of Maine,
Gordon Smith of Oregon,
Mike DeWine of Ohio and
Lincoln Chafee of Rhode Island.

Voting no on a tax cut in the midst of running two wars, low unemployment, and huge federal deficits is beyond insane. These five did the right thing. Three are out of office now. That was their reward. Only the Maine Senators remain. Obviously Maine has their head screwed on straight. Maybe when we stop voting people out of office for doing the hard but right thing more of our elected officials will be inclined to do the right thing.

Anyone that tells you that they are going to increase spending and lower taxes and it will all balance out is an idiot. Anyone that thinks that makes sense is an idiot. Maybe it is time that we stop listening to idiots.

Out #1 immediate priority is to drop unemployment back to pre meltdown levels. This will require more deficit spending but is needed. On the day we accomplish this the next priority is to have a tax increase that affects every American making more than the poverty level.

Yes, a tax increase!

We also need to cut federal spending and to take the excess and pay down our debt owned to foreign nations. The only way we are going to pull this off is to give the president line item veto like Clinton had. He was able to have 4 years of budget surpluses. It worked back then it will work again. He was the last president since Eisenhower that had budget surpluses.

It is time to pull our heads out and quit living on fantasy island. I am completely aligned with the tea-party on this one. But this includes all Americans and all of our elected officials irrespective of political party.

Once we pull our collective heads out many of you could go out to your vehicles and scrape off the bumper sticker that says “We are spending are children inheritance.”

Spending tomorrows money today screws future generations. It is not funny. It is selfish. It is immoral. Knock it off.

Dec

8

The AP reported that Consumer Credit fell by 3.51 billion in October. They went on to report that demand for revolving credit fell 9.3%. But, the number is even better as auto loans are included in this category and actually rose by 2.6%. Revolving credit has fallen for the past 13 months. (Source: NY Times Dec 8th, page B7)

The report implied that this trend could be a problem to the economy recovering I about fell over. Are you kidding?

Americans, you need to be commended for paying down your debt. Spend what you make and nothing more. In fact, you are saving more and this too is a good thing, as Banks actually get to loan X number of dollars based on the $$$ of deposits they have on hand. So actually, savings is good for our recovery!!!

While we are not close to being out of the woods, and I still think something smells funny with the banks , but, lets take a quick inventory of the good.

Last October we were in the face of a complete and total meltdown of the economy. At that time your government, both parties, stepped up to the plate and took steps to stop the bleeding.

After the Obama election our President and the Democratic party have continued working on this matter. Much work is still left, but…

- We have received back 500 billion of the 700 billion in TARP money.
- Americans are saving more
- Americans are shedding debt that is bad (credit cards!)

Our government has done what was needed to help a complete meltdown. Now, hopefully they will reapply this TARP money to stimulate job growth in meaningful and enduring ways, like building up green infrastructure and investing in education. Frankly the government has acted far more like capitalists than our captains of business and industry. Hopefully big business they will continue to become more responsible with their balance sheets.

The road to change is about being fiscally responsible, from the government down to each one of us. We have a long way to go, but we must continue this pattern of behavior in sustaining ways.

If we can get people back to work, we can soon begin paying down our deficit again, which if you recall President Clinton started doing during his administration.

Good work America. Keep it up.

Apr

26

Is your job secure (as much as it can be for these times)?

Have you been saving to buy a home?

Is your credit good?

…and the Government has a program that could put up to $8000 dollars you pay to them back into your pocket.

For more information read “First time home buyer tax credit.”

Apr

22

Commercial: CITI
“If you are stuggling to make payments your credit card is here to help”

Who exactly are these jokers talking to?

Those of us that do not use credit card all that much?

–or–

The people that have a problem with credit they fed more and more credit to for years and now have jacked up their rates to over 30%?

Many people that carry balances have found their credit line slashed (not such a bad thing) and their monthly interest rates raised above 30%.

Credit card companies have a captive audience they can now feed upon like loan sharks for awhile. These organizations screwed you by providing you access to cheap credit. Now they are screwing you by charging you massive interest.

What does 30% interest look like on a 10,000 balance?

If you plan on paying off the card in 36 months it looks like this:
Monthly Payment: $424.52
Interest Paid: $5,287.57

Back when you had a 12% rate it would have cost you $332.14 a month to pay off the balance over three years.

If you continue to make the minimum monthly payment (4% per month on the unpaid balance) here is what that looks like
Payment Period: 10 years
Interest Paid: $13,949.00
Balance still owed after 10 years: $1630.60

You monthly payment at $10,000 is $400.00. The balance declines each month. But, the credit card company is counting on you to continue using your card to keep the balance at or around $10,000.

A serious question for you…

Are your planning on no longer using your card?

Welcome to financial slavery.

It is time to cut up those cards and start paying them off. If you can trasnfer the balance to a lower interest card do so. But pay it off. Even if you can get a 20% rate it will only cost you $371.64 to pay it off over 4 years. That saves you a bit over $50 a month.

You will find more information and a link to a free Excel spreadsheet you can use to figure out how to get out of credit card debt.
http://www.everydollarmatters.com/your_debt.php

 

Apr

19

I recently added a page talking about buying stocks on 2009. We all pretty much took a beating anywhere from 30-50%.

This does not mean we should completely abandon the market. When investing it is always prudent to take the long view. Warren Buffet does and it works for him.

But, I want to caution you. The medias mentality is still “day to day.” They advice us as if we are all mutual fund or hedge fund managers that need to show some substantial gain each quarter.

Anyhow, the objectives for being in the market for 2009 are…

  • Buy solid companies with solid futures
  • Preferably buy companies that consistantly pay dividends
  • Only commit money if you can afford to hold the security for 3 years or more
  • If your securities rise, put trade triggers in place to guarantee a profit. If you are interested in more of the details click here

    •  

    Apr

    9

    I think we forget that majority out there are the people who have managed their finances in a sane and conservative way. For many of us that can stay employed these can be some good years for investing your money and saving for your retirement.

    I am not trying to be a cheerleader here. In fact, I think we are years from getting out of this mess. But, I look at this this way. If you are fifty [My Son’s definition of antiquity] you still have fifteen years until retirement. That is certainly enough time to to have a long position with respect to your finances.

    Blogs are really a transient form of communiction. Many of the subjects I want to address are far from transient. They are lifelong behaviors. As such, these blogs are going to be little more than a brief description and a link to a page on my site.

    My main focus for this is for people who are in good finanacial shape. If this is not your case my main site has a great deal of content for people that need to dig themselves out. You can start by “clicking here”.

    For those of you that do not need to start at the beginning… I hope my first topic does not drive you away. But, I felt real strong about leading off with this.

    “click here”. 

     

    Jan

    18

    I am dead serious. For many out there, credit card companies are lowering credit limits and raising interest rates. I for one am glad. If you have more credit card debt than you can afford to pay off in three months then you have too much credit card debt.

    There are always exceptions to the rule but people with average to poor FICO scores, people carrying a great deal of debt are being squeezed right now. Use this as an opportunity to payoff your credit card debt.

    People with good credit are not getting squeezed with higher rates or lower balances. Why? First, risk is low. Second, many folks will use their credit cards to make purchases that they payoff over three to six months. My wife and I will make bigger purchases on the card and pay them off in two or three months.

    Credit card companies would be foolish to squeeze us as we would not think twice of just waiting to make the purchase until we could pay for it 100%. Additionally, if our rates even climbed as high as 15% we would start paying them off every month and not worry about carrying a few hundred dollars into the next month.

    High interest rate are credit cards are a good thing. So is raising the minimum monthly payment. In the long run it will force people to get out of debt and start living within their means.

    A debt free America would be a very good thing indeed.

    Jan

    5

    This is a lifestyle change that is long term. I can tell you this from first hand experience. Once you start doing it, at least after the inital early struggle, you begin to find how free you feel, how much better you sleep at night.

    I am talking about managing your money in a manner that is free of debt. Living within your means.

    It is really great to turn on the TV and read people in the mainstream media now professing this philosophy. But the mainstream media is all about popular culture, and as such does not endure for long. It is merely a snapshot of the current status quo. This is not to say that the advice being pedaled right now is not good advice. Things like…

    - Spend no more than you make
    - Save some of what you make
    - Have a cash emergency fund
    - Keep at least three months minimum of living expenses in cash accounts
    - Save for your retirement
    - Do not use the equity in your home as a personal piggy bank
    - Credit card debt sucks

    But this is a lifestyle change you are making. The tightening of credit is going to force many to make this change whether they want to or not. Maybe it will help us to collectively realize that there is more to life than just collecting stuff. I hope this is the case.

    Jan

    3

    It slays me that the pundits and experts are still reporting everything on the short term. Many have begun talking like investing has become a thing of the past, at least for the time being.

    A few have even posed the question “what will the upcoming job loss report do to the market?” The answer typically is that the markets are “forward looking” and this is a “backwards looking” statistic.

    Certainly, there are huge behaviorial drivers that shape our economy. Hence, it is hard to say with certainy how the markets will react to this macro economic news. From a pragmatic perspective, a loss of jobs means that businesses are contracting in order to adjust to the current economic conditions so they can still be profitable. People losing their jobs sucks, but rising unemployment is an appropriate response to the times. I think it is possible that we will see double digit unemployment by mid year. I think it is a safe bet that most consumers that our conservative with their money will continue to tighten spending when they see this statistic rise.

    Many seem aghast by the impending news that unemployment is projected to hit 7%.

    How soon we forget.

    Many view the Reagan presidency fondly, though forget that the first six years were NEVER below 7%. In fact, twice it went over 9%, almost hitting 10% once. Another fact, the first five years of his presidency saw an increase in unemployment higher than at any time during the Carter administration. [source of unemployment statistics http://www.miseryindex.us/urbyyear.asp].

    The Reagan period was a time of government spending and escalation of National debt, about 1.4 trillion actual, 2.6 trillion if you adjust for inflation in todays dollars. These statistics are readily available from US Government websites.

    Hindsight is 20/20. One can access statistics and news from eras past. When examining the data one can find that even during the great depression businesses started, and there were pockets of opportunity.

    I do not believe for a minute that the stock market has hit bottom. This is not to say that there are not opportunities in the market. For instance, Obama is convicted to rid our dependence from foreign oil. Natural gas will be one of the big tickets to punch in doing this. Formulation of a new energy grid will be part of this plan. Utility companies have been viewed in the past as conservative, boring investments. Their 52 week swings are typically very low when compared to other business sectors. These companies consistently pay dividends. They are commodities that we continue to need, even in dire times. Demand WILL increase due to government expansion of our national infrastructure. I see these as the next darlings of wall street.

    If you have a good cash position you can get into stocks like Chesapeake (CSK) and Duke Energy (DUK) with tight stops to minimize your risk. These companies have good balance sheets and are currently paying dividends more than double what you can get in cash accounts.

    Once Obama gets into the big chair and his stimulus plans get announced you will see upward movement on these stocks. If you afford to take bigger risk, energy transmission and distribtution stocks which are trading near the bottom will also take off. These have wider swings than utility stocks so you need to be careful.

    Remember, your goals for 2009 are to stay as liquid (cash) as you can!

    — keep looking »

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