Frugal is the New “Cool”

Being frugal with your finances used to be considered boring and old fashioned. In the age of excess and carefree spending as well as easy credit (albeit many times high interest revolving credit), freewheeling spending was a way of life. All that excess created a booming economy, that’s for sure.

It also created something else not so pretty. An unsustainable way of life that was bound to fall. A whole house of cards that was built on a booming economy and plentiful jobs. Once the economy contracted, people started to default on this easy credit card balances, and jobs started to become more scarce, the whole thing pretty much collapsed into what we are still struggling with today.

It took a long time for free-spending Americans to get used to tightening the spending ropes, but now that we have, it seems to have taken on a life of its own. Finding better deals and less expensive ways of living has become somewhat of a pastime for a lot of us.

You often now find people bragging about finding a better way to heat their house for less money, or making their home more efficient in other ways. You are also more likely to find people proud of finding a car that has great gas mileage and that they got for a great deal.

In fact, so many people now are interested in buying used as opposed to new vehicles that there are less used vehicles on the market than there have ever been. For the first time in recent history, used cars are in such high demand that car lots are having a hard time keeping them on their lots for very long.

Deal sites like Groupon, Living Social and any number of local big discount deals on restaurants and local businesses have become a desired business model (although I personally don’t think that these business models are very sustainable, that’s just me). Women love to sit and talk about the deals they got on everything from their latest vacuum cleaner to the canned goods they found on sale at Target the other day.

It has become en vogue to go to several different stores to shop for groceries. I personally prescribe to this method of shopping. We go to Target for certain staples like Mac and Cheese and English muffins, while we go to Sam’s Club for things like detergent and trash bags, and Giant Eagle for pretty much everything else (can’t forego those tempting fuel points toward free gas, now can I!?)

And for once, maybe because I’m also getting older, I actually enjoy talking about this stuff. It gives me a little thrill to save a few bucks on just about anything. I’m also becoming smarter about stocking up on things while they are on sale – especially food. With the skyrocketing increases in most food prices, especially meat and grain, I’m stocking up while I can.

Is China Becoming the New World Power?

The recent actions, news and happenings over the past couple of years have some questioning whether China will become the leading new world power. Why? Because they basically have that control over the world’s money right now.

With so many other governments hurting for money, and countries coming to them left and right for bailout money and loans, they are quickly becoming everyone’s “best friend”. Even European countries are now asking for their monetary support. Countries that once criticized China for their human rights violations and currency manipulation are unfortunately now possibly going to be at China’s mercy for money.

This demand for money, which is something they have in abundance in foreign currency stock, actually gives China a lot of bargaining power. For example, they can ask countries to lift trade embargos that gives them (even more of) an upper hand when it comes to exporting and importing products for sale.

They could also ask for countries to ease off their constant pressure on China to improve on their human rights laws. That wouldn’t really improve their economic standing, but it would put other countries at their mercy.

China already has a great advantage over other countries, including the US when it comes to the cheapness of their goods. It is the reason that so many countries allow such abundant imports – the goods in China are usually much cheaper than they can ever be made in the US .

They suppress the wages of workers, and they artificially suppress the value of their currency, which results in their goods being so much cheaper and more desirable to American companies for use in other products or for sale on their own. They simply make things cheaper over there. Whether it’s of the same quality you might get here is another argument.

So what do you think? Do you think China is heading for world domination? Or can the US hold its position as the dominant world power? It could go either way, but the bad news is that it definitely looks like America is on the decline. The only thing we’ll always have going for us is open capitalism and favorable business conditions for people to open up their own business.

We’ll always have our engenuity too. That’s the American way. It’s the reason we invented cars, computers, electricity, the phone, and other things that no one in the world goes without today (maybe a small fraction).

Major Credit Card Companies Toying with Tracking Buying Behavior

As credit card companies are faced with fewer options for making big profits off of their customers, often at the customer’s expense if they are ignorant of the fees they can be charged, they are exploring new ways to gain profit.

Having a list of customers can be very lucrative, no matter what your business is. Why is this? Well, many companies will pay good money for the privelege of tracking your customer’s buying behavior and then using it to decipher what their likely purchases are.

It is just another method of tracking buying behavior so that companies can more easily laser-target customers who are more likely (pre sold) to buy their products. For instance, if a business credit card often buys ink and toner, then they might be a primary target for companies like Staples of Office Max.

A person or company’s purchase behavior can basically be tracked to figure out what other products might likely like to advertise to them. It is a great method of targeting a niche market or targeting people who are more likely to buy.

However, this is just in preliminary phases right now. Major credit card companies are not 100% on board or ready to start using this information. They may use it themeselves, or they may use it to sell as a third party vendor to other companies who are looking for easy leads for their products.

It is much like the methods used by lots of other companies today.Some companies are able to sell your information to third parties who may then send you emails asking you to opt in to their promotional emails.

It’s a new way of marketing that cna be quite profitable to many types of business. However, there are some consumer advocates who are against this as it seems to infringe on the rights of the customers.

It always seems awfully “big brother” when companies sell consumer information for profit or for advertising targeting. However, there are many ways that you can make sure your exposure to this type of marketing is minimized.

You shouldn’t agree to getting newsletters for things that don’t expressly say that they cannot sell your information or share it with any third parties. If they don’t expressly say this, it’s a red flag that they likely do have agreements with other companies to divulge your email address.

You can also minimize the amounts of email lists you sign up for in the first place.

Financial News : Debit Card Fees and Crazy Stock Surges

There’s a lot of news in the financial arena as of late. Some of it is good, and of course some of it is not so good, or at least not very hopeful. One of the biggest stories is the big stock market rally that occurred surprisingly at the end of October.

It was a nice Halloween surprise, that’s for sure. But it had me questioning why the stock market is rallying so much on so little good news. It seems the public is overreacting to good news. The news that made the market swing into the highs it experienced was news that there was an agreement made to get European debt problems under control.

I’m wondering why, when all other economic indicators seem to show that the economy is not really recovering that well, the market makes wild swings higher, to earlier highs when it did indeed seem a recovery was on its way. Of course, back then it was only because the government was still on its wild spending binge and propping up the economy artificially for a time.

I get a little scared when I see the stock market overreact to a little bit of good news. All this European news is telling us is that there are going to be serious austerity measures in Europe in order to get their debt under control. I’m not sure that starting the road to correcting something that went horribly wrong is a reason to start the party back up.

In other news, and one that got a lot of consumer’s boiling, including me, was news that banks may start to charge fees for customers using debit cards. Debit cards are something that we have all become so accustomed to using that this would greatly impact many of us in our wallets.

Debit cards are a great way to keep you out of getting into debt trouble with credit cards, because unlike high interest credit cards, you don’t get charged interest on debit card purchases, and you have to have real live money in your account when you spend.

So basically, debit cards are a way to make you spend only what you have and not live beyond your means unlike the unrealistic credit card. Low interest credit cards can be a great way to make purchases that you can’t pay cash for, but they are still a risk.

Banks are now actually backing away a bit from the whole debit card fee thing due to consumer pressure and an outcry that this wasn’t fair. It all stems from banks not being able to charge businesses huge fees any more on debit purchases.

Is Underwater Refinancing Going to Help with Anything?

I’m sitting here, reading about the latest move from the Obama administration in an effort to ease some fo the pain felt by home owners. When I read that this plan might help people with their housing problem, I thought maybe it meant helping families to avoid foreclosure.

That made the most sense in my mind. Help those that have lose a job or had money issues due to the economy stay in their homes instead of getting evicted and adding yet more foreclosed inventory to the already crowded and flailing housing market. Right?

Well no. Their big plan is to help current home owners that own a home that is worth less than the mortgage amount left, to refinance those homes. Right now, under current banking restrictions, most banks will not refinance a home if it has dropped in value significantly from the first time the home owner purchased it.

It makes sense from a business standpoint for the banks, but generally really sucks for home owners who tend to get antsy when they see on paper that their home value is much less than the worth of the outstanding mortgage is.

I’ll admit, when we were in this boat, it didn’t feel too good. HOWEVER, I knew that we were going to stay in this home, which we both love, for a long time. And the amount on paper didn’t bug me as much because I knew we were in this investment for the long haul.

Home owners in this situation have to realize that home values fluctuate, and that they will not always see a larger number on paper than what their mortgage is worth. I realize there are extreme situations which are exceptions, but that is generally the rule, and in a down market, you’re going to have more of this – plain and simple.

I’m not sure how much good this new plan is going to do, other than maybe keeping some skittish homeowners in their home instead of intentionally defaulting on it so they could get out of the mortgage agreement and go rent somewhere. Other than that, where is the real benefit for the economy?

And where, more importantly, is the benefit for the thousands of people kicked out of their homes, and more to come since the banks are starting up the foreclosure process again? I think the money used for this “stimulus” could have been used elsewhere, much more wisely. That’s my opinion.

Getting a Loan from Your 401k

Getting a loan from our 401k recently became a more attractive option to us as a couple, whereas before, when the economy wasn’t as in question and there seemed to be no end to the stock run up, it was completely out of the question.

It was out of the question because I never wanted to pull my money out of an account where it was making interest simply to get some fast cash.

When you take a loan out of your 401k, depending on who your 401k retirement account vendor is, it may be a really great deal and a great alternative to getting a loan out of a bank which charges more interest.

However, you are also losing out on that much money being able to earn interest the entire time it is out of your account, until of course you repay it. You also pay a small loan fee and perhaps some other type of fee, but often times it is a much better deal than what any bank or credit card can offer.

For example, we were able to get a $5,000 loan out of one of our 401k accounts with only paying about $150 TOTAL in fees and origination fees. That is much better than any other deal.

Not only that, but the minimal interest we were paying on the loan was actually being repayed by us, to us. So, instead of paying a bank the interest, we pay ourselves back the principle and interest of the loan. It’s not much interest, but it’s almost like a forced savings of interest for you.

Right now, we decided it was the right time to do this because our money is not making much interest any way. We made the controversial decision to take it out of stocks and keep it mostly in a cash type account that earns very little interst.

Now, if the economy was doing better and our money was actually generating a decent return, that would be a different story. We would essentially be putting ourselves behind a year on $5,000 earning interest.

You obviously don’t want to do this if you are making good money on your stocks. We decided that if things keep on continuing to be volatile in the market over the next few years, we may actually take out a loan to get our deck put on the house, which is something we have been putting off a while due to expensive financing options – and we do not want to take out a line of credit on our home.

How Long Will Companies Stall Raises?

It seems like there are quite a few things going on today that make it the perfect storm for those of us that are in the working class, like me. I’ve worked for the same large corporation for over a decade now, and I consider myself extremely fortunate to have such a great job with great benefits when so many others are really struggling right now.

What I’m really concerned about is that salaries seem to be completely stagnant for a lot of people. It seems that companies are using the economy as an excuse to stop giving good raises. It’s almost like they know they’ve got us by the cajones.

The more concerning part is that CEO pay has skyrocketed. I’m glad people are staging protests on Wall Street. It’s a little sickening that corporate profits are record, CEO’s pay is record, and yet the people who make this country so great – the consumers and the working class – are suffering.

Economists have forecasted that the wages paid today won’t catch up to being good again until about another decade passes. That’s not acceptable. I feel almost like the world has stalled and people are having a very hard time getting to the next level in their lives and their professions because of it.

And it’s not like the costs of food or necessities has gone down – it’s actually also at record levels. So the things we need – gas, food and staples – have gone up, while our salaries have stayed stagnant. That’s not a good combination, and it certainly isn’t going to spur consumers into spending sprees.

Housing is the only thing that has become more affordable, but who really cares about that when people can’t even afford homes, or get approved for loans as easily as they once were able to? It’s to no avail basically!

Now, what I am glad about is that we got our home when we did. We would have never gotten the loan we did for the house I now love if it were today that we were trying to buy. It’s not that we didn’t have the income – it’s that a large part of it is through business, not a salaried job, which banks get antsy about when you don’t have an actual W-2.

Banks Stepping Up Foreclosure Process Again

In a move that has many homeowners hanging on by a thread worried, banks are now finally getting through their months or sometimes years of backlogs, and are beginning the dreaded foreclosure process again. This means that people will be thrown out of their homes who previously had a stay of eviction due to backlogging in the process.

This is not a good thing. Not only does it mean that people and families will have nowhere to stay besides a motel or rental, but it also is a signal that the housing market is going to be again flush with repossessed homes on the market for sale or auction.

Because of severe backlogging in the banking industry, and a huge inventory of homes that had to go on the repo block, banks were really behind in actually repossessing the homes in which occupants had fallen months behind on their payments.

You may have even heard of some of your friends or family who are behind on their payments and somehow have still managed to stay in their homes. This means that those people may be soon looking for a place to stay. This is just a sad state of affairs we are in today that Americans are experiencing so much financial flux.

Some data suggests that the increase in actual foreclosure proceedings may in actuality be better for the housing market. I don’t know how that can be, but I’ll leave that up to the financial gurus who come up with these theories in the first place!

Do you know anyone who has been impacted by the housing market slump? Statistically you probably do. I know that we have a few acquaintances that have been impacted by it.

It’s sad to see that people who have worked so hard to get their home are now forced to give it up likely due to losing a job or getting their hours cut, or one of the spouse losing their job and the couple not being able to afford the home on a single income.

Very shameful. I hop that we do experience a real recovery soon…..for the sake of families that are affected by things like this.

Has Paying Off Mortgage Earlier Become More Desirable Now?

The whole debate over whether paying off your mortgage early or not has been debated exhaustively. I honestly think that the answer depends on too many variables to be able to give everyone the same blanket statement of yes or no on whether they should try to do this.

For one thing, it depends on how large your mortgage is and how much you pay in interest. If you are someone that has a very high interest mortgage, and it far outweighs any percentage you’d be making by investing that same money in the markets, then you definitely may be a candidate for paying off your mortgage early.

The timing also may have a lot to do with the answer to the question. Right now, people are not making much money at all in their retirement and savings accounts and other instruments. They may see paying off their mortgage earlier as more of a benefit than investing that same money.

I’ve actually toyed with this idea, because we decided to put a lot of our retirement accounts in cash. We thought why risk the value of our portfolios completely crashing in the ensuing chaos that may happen in the next couple years.

So now, since we have this money basically sitting idle, earning very little money, why not pay off the mortgage earlier? However, you also have to think about what tax breaks you are getting every year by paying mortgage interest.

That’s a caveat not to be taken lightly by some people in certain tax brackets that really get a nice tax break by having a mortgage and paying that interest every year. They may miss that tax break when taxes come around again if they have the mortgage paid off early.

However, the difference may not be huge for others. They may like the freedom of knowing they have paid in full for their property and home. They may actually enjoy that much more than getting the tax break every year.

By the way, you still would get the tax break for property taxes – those never go away since you will always pay property taxes. Now, if the government suddenly decides that they don’t want to give you tax deductions for mortgage interest, that makes the answer to the paying off the mortgage early question a little more clear cut for lots of people.

My husband and I, for example, would likely begin to accelerate our mortgage if this ever happened. This would take away a lot of the incentive we have for not paying it off early.

More Single Women Saying They’re Not Ready for Retirement

Apparently the idea that this whole financial fiasco has been primarily a “mancession” is somewhat of a misnomer. Surveys and research has shown that single women who are of the baby boomer generation are saying that they once thought they would be able to retire, but now do not think they can retire.

This is due to inadequate savings for a variety of reasons. What it is, is sad. I’ve heard this more and more where people have worked their whole lives for a company, or for themselves, and they are looking forward to those golden years of retirement where they can live out the last quarter or so of their life doing things they’ve always wanted to do and enjoying life.

Now, with the recession and the stock market basically going nowhere, people’s returns are low or nonexistent, or they’ve had to take hardship withdrawals just to make ends meet.

Single women are particularly concerned and are coming back into the workforce after being afraid to retire and thinking they don’t have the money to make it far enough into their golden years of retirement.

Women who are almost of retirement age seem to be the least prepared for their retirement. Research has shown the single women of this generation comprise about ten percent with pension, and only about thirty two percent of them with 401k plans. That is staggeringly and frighteningly low, especially when you consider social security is very uncertain in the future.

Stories like this abound. I must admit, I’m a woman and I was single for quite a long time before I met my husband. I have been so paranoid about not having enough for retirement, or having the rug pulled out from under me with my job or with my business, that my husband and I have both saved quite a lot of our paychecks for retirement.

Sure, it’s always been tempting to scale back on the savings amount, but there has always been this conservative voice in my head that sayd rainy days may be ahead and we may want to be prepared.

I know that I’m fortunate and that not everyone is in the position where they can save a whole lot of money. It is SO important though for you to take advantage of any 401k program you have – especially if your employer matches. You’d be surprised at how little it impacts your paycheck due to the tax break it gives you.