Monday, September 29, 2008

Words of a wise man

Shadox speaks.

Go ahead and read it. It might make you feel better in spite of the semi-bloodbath in the stock market today.

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Sunday, September 28, 2008

Clampdown

Last week was an interesting time to be on vacation. Right before I left, the US financial system was on its knees. Since then, things haven't really improved.

I don't have a lot of confidence in this bailout idea. I don't know who came up with the $700 billion price tag attached to it, but I don't think anyone has any the faintest idea how much it's actually going to cost or how that money will actually be spent. While I'm all in favor of clapping heavy executive salary caps on the leaders of companies that need to be bailed out, the securitized assets that have powered Wall Street in recent years are so complex that very few people understand what they are or how to unwind them, and that makes it extremely difficult to establish underlying value. That's extremely disconcerting because underlying asset value is the core behind the bailout plan. In addition, the fact that the Federal Government is now taking an outright ownership stake in public companies is mind-boggling. (Does anyone want to privatize Social Security now?)

So, what does that mean for regular people?

My own personal action plan can be summed up under the general heading of don't do anything rash. Breaking it down a little farther, here's what it looks like:

Job
As long as I still have a job, this isn't the time to be making any major changes. On the contrary, it's increasingly important to do my job well and circle the wagons even more within my team: if we don't all look good, none of us look good. As a manager, I need to make sure my team buys into that concept lock, stock, and barrel.

This isn't the time for anyone to ask for a raise either, by the way.

Debt
This is also not the time to be in debt of any kind, so I need to make doubly sure I stay debt-free. I try not to throw out too much generalized advice at anyone who happens to be reading both because it's probably irritating, and because people's circumstances are so very different anyway. With the current structural problems in the economy and their significant impact on the job market, however, I would strongly suggest that it's in just about everyone's best interest to bring overall personal debt down.

Health
Among other things, staying debt free means staying healthy. I jacked up my back on vacation, so I have to take care of it over the next couple of weeks and let it genuinely heal instead of just carrying on as usual and potentially compounding it, which is what I did last time I hurt it like this. It also means finally getting rid of the last of the extra few pounds I'm carrying around, bringing down my cholesterol (which notched 200 for the first time a couple of weeks ago), and getting enough sleep on a regular basis.

Spending
Manage my money in a turbulent period also means postponing or eliminating discretionary expenses. I had a great time buying almonds and hair conditioner at Costco last week, along with buying a few badly needed long-sleeved shirts for work and replacing all of my manky running clothes with deeply discounted new stuff, but I'm done now. I wouldn't say I'm going into black-belt frugal overdrive just yet, but figuring out creative ways not to spend money is certainly looking increasingly worthwhile.

I have an out of town weekend coming up and I'm not going to cancel it because I've already budgeted the money, but I think that's the last one for a while. (Visiting my mom, however, is non-negotiable.)

Giving
I have been quietly donating money to a couple of different causes since I paid my mortgage off. I don't plan to stop, but I think the need to fund food pantries is becoming increasingly urgent. As a result, I'm starting to buy food for donation when I happen upon (increasingly rare) bargains.

Saving
I'm still socking away money in my 401(k) and my cash-based emergency fund, and I'm aiming to reach my target figure by the end of the year. The rest of my cash donations for this year are on hold until I get within spitting distance of my target. Hopefully, investing will look a little less murky at that point and I can redirect investment money in January. The logic I'm using behind my emergency fund is that I should assume that it takes at least one month per $10,000 of income to find a job comparable to the one I have now, so I need to be able to cover expenses for at least that many months of unemployment. I'm getting there, but it's not a done deal yet.

Despite the dire outlook for the economy and the precautions that I'm taking (along with the vast majority of middle-class Americans, I suspect), I don't think the sky is really falling. On the contrary, I think that while most of us have a tough road ahead for the next few years (and for some people, that's going to include genuine suffering), for many people this is an opportunity to walk away en masse from the spendspendspend consumeristic madness into which much of the contemporary culture has devolved.

We may not be able to do much about the three-ring circus in Washington, but we can and do all make choices in our own lives that will impact our future financial health.

What are you going to choose?

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Thursday, September 18, 2008

Brief blog hiatus

I'm heading out for a technology-free vacation tomorrow. I hope everyone has a happy and prosperous week, and I'll check back in at the tail end of September.

I have to go pack. Peace out!

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Wednesday, September 17, 2008

Ew. Now what?

After the stock market took a dump on Monday, a friend emailed me to ask what I thought about the banking crisis. Here's what I wrote in response:

I haven't written about the meltdown yet. I've been too busy puking
in the corner. I'm thoroughly opposed to government bailouts,
however, on the principle that it encourages moral hazard - e.g.,
playing fast and loose with laws as well as common sense because of
confidence that gov't will pick up the pieces. I'd rather see the
market work this out on its own. If gov't needs to get involved, I'd
like to see it along the lines of a New Deal approach - job creation
through building up badly neglected public infrastructure. That, to
me, would be far more valuable than propping up banks whose management
made appallingly bad choices based on greed. As it stands, we will be
paying for this debacle for many years to come.


Your thoughts?

(And as an aside, I am so humbled and grateful not to have a mortgage anymore. . .)

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Monday, September 15, 2008

Hurricane evacuations: who pays?

At least two thousand people have been evacuated from Galveston following Hurricane Ike's destructive fury, with more than fifteen thousand still on the island. Power and water services are out all over Galveston, so food is rotting and unsanitary conditions are developing. Heavy damage to roads and bridges means that getting out is easier said than done, and poisonous snakes are infesting the debris. Many people are either injured or simply just stuck and won't make it out without help.

Who gets to pay for all the rescues?

This question comes up in Oregon frequently, as costly search and rescue operations are mounted for people lost in the mountains (usually woefully unprepared) in inclement weather. In 1995, a law was passed to allow rescue agencies to charge up to $500 per person in rescues where authorities find violation of law or a lack of reasonable care. (No, I don't know what exactly reasonable care means.) People charged with this fine can appeal, and the fine will be waived if they can successfully demonstrate that they did not violate any laws and were fully prepared for sub-optimal or outright dangerous conditions.

While $500 per person is a start, I don't think it's nearly enough of a deterrent in Oregon. On the contrary, if adventurers get into life-threatening trouble solely resulting from demonstrated bad judgment and/or poor preparation, I'd like to see them pay the full cost of their rescue.

Anyone who read my last post on Hurricane Ike might wonder whether I'd be willing to put a price on my own near-drowning a few weeks ago. The answer is simple: you bet your bippy I would. I went out farther than I should have in very rough water, knowing that I'm not a particularly strong swimmer. The danger was forseeable, and I exercised poor judgment. That particular section of the Jersey Shore has lifeguards, but should I be responsible for paying a punitive fine because I did something stupid that resulted in my needing a rescue?

Absolutely.

(Since the Jersey Shore lifeguarding system doesn't charge for rescues, I'm still mulling over what I can do as far as a donation is concerned.)

So, what does that mean as far as Galveston goes?

A mandatory evacuation order was issued for the island in more than enough time for residents to leave via public or private transportation, and approximately twenty thousand chose not to comply.

I think those people should be required to pay every cent of their rescue costs, with a punitive fine on top of that.

What say you?

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Sunday, September 14, 2008

Weekend roundup

The Frugal Blog Network is as busy as ever. This week, my favorite posts were all about the home: Almost Frugal made (yes, I said made) her own laptop case, and she shows you step by step how to do it yourself. In the meantime, Frugal Babe did one of my personal favorites, avoiding spending additional money on the spur of the moment by using clever substitutions for the things she doesn't have on hand. Tight Fisted Miser mused about how he can achieve retirement by 50. He doesn't leave any options unexamined, including the possibility of downsizing his home to a van.

Check back tomorrow for a new post about hurricane Ike and the aftermath.

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Saturday, September 13, 2008

Gazing into the eye of the hurricane

For some reason, I've been closely following the progress of Hurricane Ike as it barrelled its way towards Texas. What I found most disturbing was the fact that up to 20,000 people in Galveston - a little island off the coast of Texas that was decimated in 1900 by an approximately Category 4 hurricane - refused to leave.

Emergency workers told the holdouts to write their names and social security numbers on their arms with a marker to make it easier to identify their bodies later. (A man who helped dig out Ground Zero after 9/11 told me today that it was standard operating procedure to do this on a daily basis in the days and weeks after the World Trade Center was destroyed.) Even that wasn't enough to convince the Galveston holdouts to leave.

I've tried to understand this mindset every way possible and I just can't do it. Things are replaceable; lives aren't. Sure, it turned out that as bad as the storm was, it wasn't anywhere near as bad as it could have been. . . but there was no way of knowing that in advance.

Why would people in the danger zone stay?

To protect their houses from looters?

To protect their stuff?

Because they didn't have transportation out of town or anywhere to go? (I've read that that was the case with Katrina, but I'm not aware of it happening in Texas with Ike.)

If it wasn't for any of those reasons, then why?

I think my perspective is probably colored by the fact that I was a Labor Day lifeguard rescue on the Jersey Shore. It's not a hugely exciting story: a combination of bad judgment and a riptide resulted in my playing a starring role in a near-drowning.

The thing that haunts me to some extent is that it all happened so unbelievably fast. I can't imagine making a deliberate decision to play staredown with eternity, but that's what a lot of people in Galveston did.

I want to think that I would have run like my butt was on fire.

What would you have done?

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Thursday, September 11, 2008

Small is beautiful

Today, the New York Times published an article about the growing popularity of living small. According to the article, complete homes of a thousand square feet or less are taking off in popularity, presumably in response to the falling values of larger homes and the rapidly increasing cost of living in them.

I'm a big believer in living small. In my early twenties, I spent two years living in about 200 square feet in Japan, and it was great discipline for learning not to accumulate a lot of clutter. My current home is all of 577 square feet, but it works really well for me. I think the key is that it's very well designed: the prior owner was an architect, so he essentially gutted the place and redid it with an open kitchen (the closed-in, windowless kitchens in other apartments in my building line feel claustrophobic to me), added custom kitchen cabinets, lot of built-ins and other clever storage ideas, and even had a bed built in place (which he left for me) that contains six storage drawers below in the base on one side and a large cabinet for linens on the other. According to the New York Times article, clever design in small spaces is hardly unusual these days: as more people are turning towards living in less physical space, they're spending an increasing amount on smart design that's both high quality and makes the best possible use of limited space.

Living small is smart for so many reasons: heating and cooling costs are lower, it's more environmentally friendly, it forces people to be realistic about clutter and limiting their possessions, and it requires a heck of a lot less maintenance in terms of cleaning, fixing, and upgrading than large, sprawling homes. Having said that, although I think I could shrink my living space by a hundred square feet or so if I really had to, I'd have a hard time making a go of the hundred square feet total that some dedicated small-livers have embraced.

Could you live in a hundred square feet? How much living space do you have now, and how well does it work for you?

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Monday, September 8, 2008

Posting on Divine Caroline

My first Divine Caroline post went live this evening. Regular readers, you'll recognize it as a retread of a recent post. I haven't quite figured out the balance yet, but I think that although I'll write new posts specifically for Divine Caroline from time to time, most of the content that ends up there will start out here.

In any case, their layout is nicer than mine and they made me clean up my language a little, so I hope you'll give it a look.

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Hat tip: Shadox

A number of readers took a dump on expressed extreme displeasure with a foray into presidential politics I made some time ago. Since I clearly don't communicate my own political views nearly as clearly or as persuasively as I'd like, I am delighted to share the following presidential pick from Shadox.

I hope you find his line of reasoning as compelling as I do.

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Sunday, September 7, 2008

Weekend roundup, day of reckoning, and more

Our own heads can be our best friends or our worst enemies. In this week's Frugal Blog Network roundup, Almost Frugal presents a question from her mom: What denominations of money do you like to have, and what does that say about your personal finance mentality?

Frugal Babe looks at wedding gifts outside of the traditional formal china and crystal that just might be a whole lot more meaningful. Continuing with the gift theme, Not Made of Money is already giving some thought to Christmas giving without going broke.

Tight Fisted Miser made a mistake with his school loans, and it temporarily put a dent in his budget. He's kicking himself for it, but I'll bet that he never makes a mistake like that again.

In other happenings in the f.z. world, my TV turnoff challenge (which includes greatly reduced internet playtime) continues. Yesterday, I went way over the 1.5 hours per day of recreational internet use I had planned for this challenge, but otherwise I'm on track. Next week is when most of the season premieres start. Is anyone planning to miss the start of the new fall season? What are you doing with your time instead?

And finally, my day of reckoning came last week with my annual physical. The good news is that the thing I was a little worried about (mild to moderate hand tremors, if you really wanted to know) seems to be no big deal and definitely not Parkinson's. The bad news is that the doctor insisted on weighing me, and she confirmed the hideous truth: I lost nine pounds early last year (after gaining fifteen), and it's come right back. It's carrot stick city around here for a while, but I need to get on top of it. I wrote a while ago about what I've experienced as an inverse relationship between weight and finances. Not surprisingly, the very dilemma I wrote about back in February has come up again: losing weight makes me want to spend money.

I don't think this is an uncommon phenomenon, but I don't know why these two elements of self control are so closely linked. I just know that for me, they are.

How do you balance your weight against your wallet? Do you even face this dilemma in the first place?

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Saturday, September 6, 2008

How do you teach kids to manage money?

This one is entirely theoretical for me since I don't have kids and don't ever expect to, but I'm curious: how do parents teach their kids about money? I had an allowance starting from grade school, but I don't remember my parents trying to tell me what to do with it. (Candy was and still remains a pretty big vice.) I started babysitting at twelve and got my first job at fifteen; I paid for my own clothes and entertainments for the most part, but I sure didn't have much of a focus on saving. Even if I was more interested in saving than was actually the case, I didn't know about anything other than savings accounts and certificates of deposit.

It's not that my parents, both brought up in the Great Depression, didn't try to tell me the virtues of saving; I was a teenager and simply didn't want to hear it. I was in my early twenties working at my first real job when I realized that if I wanted to go to grad school without getting into debt, I needed to be ready to pony up for tuition. That's when everything my parents had been saying for years finally made sense.

I think my background with money was pretty common for Gen Xers, so I was surprised to learn that most people I know with preteen kids don't give allowances. If that's how it's done these days, how are kids learning about money?

Please enlighten me; I'd love to know.

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Thursday, September 4, 2008

MSN and me

MSN's Smart Spending blog has picked up a few of my posts lately, two back to back. Of those two (Big brother is watching your coffee cake and Time waits for no one), Time waits for no one has triggered an energetic discussion, mostly centered around other people's struggle to balance family and finances. If you want to see what other people have to say on the subject, it's worth a look.

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Tuesday, September 2, 2008

Spending money to save money

Sounds like a commercial, right? The more you spend, the more you save!

Most of the time, that's not true. If you spend money on crap you don't need in order to save 20%, you end up with more crap and less money. Where's the savings there?

Apparently, only in advertising fantasyland.

There are situations where spending can lead to real savings, though, and that comes from buying non-perishables that you use regularly on sale and in bulk. Case in point: I have a list of things that I look for every time I walk into a drugstore, and that list contains hair mousse. Hair mousse is a want, not a need, but with long, fine, straight-straight-straight hair, I depend on hair mousse both to add a little volume and wave, and to keep my hair manageable. Hair mousse is expensive, so I buy the cheap(er) stuff and only when it's on sale.

This weekend, I happened upon a buy-one-get-one-free offer at Rite Aid, so I bought the entire supply. Combined with what I already had in reserve, I now have a year's supply of hair mousse that cost about $25 in total. If I had bought hair mousse one can at a time as I needed it, it would have cost twice that much over a year and possibly more. If you're one of those people who is good at working the coupon system, you might be able to bring that cost down even further.

My list of items that I always look for varies depending on what I have: for now, I'm taking hair mousse off because I have plenty. At the moment, this is what it contains:

Conditioner
Toothpaste
Dental floss
Fish oil capsules
Multivitamins
Calcium
Antiperspirant
Moisture-wicking socks

Obviously, this strategy doesn't work for anything that has a limited lifespan or that you don't use on a regular basis. For things that have a long shelf life and that you use every day, it's a cheap and easy way of spending less while also making sure that you don't end up stranded by running out.

Making this strategy work requires up-front planning, an organizing system that lets you easily store and keep track of what you have, and enough flexibility in your budget to make unplanned bulk purchases when the opportunity presents itself. If you can pull all of that together and get into the habit of checking for opportunities, however, the long term savings can be considerable.

Do you have a bargain shopping list? If so, what's on it?

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