Pseudo-advice. . .

I am naturally drawn to those '10 best. . .' or '20 best. . .' of whatever, whether it be '10 best places to retire' or '5 best cities to find a job', or what-have-you. I'm not sure why I love them so much but they catch my eye and my mouse click at the same time.

Here, though, is the most idiotic 'best of' list I think I've ever seen: 100 Best Money Moves.

The vast majority of these "money moves" involve some form of consumerism, whether it's purchasing the 'best' video camera, obtaining the 'best' rewards credit card, or buying a $350 thermostat to 'save' money on heating and cooling. It's absolutely maddening that marketers are basically advertising to us by pretending to give us money advice!

Here's some advice, and it's free: Save more money. Pay down debt. Avoid ridiculous consumerist 'best of' lists.

A Day Late . . . .

And a dollar short. . .

Where was THIS guy during the housing boom?

Sorry for the silence, readers! I had (minor) surgery in March and boy did it throw me for a loop!

Frugal housing. . . .

Last week, I was dithering about whether to pay down my second mortgage early, or start working on my student loan. I was questioning whether, with the sad state of the real estate market, throwing money at my second mortgage was really the intelligent thing to do, since I don't know whether I'll ever get that money back (I'm thinking not).

I got some really good (and thought provoking) comments on that blog post. One of my commenters mentioned that she thinks that the market in her area (another part of Oregon, I believe) has finally hit bottom. I'm hoping that's the case for Portland, though I'm still not convinced.

That comment made me think about all of the news articles written by supposed 'experts' who predicted that we had (or would) hit bottom in 2008, or 2009, or 2010, or even 2011! It seems that those of us in the trenches (like my commenter) may have more insight than the experts! Here's a sampling of the articles I've read over the years about this very subject (I'm a little obsessed with home values these days, as are many of us):

2008: The well-known Kiplinger's predicted that the housing market would bottom out in 2008, as did the equally well-regarded Bloomberg (though, in its defense, Bloomberg was really just parroting the predictions of a bunch of bankers).

2009: My very own Oregonian forecasted that in fact 2009 would be the magic number for a bottoming-out of Portland housing prices, while Moody's (via the Wall Street Journal) predicted that 'some' markets would bottom out in 2009.

2010: Reuters reported that 'Home Prices May Bottom Out in 2010' (I love how they start to qualify their predictions with the words 'may', 'could', 'some', 'possibly', etc, meaning that they don't want to commit to anything but they know we're going to read their article anyway because we're all desperate for good news. Way to protect your backside, economic experts!) Meanwhile, Standard & Poor's indicated that 2010 would be the year housing values stopped their downward slide, though they were nice enough to tell us that we might not see values at 2006 levels until 2020! Also, there is this rather interesting graphic that shows various predictions by the 'big players' in the world of real estate values (click on it for a larger version):


And now, we come to 2011: It's early yet, so there aren't many economists making predictions in writing, but I did find this one from Interest.com indicating that 'most' experts expect home prices to bottom out this year.

What does this all mean? Well, call me crazy but it seems as if all of those 'experts' have no freaking idea when the housing market will bottom out, and never did. They're guesstimating an end to the housing crisis based on, I'm sure, years of expensive education at Ivy League schools and various economic indicators. None of which has amounted to a hill of beans, apparently.

Meanwhile, I just tortured myself by checking zillow.com and learned that my home has dropped an additional $4,000 in value in the past few weeks.

Frugal change. . . .

Like most of us, I have a jar of change sitting in a dark cupboard, that I sometimes throw my spare nickels and dimes into----they just get in the way in my tiny little wallet! Every once in awhile if I need money for gas (just a few bucks to get me through the end of the month), I'll dive in and grab some quarters, but in general the money just sits there, unused and seemingly unloved! I've never actually cashed it in for "real money", and I'm not sure I ever planned to. . .

With this economy, though, it seems that more people are heading to their local Coinstar or bank to cash in the random change in their respective jars. The bank representative in this NBC video says that not only do they cash out to the tune of $15,000 to $20,000 per week (total) just at her branch, this kind of business has increased by 13% this year! I guess when times are tough, every little bit counts, eh?

Visit msnbc.com for Breaking News, World News, and News about the Economy

I think I may take a second look at my little jar of change! I know I don't have anywhere close to $50 in there, but it might be enough to fund a guilt-free night out with the girls sometime soon!

Frugal confidence. . . .

Apparently, Americans have a confidence rating in the economy of -47 (on a scale of 100 to -100)! That's pretty dismal, people! This confidence or 'comfort' rating is based on personal opinions about three separate variables:

• National economy
• Personal finances
• Buying climate (meaning, is it a good time to make purchases. . .)

Interestingly, our opinions varied based on several factors. For example:

• People with higher incomes reported more confidence (-17) than those with the lowest incomes (-72);
• Those with a college degree felt better about the economy (-35) versus high school dropouts (-63);
• Homeowners were slightly more confident (-44) than renters (-54).

Also interesting (though not surprising), less than half of us feel positively about our finances. In fact:

"Forty-five percent rate their personal finances positively, typically the best of the three measures. That’s down 7 points in the past month – the steepest such decline since May 2008 – to just 4 points from the record low in January, and 12 points below average."

Actually, the last half of last month and the beginning of this month have been quite difficult for me, financially. I still haven't published my zero-based budget from May, and had quite a difficult time getting my June budget to zero out. Meanwhile, I had my debit card declined last weekend after a day of grocery shopping (I had to transfer from money from savings to cover what I'd spent)! That is the first time this has ever, ever, EVER happened to me, in spite of all the years of spending---and I didn't like it one bit! I guess this isn't surprising, considering I rarely used my debit card in my non-frugal past and simply whipped out the credit card for every little thing.

Anyway, this rather rude awakening (it's embarassing!!!) helped me to get back to the basics, in checking my accounts more frequently BEFORE going shopping! I'm feeling a little less positive about my finances than I have in the past, though, in spite of being nearly credit-debt free. This might be because I'm sensing that times will get even tighter when my income decreases very soon!

A frugal refinance. . . .

With the low interest rates, I've been contemplating jumping in and grabbing a refinance on my first mortgage at least (which is currently at 6.59%). My problem has been that I hope to sell my house and move to a less expensive place in a year or so, and I don't want to pay the cost of refinancing if I won't recoup that. Also, the value of my home is now lower than it was when I purchased, and if I'm lucky it's worth about as much as I owe on it.

Anyway, I recently took a day off from work and printed out all of my financial information---bank statements, tax return, pay stubs, etc. I took this in to the bank which holds my first loan, and began the process of talking to the mortgage loan officer about possibly refinancing my loan. My ideal would be to wrap my second mortgage into the first, since I pay an astounding 8.9% on that one (and it's a balloon loan, meaning in 12 years or so, I'll have the pay the entire balance all at once).

The woman I spoke with had a stack of loan applications on her desk, but promised to get back to me within 24 hours. Five days later, I finally got her on the phone. She said that the bank had a new program that was no cost (no points, no fees, no NOTHING) and which guaranteed at least a point reduction in my interest rate---and I was approved for 5.37%. This is higher than the current rates hovering around 4.5%, but it's still substantially lower than the 6.59% I'm currently paying. She couldn't tell me whether my second mortgage would be rolled into one big one (my second is with a different bank, unfortunately). I'll find that out this week, when the paperwork arrives. The mortgage officer predicted that even by just 'modifying' the first loan, I'll save $200 per month!

After hanging up the phone I burst into tears, I was so relieved. I'd had no idea that my mortgage(s) were creating so much inner strife. I've been doing well with saving my money and planning for the future, and although my budget is tight and I'm working two jobs out of necessity, I feel much more secure (and lucky) than many people do right now. So I was a bit surprised at my reaction, to say the least!

Of course my pessimistic side is thinking that this is just too good to be true, and that when the paperwork arrives there'll be some hitch that the loan officer failed to mention in her very brief conversation with me. Then again, this might be just the thing that will allow me to breathe a little easier each month when my income falls next year. Heck, I might even be able to rent out my house without too much trouble and find a small, cheap apartment for myself, thereby saving more money and living closer to work (uh oh, there's my optimism rearing its shining head above the pessimism).

I'll let you all know how it works out!

Can you smell the fear?

Last week, I went to a union meeting at my university, to discuss the upcoming contract negotiations. Our particular contract allows departments to send us yearly 'pink slips' six months in advance of the end of the fiscal year, basically telling us that we may or may not have a job in six months. Of course, since the end of the fiscal year is June 30, the letters go out right around Christmas of the previous year. Merry Christmas!!!

Although my department has thankfully neglected to send these out (recognizing what a morale buster they are), apparently members of other departments have not been so lucky. So, at this union meeting there were probably five or six instructors from the same department who had received these rather ambiguous letters last December. Now, during a regular year, the letters are a reminder that our contracts could end in six months' time. In a year in which there is 9.5% unemployment in the state, administrators are talking about mandatory and voluntary furloughs, and we're being asked to cut our budgets anywhere from 5% to 12%, these letters take on a much more frightening tone.

Basically, the instructors who received the letters were incredibly anxious about what they meant: in other words, would they have a job, come June 30, or should they update their resumes, contact Human Resources, and set up their COBRA accounts pronto? It's a tough call. I'm not sure what I would do in their situations. Luckily, I have the second job, but my earnings are a drop in the bucket compared to my mortgage payment, let alone costs for utilities and food.

Here's what the experts would say my colleagues should do:

• Pad that emergency fund! Start tracking your spending, cut the fat in the budget and start sending any extra money to savings. You'll thank yourself later, whether you lose your job or not;
• If employees in your field typically receive a severance package, start researching this. You'll want to negotiate the best possible package when or if your layoff becomes reality. Of course, in my world (the field of education) there are no such things as severance packages! I suppose the six months' notice we receive is considered severance enough.
• Start becoming indispensable to your boss. The first to go (usually) are those who contribute the least. Make sure your supervisors know which projects you're working on as well as the outcomes.
• Start talking to friends, family members, neighbors, the postman, everyone you come into contact with about the opportunities that might be out there for you. Make networking your best friend--you never know what could come of it!
• Make sure you know the steps to apply for unemployment insurance. I, for one, would have no idea how to go about this. And because it can apparently take weeks for that first payment to come in, it's imperative that the paperwork is taken care of at the first possible opportunity.
• Balance adding money to savings accounts with paying down credit card debt. If you find that you won't be able to make your credit card payments, be sure to communicate with the credit companies---in this economy, they've heard it all before, and may be able to assist with a smaller payment temporarily.
• If you do lose your job, consider part time or temporary jobs in the interim that you might not have considered before. Waitressing, home health aide, data entry, anything to keep the money flowing could be of help, especially if unemployment insurance runs out.

It was painful watching my colleagues wring their hands about something over which they have little to no control. I wanted to reassure them, but couldn't---ultimately, none of us knows what the next year will bring. Their anxiety reminded me that I need to keep working and saving, preparing myself for the worst while expecting (and hoping for) the best.

Frugal is the new cool. . . .

I began my frugal journey over a year ago, when I became sick and tired of feeling as if I was working for my credit card companies instead of for myself (read Your Money or Your Life to learn what inspired me). Now that the economy has tanked and people are losing their jobs and homes, it seems that frugality is becoming popular in a way I never imagined!

According to Paul Harris, a columnist with the London Guardian, the recession is changing the very fabric of society in the United States. Whereas we've striven for 'bigger and better' over the past 30 years (in everything from cars to cookies), we as a nation are beginning to see that the culture of overconsumption was not only bad for our environment and our waistlines, it has wreaked havoc with our collective pocketbooks.

"Frugal is the new cool, putting an end to hyper-consumption. The orgy of credit card abuse is over. A website called Debt Proof Living launched a daily email tipsheet last summer which now has 100,000 subscribers. Oprah Winfrey forsook her annual holiday list of expensive gift suggestions in favour of more modest "favourite things". Salons and spas are seeing customers desert them as women pamper themselves on the cheap at home."

While Harris ties this new culture of frugality to the ascendancy of Barack Obama, I believe thriftiness and simple living concepts would have been just as powerful under a McCain presidency. After all, our economy is in the toilet and will remain so for quite some time, regardless of who is living in the White House. The financial metamorphosis that we are undergoing is a result of the crash in the housing market, among other things, and would have been inevitable no matter the outcome of the election.

It is possible, though, that President Obama will become the new symbol of living within one's means (although the recent bailout package seems to fly in the face of this notion). I'm hopeful that this ginormous injection of capital (translation: credit) into the country's coffers will enable us as a nation to become more frugal at the government level. Perhaps the New York Times columnist Bob Herbert says it best when he tells us to "Stop being stupid". I only hope our government will take the time to read and digest Mr. Herbert's message of economic intelligence, as so many individual Americans have done (and continue to do in greater and greater numbers).

Frugal taxes. . . .

The tax season is almost upon us! Last week I briefly mentioned a realization that I recently had concerning my tax refund this year. Because my salary is relatively low compared to the money I spend on my mortgages (most of which is interest payment), I generally receive a nice, hefty tax refund. Last year's refund allowed me to pay down a good chunk of credit card debt, and add some money to my emergency fund.

This year, however, I created a little estimate of my 2008 tax refund, and determined that--because of the earnings from my second job--I'll be lucky to get even $200 back! Egads! I was counting on a healthy refund to pad my 'internship year' fund, with which I'll make up the loss in earnings I'm anticipating next year. (Note: it's amazing to me that I'm even planning ahead for this. A year and a half ago, it would never have entered my mind that I would actually be able to save enough money to allow myself to work part-time temporarily).

I've been reading articles about the latest U.S. 'stimulus package' to learn whether I can expect a 'rebate' check this year, which may help. Actually, there appear to be quite a few changes in the works that could help many American taxpayers this year:

• First-time homebuyer's credit: my prospective realtor mentioned this to me late last summer, when I was researching the feasibility of selling my house (I decided not to try just yet). The catch is that the $7,500 'credit' is actually an interest-free loan to be paid back over 15 years. There are rumors, however, that the 'loan' may be transitioned into a true 'credit', though, so if you purchased a home after April 8, 2008, you will want to keep your ears pricked.
• Foreclosure tax break: I sincerely hope none of you are in the midst of a financial crisis that resulted in the foreclosure of your home. However, if this did happen, there appears to be a (slight) silver lining to that black cloud: Whereas in the past, forgiven mortgage debt was actually TAXED, this year any forgiven debt under $2 million will be tax free.
• The standard deduction is increasing: to $10,900 for married couples filing jointly, to $5450 for singles and married filing separately, and $8,000 for head of household.
• The personal exemption is also going up: of course, it's increasing by a mere $100, but in this kind of economy, every little bit helps!
• Don't forget the benefit of free filing: if your adjusted gross income is less than $56,000, you're eligible for Free File. I use H & R Block, and have found the website to be user-friendly and accurate. There are many companies that can help, though, so go to http://www.irs.gov for more information.

Most of these changes and new benefits don't apply to me, unfortunately. And it sounds as if any new stimulus package will result in lower payroll taxes, rather than a lump sum payment, which may make it more difficult to save. If, in fact, our payroll taxes are lowered, I plan to pay close attention to how much this increases my take-home pay, and will have that amount automatically sent to my savings account---if I never 'see' it, I won't spend it!

The inevitable disclaimer: I'm not a tax professional, just a mere mortal trying to figure this stuff out myself. For questions or more information, check out the IRS website. I've actually found this site to have a wealth of information, especially the various electronic publications housed on the site---there's even a toll-free number you can call for additional assistance!

Are my frugal ways hurting the economy?

A recent Forbes article indicates that a whopping third of U.S. women are planning on making NO clothing purchases in 2009! That is an incredibly high number, in my opinion, and speaks volumes about the current state of our economy. Apparently, in a 'normal' year, only 4% of women say they won't purchase any clothing. In fact, consumption in general seems to be waning, as the graph below from the Wall Street Journal indicates.

Partly as a result of the sudden increase in women who will wear what's in their closets, many retailers are either in dire straits--and will probably close their doors completely--or are in serious financial jeopardy. I was shocked to see some of the well-known brands that may be shutting some or all of their stores in the coming year:

• Eddie Bauer
• Ann Taylor (a personal favorite)
• Sears/Kmart
• Lane Bryant
• Pacific Sun
• Timberland

Learning this immediately made me think of my own frugal goals for 2009, which include following The Compact and attempting to purchase used clothing and other items whenever possible. Technically, I must count myself in that 33% of American women who will avoid the mall this year. Are my frugal habits going to hurt our economy? According to this Wall Street Journal article, we 'frugallers' are "aggravating" the economy!

Well, I decided to do a little unscientific web research on the topic of frugality, saving money, and helping (or hurting) the economy. Here's what I found:

Jim Ludwick of the Business Monthly has this to say:

"I won't take you back to school for economics class other than to remind you that when you save you can help banks, companies and even the government save money, too, by putting your dollars to work at less cost. That means more profits for businesses and their owners (read: shareholders), and it lowers the cost that the government must pay to borrow (read: lower interest rates)."

Scott Malcomson writes on the Huffington Post:

"The theory is that, in the near term, the American economy needs stimulus, and a critical part of that stimulus should come from consumers. Otherwise the current Mexican standoff - companies cutting back and shedding workers, banks not lending, consumers not spending - will continue.

It makes sense, up to a point. But it isn't as though Americans aren't spending at all. A savings rate of 10 percent will still keep us a bit behind the French and Germans (who don't have our worries about health care and retirement savings), and far behind the Chinese, whose levels are somewhere around 20 or 30 percent (and who have much worse worries than we do about health care and retirement). Besides, the money is not being put under mattresses. It is going into bank accounts and other highly conservative investments. It is available to be lent."

Meanwhile Steve Hamm, over at Business Week writes about the 'new frugality' this way:

"Menzie D. Chinn, who teaches economics at the University of Wisconsin, figures consumers won't be in a position to spend freely for five years.

Which brings us to what John Maynard Keynes called the paradox of thrift. What's good for the individual, argued the famous economist, can ignite or deepen a recession. But that won't deter the newly thrifty. "I can't help the economy," says Kim Schultz, a resident of hard-hit Avoca, Mich., who with her husband, Jon, owes $40,000 in credit-card debt. "I've got to help myself." On the other hand, this newfound austerity could—emphasis on could—rewire Americans as savers rather than spenders. And that would help put the economy on a sounder footing over the long haul."

It seems that Keynesian economists would likely blame the slowing economy on frugal Americans like me---if I don't spend, then our consumer-driven economy will topple and fall. But isn't it better for Americans to SAVE, rather than overspend? Isn't one of the reasons we're in this predicament because lenders gave out too much easy credit to people (like myself) without the ability to pay it back?

Although I "get" the argument that I must spend to help my country's economy, I don't BUY it. A healthy economy, in my humble opinion, is not one that is driven by short term spending by people who are living above their means. Instead, a healthy economy is one that is based on long-term investment in the things we can afford, whether at the individual level with a reliable car (paid for with cash) or at the government level with investment in sustainable industries and infrastructure.

I choose a healthy economy. I choose frugality.

Frugal incentive. . .

As a new year begins, with new goals and challenges, I'm finding it both more difficult and more important to track my expenditures. Living beneath my means is still a daily struggle, and I'd like to internalize my strategies enough that it simply becomes a habit.

In reading other blogs about frugality, simple living, and decreasing spending while increasing savings, I came across a recommendation for this online documentary, called 'IOUSA'. It's a 30-minute video that addresses the excesses of our own government, and the ramifications of the huge--and growing---national debt that we (the 'richest' country in the world) carry.

In short, the U.S. has become a debtor nation to such a degree that in thirty years, we may not have enough to cover basic services for senior citizens, let alone the infrastructure needs of our large and diverse nation. It appears, from the documentary, that our elected officials (from both sides of the ideological aisle) are hesitant to take the steps that will help mitigate the impact of our $8.4 trillion dollar debt. No politician wants to radically slash benefits while tripling the taxes that we pay---no politician these days would be reelected with that platform, regardless of the fact that in a generation we may be a bankrupt nation.

I reacted both negatively and positively to the fiscally terrifying information presented in this documentary.

My negative reaction was disgust and fear. Disgust that we've allowed ourselves to get into this situation when tough choices by our leaders could have avoided it, and fear that in 30 years, when I'm a senior citizen, my country won't be able to meet the promises it has made to me during all the years I've paid (and will pay) social security and medicare taxes.

Here's the positive, though. Knowing that my country has---in essence---brought itself to the brink of bankruptcy (like many Americans over the past ten years) makes me more likely to stick with my own objective of living within my means, increasing my savings exponentially as I continue to improve my own finances, and securing my future by preparing to take care of myself, rather than relying on social security or medicare to provide a chunk of my support in my later years.

I urge you to take 30 minutes to watch the 'IOUSA' video. Although it's economics-based (NEVER my favorite topic) it's presented in layman's terms with easy to follow graphics and interesting commentary. If you ever needed a frugal incentive, this is it. And I also urge you to click on the link at the top left of the page, entitled 'Take Action'. You can send an emailed letter to our elected officials, asking them to consider the seriousness of our country's financial situation.

Credit use decreasing. . . .

So is household worth, unfortunately! According to this CNN article, Americans owe less to banks than they ever have! Here's some text:

The government reported Thursday that household debt in the third quarter fell for the first time ever. Meanwhile, net worth dropped by the largest amount on record based on data going back to 1951.

While the fact that household worth has dropped isn't surprising, given the way homes have continued to drop in value, I am a bit curious about the decrease in credit use. I would have assumed that as people lost jobs or had their employment drop to part time, they would be more likely to pay for necessities like food and gas with credit. It appears that this is not the case, primarily because lenders are beginning to take a closer look at how much they're lending, and to whom.

As in previous articles discussing the use of credit by Americans, this one also communicates a barely disguised dismay at the fact that Americans are "spending less". This is because the economy as we know it is highly reliant on our purchase of assorted doo-dads of greater or lesser value, which are designed to wear out quickly so that we are forced to purchase replacement doo-dads.

As I've said before, this notion that Americans need to spend more to keep the economy moving is highly suspect! Why would our government and/or knowledgeable economists want Americans to use money that they don't have? It seems as if (as we're currently experiencing), building an economy on 'credit' creates a house of cards---if just a few cards at the bottom of the house are knocked out, we all come tumbling down. It's as if the people who make decisions at the very top of our economic structure want us to be a nation of serfs, ever more dependent on our 'feudal lords', the credit companies.

That is no life for me. I will continue to save money, spend it on needs (and some wants, within reason), and eventually gain financial independence from lifelong serfdom in the Land of Easy Credit.

Tough times. . .

I just received an email from the CEO of the company I work for in the evenings, asking us to improve our efficiency and accuracy, and letting us know that we would begin being compared to other employees. If we don't measure up, well, the implication is that we would be asked to go. I'm not particularly worried for myself (I just got a raise and a promotion, after all) but there were many anxious IM's and emails from my coworkers, wondering if we're about to see the axe drop. It was a little strange, and completely unexpected, to be honest. I suppose even grant-funded non-profits are suffering from the economic crisis. . .

On a more humorous note, I just came across this "memo" on a blog called The Iterative Life, from the "CEO" of the "Stober family", discussing these very same issues. This made me giggle and I thought I'd share it. Here it is in full, below:

M E M O R A N D U M

TO: Stober Family Members, Newton Highlands Branch

FROM: Marc Stober, Chief Operating Officer

DATE: November 21, 2008

SUBJECT: The Financial Crisis

With the recent news on Wall Street, I have been hearing many concerns about our organization’s situation and wanted to take this opportunity to detail what we are doing from the top.

First, there will be no layoffs.

As you know, we are operating at a deficit this year, due to extraordinary child care and preschool expenses. It is important to note that this is unrelated to the general financial crisis, and these expenses are fully funded through school year 2008-9.

In terms of recurring revenue, our employers have indicated that they are committed to continuing at present levels on a monthly basis. However, they are also facing pressure, and, based on our discussions with them, we are budgeting for a significantly smaller increase in revenue compared to what we have seen in recent years.

At present, our greatest exposure is highly leveraged real estate debt used to purchase our primary residence. While related debt service is our largest recurring expense, the good news is that this is a fixed expense that will not increase until at least 2013. We believe our investment is fundamentally sound, and will achieve long-term growth while continuing to provide immediate benefits through use of the underlying assets, regardless of the current market.

Our extended family’s long history of continuous operation through difficult times–including the Great Depression–gives us the strength to navigate in the present climate. However, in light of the global financial situation, there are some measures we are taking to cut back expenses. We feel these measures are prudent to preserve cash flow in the face of uncertain growth and unfavorable credit prospects.

The most difficult budget issue is transportation, and we have not made any final decisions. As you know, our second car was scheduled for replacement at the end of this school year, and we may decide to extend its service life. The reason we have not made a final decision is that repair costs required for this course of action are yet unknown. While this is potentially disappointing, keep in mind that our primary car still serves over 80% or our non-transit transportation needs. We committed to meeting those needs, and through a program of regular maintenance (that has not been cut), we have not had any unplanned downtime for a primary car in over 4 years. Additionally, thanks to successful strategic planning undertaken by the Board, we are uniquely situated for a suburban family to be able to utilize the MBTA as a safe, cost-effective option.

In the Travel and Entertainment category, you will find that fewer requests to eat in restaurants will be approved, and requests for desserts in restaurants, particularly, will not be approved (unless they are included in the cost of a kid’s meal). In the case of Cabot’s or The Cheesecake Factory, where ice cream or cheesecake, respectively, is kind of the point, sharing is strongly encouraged. An additional benefit of this will be improved health. Netflix has been put on hold for 90 days, and we will reconsider that offering then; unopened red envelopes left on top of the TV indicate a lack of demand at present. Newspaper and magazine subscriptions are subject to elimination as well. Executives, including myself, are being asked to purchase regular coffee in place of more expensive coffee drinks while traveling, and to utilize meals from our on-site food service provider whenever possible.

Charitable giving will continue, primarily to organizations to which we have supported on a regular annual basis, and new requests will be considered individually.

All major vacations, home improvements, and furniture purchases are temporarily put on hold, unless essential. Pre-approved food and clothing purchases can continue as needed and may be subject to increased budget scrutiny.

Lastly, note that we have no plans to add human resources. Requests for non-human resources (i.e., pets) may be considered in a future fiscal year.

The bottom line is that while the coming years may not be everything we want, we will stay together and have great stories to tell the grandkids.

Happy Thanksgiving.

Call me crazy, but. . . . .

I find it difficult to feel much sympathy for the wives of husbands who work on Wall Street, who have seen their incomes shrink significantly. For example, in this LA Times article, one woman's husband was making $400,000 a year ($200,000 base salary, and, I presume, $200,000 in bonuses). Now he's down to "just" $200,000 a year. No bonus, poor guy.

Am I seriously supposed to feel bad for people who were earning---on one salary---more than I'll make in ten years?? I'm usually not this snarky on this blog (I'm plenty snarky in real life), but $200,000 is a ton of money. If you move out of your giant house with the giant yard in the great neighborhood, and maybe trade in your giant cars for one efficient one, and consider NOT spending $500 on a 3-year old's "back to school" clothes, perhaps, just perhaps, it won't hurt so bad.

Now, I know everything's relative. My salary is pretty good, and my income is actually right at the median for Portland when I include the earnings from my second job. I've got it pretty good, in spite of the crazy fun I've had with credit cards in the past (one more month to the Big Payoff, folks!). There are people out there who would look at my life and think it's pretty luxurious, frugality notwithstanding.

Truly, though, I don't think I can stand to read too many more articles about Wall Street wives (or employees, or whatever) who were making upwards of $200,000 and more a year, who are now forced to (gasp!) clean their own houses and make their own meals.

There. That's my rant. I hope to be less snarky as the week goes on!

Overheard on the Max. . . .

A woman having a conversation with her seatmate about her husband, who was laid off months ago, and hasn't been able to find a job since. She talked about the "tight market", meaning that even though he has years of experience (in what, she didn't mention) he's not receiving many responses to his resume.

She commented that she hadn't been sure they could live on just her salary, and that they were making drastic changes in what they spend money on. It appears that they're 'making it', for now, but if her partner doesn't find a job soon, they could be in trouble.

It was interesting to hear this firsthand account of the troubles that Oregonians (and Americans) are facing right now. As I wrote on Tuesday, I feel somewhat insulated from economic woe because I work for a large public university. Barring a complete meltdown in the government, my job is fairly safe.

My eavesdropping emphasized (for me, at least), the reality that folks are struggling. They're losing jobs they've held for years. They're having a lot of difficulty finding other work. Hopefully, this new economic reality will force all of us to think twice before pulling out the credit card and making unnecessary purchases; especially when that credit card might be needed for a true emergency sometime in the future (I wish they were called 'emergency cards').

Crazy for credit. . . .

I got home in time for the last half of a national news program on TV, and heard this very interesting quote:

"Consumer credit helps the economy the way getting drunk helps make a party more fun"

I wasn't quick enough to note the economist who said this, but I thought it was brilliant! It completely illustrates the danger of having a bit 'too much' fun at a party, and having pay for it the next day in the form of a raging hangover. I think we, as a society, are now past the point of partying, and are in the midst of a mighty hangover!

In attempting to track this economist down, I came across an article on MSNBC that discusses the 'American Debt Nightmare'. This article, at the outset, makes two very important points:

1. We rely on consumer credit now more than we ever have in the past. On average, we spend a whopping 14% of our disposable income on credit card payments! That's a huge number! Say your disposable income (what's left after paying taxes) is $2,000 a month; if you're an average American, almost $300 of that would go to minimum credit card payments!
2. Since Americans are clearly living way beyond their means, relying on credit cards to meet basic needs, our savings rate is miniscule. In fact, the savings rate dropped to less than 1 percent last year. How can we ever expect to reach financial independence by relying on credit cards and a savings rate that is flirting with zero percent?

This article continues by presenting 'real person' interviews with Americans who are now beginning to feel the pain, especially since credit is now drying up. One couple had their $40,000 equity line of credit frozen. Granted, it sounds like they're going to be just fine---they simply won't be able to renovate their basement this year---but it must have been quite a surprise to learn that their $40,000 'cushion' had suddenly disappeared.

This story and others simply serve to remind me that credit isn't really money---it's sort of imaginary. If you're relying on imaginary money to shore up your finances during hard times, you're putting yourself in danger. It's a sad commentary on the state of the economy, but I wonder how many of these people will remember the lessons they've learned once we're 'back in the black' financially as a country?

There is some good news. . . .

So, every time I think that the economic news couldn't get any worse, I click on another story that just makes me sick. I am a chronic 'worrier' (so much so that I have a library self-help DVD in my house right now entitled "WORRY"). However, based on a couple of comments from readers of Finally Frugal, I realized that we can probably find some good news in all the bad.

For example, some people are keeping things in perspective and doing just fine, like Marci:

"What's the worst that can happen? I could lose all my money, my IRAs, my PERS, and SS, and my job. I think I'll still be ok. The house is paid for - and my bare bones emergency budget is under $400/month, under $300 if I defer the property taxes for up to 4 yrs.. I don't think all the pieces of the pie would get lost at the same time. Therefore, I'm just not going to waste time worrying."

In response to my post about sending a $1,000 windfall to my credit card company, 'Melanie' had this to say:

"Way to go FF! Those "three check months" can be a real boon - I managed to eat up nearly that much student loan debt in just a few years by throwing every tax refund, "third check" and found dollar I could find at it. I'm now down to under $6k. Have faith, you're on the right track and I'm cheerin' you on."

This got me thinking: one of the things that keeps me motivated about paying off debt are the stories from other people about their journey toward financial independence. I LOVE hearing about folks like Melanie who have succeeded in doing just what I'm attempting! Someday soon, I'm going to compile a list of posts from across the blogosphere that highlight and celebrate people who are either close to meeting their debt-free goals, or have actually gotten there.

Here's an example of the type of story I'm talking about, posted on The Consumerist, and entitled: Reader pays off $14,330 in 20 months with our tips. This is a wonderful story, not just because it's a motivator, but because this reader shares her personal strategies, month-to-month, that enabled her to get out of debt.

I guess in the end, I can choose to focus on the gloom and doom, or I can choose to focus on getting myself to a place where I can say: "I'm ok", like Marci, or where I can say that I've paid off most of my student loan debt, like Melanie has. And then maybe my story will help others get motivated to pay their debts, and so on, and so on. . . . .

Better late than never. . . .

In scanning personal finance websites, I'm always sucked in by titles that suggest that the author can help me survive this 'economic downturn'. Although I think I'm in fairly good shape now---assuming I don't lose my day job---I'm still not feeling totally comfortable with my day-to-day financial life. I think this is primarily because I'm a news junkie, and reading about 300 or 400 or 500 point drops in the Dow make me jittery, regardless of my miniscule retirement investments.

The articles that make me incredulous are the ones that purport to tell Americans what to "do" with their money, now. The little voice at the back of my head always asks , "what money"? Perhaps because we're hearing the worst-of-the-worst news day in and day out, I imagine that no one has any extra money to invest.

In any case, I definitely lean toward articles that give commonsense advice to people who may already be in financial difficulty, but who, with some discipline and hard work, can weather the storm and come out of this crisis without losing any more money than they already have. With that in mind, here are some ideas gleaned from recent articles that resonated with me:

• As painful as it may be, take stock of your financial situation. List your debts---all of them---as well as your income. Take a close look at how much you're spending on a daily, weekly and monthly basis, and compare that to how much you're bringing in.
  
• Pay the most important bills first, if you have to make a choice. What's more important? Paying the cable bill or the electricity bill? I'd say electricity, personally.
• Call those credit card companies, and ask for a lower interest rate. This has worked for me on multiple occasions---they're not going to offer this to you, so you have to be the one to ask.
• Speaking of credit cards: STOP using them! Unless you've got a major emergency, those credit cards need to stay in a drawer at home.
• Pay more than the minimum on your debts. Due to my second job, I'm able to pay much more than the minimum on my credit card---plus I throw any additional income toward my credit card debt. Because of this (and the fact that I canceled cable, my gym membership, and other 'luxuries') I will hopefully have my last credit card paid off by November!
• Speaking of second jobs, consider getting one. Although my second job only brings in about $600 a month, this has been instrumental in getting my financial house in order. An added benefit is that it lowers my stress level when considering a job loss (this isn't going to happen, but I'm a worrier. . . .)

Although I started doing most of these things almost a year ago (!!), even if I started tomorrow I would be better off than if I never began at all. To paraphrase a popular quote:

"The best time to fix your finances was yesterday. The next best time is today."

Frugal economy. . . .

The more I read about our collapsing economy (I'm an internet news addict, these days), the more I thank my lucky stars that I began paying off debt and saving money almost 12 months ago. One of my bank accounts (no longer used for anything other than ATM withdrawals) is at Washington Mutual, which, as I'm sure you've heard, 'failed', was taken over by the government, and is subsequently being sold to J.P. Morgan Chase. Incidentally, I heard this news late last week; by today, my ING Account showed not 'WAMU' as a linked account, but in fact 'J.P. Morgan'! They certainly didn't waste any time!

Last week (or, geez, was it only a few days ago?), I wrote about my upcoming lump sum payment for a retroactive pay increase. I intend to send this money to my credit card, paying off about $1,000 in debt in one fell swoop! I also contemplated using some of my emergency fund (of which I have $1,600) to pay off the rest of my credit balance. Several commenters thought I should keep the emergency fund as it is, 'just in case'.

I'm definitely leaning in that direction, folks, not only because of the points my commenters brought up, but also because of this financial article, reminding readers what to do in an economy like ours. Basically, the author suggests that we should act as if we were preparing to lose our jobs! In short, this means:

• Decreasing contributions to a 401(k) or 403(b). I already did this last spring, when I became determined to pad my emergency fund (something the author recommends) and pay down my credit when a labor strike seemed imminent.
  
• Eliminate unnecessary payroll deductions. The author uses charitable donations as an example, which seems sad. However, I suppose in the long run a strategy like this would work better for charities anyway; keeping oneself healthy financially in the short term would allow one to increase donations in the future.
• Reduce income tax withholdings. Or, put another way, decrease the money that you'll receive as a refund later and increase take-home pay now.
• If you're still brave enough to be investing in the stock market, diversify. Personally, I don't have the stomach to even look at my tax deferred investment account, let alone play with the contributions.
• Pay off any 401(k) loans. Hopefully none of us have taken a loan on our retirement!
  
• Research life and health insurance options, in the event of a layoff. Find out how long you're covered and for how much; if you're lucky enough to have a spouse or partner who has coverage, consider switching to their plan.

So there you have it. Luckily, I'm already doing all of these things and more, although I'm still nervous, of course. My job is secure---for now. But it's nice to have even a smallish emergency fund to back me up in the event of a financial meltdown.

In other news, Dave Ramsey's coming to town on November 1st, and I can't decide if I want to shell out the $36 it would cost to see him in person. I know it would be a great motivator and reminder---Dave's book, The Total Money Makeover, is one of the first financial books I read that catapulted me into my frugal lifestyle. I'll have to see how much money is left in my checking account after I've sent my mega-payment to the credit card company later this week!

Another reason to minimize credit card use. . .

So, I came across this article based on an interview with two women who worked for a large bank, as customer service representatives (you know, the people we call when we want a balance transfer, or a lower interest rate, or a late fee removed). Apparently, these employees were encouraged to "sell" credit to people----especially people who sounded as if they were already in financial dire straits.

For example, they were trained to listen for phrases like "I can't pay my bills", "My son is going to college", or "My car isn't running". These consumers were considered 'marks', and were then sold credit at "the highest rate possible".

Now that it's clear Americans have been financially overextended for a very long time (and I include myself in that group), we can see that part of the reason for this has been what I consider to be unethical selling practices by American banks and lenders. 'Selling' credit to a person who has a very good chance of repaying that debt is good for the economy and the country; pushing credit on people who are already stretched to the limit and who will probably miss their payments (thereby allowing the bank to increase interest rates) is immoral and dangerous.

I'm not saying that people don't have a responsibility to determine whether they are able to repay their debt before borrowing money. But I think at least part of the horrendous economic problems we're facing have to do with lenders threw money at people they knew would be unable to pay on time. Just one more reason to keep the credit cards safely stashed in a drawer at home, unless a true emergency presents itself.