So I was reading yesterday that the airline industry is about to change for the worse (that is if you are a consumer). There will soon be higher prices for aisle and window seats. It will cost $1 for a can of Coke, and you will be charged for all of your luggage. Sounds terrible, right? I agree.
Here's the deal. The airline industry has decided that they want to stop losing money. That sounds reasonable, but I really don't want to help them make money either. I think that $200 is a good price for a person to pay to fly from the Midwest to Florida. I don't think that the $400 ticket that is on the way is in any way appropriate. I recently had a friend get his flight to Hawaii canceled because the airline went out of business while he was in the air. He then had to pay $2400 for a new ticket on a different airline to get to Hawaii. He had to get there to conduct business. Flying has become a very accessible mode of transportation for Americans, and that is all about to change.
Please allow me to Rube Goldberg us through this process.
-Oil is expensive for lots of political reasons.
-Therefore jetfuel prices are high
-Therefore airlines profit margins shrink
-Therefore some airlines go out of business
-Therefore other airlines have less competition
-Therefore they raise prices
-Therefore less people fly
-Therefore less people vacation
-Therefore people are more stressed
-And tourist destination cities lose money
-Therefore businesses in those cities lose money
-Therefore they lay off their already stressed out workers
-Therefore people have less money to live on
-Therefore they don't even drive due to high gas prices
-Therefore fuel demand decreases
-Therefore fuel prices fall
-Therefore jetfuel prices fall
-Therefore airline prices will fall
-Therefore people will be able to afford tickets
-Therefore airlines will have more flights
-Therefore they will hire more people
-BUT they will start losing money!
Okay, I don't have it figured out. Maybe you do. Let me know. email@example.com
I have a green thumb...wait...I think I have a green thumb. Actually, I'm not sure I know what that means. I like to work in my yard and on my landscaping. Does that mean that I have green thumb? Anyway, I learned something interesting this past weekend.
No, this won't be your run of the mill "growing" metaphor. Although, there is nothing quite like a "growing" metaphor to explain investing and patience.
I am, generally speaking, an impatient person. Not rude-impatient, just impatient. I don't like to wait for things, I don't like waiting in lines, and a month usually feels like a year. I have been researching some different plants for some of our landscaping beds, and have discovered that things cost more when you have no patience. If I were to buy seeds for some of these plants, then I would spend maybe 10% of what I would spend if I were just to buy the plant itself. Therefore, I either wait one year or more for the plant to grow to the size of the plants that I could just buy right now.
This is a mind-numbing conundrum for me. I have become somewhat frugal over the years, but my impatience usually trumps my frugality. Do I have my yard look the way I want it to now, or do I save money and have it look good next year? I have chosen a combination. I have planted some full grown stuff and some seeds.
How often would your patience help or hurt your budget? I know that usually is a challenge for me.
I'm back from a little interlude. I have traveled the world and now have a lot more to share with you. Since we have last talked I have been to two very exotic places: Fort Wayne, IN and Sydney, Australia. Let's leave Fort Wayne to your imagination and simply address the economics of a trip to the other side of the world.
I don't mind flying. It doesn't bother me at all....until now. I don't know if you have ever been on a 15 hour flight, but if you haven't, then I suggest you don't unless you can fly at least business class. You see, I sat in my coach seat for 15 hours trying to figure out how the American airline industry is struggling. We were packed in like sardines, there was no entertainment, and I ate a chicken/fish type dish for a 4am dinner. I completely understand that I was very fortunate to be going to Australia in the first place, but when you are jammed on to a flying city for 15 hours you really start questioning your existence. I told Mrs. Planner that I would rectify this situation on the way home. I told her we would check into upgrading to a better seat.
Sometimes your promises to your spouse in the heat of the moment don't really pan out. I called the airline to inquire about upgrading our seats on the way home. It was going to cost $8,000 per ticket to go business class and $30,000 per ticket to go first class. $30,000 TO GO FIRST CLASS! Okay, so what you are saying is that I pay the airline the same amount of money that I made my first year out of college in order to lay down on a plane and have a flight attendant hand me a hot towel? Needless to say we stayed in coach and we survived. It is slightly unnerving to think about people 50 feet in front of you having the time of their life while I am crowbarred between my wife and a lunch lady from Montgomery, AL who can't get enough of Sudoku.
Bottom line: don't pay to fly first class to Australia. It doesn't make sense.
I read the other day that the US Government is spending $42 Million to send us all letters explaining that we are getting checks sent to us later (the checks are part of President Bush's Economic Stimulus Package). While I appreciate the reminder that I will be getting a check, I don't really need a reminder. Do you need a letter telling you that Christmas is on December 25th? Do you need a letter telling you when Super Bowl Sunday is? Do you need a letter telling you when the NFL Draft is? Okay maybe you do, but I don't.
Let's band together to save $42 Million. Here is the plan. I will give the important details to this check you will be receiving, and you forward this blog post to everyone on the planet. If you happen to send it to your friend, Yoshi, in Japan, just be prepared to explain to him that he doesn't get a check.
Here are the details that matter:
You will be getting a check sometime in late Spring. It could be anywhere between $600-$1500. Don't throw the check away. It is not a scam. Use the money for whatever you want. The irony is that I am spending my check on our trip to Australia. So, although I am attempting to save taxpayers $42 Million, I am being a terrible American by spending my money overseas. I am going to spend the money boxing a kangaroo. Oh great, now PETA is going to be after me. I should have kept my mouth shut. Now it is going to be PETA vs PETER.
What city in northern Ohio starts with a T, rhymes with burrito, and is the hometown of the new owner of my iPod? Well, it doesn't matter what town it is. What matters is why someone there has my iPod. Allow me to paint the picture.
It is a Monday evening, and I am in T-Town at the nicest hotel in T-Town (read: not a nice hotel). I am there for a financial conference for a company that I do business with. I had just finished my run along the river walk in downtown T-Town. There was a freezing rain storm during my run. It wasn't pleasant. I ran along the frozen river. Every other body of frozen water that I had ever seen looked different than this here river. This river looked like chocolate ice cream. It was dirrrrrty. Anyway, I finished up my run and the freezing rain had stuck to my face and clothes. My eyebrows looked like Andy Rooney's eyebrows. I was wearing black running tights, so I got to walk through the hotel lobby full of my colleagues looking like an extra from Peter Pan. This was not my best attempt at proper pre-planning for running on the road. I had forgotten my shorts to put over my tights.
So i finish up, and then go to the dinner and mixer. The dinner was a mashed potato bar, and the mixer was like a middle school dance. I could tell at this point that I wasn't going to catch a break during my time there. I mingle for about 20 minutes and then go off to my hotel room to work. I fall asleep at about midnight, and I wake up at 3 am to a Tom Petty Karaoke party in the hotel room next to me. Yes, this hotel was full of people from this conference, and a few of them took the liberty to party it up at 3 am on a Monday. I call down to the front desk hoping that they would throw the people in the Chocolate River. They didn't. They sent up someone to yell at the people, yet the party continued. I got up and grabbed my iPod and started listening to some random music to drown out the yelpings of a Tom Petty wannabe. Next thing I know my alarm is going off and it is time to go to the conference. I pack up my stuff, load up my car, and slump to the breakfast (liquid eggs and cantaloupe).
Long story short (too late), I finish the conference, drive home in a winter storm, and get home just in time to make dinner for Mrs. Planner's birthday. We enjoyed a nice dinner, and went off to sleep (hopefully Otis, our dog, wouldn't be singing karaoke). Just as I start falling asleep I shoot up in bed with my eyes wide open. I left my iPod in the hotel bed. It fell off when I was sleeping and I never grabbed it out of the bed. I saw it laying there, but simply forgot to pick it up. I called the hotel, and they told me to call back in the morning when the head of housekeeping arrived. I did, and guess what? They didn't find it. Hmmmmm. So what you are telling me is that someone not named Pete got a new iPod?
So what happens next? I am not buying a new iPod. I am not spending $200 because I lost my other iPod. By the way, this is the "moral of the story" section of the blog. Just because I don't have an iPod, that doesn't mean that I should just buy another one. This is how people jack up their budgets. I didn't plan on wasting $200 on something, and its not like I neeeeeed an iPod. Mrs. Planner and I are going to share hers. She suggested it. Not me. But hopefully you see me point. How many times have you replaced something that is not a necessity? I am guessing it blew up your budget that month.
I enjoy watching people who are good at what they do. It inspires me to try to be better at what I do. It doesn't matter how much money they make or how prestigious their job is. The only thing that matters to this special breed of people is being excellent at what they do.
Mrs Planner and I were in Chicago over the weekend and we went to a local breakfast place called the West Egg. Very good short order breakfast spot. It's a pretty popular place, and when we arrived we were greeted by a brutal line. There had to have been 25-30 people in line to eat breakfast. This is both good and bad news. The good news is that it is probably pretty good food; otherwise why would people stand in a line that long. The bad news was that I was starving and a line 30 people deep was quite discouraging. I went to the front of the line to put my name in with the host.
"How long of a wait?" I asked.
"20 minutes, sir." He replied.
"Okay", I said as I gave him my name.
I went back to Mrs. Planner and told her it would only take 20 minutes. We both stood in disbelief. How in the world were all of these people going to be seated in 20 minutes? We stuck with it, and by God he called our name in exactly 20 minutes. Exactly 20 minutes! We went inside and were seated near the host stand. I got to watch this guy work for the next 35 minutes as we ate. He was incredible. He started telling people, "17 minutes" or "18 minutes". And he nailed it every time. He had a huge smile on his face the whole time and he made sure that everyone's experience was great. He was truly great at what he did, and it had a huge impact on everyone he encountered.
It makes me want to be the best when I meet people like that guy. Does this sort thing inspire you as well? Does it inspire you as much as money and prestige? Be on the lookout for people like this, and make sure to let them know that they are doing a great job.
Well, I haven't blogged in a while. It was due to my new diet plan. You haven't heard of the newest weight loss technique? Yeah, it's called the flu. Yes, good old influenza. Wow! 7 days and 9 pounds. I am now back from the near dead. I learned an important economic lesson during flu week.
I would have liquidated any account that I have to have felt better. I would have paid anything to feel normal.
Sidenote: My doctor's office makes you pay the co-pay prior to service now. It was kinda weird. Here is $20, now I am going to sit in your lobby full of the undead for 60 minutes, then go into a room for 5 minutes with a doctor and then leave.
I will be firing back up the content this week. Thanks for your patience. Cough.
Act like a tree, and leave —A classic middle school insult.
GM recently announced that they have offered buyout packages to their entire hourly workforce. That is 74,000 UAW members. The most that GM would agree to pay you in a buy out is $140k. That seems like good money. But, you have to sever all ties with the company. No healthcare, no pension, no Christmas Card. Nothing. You take your $140k and leave quietly. They are doing this to decrease the cost of their workforce. They will get rid of experienced (read: expensive) workers and bring in young (read: cheap) workers.
The older workers aren't being forced out, but they are certainly being enticed. What would you do? If, and only if, a worker had completely been financially savvy throughout their career, then this is a no brainer. There use to be this concept of retirement planning that said there were three components to retirement. Your pension, your social security, and what you do on your own. Most of us today simply are planning as though we are going to have to retire completely alone with no help from the government or our employers. UAW members have been taught to rely heavily on the union, and therefore may not have done a great job of saving for retirement outside their pension.
Are you in a position to walk away from your current employer for $140k? You won't have any ties to them once you leave. Let's say Pete the Planner (the company) gave Pete the Planner (the planner) $140k to leave, would he? Yes, he would. But he would soon open a new company called Peter the Planner.
I saw a story on 60 minutes on Sunday about the production of the penny. It costs the US mint almost two cents to produce the one cent penny. It also costs them about 10 cents to produce a nickel. This is like when you try to trick a little kid into giving you one nickel for two shiny pennies. Okay, maybe I just try to trick little kids out of their money.
How can we continue to rely on such poor economic decisions? The government has now made it illegal to melt down coins because the raw metal is worth more than the money itself. If it wasn't illegal, you could melt your change and simply double your money by selling the raw metals. Double your money! Wow! But, it is illegal.
Isn't this a lot like your buddy who will drive 100 miles to get a good deal on gasoline?
What a beautiful coin. No wonder it costs so much to make.
A personal trainer friend of mine told me a crazy story the other day. He has a new client who is a cardiologist. The cardiologist doesn't want to be a client of my friend, but his wife is insisting that he works out (we've all been there). Anyway, the cardiologist believes that working out is pointless. My friend, being a personal trainer, thought this was odd so he asked the cardiologist why. The cardiologist said that he doesn't believe in a good diet or regular exercise. He believes that advances in medicine are enough to keep you healthy. He said that cholesterol medication, angioplasties, and other heart procedures are the most effective way to remain heart healthy. He said that exercise and health eating are myths created by the media. WHAT? As you can imagine, my buddy thought that the doctor was kidding, but he wasn't. Can you imagine if this was your doctor?
Would this be the equivalent of a bankruptcy attorney going into bankruptcy on purpose? A total disregard for discipline is pathetic, but especially for an individual who is an "expert"on a given topic. WOW.
Are you purposefully ignoring areas of needed discipline in your life?
Do you think there is a clean delineation between Democrats and Republicans when it comes to economic status? I use to think there was, and even these days I am not sure. Politics often lead to sticky conversations about social ethics, moral ethics, and financial ethics. If you had to rank how these ethical questions affect your vote, what conundrum is at the top of the list?
Is the threat of higher taxes enough to dissuade you from voting one way or the other? I think it is if you view your personal wealth and security as your main objective. If you are socially liberal, but fiscally conservative, where does this leave your vote? How can (what you perceive to be) important social programs be implemented without increasing taxes? These are tough questions that Americans are dealing with. Are you willing to sacrifice your personal wealth to advance the cause of the nation? Wow. How can you even begin to decide this?
This may sound like I favor one side over the other, but I ask the simple question. Are you willing to sacrifice your hard earned dollars to accomplish your world ambitions? My answer to this question changes all the time. What is your answer to the question? Is your economic status more important to you than the nation's as a whole?
I would love your comments.
I really don't know where I stand on this. I only know three things to be true in this world: death, taxes, and there were no dinosaurs. How many rhetorical questions to I ask in this blog post?
We all waste money. I like to detail major wastes of money. Here is one for you. The New England Patriots organization applied for a copyright on the phrase "19-0" early last week. At the time they did this they were 18-0. Therefore, they spent thousands of dollars in legal fees to protect the phrase "19-0". They did this so that they can extort money out of anyone that says the phrase "19-0". Just like Donald Trump did when people say the phrase "You're Fired".
Well, they should have applied for a copyright on the phrase "18-1" or "19 and oh no". My bottom line is that spending thousands of dollars on copyrighting a phrase that doesn't apply to your current reality is a bad idea. Thank you New York Giants.
-Who is in the best position right now with our "housing crisis"? People who currently rent and are looking to buy. You can get a steal of a deal on a house, and you can get a great interest rate. If you currently are renting, and are looking to buy in the near future, then start thinking of today as the near future.
-Beware of housing mistakes right now. Yes, prices are low, but that generally means that the house you are in right now has deflated in price as well. Don't commit to buying a new house unless you have a solid plan for your current house.
-Don't be afraid to refinance over the next 6 months. Rates are falling, and you can replace a bad loan with a good one. Experts usually want you to refinance if you can reduce your rate by at least 1%. This is a good rule of thumb, but based on your loan, less than 1% can make a difference too.
-Al Gore may not be part of Super Tuesday today, but there were thunderstorms last night that were incredible. Sure, 60 degree weather and thunderstorms on Feb 4th are completely normal....
I love capitalism. I love a free market economy. I love the fact that a company can take advantage of supply and demand and make a great deal of money...........but sometimes it goes too far.
What do I mean?
Well, price gouging is one example. During 9/11 some gas stations jacked up prices when people were panicking. This was clearly unethical and illegal. That example is quite obvious. I don't even think there is another way to look at that situation in which it seems like a good idea.
But what about this situation?
Exxon Mobile has just recorded a record year for a U.S. company. They made $40.6 BILLION. Okay, let me break this down for you. We are in the midst of a recession because oil prices are sky rocketing. The theory was that oil supplies were low, thus there wasn't much room for profit, but Exxon somehow managed to have the highest recorded profit in the 231 years of the United States. Is this unethical?
Don't get me wrong. I love a free market economy. But this seems crazy. We are potentially looking at a terrible economic time, but Exxon, which affects our economy, is having the greatest time....ever...ever...in the history of ever.
I would love your comments. I assure you that I am not a communist. Nor a socialist.
Congress just announced that they are passing the economic stimulus bill. That means that you will be getting a check in June for $1200 from the government. The idea is that you will spend the money, thus sending the economy propelling up into the heavens. Far be it for me to question the most powerful former baseball team owner in the world, but I don't get it. Giving someone $1200 to spend seems like a bad idea long term. The problem is that Americans don't save. Basically the plan doesn't work if we choose to save, invest, or donate the money. Saving, investing, and donating are the things that we Americans need help with.
Therefore, I have decided to do exactly what Sammy Sosa's former boss says. I will spend the money. I have put together a list of things that you could spend your $1200 ($600 if you are single. It might be a good idea to find someone that is willing to marry you...soon) on. It really doesn't matter what you spend your money on. You could go to Target, buy 5 cartloads full of stuff and burn it. You are helping the economy.
Here is the list
1. 400 jars of Hellmann's Mayo
3. 1200 junior bacon cheeseburgers from Wendys
4. 48 bags of Monkey Picked Tea
5. 3.48 annual memberships to the bacon of the month club
6. 100 copies of What Your Dad Never Taught You About Budgeting
Waste your money wisely. Your country is depending on you. This plan may work, but are we constantly going to just put patches over huge holes?
Long story short. That was one of the craziest days in the market that I have ever seen. The market started off down almost 500 points, and then due to the emergency rate cut it only ended up being down 130.
Our local CBS affiliate called me to help them with a story they were doing on people flipping out. You can view it below.
The Lesson for Yesterday: Nothing is worth freaking out over. Everything ended up okay.
I had a friend who recently suffered hail damage to his roof. True story. He is a very handy guy who doesn't really like paying to have things done that he could probably figure out himself. He also was in a little bit of a cash crunch, so he wanted to do this on the cheap, and pocket a little bit of the insurance check. I don't know the rules about insurance checks; thus that's not the point of the story. Re-roofing a damaged roof is a pretty basic process that happens to take some very specialized skills.
The real questions here are: Is it worth risking your homes' contents? Is it worth risking your safety? Is it worth the problems with resale? When a real bad storm comes, will your amateur job do the trick?
Basically what I am saying is that doing it yourself is easy when things are good. Doing it yourself when times get tough is really really tough.
Anyway, my buddy fell off his roof. Hurt his back, and ended up spending more on rehab than he would have if he would have paid to have his roof replaced. Do it yourselfers often end up in a worse position once the bad begins. The bad always begins, you just need to know how to deal with it. Get help if you need it. Don't go cheap.
The market is going to get stroked today.
The good news: the first season of Dharma and Greg was just released on DVD. Who cares, you say? No one does, but I didn't want to leave you with the news that the market is going to get killed today.
Welcome to a very disjointed and uncomfortable blog entry. I apologize in advance for your discomfort, but I think this is interesting.
I had a friend email me last week in regards to this ethical question: Should you be able to sell your organs? Yes, in itself it is a disgusting question, but an interesting one nonetheless. Let me first start by saying, "I don't think that you should be able to sell your organs for profit." But I am going to argue that you should be able to.
Let's start at the beginning. In the beginning....you know the story. From a religious standpoint, selling your organs seems like a one-way ticket downstairs. I am not a religious scholar, but I am guessing it is a bad idea.
You can sell blood plasma, why shouldn't you be able to sell other pieces of your body. In fact, I just put my receding hairline on eBay.
Let's say that your house is in foreclosure, and if you sell a kidney, then you could save your house. Should you be able to do this?
Would organ transplants increase if people were allowed to sell their organs? I am guessing they would. That means that more people would be helped.
Should a family be able to sell a deceased persons' organs at the deceased request?
This is a pretty crazy topic, huh?
This topic proves one thing. Money has nothing to do with money. It just seems wrong to sell your organs, yet it would help you financially.
You often hear people describe the financial markets as either a bull market or a bear market. This can be confusing and people often mistake one for the other. Let me try to unravel this a little bit for you.
A bull market is when investor confidence is high, and the masses are making money. People are feeling as though the market will continue to produce capital gains. It is called a bull market because the "herd", the term used to describe the majority, is in agreement that the markets are good. The bull is a herding animal, and thus the term bull market.
A bear market describes a financial environment where there is widespread pessimism. A bear market is when things aren't going well in the financial markets and people don't feel positive about the immediate future. I have no idea why they call it a bear market, and frankly the bull market reasoning is dumb too. So I created my own story.
Wanna hear it? Here it go.
Back in the middle ages, there was an evil wizard who was also a tax collector. His names was The Great Bernanke He would ride through the streets of the village and collect taxes. Since there were no mo-peds back then, he rode one of the animals from his petting zoo. Let's for the sake of argument call it an evil petting zoo. The wizard had two favorite animals that he would typically ride though the streets. He had his work vehicle, a bear, and he had his recreational vehicle, a bull. When he rode his recreational vehicle, the bull, he wouldn't collect taxes. This made the villagers happy; thus the term a bull market. When he came through the streets on his bear, then the villagers were forced to pay taxes and were subjected to an occasional mauling. Thus the bear market.
See. That was a much better story. Just remember: bears can maul you, and that is bad. Bulls could run over you, and possibly gore you, but if you avoid Pamplona then you should be fine.
I have always thought that banking was a commodity. (A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a given market.) Okay, I "borrowed" that definition. Here is my real definition. A commodity is a product or service that isn't easily differentiated. I wonder if Cal Ewing, the Patron Saint of High School Economics, would approve of that definition.
Anyway, a bank is bank. Right? You keep your money there, they charge you dumb fees, and then you complain about it. Well, it turns out that I am wrong. [Mrs Planner: "Nothing new there"] I started thinking recently about the relationship with my bank. What relationship? I have banked with them since I was in 8th grade, and I never really had an ongoing relationship with anyone. I know that I mainly use online banking, but if I have real problem...who do I call? This started to bother me. I was contacted by another local bank recently, and they had me in to the branch to discuss what they could do for me. Frankly, if they just called me by name, then they could have my business. I always like being on a first name business with people. You know, like Norm on Cheers. [Side note:Being on a first name basis with a Bail Bondsman is not good.]
Well it turns out that the new wave of banking is all about turning things back to the old school. Shell-toed Adidas, Kangol hats, and thick gold chains. Okay, maybe not. In this case, the old school is the fact that they want to know your name. Novel concept, right?
So, I switched. I also found out that there are no fees on my new accounts, I got a free safe deposit box, they game me 200 bones for switching [not actual bones; that would be weird; money, people, money], and I got a personal banker. What's a personal banker? I still don't know yet, but I have someone to email and talk to when I have questions.
I feel that I was properly rewarded for not doing things status quo. I had realized that I had been complacent with my banking. I will update you in six months when all the hidden fees show up.
Another bad report this morning, but I think that there is a silver lining on this one. I would attribute some of this to tightening lending practices. People can no longer build a new house with bad credit, no money down, and a handshake. The reality is that too many people are living in houses they can't afford.
This drop in construction is bad for the economy, but it is a product of our economy trying to correct itself.
Sorry about all the bad news. Here is some good news. Uhhhhhhhhh...thinking........uhhhhhh.....okay.....I got nothing in terms of good news right now. Wait. The Monkey Picked Tea post from earlier can be our good news.
A report came out yesterday detailing our latest inflation rate. Not good news. We have the highest inflation rate in 17 years. This is due to higher fuel costs and higher food costs. Reportedly gardeners who ride bicycles weren't affected.
Give me an R. Give me an E. Give me a C. Give me a.... okay I'm trying to get you to spell recession.
Workers' wages haven't kept up with the higher inflation rate. This means that we are making less, and stuff is costing more. It's like when my favorite bagel place shrunk their bagels and increased their price. Let's just say that I considered switching to crumpets.
The rate of increase was 4.1%. In 1990 the rate was 6.1%. Did you get a 4.1% raise for 2008? If not, print off this blog post and give it to your boss. I don't do well with confrontation though, so if your boss calls me then I will probably agree that you got the raise you deserved.
First, thanks to all of you who emailed and called in regards to my last entry. I will keep you posted on my client's recovery.
What possibly could follow the most serious piece that I have ever written? Monkey tea. Make that Monkey Picked Tea. That's absolutely right. Tea that is picked by specially trained monkeys. The site claims:
Nowadays the practice of monkeys picking tea has all but died out, except in one small remote village where they still continue this remarkable tradition. No monkeys are harmed or mistreated in order for us to bring this rare brew to you!
This tea can be purchased for $25. Proving once again that we humans can come up with some pretty creative things to spend money on.
Hopefully you realize by now that this blog is and isn't about money. I know that we discuss money quite a bit, but you should know that we talk about it because it is a necessary evil. The reality of the situation is that I want you to have your money taken care of so that you can worry about life. Money is supposed to be an afterthought, but a correctly handled afterthought. You should be so comfortable with money that you don't have think about it. You shouldn't be so uncomfortable about money that you choose to forget about it.
I asked myself that same question last night when I drove home from a client's house. Here is a great young couple who have been trying for about two years to start family. They knew that the growth of their family was out of their hands, so they just made sure to take care of everything else they could. They setup the proper investments, they developed the proper habits, and they cared just enough to ultimately not have to care about their money. Well, eventually they got pregnant and had a beautiful little girl 6 months ago. Their daughter has a beautiful full head of hair and cherubic smile. They had me out to their house last night to "get some things in order". We did some basic stuff, I answered some great questions, and the meeting was just wrapping up. The new mother quietly left the room as the proud new poppa and I finished up some business.
Once his wife had cleared the corner, he looked at me with concern and said, "Pete, we had you out here tonight so that we can just forget about our money for a little while."
"Okay", I said.
"(My wife) left the room because she would cry if she stayed in here. Because we found out just recently that she has cancer, and she is having a masectomy tomorrow."
And there it is. Age 32, new mother, and now dealing with Breast Cancer. Yet, they had the wherewithal to take care of some basic money needs so they could "forget about their money for a little while."
That's why this is important. Life happens. You should care about your money now, so that you can forget about it when you need to.
Do you remember 1999? I hope so. It wasn't that long ago. Did you buy a bunch of supplies? Water, canned goods, flashlights, short wave radio. I didn't, but still felt prepared for whatever the year 2000 had to offer. People were frightened by the Y2K bug. It is slightly laughable now, but it was scary then. Many people over-reacted, and vice versa many people under-reacted. But all parties were fine.
I bring this up because you are going to hear, read, and see a tremendous amount about our economy in the next couple of months. The NY Times this weekend all but put us smack dab in th middle of a recession. It is scary. I felt uneasy after having read the article. Your first reaction is one of evaluation. Should you do anything different? Should you move your investments? I know I talked about recession last week, but believe me. This is just the tip of the iceberg.
Here is my super simple recession survival guide.
1. A flashlight. (I don't know why. It just seems like it should be on a survival list) 2. Make sure you have a three tiered savings and investment plan. Short term savings in a savings account or money market. Mid-term savings in balanced mutual funds (nothing risky). And finally your retirement savings in a properly allocated portfolio. You need all three. This is also the time that some people find out that their is a downside to aggressive investing. Yes, 38% returns have been nice, but there is a downside. 3. Don't panic and sell. If retirement is close, or if you need your money for a house or something, then consider moving some to cash. People who are 6 or more years from retirement, just relax. The market will find its way back up. 4. This is a good time to work on controlled spending. 5. Don't listed to the media. They are just trying to scare you. They just want you to watch their show. We have been through this before, and we will go through this again. 6. Freeze-dried ice cream. 7. Be weary of a do it yourself stock portfolio. This is not a time for amateur stock picking.
This post isn't meant to scare you. It is simply meant to relax you. Don't do anything drastic, and seek professional advice if you are unsure what to do. Remember there is no reason for 95% of you to freak out. The other 5% should have freaked out a long time ago because they were doing the wrong things anyway.
If you are like me, then you can read. I read earlier this week that Goldman Sachs thinks that we are heading towards a recession. By we, I mean our country. Let's discuss.
First what is a recession?
A recession is a pull back in the economy. It usually means that the Gross Domestic Product (GDP) declines and there is usually negative economic growth. Much like my hairline, a recession, simply means that thinks are going the wrong way, backward.
Should I care?
Caring and awareness are different. You should be aware of how it affect you, but I don't really think you should care. You can't do anything about it (much like my hairline).
What if the recession lasts a while?
Then it is called a depression. Then things get a little depre.... sad. A depression is when a recession goes longer than a few economic quarters. Usually energy costs are super high, interest bearing accounts are really low, and no one wants to do anything but sit on their money.
Will this affect my investments?
Of course it will. Whether you are in CDs or in the stock market, it will affect you. But, you simply need to examine your goals. If you have mid or long term goals with your assets then you really shouldn't do anything different. You don't want to be out of the market when it heads back up. If anything, continue to invest. It will lower your cost basis. Always ask your financial planner what they are personally doing with their money. I may not be your advisor, but I am investing more than I usually do right now. I realize that the market is pointing slightly down. The further it goes south, the more I am investing.
Pete, why did you always end up missing part of recess in elementary school?
My answer is simple. I needed the teachers to feel like they were doing their job. I felt as though I was keeping them company as I stood facing the wall. Okay. You don't believe me.
How much are you comfortable spending with out first consulting your significant other? Can you spend $100 without discussing the purchase? 500? 1000? Does your partner have the same number?
I think that my number is $100 with Mrs. Planner. It's not that I feel that A) I need permission $100 is a lot of money or C) I can't make money decisions on my own But I frankly can't think of something I would need that costs more than $100 that I can't take the time to discuss. I feel that the discussion helps hold me accountable to our financial goals.
Some of you may find that this could be the root of some deeper issues. I will not be held liable for possible progress.
****Gift purchases for the significant other don't count.
An Indian automobile company has just released the $2500 Tata (available in India). It is an ultra-compact car that is meant to bring transportation to the masses. This seems like a good thing, right? Finally an affordable solution. Finally an automobile company that isn't raking you over the coals. Oh, but wait. People are up in arms.
You see, critics are saying that the car is too affordable. The argument is that too many people will buy the car, and there will be traffic problems and environmental problems. Okay, so let me lay this out for you. Some group of environmental killjoys with cars don't want a bunch of less fortunate people to have cars because of the chance that there will be increased traffic. In other words, there needs to be people that are poor without cars, so that the car-owning middle and upper class can get to work on time.
I am glad that the Western way of life has finally made its way to India. What's next for India? Surely they wouldn't get involved in sub-prime lending.
The PTPWHQ (Pete the Planner World Headquarters) is proud to announce the hiring of a new intern. We are now shaping the impressionable minds of American. God help us all. The intern doesn't know it yet, but he will be blogging. Shhhhhhh. Don't tell him.
I always feel on edge between January 1st and April 15th. It is tax purgatory. The previous year is over, but you now get to face Uncle Sam and his minions. I don't like the feeling of owing anyone anything, but owing money to Uncle Sam is a normal occurrence. Owing money to Uncle Sam at tax time is not necessarily a bad thing. Well, as long as you still have the money to pay.
The one interesting part about this time of year is the IRA rules. As long as you qualify for a contribution, you can make your 2007 and 2008 contributions between Jan 1 and Apr 15. That means that if you are under 50 then you can contribute $4000 for 2007 and $5000 for 2008. If you are above 50, then you can contribute $5000 for 2007 and $6000 for 2008. The best way to contribute to any investment is to contribute regularly on a monthly basis. But if you have neglected to invest on monthly basis, then make sure you still make a lump sum contribution. It will certainly make the tax time blues go away.
Sometimes (a lot of times) financial change is necessary. You eventually figure out that what you are doing is a bad idea, and you need to change your ways. As we have discussed many times before, financial changes and diet changes are two of the hardest things to do.
Let's cut to the chase here. There are two things that eventually get someone to change. The either A) get a great vision of their future after the change or they can't handle the pain that their current lifestyle inflicts. In other words, they choose to change because they have created a great vision, or they are forced to change because if they don't they will cause unrepairable damage to their life.
Do you start eating healthy when you have a heart attack? Do you start paying attention to your finances when your house is foreclosed on?
My suggestion is that you start to visualize what you want in this world. Do you want good health? Do you want financial stability? Ride that vision until it is crystal clear, and then you are on the way to making a change. Don't let your unwillingness to change make the choice for you.
Enjoy the clip. Nothing like trying to pay off holiday bills. Make sure to look back on 2007 to evaluate the good and the bad. Then look forward to 2008 and start setting goals. You won't accomplish anything great unless you set your goals in your sights.
Some of you may have wondered what happen to the Pete the Planner blog. You may have thought that I was part of the Hollywood Writer's Strike. You may have thought that I was on vacation. You may have though that I was lazy. You may have thought that I had run out of original material. Well, some of you are right.
I'm back and ready to spill my knowledge.
Here is what I have learned over my two week vacation.
1. When people have nothing to do, spending money seems like a relatively good idea. 2. I used a lot of cash during transaction, and ended up with an incredible amount of coinage. 3. If you buy a tube of wrapping paper on Dec 23rd it may cost you $4.00. If you buy it on Dec 26th, it may coast you $.40. 4. Bad sweaters are a timeless gift. 5. Painting a room is an acquired skill, not something you randomly do on a Saturday 6. If I had a dollar for every bowl game....
On a serious note. Did you do it? Did you speak the infamous phrase?
I made $______ this year, and we have nothing to show for it.
Look back on 2007 and make sure that you aren't speaking the infamous phrase. If you do, continue reading this blog. The blog is back and strong. Stay tuned for a great year.
I have said it one million times. Money has nothing to do with money. In other words, money is about discipline, emotion, respect, and common sense. I just finished reading an article that expands this though even further. A former WWII veteran was just payed $725 by the US Army for giving him an unfair trial 63 years ago. The Army imprisoned Samuel Snow for participating in a brawl on an Army base. There were a number of soldiers involved in the brawl, and many were imprisoned. He was sentenced to 15 months in prison. It was later discovered that he didn't participate in the brawl. Oh, yeah and there is a ton of racial discrimination in this case. Read the article. It is heart-wrenching. Here it is.
After reading the article you realize that the $725 that the Army is paying him is more than insulting. He was considered a criminal for 63 years, he spent 15 months in prison, and they sent him a check 63 years later for $725. Money has nothing to with money.
As if you needed any more reasons to love Harvard, here is one more. Harvard has done away with all loans, and made them grants. They have the most advanced financial aid program on the planet. If your family's income is $60k or less per year, then you pay nothing. If you make between $60k to $120k then you pay a percentage of your income (not to exceed 10%). And if you make $120k-$180k then you pay 10%.
That is genius. Their endowment is so huge that they don't need your tuition money. They are more concerned with getting the best students. They will give you a free education as long as you qualify. Compare that to normal state universities that just want your money. How many times did you feel like your college was nickel and diming you?
So what's next? Well, it's simple. Get your kids into Harvard. It is worth it.
Last week President Bush signed a bill that would freeze sub prime mortgage rates for a number of years. This was meant to "bail out" the American Public. I feel weird about this. Here are some things to consider:
-Did the American people know what a sub prime loan was? Did they understand what they were buying? -Were they misled by aggressive mortgage brokers and builders? -Will these people learn a lesson if they are bailed out? -Will this bill give these people the chance they need at financial redemption? -What about the financial institutions that issued these loans? They are forced to lose money. -There is no financial education program linked to this bill.
Although I want Americans to get some help with this terrible issue, I can't help think that this seems like parents sticking up for their kids when they shouldn't. As you know, Mrs. Planner is a high school teacher. She often gets calls or emails from parents asking her to change their child's grades. The kid earns a "C" on a test, but the parent wants to negotiate the "C" into a "b" because "the kid was tired from a late night swim meet." Tough lessons are though to learn, but that is why they are called tough lessons.
We all struggle with this age old question. Actually, its not that old. But, a question we struggle with nonetheless. I love receiving gift cards, but I am always unsure on whether I like giving them. Economically, they make sense. You allow someone to pick what they want, thus eliminating the possibility that they get something that they don't want.
Is it thoughtful? I think so. You are being thoughtful enough to not get them something lame. Unfortunately there is always the possibility that you get a gift card to a store you don't shop at. Man! This is getting complicated. Okay. Gift cards are better than lame gift cards, more thoughtful than cash, but not as tacky. How's that?
I had a friend in college who use to make us stop at the ATM every time we would make a late night run to Taco Bell. He wanted to know what sort of menu delicacies he could afford. If he had $6 in his account, then he would usually get a Mexican Pizza and a Chalupa. If he only had $3, then he would get two Chicken Soft Tacos and a Meximelt. Although I appreciated his attention detail, I thought this was a rather ridiculous way to spend money. Little did I know that online banking would allow millions of other people to "run for the border" the same way.
Online banking is a technological innovation that the banking industry has brought to us. Our job is to harness it's convenience, and better our financial lives. Unfortunately, we have leaned on online banking, and now it could be our downfall. Many people today simply log on to their bank accounts daily to check their balances. They then spend whatever is left in their account. This is not the way online banking is meant to be used. It is impossible to get ahead when using this technique because you always spend what is left. People log on and then decide if they can afford a good lunch or a cheap lunch. It is liking opening your fridge and eating whatever is inside.
Do you do this? Do you do anything like this? If so, STOP. And if all else fails, make a trip to the Pete the Planner World Headquarters. I will yell at you with a smile on my face, and then we will go grab some lunch. You're buying, so make sure to check you balance.
The holidays are upon us. That means that you probably are going to be purchasing some gifts for some folks. I think that gift giving is fascinating from a sociological perspective. I find that there are a number of reasons that people give gifts, and a number of different reasons you buy what you buy.
People buy gifts for others out of love, guilt, admiration, appreciation, tradition, reciprocation, fear, and finally the good old holiday spirit. Why do you give? I'm sure your answer is different based on who you are giving to. The next variable in the giving equation is: Why do you buy what you buy for the person you are buying for?
Here are some possible reasons that you choose to buy what you buy. -You think that the receiver needs the item. -You think that the receiver would like the item. -You think that the receiver would be impressed that you bought them the item. -You want to show the receiver that you can afford the item. -It is a forced gift exchange and you bought the first thing you could find under $10 at the drug store. -You like the gift and you want the receiver to not use the gift so that you may use it. -It is the only thing that you can afford. -It has sentimental value. -You are re-gifting.
I like to think about all of this when I am buying gifts just to make sure that I am doing things for the right reasons. Maybe you need to take yourself through the same process.
What does it take to get you to smile? Are you more excited by a monetary windfall, or something hilarious that randomly happens in life? That is a loaded question. Would you rather receive $100,000 or see something crazily funny like a turtle riding on a deer's back? Yes, that is the stupidest question ever asked, and no I am not on medication.
The reason I ask.... I spoke to a group of retirees the other day at a local University, and I saw the funniest think that I have ever seen. I was in the midst of my presentation, and I was scanning the crowd of about 200 to see if anyone was still listening to my mindless banter. There was a guy with a seeing eye dog in the front row. Let me digress for a second. Seeing eye dogs are the most incredible things in the world. They completely change blind peoples' lives. A dog leads the person around! It is incredible! Anyway, back to the story. My eyes wander over towards the blind gentleman and his German Sheppard. They were yawning at the same time. The guy was stretching his arms upward while he was yawning, and his dog was on his side stretching all four paws out. It was easily funniest thing I have ever seen. Not only was I boring the guy, but I was boring his dog. I was trying to figure out what that moment was worth to me. Honestly, I think it was worth at least $1000. I truly believe that I would have turned down $1000 in order to see a blind guy and his seeing eye dog yawn during one of my speeches. It was awesome.
Last Friday was the beginning of the holiday shopping frenzy. Mrs. Planner and I actually participated and got all of our holiday shopping finished. Our secret is to go to an outdoor mall in 25 degree weather. There are no crowds.
Here is another way to avoid the malls and the crowds. Today is called Cyber Monday. It is the day that all the online retailers have special deals set up for you. Go to www.cybermonday.com to learn all about. If you are going to shop for your loved ones, I would at least like you to get the best deals.
Turkey time. This is my favorite holiday. It is all about family, thanks giving, and food. The materialism of present-day Christmas has become daunting; thus (short of the important religious implications) Thanksgiving has become the new Christmas. I love the idea of just relaxing and reflecting on Thursday.
Although I said there are no gifts. I do have a gift for you. My Vegas Podcast will be posted soon. You won't be disappointed. Happy Thanksgiving!