But, my question is, “What have we learned as individuals?”  Basically, the way I see it, we’ve got two problems going on, what the government has done to us economically, and what we’ve done to ourselves.

In this last year, many of our own budgets have been cut, due to tanking investments, job loss or benefit reduction. Permanent personal recovery will take time and effort for a lot of folks. It will also take a change in behavior on the parts of consumers.

I happen to agree with David Walker’s take on the world. In case you were sleeping in a cave these last few years, Mr. Walker was one of the original harbingers of economic doom clear back in the Bush years. I call him a prophet. As former Head of the U.S. Government Accountability Office (GAO), he predicted the very situation we’ve been facing in 2009, including the health care crisis, over spending, the near demise of the value of our dollar, etc.

When I’ve listened to David Walker, I see many correlations in the federal crisis and in our own financial situations. Nearly every issue the country has faced or is facing fiscally is similar to our personal cash crunch.

That’s why I reiterate the question, “What have we personally discovered from the economic crisis?” The adage, “Those who do not learn from history are destined to repeat it,” comes to mind.

Here’s what I think we should have learned by 2009’s brush with fiscal death:

Our personal spending habits need to change. Let me give you an example: I’ve got a friend whose husband currently nets a salary of over 65K as a professional. She’s working as a nurse full time and as a QMA part time. With a combined income of over 100K annually, they’re considering filing bankruptcy. My friend’s had no major medical issues, or giant fiscal shift, except for a freeze on commission bonuses for the last year at her husband’s work. Maybe I’m crazy, but if you can’t live on a 100K a year, in my book, you don’t deserve that kind of money. Or you need to go to a financial boot camp to be re-educated. In spite of my friends’ economic issues, they have a skiing trip planned and are forever remodeling. They’re still spending furiously,(but now on credit, without paying it off in full). Every purchase is “the last big one” and every month it continues. It’s hard watching a friend do this to herself. I’m fighting the urge to have an intervention on her behalf. This case is not isolated, by the way. According to prophet, David Walker, “Americans are living beyond their means.” It’s true. If all we learned from this last two years was to put our purchases on credit cards and take out extra loans, then we’ve learned nothing.

Americans need to proportion their spending in line with their budget. In spite of how tempting “Cash for Clunkers” or how attractive the current mortgage rates are, we still need to hang onto our money or make best use of it. Buy a used car in cash, the old fashioned way. Take advantage of the mortgage rates, but buy down from what you think you can afford, to what you know you can easily afford (including renovations, insurance, taxes and utility bills for said home). Like the government, endlessly spending (albeit even for some very altruistic programs)- if you can’t afford it, you don’t do it.

Credit and lenders are not the devil. Our own impulses are. It’s not the banks that got us in trouble. And it’s not the credit cards. It’s our misuse of them. Had we turned down banking offers to re-finance or dampened our spending, much of the fiscal damage that occurred in these 2 years would have been a tremor to the economy instead of a giant earthquake. I know many people who don’t abuse credit cards and actually make money using them, via rewards and cash back programs. My own paternal grandpa was a banker and a farmer. He’s in his late 80’s, and has a very modest home. I’m guessing at one time he could have made a shift to an upscale place, but he didn’t. I think his furniture is dated, circa 1970. Grandpa’s made good choices, curbed fiscal impulses and along the way, even had opportunity to help others.

 Place less value in stocks and more value in savings. I’m going to get dragged outside the city gates and stoned for this one. But, none-the-less, I believe it to be true. The thing is, we want our money to grow. We all desire a retirement nest egg, right? So stocks seemed like the easy way to keep spending, while still acquiring that nest egg.However, if you’ve got cash, you’ve got cash. Ain’t no one gonna take it away. Let the economy fall to its knees, and you’ll go on. The reality is, interest rates in savings accounts are barely existent.  Even the online banks, who offer “great rates” aren’t too impressive. So to save for retirement, in a traditional means, is to truly cut spending today. Your money won’t quadruple in four years, like some stocks have in the past. You’ll have to save more. But money in the bank also won’t collapse, costing your home and leaving you penniless for retirement, either. (At least there’s a federal guarantee if the bank goes belly up). I’m not saying stocks and money market funds are a totally bad idea.  I’m just commenting that we need to curtail how much value we place in a risky business, compared to good old fashioned savings. If the money fairy ever blesses me with extra cash, I’d be open to a few stocks. But I’d be sure to have savings built up first. Stock investing would be money I’d be open to lose if it came to it. (I think I’d rather invest in a good pair of Italian shoes, actually. At least those won’t lose their rich Corinthian Leather smell).  

Say “NO,” wait on purchases, be frugal as a permanent way of living. Some folks have learned this year. Their fiscally penitent at the moment, taking the pledge to never overspend again. But I wonder how this will look in four or five years? Are these same individuals going to go nuts with spending again? Let coupon shopping, buying bargains, and being frugal with fuel, utilities and expenses be a way of life, not a temporary fix. It also means saying, “No” to purchases. Or waiting on them. You’re offered a “free” upgrade on a cell phone, which actually costs you another hundred bucks? Say “no” unless your phone breaks and you’re S.O.L without it. Don’t just buy because it’s on sale, buy because you need it. And when you do have to purchase, shop for a great bargain. 

 Make your kids wait on stuff too. It’s ok that “all their friends” have something they don’t. If you’ll be strapped to purchase it, make kids wait. Trust me. I’ve got five kids who’ve waited all their lives for some luxuries. My very youngest a couple of years ago, (age 12) desperately wanted a Nintendo DS. As a parent, I’d loved to have bought one. She’s a good kid. But I couldn’t afford it. I already pay for struggling college kids’ car insurance and had just put braces on another child. My daughter took her Christmas money, from aunts and cousins, to Wal-Mart and bought a Nintendo on sale after the holidays. She’s treasured it since. She didn’t die because she waited almost two years after her friends had one. Your kids won’t die either.  

 Food for thought, while in the pre-recovery mode. I’ll leave you with David Walker’s words. In my opinion, greed, lack of fiscal accountablity, poor budgeting and spending beyond our means, are common demonimators we’ve shared with the government.  I know at one point, I’ve been guilty of all of them. But I’m trying to recover and relearn my own spending.  Let’s recover in the grassroots as well as federally.

 

 

 

 

There’s another MSN Smart Money Blog I’d like to share with you today. It was pointed out to me by a reader. I, in turn, would like to share it with you.

Jim Wang, from blog site, “Bargaineering”, guest posted on MSN’s Smart Money Blog, June 17, 2009, his inflammatory blog, “Devil’s advocate: Don’t donate money to charity.” He then proceeds to list four reasons why it’s fiscally unwise to give additional “hard earned tax dollars” to these organizations when your tax dollars are already sneaking in the back door through subsidies.

Also with all respect to Mr. Wang, is his belief that these charities do not “teach a man to fish”, but instead cause the lazy to suck money out of the system by lingering in homeless shelters and soup kitchens. He suggests one alternative is to withhold money, thus forcing the homeless to find another option, (like work). (Why do I feel like I am in a Dickens novel when I look at those words?)

Two other reasons not to donate to a charity, according to Jim Wang are high administrative costs and the ease with which people give money versus physical help. Jim states, “Money is too easy.” Rather, he asserts, charitable organizations would rather have our time and effort, in lieu of money. ( I am sure he’s polled the charities of his choice for this answer).

I have a fair amount of respect for charitable organizations, having been helped by their generosity in the not so distant past, having been a volunteer myself, a financial donor, and also for producing several charitable activist children.

Here is my Angels Answer response to the Devil’s Advocate.

Angels Answer: Why donating to a charity makes sense even in a tight economy:

Subsidies from the federal government are not enough to fund all costs. Please see the recent Johns Hopkins University study, of over 360 not for profits, released June 29, 2009. “Contributing to this stress has been a perfect storm of impacts including declining revenues (51 percent of organizations); increased costs, particularly for health benefits; declining endowments; and decreased cash flow as a result of restricted credit and government payment delays”.  The full study is attached via link below. Basically, expenses are up, donations are down, and the numbers needing assistance are skyrocketing, beyond federal budget subsidies. These organizations can make it, but they do need our assistance bridging the gap.

 Teach a man to fish? Many not for profits and charitable organizations do just that by employing those they assist. The South Bend, Indiana, Homeless Shelter is a model for this, by having a step by step model for individuals to work or educate themselves out of the program. Also, most Salvation Armies, Unemployment offices, domestic violence centers, and other not for profits do employ their clients. Give a man to fish, does not mean throwing him to the wolves while clutching his fish. It means assisting him or her over a period of time, which these organizations need money to do. If we feed the homeless in soup kitchens, but never teach them life skills, we are shorting humanity itself. And teaching job skills IS what many of these organizations are doing.

 Administrative costs are necessary. How many pastors could preach and feed their families without a salary? Would you like to run a crisis pregnancy center or a homeless shelter with no pay?  It’s my guess that these salaries are for the most part, significantly low already, without a fiscal ax being implemented by the public. These are to a degree businesses. They are in the business of helping others. As such, they do have operating costs, like it or not.

 Helping hands don’t take care of  all expenses. Mr. Wang asserts that helping is more needed by these organizations than dollars. “Money is too easy.” I attest charities need both. My local Boys and Girls Club purchases over a thousand book bags, complete with supplies at school time. By purchasing in bulk, the BGC makes the donation money stretch further. These organizations need both cash and helping hands. Frankly most organizations these days probably need mass quantities of each.

 Give how you can, folks. Whether it’s your time or your money, but realize the impact you have in generosity. There are many times I embrace the inner tightwad. Donations to charities are not included in that thought process. Sorry Mr. Wang. I’ll back you on bargaining and being thrifty, but not in this “revisitation of Scrooge” venture.

You can read the Devils Advocate by following this link:

 http://blogs.moneycentral.msn.com/smartspending/archive/2009/06/17/devil-s-advocate-don-t-donate-money-to-charity.aspx

“Perfect Storm” of Fiscal Stress Hits Nonprofits

 http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=922

Want to join me in a social savings experiment?

Recently, I took a trip to New Jersey via American Airlines. It seems every time I fly, I notice more corners viciously slashed. I get moderately crabby over this. I do. I complain about microscopic soft drink portions, no free food, over priced snacks, lack of pillows and blankets.  Flight attendants clearly despise my griping. I am certain they contemplate checking my carc-“ass” into cargo.  

Honestly, I do see the wisdom of saving.

I’d rather cut the food and drink, than skimp on safety. I am quite relieved the technician who tightens the plane’s nuts and bolts is still on the pay roll. Having no ice for drinks (egad) on one flight though, did make me grouch for nearly a third of the 50 minute trip. That should constitute cruel and unusual punishment, especially when coupled with $3.00 candy bars. (Who pays that anyway??)

In between my ranting and my reflections on budgeting, it occurred to me there are always ways to cut a little more. The airlines and hosts of other companies do so.  What about me? Can I chop more off the ol’ budget? A few weeks ago, I blogged about moving to downscale my housing expense. 

Now, what about all those other expenditures? A quick, unplanned, trip to the grocery store, where I drop an extra twenty or thirty bucks?  Not to mention gas to get there.  My seven a.m. twice a week latte? Even if it’s the dollar menu, can we give up a few stops to McDonalds?

So here’s my personal challenge. I am trying for two weeks, to spend NO unplanned money. At all- other than necessary bills (utilities, housing, etc).  

This means, nothing. No extra gas for car. No additional food. No entertaining that costs money. I just bought groceries. We won’t starve, but I will have hold off on the urge to buy “quick” food and make real dinners that take a bit more effort.

I have a full tank of gas right now.  How long can I stretch that?  

I have a holiday weekend looming and two friends with birthdays coming up. What about that? How can I do that without spending money?

I have three girls still at home. They are a major expenditure. Every day it seems something needs to be purchased- styling products, lotions, shampoo and conditioner. Never mind that I have a supply of cast off beauty aids that rivals a salon supply store.

So there’s my challenge. Two weeks. No money spent. No extras.  Can I survive and still have fun?  

Here’s my challenge to you- wanna join me? What will this do for your personal budget if you can stick to it? Are you up to attempting this adventure?  I’d be curious to know and to hear your chronicles.

Thrifty citizens unite! Spend no unnecessary money for fourteen days! Take the budget challenge with me.

They weren’t in the car yet, but I girded my loins to prepare for battle. Brightly colored papers clutched in my youngest daughter’s hands bore evidence of impending drama.  Extracting one she proclaimed, “Mom!” “There’s a gymnastic camp right here in town!” “It’s only $200.00!”  

From middle daughter, aka, the “Cool Teen”, a more stealthy approach: “Hey Ma, can I hang out with my friends this Friday?”  It took some pushing on “Cool Teen” to discover “hanging out” was at an amusement park, (estimated cost, $70.00 for admission plus food).

A third country in the Allegiance of “Spend Mother’s Money Faster Then She Earns It” was heard from later that day.  “Like, there’s like, a Warp Concert Tour, like, next weekend!”  (Tickets for this hard core, head banging, extravaganza were, “like,” $50.00)

It was 4:10 p.m.  If I calculated correctly, my children had designs on $320.00 of my money that day alone.  Calgon take me away!

 I happen to love summer vacation. It’s an opportunity to spend time with my kids, not live by a schedule and be carefree. But there’s one seasonal area, I have come to dread- the fiscal drain.

Why do parents feel compelled to shell out so much money for kids?

 Because we don’t have backbone, that’s why!

 Think back to your childhood, do you remember being bored if you weren’t entertained?

 Boredom? What the heck was that?

How do we escape with sanity and our budget intact?  Often it’s not the big purchases, like a pricey camp, that do us in- it’s the nickel and diming of summer time-ice cream, movies, arts and crafts, etc.

My advice is two-fold:

First- budget! Second- be fair, but strong.

Here’s what I do:

If my income allows, I permit each child to pick one “big” ticket item such as a camp experience, for the whole summer.  This means I don’t have to work continuously to provide constant “fun”. And it teaches them about choices.  As adults, what gets us in trouble fiscally is feeling like we deserve it all. Why not teach kids that financial planning means choices?

 I also budget an extra $21.00 per week for small extras, split between all three girls.

Yeah, this sounds like I am being a tight wad. $7 a kid a week?

What will seven bucks buy?

A regular movie ticket (or a matinee plus small popcorn)

One round of miniature golf

Roller skating (skate rental plus admission)

“The Works” fast food combo meal at most chains

Bowling (two games plus shoe rental)

It’s what I can afford without breaking the bank.  If the kids do not use this amount, it carries into the next week and so on.  Hence, they need to (gasp) work for extra, save, or find “free things” to do.  I still have to remind them of this every summer. They grumble, but fall in place eventually.  

I do not “give it” to them as an allowance, as we also may elect to use this money for family purchases such as zoo or water park visits.

This helps me stay in budget and also gives them a medley of things to do, without feeling deprived.

 Parents, embrace your inner tightwad!

Don’t give your budget a summer vacation. Use this time to teach kids about money management.

Got a summer budget strategy to share with the class? I’d love to hear it!