Meta Post : 5 great comments

Posted by Tad Johnson - May 5th, 2008 at 20:05

I’ve been impressed by the quality of comments lately. In case you missed them, here are five comments and my response. 

1) In response to backing up your finances, Presh wrote :

“I would add one more suggestion for younger people: talk to your parents about their financial information and ask if they have all their financial information backed up. We don’t like to think about it, but we might need to help them in a medical or physical emergency”

This is a great point to add and an important consideration. Chances are, you have parents. Have you talked to them about their finances? It may be an uncomfortable conversation, but it’s important none the less. 

2) On the subject of real estate, and the falling suburb house prices, jrandom42 added this: 

 ”Notice it said MOST. Not happening in the Puget Sound area. Prices are still sky high. There are radio commercials for places in the “mid 700s” as if those were really bargains. Even an hour and a half away from Seattle, prices are still in the mid-300s.”

This is a really important point for anyone considering a real estate investment. The U.S. economy is continually shifting and picking the right area is crucial for any long term investment like a house. 30 years ago, Detroit seemed like a pretty great place. Today it’s a ghost town in some parts. Flint is even worse. Pick an area with a strong economy that is likely to remain strong throughout the coming energy shift.

3) Glen shared his personal experience with using cash : 

 ”I normally swipe my debit card for everything, only using cash for parking decks and restaurants that won’t take cards.

While I was in Europe earlier this year, however, I found that carrying Euros was far easier than hoping that a store would accept a card, and I was amazed at how much more conscious I was of what I was spending.

I’m normally a tightwad, so I rarely worry about going over my limit - with 150 Euros draped around my neck though, I could literally feel the impact of every three or four Euros spent (especially via coins).”

Going cash-only not only helps your everyday personal finances, it can really help while on vacation.

4) Quick hit–Eric suggested another credit card for gas rebates : 

 ”I’ll just add that the Discover Open Road Card includes 5% back on gas purchases as well as the above mentioned ‘Auto maintenance.’”

5)  Dan achieves the ultimate gas savings zen : 

 ”I think there is one obvious tip for saving money on gas … take fewer trips. I think our culture is too comfortable with this on-demand lifestyle. In the old days, people would keep a grocery list and then go shopping on the weekend to stock up for the week to come. Now we are constantly making trips to the super market or over to pick this up or run that errand. I think we could all save some gas and some stress if we slowed down, planned, made lists, and stocked up.”

This is a great point that can be said often enough. We need to rethink our relationship with automobiles. If nothing else, $4 gas should teach us that we don’t need to drive for every errand or every outing. Most of the other 6 billion of our neighbors on Earth manage to live without cars. . . why can’t we?

 

Energy Savings : Fill the Freezer

Posted by Tad Johnson - Apr 2nd, 2008 at 18:04

Your refrigerator is probably the biggest electricity user in your kitchen. With energy costs going up, you don’t want it to work any harder than it has to. Fortunately, there are some very easy ways to keep it running efficiently :

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  1. Replace the ancient model. If you’ve had the same refrigerator for 20 years or more, it’s time for an upgrade. Newer models are so much more efficient that they pay for themselves in energy savings in just a few years.
  2. Keep it clean. There’s a reason your fridge has wheels–you need to clean behind it every month or two. Dust buildup prevents even heat transfer, making it work harder.
  3. Fill the freezer. You want your freezer about 90% full for optimal efficiency. If you keep lots of frozen foods on hand, great. If not, fill the extra space with something easy, like ice. I fill up my empty milk cartons with water and place them in the freezer. If I need the space, I’ll just empty a few and throw out the cartons.

Remember, saving energy not only saves you money, it benefits the globe. Don’t let your fridge be an energy hog!

A Market Bubble Collapses: The Slow Motion Train Wreck Version

Posted by T.W. Hanson - Mar 16th, 2008 at 20:03

train wreck

Vicenarians don’t have much practical experience with the troughs in the business cycle. There was the savings and loan crisis in the late 80s and early 90s, but many of us were learning how to read during those years. The Internet/.com bubble collapse of 2000 is our primary frame of reference for distressful economic times. This crisis is appears very different. Although characteristics like increased unemployment seem to reappear each cycle, there are rarely perfect parallels from one downturn to another. One of the macro differences is the speed. The rate at which this credit markets are contracting is much slower than the rapid implosion of the Internet companies in 2000.

Unlike in 2000, today’s irrationally overvalued assets are homes and properties.  Prices for these assets are sticky.  Most are unique and take weeks, months or years to sell.  One result of this is that the securities tied to the value of these properties have fallen at a similarly and painfully slow pace.  Write downs of assets on bank balance sheets haven’t occurred all at one but have been stretched from quarter to quarter to quarter.  This is forecast by some to continue for quarters to come.

bubbleDuring the Internet bubble, company values were wiped out overnight.  Equity values disappeared, companies shut down, people and families felt pain and the economy took a hit.  However, it was over in a relatively short period of time.

The industry this is hitting the hardest is slowing down the bleeding even more.  The financial institutions provide and source the capital for all other industries.  Each day they are operating in a weakened state, other businesses and individuals aren’t getting the financings or financing terms that a fully functioning free market would provide.

When will the market recover and economic expansion resume?  When the financial sector reaches a catharsis resulting from both the final write down and the replenishment of tangible assets on their balance sheets.  Don’t hold your breath.

A penny saved

Posted by Tad Johnson - Mar 11th, 2008 at 19:03

I believe it was Benjamin Franklin who coined the phrase “a penny saved is a penny earned”. In today’s economy, this isn’t quite true. A more accurate version is “a penny saved is a little more than a penny earned”. This extra, of course, is interest.

penny savedCompound interest is a pretty magical thing–it turns a little bit of money into a lot of money over a long period of time. This is why we all save money in Roth IRAs, 401(k)s, and the like. There’s just one little problem–saving money is no fun.

Sadly, I don’t have anything to offer that somehow makes saving as much fun as, say, a weekend in Vegas. What I do have is human psychology that affirms spending money isn’t nearly as fun as we think. I read about this most recently in the books Stumbling on Happiness and Deep Economy.

The thesis goes like this : we think that buying that new car, or new computer, or new pair of jeans will make us happy. More so, we think that the really expensive car/computer/jeans will make us really happy. But once we buy them and the initial glow has worn off, we discover that even a Porshe is just another car. And that brand new iMac is just a vehicle to the same old internet. And those designer jeans feel about the same as the less expensive pair.

For the vicenarian, understanding this psychology can be a powerful tool in happily saving money. Since you know (once you’ve read the above books) that buying stuff doesn’t make you as happy as you expect, you can more comfortably choose not to spend. Or, to be more precise, you’ll spend your money on the things that really make you happy (dinner with friends) and less on the stuff that won’t (expensive gadgets).

The dollars and cents of saving energy

Posted by Tad Johnson - Mar 6th, 2008 at 21:03

The green movement is [finally] gaining traction in the U.S. Driven in part by $100 oil and climate change science, companies are actively marketing to a green conscious consumer. In turn, the consumer is starting to prefer products that require less energy. In a moment of sublime corporate cliche, this is a true “win win”.

Most of us pay between $0.12 and $0.15 per KWh (killowatt hour) of electricity. This is a somewhat abstract figure; let’s see how it relates to real life.

Above is a graph comparing standard incandescent and compact fluorescent (CFL) bulbs. You can see that the dollars and cents really start to add up; over a month a CFL bulb will save you over $4 in electricity costs. (In the interest of full disclosure, this is assuming the bulb is on 24 hours a day; hopefully this is not the case. Even so, you get the idea.)

green-basics-cfl-white.jpgThe savings above reflects the energy savings of one bulb. Chances are, you have at least 15 light bulbs in your apartment/condo/house that could be swapped for CFLs. Not only are you reducing the environmental impact by cutting energy usage, you’re saving money as well. Excellent!

Of course, the savings don’t stop there. Turning down the thermostat by a degree or two in the winter (and up in the summer) will yield more savings. Reducing your hot water usage will likewise save money in the cost of heating that water. It’s surprising how easily you can save money on energy costs with a minimal effort.

Not only will you be saving money, but you’ll feel good about yourself for doing your part to cut energy usage. Fantastic!

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