January 2008 - Posts - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

January 2008 - Posts

  • A Little Security

     A number of years ago I read a story about children who were found in an orphanage at the end of World War II. They had suffered from a lack of material things during the war. They were undernourished and dressed in rags. Once the town was liberated material things were still in short supply, but those in charge made a special effort to see that the children had enough to eat and proper clothing. Yet, weeks went by and the children didn't seem to be doing any better. They weren't gaining weight. They still suffered from nightmares. The adults weren't sure what they could or should do. Finally someone got the bright idea to give each child a biscuit before bedtime. If they ate the biscuit, they were given a second one to hold during the night. The effect was almost immediate. The children began to sleep better. They started gaining weight. More and more smiles were seen. 

    When asked about it the adults surmised that the even though the children were well fed now, subconsciously they weren't sure that they'd have anything to eat tomorrow. After all, there world was fine before the war came. The simple fact that they went to sleep with a biscuit in their hand or beside them on their pillow told them that they'd have something to eat tomorrow. Just that little bit of security made all the difference to them and changed the way they saw the world.

    I think that adults are like that, too. If we don't know how we'll make our next car payment there's a heightened level of stress. Add a ballooning credit card balance and we'll begin to lose sleep (just like the kids). But give us a small savings account and we sleep like babies. It's a lesson that we all could benefit from learning.

    In this week's Dollar Stretcher you'll find a story that shows how one generation can pass a biscuit to the next generation. You'll find it at <http://www.stretcher.com/stories/08/08feb04f.cfm>. Now that's a real gift. Passing on a sense of security to your children. It doesn't get much better than that.

    Keep on stretching those dollars!



    Posted Jan 30 2008, 02:28 PM by Gary with no comments
    Filed under: ,
  • Step Away From the Computer

    How many of you have heard the term 'shopping therapy'? That's when you go shopping to make yourself feel better. Maybe you're fighting the blahs. Maybe a bad day at work. Maybe you just broke up with a significant other. A little time shopping will make you feel better.

    The subject came up when I was doing a radio interview with Gail & Keith at 600KCOL in Colorado http://www.600kcol.com/cc-common/podcast/single_podcast.html?podcast=keith_and_gail.xml We were discussing ways to replace 'shopping therapy'. Gail challenged me to give listeners the benefits of shopping therapy without running up their credit cards. How could someone spend hours at the mall without spending money? The answer is obvious. Don't bring any money (or credit cards). I suggested going to the mall with $5 in their purse or wallet. You could 'window shop' without risk. Visit the food court for a soda. Window shop some more. Keith agreed that Gail couldn't get in too much trouble doing that.

    Then I mentioned that some people can get in just as much trouble surfing shopping sites on the net and brought up "The Barbershop" post http://community.stretcher.com/blogs/stretcher/archive/2008/01/10/the-barbershop.aspx My solution was to turn off the computer. That's when Gail broke into her best police officer voice - "step away from the computer".  I couldn't help but break up. She had it exactly right. Sometimes the absolute best thing that we can do is to step away from the computer. Don't flirt with temptation. Walk away from it. And, it's always best if you can do it with a smile on your face!

    (btw, I usally enjoy doing interviews. This one with Gail & Keith was especially enjoyable. You might want to check them out.)

    Keep on stretching those dollars!


  • Preparing for Recession

    Lately it seems everyone is talking about a possible recession (or even a depression). When the Federal Reserve drops rates by 3/4% between meetings it's probably time for all of us to take notice. No one knows for sure whether we'll end up with a recession or not. But, as we all do know, it's always better to be prepared for financial challenges. Just in case.

    The first thing is  to know what your current position is. Are you spending more than you're making? Do you even know? Where does your money go each month? The only way to really find out is to track your spending for a month and compare it to your income. Don't forget to include items that happen just a few times a year (property taxes, auto insurance, etc). If you are working you should be making more than you're spending each month. That extra money can be used for paying down debt or building an emergency fund.

    Next, pay down debt. It's easier to survive a job loss if you don't have a lot of bills each month. Now is the time to reduce credit card balances. Even it it means taking a second job or cutting off cable television. You'll be tempted not to do anything. Just remember that if you do lose your job it will be too late.

    Look for big savings items. With lower rates now might be the time to refinance your home or car. Compare insurance rates. Make sure that you really can afford the house or car you're paying for. Typically if your house is over 40% of income or your car is over 20% you need to do radical surgery. That means moving to a cheaper home or car.

    Take a serious look at your food/grocery/eating out expenses. Most people spend 15 to 20% of their money on food. But, it's real easy to spend more. And, it can happen a little at a time. That luscious $4 dessert won't bankrupt you by itself. But, it will take you one step further from your goal.

    Look at your employment situation. If you're honest with yourself, it's not that difficult to recognize job troubles ahead. Is your employer in trouble? Is the whole industry suffering? Could your job be done by someone else for much lower pay? Either within the U.S. or without? Does technology threaten your job? If you can answer 'yes' to any of those questions, you'd be wise to consider what your life would be like without your present job. 

    Ask yourself if you'd be likely to find the same type of work at a different employer. It could be that your field is changing. That happened to me. If you're facing a similar situation begin learning a new trade now. Don't wait until you lose your job. Waiting will only make the transition longer.

    No, I can't say whether you'll be affected by a recession or if there will even be a recession this year. But I can tell you that you'll be better able to handle one if you begin preparing now. 

  • Auction Fever

    During the last week I spent some time watching the Barrett-Jackson collector car auction. Anyone involved with collector cars has heard of Barrett-Jackson. Each January they hold a huge auction. This year I believe they sold something like 2,000 cars!

    I love old cars and quite often you'll find me at a local show in my '65 Chevy. Often you'll hear guys (and gals) talking about the eye-popping bids at Barrett. Yes, there are some exotic, very rare vehicles. But some of the prices are really unbelievable.

    As a car guy and a frugal living guy, I tried to figure out what was going on. An auction is a complex psychological dance, but even simple people can gain some insight from studying it.

    The first thing is that it's viewed as a competition between the bidders. I just checked and on the homepage of ebay.com, you'll find "Don't just shop. Win!" Wow! Somehow I don't get the feeling of winning when I"m buying a tool at Sears! Missed the whole "winning" experience! Maybe next time.

    On TV the announcers talked about it being like an old western shootout between two bidders. (somehow I have trouble picturing Matt Dillon pulling a credit card out of his holster in the opening scene of Gunsmoke)  Don't get me wrong. There is a lot of ego involved. And, if someone outbids me, the assumption is that he has more money than I do. That could be a big deal when you know that people all over the country are going to see someone with a bigger bidder's paddle than I have.

    Another part of the push to ever higher bids is the audience. When the bidding gets near a round number ($100,000 or $250,000 or $1,000,000) the auctioneer would ask the audience to encourage the bidders. I really don't know why they complied. Should it really matter to me whether someone pays $95k or $100k for a car? If he pays more it favors the seller (who I don't know). If he pays less it favors the buyer (who I also don't know). Why would spectators cheer for higher bids?

    The urgency of the situation also effects bidders. You have to make a decision right now. Not tomorrow. Not later. Right now. And, (you're told over and over) you don't want to miss this one. Once it's gone you may never get another chance at it. So step up now before it's too late.

    One other thing seemed noteworthy. For the really high-end stuff, there are buyers for museums and very private collections. These buyers are typically very calm and collected. The auctioneers don't seem to try to goad them into higher bids. My guess is that they know that won't work on them. They've done their research before the bidding began and they pretty much know exactly how high they are willing to go. (and they won't change their mind in the middle of the bidding)

    So what's this have to do with you? You're not thinking of buying a collector car. Ahh, but you do shop on eBay.com. And, you've got a bid in on that cute little purse that closes in 15h 56m. Don't want to miss that. The seller says that it's unique. Plus there are other people who are bidding on it. Some might even see your name on the 'high bidder' space. Kinda sounds familiar doesn't it. The same tactics work no matter what's being sold at auction. 

    So, just as you'd be careful not to accidentally buy a $50,000 car at Barrett-Jackson, it's probably a good idea not to make a mistake and buy a $50 purse on eBay.com.  



  • Efficiency vs. Frugality

    Last Saturday (I'm writing this on the 16th), I was watching my beloved Packers play the Seahawks. As you can imagine I loved the game. Especially the final score! But, that's not what this post is about.

    One of the commercials that ran repeatedly during the game was for a credit card. Visa if I remember correctly (but any card will do). A group of people were doing robotic moves in sync to music. The whole scene was very high tech. Person after person would approach and swipe their credit card in perfect time with the music. Clearly this new world was a place where things moved along efficiently.

    Then came the dischordant note. Someone approached the credit card machine and (horrors!) pulled out a checkbook. The music and all the dancing characters ground to a halt. This out-of-sync cog had brought the whole machine to a halt. How dare he do that? (at least that was the message of the commercial)

    I gave some thought to what I had just witnessed. The commercial was true. It is more efficient to swipe a card instead of writing a check. If there are other people in line they will have to wait a moment or two longer if you don't use a card.

    But, it also occurred to me that slowing down might be a good thing. We all know the studies that show that people spend more if they use a credit card. Part of the reason they spend more is that they don't make the connection between the item they're buying and the money they're paying for it. The item has been disconnected from it's price. That's not a good thing.

    If you want to control your spending, it's a good thing to think about each purchase. I got an email awhile back from someone who paid with one dollar bills so that they would have to count it out at the checkout counter. That's probably a little extreme (although very effective - think about it). But, writing out a check instead of using a credit card? That doesn't seem unreasonable at all.

    Bottom line? Much as I like efficiency (it even saves us money sometimes), sometimes it can become the enemy of frugality. It's the wise person who can recognize and behave appropriately when that happens.

    Keep on stretching those dollars!


  • Cardless

    If the experts are right, there's a good chance that you got a gift card from someone this Christmas. According to the National Retail Federation as quoted in CNN Money, they expected that consumer would buy over $26 Billion (with a B!) worth of gift cards.

    A couple of things occurred to me about gift cards. First, on average, you probably spend more on gift cards than you do for a gift. The reason is simple. If you buy Uncle Harry a sweater, he doesn't need to know that you're a Dollar Stretcher shopper and found it on sale. But if you hand him a gift card for $10, he knows exactly how much you spent. So, if you're like most folks, you'll spend a little more on the gift card.

    The second thought was that the receiver often will make a purchase that's greater than the gift card. Uncle Harry wants to use all of the $20 gift card you gave him. He doesn't want to spend $15 on a CD and lose the balance. So he's going to buy two CDs for $30. The bottom line for the store? More sales.

    One other thing gives me cause to wonder. If you give a gift card, you've limited where the receiver can shop. Wouldn't it be much more logical to give cash? Of course, you can't put cash on your charge card. At least not very easily. Charging a gift card is the easiest thing in the world.

    So what's the solution? Well, you might want to consider talking to people you give gift cards to this year. They might be just as happy as you are to skip gift giving next year.

    For those who you really want to give something, another possible solution is to begin shopping much earlier for those hard-to-buy-for people. If you start in the early fall, you'll have time to do something truly unique for them. That way you won't be tempted to solve the last minute problem with a gift card.

    I'm sure that we'll continue to see a lot of gift cards in the future. But maybe a few of us can begin to limit their use to situations that truly call for them. And, although it wouldn't make much difference in the total number of gift cards, it would certainly be good for us!

  • The Barbershop

    Last week a friend said something interesting. "If you sit in a barbershop long enough, sooner or later you'll get a haircut." It came up again this week when I was doing an interview with Amy Spencer who was working on an article for an online magazine called "The Nest" http://www.thenest.com/. She asked how people could save money on their computer. My first response was to turn it off. I was only partially kidding.

    I know a lot of people who spend their time surfing ebay or amazon. And if you surf ebay long enough sooner or later you'll be the winning bidder. The same thing with Amazon or any other shopping site. (for whatever it's worth, it's also true of shopping channels on TV or infomercials or hanging around the mall - sooner or later you'll pick up the phone and spend some money.)

    So I guess my question is how much time do you spend in the barbershop? If you hang out there regularly don't be surprised if sooner or later you get a haircut!



  • How Bad Is It?

    Have you ever felt like throwing in the towel? Just calling it quits? Decided that you can't control your future and that the sanest thing to do is to pull out the credit card and just not worry about what you put on it?

    Recently, a friend sent me a link for an article on MSN Money. The article was called the "garage sale economy" and discussed all the hard times caused by the housing market and the "growing probability that 2008 will be a recession year."

    It bugged me. In part, because writers have been predicting a recession since 2001. The facts show that the economy grew at a 4.9% rate in the third quarter http://money.cnn.com/2007/12/20/news/economy/economy_pace.ap/index.htm and the GDP (gross domestic product) has been growing at 2% or better since 2002. Add that to the 8.3 million new jobs since August, 2003 <http://www.whitehouse.gov/infocus/economy/> and the fact that real income (after inflation) is up 12% over the last 7 years. These are all very good trends. Looking at them, you'd have to ask if the real dark cloud isn't in the writer's imagination.

    Please don't misunderstand me. I know that some people are hurting. And, that there are folks who are victims of circumstances that they didn't create. That's always the case (in good times and in bad). I'd like to try to make things easier for people who struggle. That's one of the reasons that we don't charge for our email newsletters or anything on the The Dollar Stretcher.com website. We want to help people who are struggling. And, we believe that it's always good to help those who need it.

    Some people will lose their homes. That's terrible. I do some volunteer work with the homeless and it breaks my heart to see what happens. But even those who face losing their homes do have some (admittedly limited) options. Mortgage companies are realizing that foreclosure is not their best choice. Once they foreclose they own the home and are responsible for it until it's sold. And, once all the expenses are added in they could lose $100,000 on each house they foreclose. So working with the current homeowner to keep the payment affordable makes sense. Even if they have to add some current late mortgage payments to the end of the mortgage.  

    What really concerns me is how many people read these articles on how bad the economy is and decide that there's no sense looking for a better job or getting training that would qualify them for a new, more promising career. How many people give up on themselves because of what they see on the nightly news? They've given up before even making an attempt to change their circumstances. To me, beliving that you're a victim of circumstances and have no control over your future is terribly sad.

    I can't promise that 2008 won't be a challenge. But I do believe that just about all of us can do something to make our financial lives better this year. And, I promise that we'll do the best that we can to help provide the ideas and tools that you can use to do it. So are you willing to promise yourself that you won't succumb to negative perceptions (whether justified or not) and you'll give yourself every chance to succeed this year? Seems like the least that you can do for yourself.

    Posted Jan 08 2008, 09:02 AM by Gary with 4 comment(s)
    Filed under:
  • Service?

    Like many of us, I got together with family over the holidays. I was visiting with my sister when she said something that caught my attention. She and my niece had decided that they would not accept poor service without taking note of it. She told me about a local Taco Bell that they visit. Typically, they go inside to order a take-out meal for the family. There's a sign that says that if you order a meal, the cashier is supposed to ask you if you want a drink. If they don't, they'll give you the drink for free. According to my sister, what was surprising was that they were getting free drinks every time they went in. It wasn't just one or two cashiers who neglected to ask, but almost all of them. And although they would be happy to drink whatever they had at home, it was foolish not to take the free drinks they had been promised.

    (note: the reason the Taco Bell does this is to encourage people to buy drinks. They're a very high profit item for them.  So giving away a few drinks is a small price to pay to make sure that the servers remember to ask if you'd like a drink.)

    The discussion went on about how my mother had a problem with her bank. She had given a clear instruction and it still got goofed up. Just about everyone there had one story or another about how even the simplest things weren't being done correctly.

    I wonder what would happen if everyone did like my sister and niece. They're both polite, mild-mannered people, but they're tired of being treated as if their business wasn't important. I'm generally someone who avoids confrontation, even if I'm pretty sure I'm right. But I think that I'm going to do a little bit more of that myself in 2008. Maybe we all should.

    I'd love to know what you think about it. Comments?


  • Back for a New Year

    Wow, hard to believe how quickly time flies during the holidays. Of course maybe time isn't moving any faster. It could be that I'm just going slower!

    Wanted to start this year with a mention of a column I wrote and a blog comment about it. The article was about a mother who had co-signed an auto loan. Now her son decided that he didn't want the ride and couldn't make the payments. You'll find it at http://www.stretcher.com/stories/07/07dec24c.cfm

    The comments are from Nancy Castleman. She's someone you should get to know. Nancy co-authored "Invest in Yourself: Six Secrets to a Rich Life" and has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com. You'll find her comments about the column at http://www.creditbloggers.com/2007/12/taking-out-a-ca.html.

    As you can see by my response comment, I agree with Nancy. Sometimes a kinder response is better. Or as my Grandma used to say you can catch more flies with honey than with vinegar (although I never really wanted to catch a bunch of flies!).

    At any rate, you might want to check out Nancy's blog. I think that you'll find it interesting. 



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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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