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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.
  • Are Your Savings Really Safe?

    Boy, this one is a shocker. CNBC is reporting that banks are being pressured into buying government debt (story here). They say that US banks have bought $700 billion worth of Treasuries since 2008. So what's wrong with this picture?

    Let's drop down to the real world and take a look. You managed to save $1,000 and put it in a bank. You feel safe because of the FDIC or FSLIC insurance. After all, if the bank goes under, Uncle Sam will make sure you don't lose any money.

    But, let's for a moment suppose that a few years from now the bank does fall on hard times. The people who they loaned money to can't pay it back. So they're closing the doors. You're ok, though, because the insurance has your back.

    But, wait...there's more. You find out that part of the reason that the bank is having trouble is because the US Treasury can't repay the money they borrowed when they issued the $700 billion in bonds. Humm...could that be a problem for you?

    You betcha! The same government that promised to guarantee your savings can't pay their own bills.

    In reality it probably won't happen that way. If the government couldn't raise enough taxes to pay their bills they'll just run the printing presses. They'd issue enough dollars to cover their debts. So your savings would be secure. You'd still have $1,000 in the bank. The only problem is that you'll need that much to do your weekly grocery shopping.

    So the next time you hear about government borrowing remember that it's your savings they're playing with.

  • Can Boomers Depend on Social Security?

    As a baby boomer who has been involved in personal finance for 30 years I try to follow what's going on with Social Security. And I have to say that I'm not that happy with what I'm seeing. Just finished reading a report from Reuters that set off the butterflies in my stomach. Here's the first few paragraphs:

    CHICAGO (Reuters) - The trustees of Social Security will release their annual report on the program's health sometime in the next few weeks, and the news will not be good.

    The 2012 briefing is expected to show further deterioration in Social Security's financial outlook, due to the higher-than-expected 2.9 percent cost-of-living adjustment awarded this year and a decline in the taxable wage base available to the program. The report is the official gauge of the program's health - signed by three Cabinet members, the Social Security commissioner and two independent Congressional appointees.

    Social Security is not in imminent danger of running out of money, but it faces a financial crunch a bit further out - around 2035. That is when Social Security's Trust Fund is projected to be exhausted due to the drawdown of benefits by the baby boom generation. At that point, the program would have sufficient tax revenue to pay only about 76 percent of promised benefits.

    The article does a brief Q&A with Steve Goss, the chief actuary of the Social Security Admin. In it Mr. Goss tries to encourage people to wait until age 70 to begin taking benefits because they'll get more each month. And, his analysis is correct as far as it goes. But there are two things that weren't mentioned in the Q&A.

    First, you really should take a look at how long you're likely to collect those benefits. Most of us boomers have already buried one or two friends. We hope to be among those who live into our 90's. But, based on our family history and our own current health that might not be too likely. If none of your parents or grandparents lived past 65, you might want to start taking Social Security as soon as you're eligible. At least have a financial planner (or a financial website) put together a projection of how long you'd need to live to make up for the years that you delayed getting Social Security.

    Secondly, what happens around 2035 (just 23 years from now)??  Yes, we have a promise of what benefits will be paid. And, yes, there are cost of living adjustments. But what happens if the money simply isn't there? In a few short years (hopefully prior to 2035) we're going to be facing a decision. Will we ask seniors to take less in Social Security or will we take more from younger workers (and taxpayers)?

    It's not a stretch to think that one of the first suggestions will be that people who have accumulated some savings will be asked to take reduced SS benefits. That's particularly relevant for people who have lived frugally so they could save for retirement.

    And, I'm old enough to recognize that sometimes people make promises that they're unable to keep. Being frugal I'm naturally cautious. In effect Social Security has promised to raise taxes on our children and grandchildren. I question whether our kids can meet those promises and still support their own families. So I can't help but wonder how SS will keep the promises that have been made.

    Bottom line? I'm not suggesting that everyone take their Social Security benefits as soon as possible. Just saying that you should look at some numbers before you make a decision. Consider your life expectancy and the ability of Social Security to keep it's promises in the future. Hopefully the money will be there and you'll collect benefits for 30 or more years. But, you'd be less than prudent if you don't consider other alternatives

    Keep on Stretching those Retirement Dollars!



  • MIT Researchers Predice Economic Collapse by 2030 - Really??

     Interesting piece in Yahoo this morning. It says that researches from MIT project that the world will run out of resources by 2030. You can read the article here.

    A new study from researchers at Jay W. Forrester's institute at MIT says that the world could suffer from "global economic collapse" and "precipitous population decline" if people continue to consume the world's resources at the current pace.

    I'm not an MIT graduate and I don't play one on TV. So I probably can't match credentials with the MIT folks. But, I do think I have something that they've neglected to factor into their research: common sense.

    To make their prediction they need to forecast both the growth of population and the growth of available resources. And, I believe that's where their analysis breaks down. Here's why. There's no way to forecast what new technologies will do to the amount of resources available in the future.

    Consider these examples from the past. 150 years ago people thought that population would outpace the ability of farmers to produce food. Ofcourse that was before the combine, tractors, modern ag schools, hydroponics and a whole host of other tools that have multiplied the food supply many times over.

    Or what's happening to the energy market today. Just in the last few years we've discovered that we have much, much more recoverable natural gas than we thought we had. And, if some researchers are correct, the same may be true for crude oil. We've only begun to explore solar and other renewables. Not to mention nuclear power which didn't exist 50 years ago.

    If that's not enough to convince you that we can't predict what man's ingenuity will make available for us, consider the computer/tablet/cell phone that you're using to read this on. 20 years ago none of that was possible. But it was and it has made many human endeavors much more productive. And, we've only scratched the surface. The personal computer is only 20 years old. Think of where the automobile was in 1920 compared to today. What might we be doing with computers (and their offspring) 80 years from now?

    So while I'm sure the researchers at MIT meant well and used all the right math and algorithms, I think that they forgot a very important element. Man's ability to put his mind to solving problems. So to that extent, we should thank them for helping to spotlight the problem and then root for those who will discover ways to solve them.

    Keep on Stretching those Dollars!


  • Homes Available for the Price of a Car?

     Just read an article from Yahoo on how there are some homes available for the price of a new car. And we're not talking about some uber-luxury model like the Maybach or a Ferrari sports car. We're talking about cars like the Honda CRV or the Ford Fiesta!

    I even know the area where one of the homes is (Two Rivers, WI). Not far from the old family homestead and in the heart of Packer country.

    Now I don't know what's available in your hometown. Or whether now is a good time to buy real estate. My inner expert tells me that there's still a lot of homes that will be foreclosed on or sold short in the next few years. So there's probably no reason to hurry. But at these prices and with mortgage rates being so low, it might be a good way to lock in a low rate. Especially if inflation kicks in and rents begin to rise.

    So take a look and let me know what you think.

    Keep on Stretching those housing Dollars!


    revision: Weds 4/4 9:45 am

    New data on housing prices from Calculated Risk Blog. Seems as if housing prices continued to drop in February, but that the rate of descent is slowing down. Who knows, maybe we're getting near the bottom.

  • MSN 102 Best Money Websites

    Normally I don't like to brag. Just don't think that it's polite. But, sometimes it's hard not to.

    Recently someone I respect greatly included The Dollar Stretcher.com in her list of the best financial sites on the web. I've know Liz Weston for years and admired her work just as long. She's a columnist for MSN, writes her own blog and contributes frequently in other financial venues.What I like about Liz is that she gets to the point, often digs out facts everyone else seemed to overlook and she makes it all understandable to the average reader. So when she says something I tend to take notice.

    Periodically she'll do something highlighting sites that she respects in an area of the financial world. This time she decided to cover all financial sites. You'll find the article here.  Seeing The Dollar Stretcher on the list understandably makes me feel good. But, much as I want you to rely on our information, please read Liz' article and check out some of her recommendations. I'm confident that she'll point you to some valuable resources.

    Naturally I recognize that we've had literally thousands of authors and readers contribute to The Dollar Stretcher. No one person or small group of people could have done it. We've always been blessed with many wonderful contributors. Professionals, people who shared 'my story' or their tips and all the wonderful people who contribute to the forum. But I can't help but get a little prideful when we can display a button like this:

  • Random Thoughts About Personal Finance

    Some random thoughts about personal finance:

    A lot of people who can't find jobs are going back to school. More education is usually good, but what happens if the take out additional student loans and still can't find a job after they complete their education. Seems that you'd need to be very sure that your chosen field will have job openings when you graduate to make this strategy smart.

    Baby boomers will have a rough time in the job market. Even if the economy suddenly got much better, employers will hire the many 20-somethings that are unemployed first. Their wage requirements are lower and their medical insurance cost is lower. Boomers need to rethink the kinds of jobs they're looking for. The odds of finding a job like the one they lost are pretty low.

    What would you do if gas hits $5 a gallon? Many experts think that's possible this summer. For most of us that would be a big burden on the family budget. Might be a good idea to start making changes now so that the adjustment isn't so painful later.

    Wish everyone had joined us for our Twitter #DlrChat last Tuesday. One participant (@scg003twitparty) won a Kindle. Everyone who participated learned something about preparing to buy a home. The next #DlrChat will be on March 20th and will discuss retirement accounts. If you can, put 3pm Eastern on your calendar.

    Finally, a reminder if you're getting a tax refund to use it wisely. Don't get a 'refund anticipation loan' (RAL). Typically you're paying an interest rate of over 100%. And, if you can apply your refund to a credit card balance you'll multiply the benefit. Kind of like the gift that keeps on giving!

    Keep on Stretching those Dollars!


  • RetireAndRenew

     As mentioned in an earlier post, I'm concerned about baby boomers and retirement. It's almost as if a whole generation is heading full speed ahead into a brick wall. So I'm always on the lookout for resources that can help boomers (myself included) navigate these times financially. Today I want to re-introduce you to a blog by someone that Stretchers already know.

    The blog is RetireAndRenew.com and it's done by Lori Blatzheim. If the name sounds familiar that's because she does the Thrifty Living Today blog and the Virtual Thrift Club forum for us here at The Dollar Stretcher.com.

    She's going to discuss all the live changing events that come with retirement. Changes in finances, friends and activities. And, if I know Lori, I suspect it will be an interesting journey that she'll share with readers.

    So drop on by and leave her a note. Especially if you're among those who are retired or are thinking about retirement.

    Oh, and don't forget to keep on stretching those dollars!


  • Baby Boomers and Retirement

    As many of you know, I'm a baby boomer. So it's only natural that I share many experiences and challenges with other boomers. One upcoming challenge is that I'm beginning to believe that many baby boomers will not get to retire. Not at age 62, 65 or 67. Not even at age 75. The reason is simple. Most of us simply haven't accumulated enough wealth so that we can live off of it for the balance of our lives.

    I'm working on collecting the statistics and won't take your time for that here. Suffice it to say that I'm betting most boomers, if they're honest with themselves know that they haven't saved enough for retirement. Or maybe they thought that they were on the right track, but the drop in housing prices and the value of 401k plans put a hurt on their plans.

    If you're a boomer how do you feel about your retirement plans? I'd love to hear what you think. As you enter or approach the 60's do you think that your plans are going well? Or are you becoming concerned that your nest egg just isn't big enough? Please shoot me an email and let me know what you're thinking.

    Keep on Stretching those Dollars!


  • 0% Interest Rates Forever!

    Just saw that the Federal Reserve says that they don't plan on raising interest rates until the end of 2014 (NY Times). That's going to create some challenges for folks like us who believe in savings. Probably a good topic for a future article. Finding good places to get a reasonable return on our money in this environment. I'll let you know when it's written!

    Probably also means that the Fed doesn't expect the economy to take off any time soon. That they expect things to muddle along pretty much the same as they have for the last few years.

    We don't have space to go into a 'what you should do now' type of piece. But, it is a good reminder that we'd all be wise to pay attention to our personal finances. Not only doing what we can to watch our expenses, but also to guard our savings, too.

    Keep on Stretching those Dollars!


  • Of Satellites

    Learned something new (and probably irrelevant) the other day. My wife and I were heading for a conference near Cape Canaveral. We had left time for breakfast and were looking for someplace to eat. I expected to find something like Denny's or Bob Evans, but we weren't having any success. So my bride pulled out her handy phone to search for one.

    After a few minutes I was surprised that she didn't have an answer for us. Her reason? Her phone was unable to find a satellite. Seemed pretty funny to me that in the place where the US started sending satellites into orbit you couldn't find one for an internet connection! Oh, well. Goes to show that the internet doesn't cover the whole globe just yet.

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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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