Archive for April, 2008

Stagflation is HERE

Wednesday, April 30th, 2008

Y’all have heard me gripe and grumble about the Fed cutting interest rates, with my main concern being inflation or even worse stagflation.  Break out the polyester leisure suits and disco albums (yes, vinyl LPs), because it looks pretty official to me: Stagflation has returned to the U.S.

Short definition of stagflation

Stagnant economic growth or recession coupled with higher level of inflation.

The president is currently denying that we are in a recession right now (Wow, he not only looks like his father but now he sounds like him as well!).  Technically, he is right when you apply the classic textbook definition of recession, which is two quarters of economic contraction.  The official government numbers say we haven’t had actual economic contraction, but the anemic “growth” of 0.4% and 0.6% would put snails to shame.  Basically, the economy is moving about as fast as swamp water … stagnant, in short.

Inflation numbers DO lie

Now for the other half of stagflation, which is inflation (prices inflate like a balloon).  The “normal” government numbers show an annualized inflation for the past month of 4%, but then they get downright sneaky and strip out food and energy prices for some (male bovine excrement) figure they call the “core inflation” figure.  I’ve made several snarky remarks about how Ben Bernake must not eat or drive to think the core inflation number is anywhere near realistic.

Doing a little digging around on the web I have discovered the government has changed how they figure inflation several times, and each change they make doctors up the numbers to make things sound much rosier than they are.  Sit down and hang on to your hats, because here is a graphical representation of MY budget reality versus the government’s rose-colored glasses:

inflation numbers real and imaginary

(original article and image source here)

That’s a huge difference in figurings!  And when you take into consideration food and gasoline, that top line reflects how I had to adjust my budget for April … and how I’ll be working the numbers again for May.

Stagnant Economy + Inflation = STAGFLATION

There you have it folks, stagflation is back … I am not at all happy about having seen this coming either.  Supposedly the members of the FOMC are old enough and educated enough to have seen the signs of this economic catastrophe sooner and clearer than I could have!  Yet they have been on an interest rate cutting spree reminiscient of those 70s slasher horror films in hopes of keeping the Wall Street markets happy and every consumer in America spending like before (at unsustainable levels).

This could have been avoided.  Energy costs, especially oil, are priced in dollars and the dollar has fallen with just about every rate cut.  Even OPEC says the price of oil wouldn’t be nearly as high if the dollar was strongerThis round of stagflation is on Ben Bernake and seven others in the FOMC - excluding inflation hawk Richard Fisher of the Dallas Fed and recently Charles Plosser of the Philly Fed.

I’ll do some rooting around and asking the older generations how to survive stagflation and report here when I come up with something good.  In fact, I’ll make it my post-finals project, hopefully starting tonight.  Until then, turn on the 1970s classic rock radio station to get into the mood … the angrier the better.

Finals Week Link Love

Tuesday, April 29th, 2008

Two cups of coffee and I still can’t put my thoughts into coherent form today, plus I have to go camp out on campus again for finals … so it’s a link love post for y’all.  My brain is in chemistry student mode LOL

First up, I need to get caught up on what little blog carnivalling I’ve been doing recently:

I haven’t been reading the blogs as much recently … but here’s a few that did catch my eye:

Now, for the one thing I have actually been reading about … other than organic chemistry: the Federal Reserve FOMC starts their two-day meeting this morning to decide the fate of the U.S. economy (otherwise known as setting the interest rate).  Here’s a few good articles on it:

It’s no secret I have a pretty low opinion of the Fed’s rate cut policy, and I am pretty convinced this “economic stimulus package” payment will end up at most folk’s local grocery store and gas station.  There’s this thing called INFLATION that Ben Bernake seems to be totally ignoring, mostly in the form of rising food and energy costs (which the government conveniently strips OUT of their inflation calculations).

They’ll announce their decision about fifteen minutes before we organic chem students go into the slaughter known as a year-long cumulative final, but y’all can probably guess what kind of post I will write if they do remain stupid and cut the interest rate again.

Now I am off to study again … and finish up a couple of projects due before the finals (which cannot be over with soon enough!!!).

Safety Tips from your Pizza Driver

Monday, April 28th, 2008

Saturday night I had some guy tailgating my back bumper on a dark country road.  When I turned onto the two-lane highway, he stayed on my back bumper and almost got himself T-boned by oncoming traffic that I was able to easily clear but he shouldn’t have even tried.  This is just the latest example of how unsafe some people drive!

As a pizza delivery driver, I see all kinds of examples of unsafe driving and even some very nasty car wrecks.  As a “public safety announcement” I thought I would list a few of them here (and to vent a bit).

Unsafe Driving Practices

  • SPEEDING:  along with killing your fuel efficiency and gas mileage (MPG), speeding is not a safe thing to do!  It becomes especially unsafe on the curvy twisting country roads I often deliver on, and is a hazard in town where you might not have the time or distance to stop for a traffic light.
  • RUNNING RED LIGHTS:  I understand some yellow lights are very short (I don’t know why) and sometimes people can’t stop in time, but running a red light is dangerous because there are folks who feel a need to to do an extreme “quick start” or “jackrabbit start” off the line as soon as their side turns green, and some jump off that line so fast you have to wonder if they drag race in their spare time!  I’ve seen T-bone wrecks that require the rescue squad, the “jaws of life” and at least two ambulances or even a life-flight helicopter, not to mention the fire trucks, police vehicles, and of course a flatbed wrecker or two to haul what’s left of the car off.  Really, it ain’t worth it … especially if they have to call the coroner instead of an ambulance.
  • TAILGATING:  This one really chaps my (donkey) big time.  I drive a stick shift, which means I will likely slow down without using my brakes!  Also, that lighted sign on top of my car says I am WORKING, and if I am going slowly I may be hunting for an address or road … so driving three inches off my back bumper with your high-beams on will NOT make me go any faster.  No, you are not “drafting” either, because before you get close enough to actually draft I will have slammed  on my brakes to get you to back off.  I am older than most tailgaters, and have much better insurance rates … and YOU will get the ticket for failing to maintain a proper following distance.
  • FLASHING HIGH-BEAM HEADLIGHTS:  I really don’t understand this one at all.  Why do people feel a need to flash their high-beam lights at me when oncoming?  Do they think they are being cute?  Or are they just that much of a total jack(donkey)?  People in tall trucks seem to do it much more than small car drivers, and it really does temporarily blind me.  It’s even more annoying than those (donkeys) who tailgate with their high-beams on.

Now, for a non-driving but even more important safety tip: MAKE SURE YOUR HOUSE NUMBER IS EASILY VISIBLE FROM THE ROAD!!!  As a pizza driver, this would help me immensely in my job.  You may even think it’s amusing to see me go past your driveway three times hunting for your house with my lighted pizza sign showing how hard a time I am having … but will it be just as amusing when you have a life-threatening situation and it’s the ambulance, fire truck, or police car who can’t find your house?!?  Use reflective house numbers that are two inches tall or larger, and make sure they can be seen from the road even during the late summer when bushes and trees have all of their leaves.  Folks, if the pizza driver who is up and down your road regularly can’t find your house at night, the ambulance driver won’t be able to find it easily either.

Now, for a few tips to make your pizza driver feel safe:

  • Turn on your porch light!  It helps us find your house a little easier, and there are some neighborhoods I’ve delivered into that were not safe in the dark.  I carry a large 3 D-cell Mag-Lite flashlight for occasions like that … not just for the light either.  I often tell customers that “porch lights attract pizza drivers.”
  • Don’t leave things laying across your sidewalk at night, especially if you don’t bother to turn on that porch light.  I’ve tripped over all manner of things just trying to get to a house’s porch.  If you think I am just whining, pretend I am a paramedic and your child is choking and blue … then maybe it won’t sound as trivial.
  • If your dog may be aggressive, put it up.  I have nothing against dogs, or even big dogs (I own a 130 pound Rottweiler).  But I get a little nervous when a customer is at the door yelling at me to stay in my car while they catch and contain their dog.  If you have someone coming to your house, get Cujo in his pen or on a leash … before my tires hit your driveway.

These are just a few safety pointers from my experience as a pizza driver.  I am sure other drivers can chime in with more.

Numbers Vs Emotion in Money Decisions

Sunday, April 27th, 2008

One thing I truly love about reading y’all’s comments is they often make me think about things either in a new light or at a much deeper level than I had.  Here’s another great example, in Eric’s comment on my post Raiding Retirement - A Huge No-No:

… I would have to sit down and run the numbers - this isn’t an emotional decision, which I am afraid you have made it into …

I am all for running the numbers on most things, but there is one simple truth (for me, at least).  My emotions are tied to my money situation, and heavily influence my personal finance decisions.  For me, money equals security.  When I lived paycheck to paycheck, I lived with a fear in the back of my mind and in the pit of my stomach at all times.  What if the car broke down?  What if the gas (heating) bill came in higher than expected?  What if I got sick and had to miss work?

This feeling of fear and insecurity is why I am so anti-debt, and is the result of bad experience (and bad decisions).  When I was driving home on Decemeber 26, 2006 - knowing the trip was on a credit card and worried how to pay it - and heard of a better plan on the radio, it was of fifteen years of financial fear and frustration that motivated me to make such major behavioral changes my son wondered if I had joined some kind of cult.  These emotions also motivated me for fourteen long months to get out of debt.

These changes brought about another emotion that I had never associated with money: HOPE.  It’s another strong motivator, and one that drives me today.  HOPE that I will have a big enough emergency fund to cover whatever life throws at me.  HOPE that I will be able to retire comfortably, and not need to rely on VA disability or Social Security.  And best of all, HOPE that I can influence my son so he can truly have wealth and financial success in his adult life.

Money is a very emotional topic: for proof I point to the comments section of just about any personal finance blog where discussions often get heated (this one included).  Money - or lack of it - colors almost all of our daily decisions and touches our emotions.

I am sure there are folks who are able to make money decisions on a purely numbers basis instead of an emotional basis.  Obviously I am not one of them!  One of my favorite quotes is Dave Ramsey on the topic of saving up money for an emergency fund: “You will only save up money when it becomes VERY VERY IMPORTANT TO YOU!“  Guess what?  Eighteen months ago, getting out of debt and saving up money became VERY VERY IMPORTANT to me!

I can run the numbers for the most part … but for me money IS a very emotional thing, and the emotional component is what has kept me motivated to make major positive changes in my financial life.  Since this blog is about my experience with money and debt … it will have a strong emotional aspect to it.  Sometimes I will run numbers to back up a point I am trying to make, other times I will simply link to other people who are better at the numbers part of the money game.  But for me personally, money decisions are all about emotions and how well I will be able to sleep at night.

I will admit I am now curious.  Which is it for y’all, the readers?  Emotions or numbers?

Raiding Retirement - A Huge No-No

Saturday, April 26th, 2008

In my post on How to Pay For College, I referenced a CNN/Money article that encouraged parents to raid their retirement to pay their childrens’ tuition bills.  Becca left a comment on that post:

… Where I disagree is the comment in the article about “raiding the IRAs”. That should never ever be done. No one will give you a loan to retire. …

Since I have picked up quite a few new subscribers in the past couple months, it occurred to me not everyone is familiar with my opinion on raiding retirement.  I take a hardline attitude on this: DON’T DO IT!!!  Leave your retirement funds alone!

Don’t raid retirement to pay down debt (even as much as I love the idea of y’all getting out of debt!).  Definitely don’t raid retirement for your kids’ college.  And, by all that’s holy, don’t raid your retirement funds for something material!

When I say “raid retirement” I am not only talking about making withdrawals … I am also talking about those loans against your retirement funds as well.  After finals are finally over, I’ll do some research on those stupid ideas like 401(k) loans and the even dumber idea of a debit card for your 401(k)/403(b)/whatever account just to get the hard and nasty numbers.  Stay tuned for the ugly truth behind all the hype ;)

If you are still thinking about raiding your retirement funds by withdrawal or loan, you need look no further than the U.S. government for a shining (?) example of why this is a Bad Idea.  Back in the 1980s, Congress had the “brilliant” idea of raiding the Social Security trust fund to help cover the budget.  Twenty years later, quite a few (but not enough) government officials are now saying it has never been paid back and Social Security faces possible insolvency.  We have the largest demographic group starting to retire … and a bunch of unpaid IOUs in the account.  It’s the government’s equivalent of taking a loan against our retirement.

Unlike Congress, you cannot borrow however much you want whenever you want with the expectation that someone else will pick up the tab for you (although some people seem to act as if they can).  Let’s face it, if that strategy doesn’t work for Congress, it will be disasterous for YOU.

I can think of only two instances where I would raid my retirement funds, and that would be my option of absolute last resort: as a last-ditch effort to prevent a bankruptcy or as the last option to pay for life-saving emergency medical careI would go back into debt before tapping my retirement funds, and long-time readers will tell you that is saying a LOT.  Let me repeat that for effect:


I hope I have been quite clear on that point.  So, unless your “retirement plan” is to move in with your children and grandchildren and be a burden in your old age, STAY OUT OF YOUR RETIREMENT FUNDS!

How to Pay for College?

Thursday, April 24th, 2008

It’s finals week at most colleges around the country, and parents of graduating high school seniors are facing a huge question: How to pay for college tuition, fees, and books for next fall?  Well, CNN/Money tried to tackle that question this morning, and boy did they get things wrong!

The article starts off highlighting a couple who have an 18yo and 20yo in college … at Georgetown and Tufts!  It then goes on  to mention financial aid … payment plans with the university … childrens’ college savings plans … student loans … PLUS loans (parents take out) … then HELOCs and raiding retirement savings like IRAs!  The very last paragraph in the article really set me off:

The Mathenys were happy to borrow from their home, but they don’t see anything wrong with kids graduating with some debt too. Says Patrick: “Hopefully the loans will give the kids a lesson they wouldn’t learn in a classroom: financial responsibility.”

No, NO NOOOOO!!!!!  By all the gods known to mankind, why don’t these parents simply sell their children into slavery?!?  It would be quicker, and the end result is certainly the same!  What ever happened to parents caring enough for their children to try to help them achieve a better life than the one they are living??

With this kind of debt-slavery garbage floating around as “good advice” it is no wonder people are wondering if student loans will be the next financial meltdownWe have been setting up an entire generation for failure with this kind of advice.   Some pundits have gone so far as to nickname Generation Y “Generation Debt.”  In fact, I think we are setting up the class system for the next couple of generations into those with crushing student loan debt and those who have the financial freedom that little to no debt brings.  I’ll give y’all one guess where my son will end up!

So as an alternative to this bad advice, I offer my “graduate debt free” plan (for the record, I have NO STUDENT LOANS AT ALL!)

  • Go to a community college for the core curriculum.  This is especially good for students who haven’t decided on a major yet!  Community colleges are significantly less expensive than four year universities, and the credits will transfer just fine.
  • Go to college part-time while working a part-time job.  It may take a little longer, but with student loan pay periods getting as long as mortgages, you will gradauate debt free and be able to keep your money much sooner.  As the part-time job, I personally recommend delivering pizza :)
  • Stick to classes within your declared major and/or minor.  I am not opposed to learning for education sake, but with tuition rising as fast as it is you might want to wait until after you land a good job for the “personal enrichment” classes.  I don’t have a choice, as the GI Bill only pays for classes in my major or minor.
  • Save up over the summer and during the semesters to pay your tuition bill in full.  Those payments plans my college offers really aren’t very good terms, and they already bleed you dry with strange fees (”debt service fee” was the one that annoyed me this semester).  For my college, the business office charges almost $100 for the privilege of breaking your payments into 50-25-25% so the registrar doesn’t drop you if you can’t pay in full.
  • If you do need to take student loans, take only what you absolutely need!  Don’t spend the next fifteen years or more paying on something dumb, like a car that will be long gone by the time it is finally paid for (I’m not kidding, some students use their student loans to “trick out” their cars).  Student loans should be used for tuition and books only.
  • For the students who have no idea what they want to be and no way to pay for college, consider military service.  I’ll be the first to admit the military isn’t for everyone, but if you think your child can hack it and has a desire to serve the GI Bill plus the recruitment incentives (Army College Fund in my case) will help out tremendously.  Patrick from CashMoneyLife went the Air Force route and considers it one of his best moves.

These simple steps are not the be-all and end-all of how to graduate from college without student loan debt, but they are certainly a good start and also what I have done (except the loan part).

Your turn, folks: what kind of advice would YOU give for parents wondering how to pay for college without debt?

Welcome to The Simple Dollar Readers

Wednesday, April 23rd, 2008

I just got back from my organic chem test to find quite of few of Trent’s readers already looking around my archives and commenting.  For the rest of y’all, be sure to check out my “Best of DFR” page for some of my favorites and my readers/commenters’ favorite posts.

Recent posts of interest (besides the very popular “Teenager on a Budget” posts) include:

I hope y’all enjoy the reading and decide to stick around by subscribing :)

Oh … the organic chemistry test?  Don’t ask.  The morning class used words like “traumatic” and “brutal” and I completely agree.

Reusing Plastic Drink Bottles

Tuesday, April 22nd, 2008

Yesterday I blogged about finding those reusable shopping bags at Kroger, and since today is Earth Day I thought I’d share a little tip I have been using for a while.  I reuse those plastic 20 ounce drink bottles.

The main thing I reuse them for is water.  I personally have never understood the concept of buying bottled water when it comes out the same from the tap. In fact, John Stossel’s 2005 survey only confirmed what I had suspected all along about bottled water: it really isn’t any different from tap water.  So here is what I have been doing:

  • On occasion, I get a 20 oz bottle of Diet Pepsi from the pop machine on campus (only $1 cold)
  • After I am done drinking the pop (soda) I rinse the bottle out then wash it and the cap with dishes
  • once it’s fully dry, I put about 3 ounces of water in it, then pop it into the freezer
  • after it’s frozen solid, I can put in water or tea for a cold iced beverage!

A quick note about the tea: having grown up in the Midwest I drink UNsweet tea which is virtually impossible to find in bottled form here in the South, so this practice originally started because I don’t like “tea-flavored syrup” as I call it.  Trying to find mint-flavored unsweet tea (my favorite) is exponentially harder, much less the “honey lemon ginseng” green tea I have liked since it came out.

We actually did this in Iraq with the 1.5 liter bottles the Army had, except we froze the entire bottle just to keep it cooler longer in the 120F summer.  We also made up Gatorade and tea when we got tired of regular water.

For my teenage son, I have honestly tried to convince him this is better than buying the individual bottles from the machine at his school.  I once bought him a 6 pack of the bottled tea when it was on sale and told him to save up the bottles so he could reuse and freeze ice into them before adding his green tea.  The bottles ended up in the trash.

This week at the grocery store, the Teenager bought an 8 pack of Gatorade bottles, at a price he could have gotten the large can of powder for.  I started to point it out to him, when he interrupted me to say that was his plan: buy the bottles this week and the powder next week.  He mostly just wanted the bottles (with the labels) to take to school with him.

So that’s what I do with the 20 ounce drink bottles.  To find ideas for reusing plastic milk jugs, look at Frugal Dad’s post for today.  I know I found some good ideas!