To Stimulate Or Not To Stimulate?

Posted on May 12, 2008

The Happy Rockette mentioned something about our stimulus check that got me thinking. We already have a plan to spend the money on some improvements to the condo. We can enjoy then for the next year our and they will help our house sell when the time comes. I mentioned that the $1500 would look pretty nice in our down payment account, and she hinted that we should use the money for its designed purpose….to stimulate.

She was being somewhat tongue and cheek to counter act my subverting of the plan, but until that moment I hadn’t considered that people might feel obliged to spend money to ‘help’ the economy. In my opinion, the money was ours not the governments and we are free to do whatever we chose with it. This includes paying consumer debt, if we had it, or even throwing it under the mattress. Is it our patriotic duty to spend the money? Will it even make a difference? Thought-provoking questions.

To help answer the question I did a little digging into what kind of effect stimulus payments can have on the economy. Here are a few quotes from the Congressional Budget Office(CBO) on the matter :

“Most studies of purely temporary, one-time changes in taxes have suggested that they have only a moderate effect on household consumption,” the CBO said, noting studies of a rebate issued in 1975 “suggested that only 12% to 24% of the rebate was consumed in the quarter that it was received.”

CBO said though “the experience of the 2001 tax rebate appears to differ from the findings of these earlier studies.” CBO noted the 2001 rebate was part of a broader tax package which lowered tax rates and applied those reductions retroactively. In 2001, most households received rebate checks of either $300 or $600 from late July 2001 to the end of September 2001 during a recession.

“Most analysts agree that the 2001 rebate stimulated the economy,” CBO said, “although there is some debate about the magnitude of the effect.” Households, according to one study, spent between 20% and 40% of their rebate amount in the quarter in which the rebate was received.*

So it looks like there is potential for the stimulus checks to infuse economy with a little money, but there is plenty of debt as to whether our government borrowing money to give to people to spend will do anything to truly stimulate the US economy.

So the question remains stimulate or not to stimulate, what’s your answer?

*Source - The Winners and Losers of the Stimulus Package

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» Filed Under Spending, Taxes

Demystifying The Budget - Don’t Be Afraid

Posted on May 10, 2008

I am not sure many other finance terms inspire more fear than the word ‘BUDGET’. Ok, well maybe bankruptcy, foreclosure, and a few others, but you get the point. Some people even will physically squirm when they think about having to adhere to a budget.

I am here to squelch some of those fears and I am not even a fervent budgeter. A budget is nothing more than a plan for your money. That’s it! There isn’t anything magical, nothing scary, no straight jacket, just a plan.

Here is the formal definition :

Budget : a scheme or method of acting, doing, or making developed in advance

That captures what a budget it beautifully. You decide were your money should go before you spend. You can be objective and rational about were you money is going, rather than being ‘forced’ into decisions at the cashier’s counter. You also have a metric to help keep you accountability and give you feedback on how your spending is proceeding. Just, list your all your bills, debt, and goals like savings and divide up your monthly take home pay between the categories however you see fit.

One of the big concerns people have is that it will take the joy out of spending and turn them into a cheap miser, but the only way that will happen is if you let it. You are free to budget however you want. If you want to spend $500 a month on movies and eating out, by all means. I think what most people realize when they start to budget and track their spending is that you have more money than you think, or at least it will feel like you have more money.

Another concern is that you will miss something or not budget enough money. I am hear to tell you that a budget is a continual process. You will make mistakes. You will blow the budget, but with each mistake you will be able to budget better and better. Adjust and tweak is the name of the game.

So don’t be afraid, be willing to try it for a few months. Here is an online budget calculator from Crown Financial that will help provide a little context.

» Filed Under Debt Elimination, Financial Succes, Planning

The Library Isn’t Free When You Pay $17 In Fees

Posted on May 8, 2008

Just got back from getting another round of books for The Pebble, but I had to pay $16.95 in back fines/fees just to checkout. Being a couple days late when you have 2-3 books out isn’t too bad, but ever since The Pebble hit reading age we have been getting out 10 books at a time. Leave for one vacation without returning books, and be a couple days late a few times and you are paying $17 to rent books rather than utilizing a free public service. We still probably got great value despite the fees, but it could have been FREE!!! Children’s books + library + inadequate return planning = the potential for some financial leakage.

Anyone with children have a great system for using the library efficiently and free?

» Filed Under Money Savers

Vacation and Perspective - Simplify Your Finances

Posted on May 6, 2008

The Rock Garden went vacationing this past weekend to Pocono Mountains of Pensylvania just outside of Jim Thorpe, PA. We got a great a good deal on a modern three bedroom house with a scenic view that I will post about later. Despite a wash out on Saturday and some allergies, it was a great vacation. I am not here to talk directly about the vacation though, but rather something peculiar that I noticed.

The Satelitte TV wasn’t working in the house and there was no internet. The amazing thing was that after the 36-48 hour withdrawal period, I began to notice some changes in my brain activity. The further I was removed from overloaded email boxes, must see TV, Twitter, flashing phone messages, to-do lists, and daily bustle of life my brain began to exercise areas that it doesn’t normally use. It seems like the immediacy of our daily lives keeps our brains focused on surface tasks. These surface tasks often impede us from focusing on the things that will truly bring us joy or things that will provide much greater value.

I was able to think about were I wanted to be in a year, or five years without getting overwhelmed. I was able to step back and view some of the daily grind with objective glasses. Our spending patterns became much more visible when I wasn’t focuses on the latest Target receipt. I found new oppurunities for passive income and areas for frugality, all because I had time and mental energy to devote to thinking about such things. One of the big things we realized is that we really need to tighten the reigns on the budget/spending if we want to have the type of down payment we desire to move in around a year.

So what does this means to our finances? It means that our lives and our financial systems need to be simplfied to the point that our brains can jumpstart idle areas of our brain back to life. Areas like creativity, chasing dreams, and romance. I think it will take years constant growth and changes to really understand, but I know that when I look back in five years I will be amazed out who much more my brain is alive.

Here are a few ideas that I will be doing to help simplify and set the daily tasks on auto-pilot:

Cancel Those Extra Savings And Checking And Credit Account - If I am honest, the added headache and management time just isn’t worth it.
Improve Your Bill Pay And Budgeting System - Setup up automatic reminders. Call and change the due dates on bills to be the same time.
Get Out Of Debt And Get Security- Finances are so much easier without debt and with an emergency fund. It really is night and day.
Sell Or Give Away Stuff - Furniture you don’t need. The garage full of junk. Books. You may need it someday, but it probably isn’t worth the hassle of keeping it around just in case.

» Filed Under Chasing Dreams, Personal Finance Systems

Community In Action - Pursue Your Dreams Edition

Posted on May 1, 2008

First was an article on Life Hack called Personal Development, Canine-Style. It is a long read, but well worth the time. It is written from the perspective of a man’s dog while the owner’s life and finances grow over the years. It shares some of the potential dangers that come with chasing our dreams and getting on top of our finances. Great life perspective with an funny amusing edge.

Second, I wanted to highlight one of the best Personal Finance blogs on the net, The Simple Dollar. This story is quite inspirational. Just about two years ago he hit financial rock bottom, and now he has quite his steady job to pursue his dream of making a living as a writer. I suspect that he we will make judging from his motivation and body of work. Here is one of his recent pieces that provides a wonderful framework for making your dreams look possible. If you haven’t ever checked out his blog, I highly recommend it.