Are you changing your behavior in response to current events? - Page 14

Re: Are you changing your behavior in response to current events?

I am curious; When, in either case, did BofA get federal incentives for buying these companies? The only federal assistance they have received came much later via TARP afik. I couldn't find anything to the contrary when I searched - so I am curious what other federal assistance you refer to.


On second read Dave's post seems specific to people in the sub-prime departments of banks - however the media is not nearly so selective and I stand by what I said before about them.


I do not see this - maybe you could clarify? I know that we avoid partisan discussions but I made no partisan comments. (and I am hardly a partisan person myself) I discussed tax code as a tool for social/behavior/economic influence - which is a common and expected purpose for tax code. AFIK tax is not a taboo topic. Your comment which implies somehow that 'for profit' institutions are somehow incapable of patriotism are more incendiary imho (not to mention anything about 'punking' you...)

Re: Are you changing your behavior in response to current events?

Eric, my phrasing was deliberately vague and limited, for the reasons stated. Those reasons haven't changed. I'll just add this: TARP didn't spring into existence overnight, and a lot of things happened between the dates when BofA announced each of those acquisitions and the dates when they closed (which, in the case of Merrill Lynch, was several months after the TARP legislation was passed and after BofA tried to back out of the deal -- this is public record).

I do apologize if you found the "punked" reference offensive. I was simply trying to indicate my astonishment that anyone would think a business institution was acting out of anything other than the profit motive. That is, after all, how the system is supposed to work.

As for the rest, I refer you to HTF Rule 18. The short answer -- and I provide this for everyone's benefit -- is that your premise is faulty. It is not "partisan" discussion that the Rules prohibit; they prohibit political discussion, whether or not it's partisan. I said that your self-entitled "rant" would lead into such areas, and its very phrasing so suggests ("not being encouraged by the government"; "ignored by our leaders"). Leave it alone, please. And please do not debate this instruction any further in the public forum.

Re: Are you changing your behavior in response to current events?

It was lay-off week last week. They let about another 10% of our work force go. This time it was primarily office people. I am one of the lucky ones though - I kept my job! And also was given all of the responsibilities of one of the folks they let go. So now I have twice the work with reduced hours and pay. At least I won't be bored any more like I was last summer. I would much rather have a job and be busy.

Re: Are you changing your behavior in response to current events?

By that standard than every employee in the world is solely motivated by profit as well - a presumption I would hope that any right-thinking person would find fault with.

To presume that employees go to work solely for the purpose of making money is parallel to your assumption that businesses exist solely for the purpose of making money.

In reality employees (who make every business decision for all businesses) have motivations far more intricate than bottom-line profit - therefore these values influence business decisions - resulting in business making decisions which are not solely based on the bottom line. There are plenty of examples of this - corporate charity is only one. (and this is not always limited to money - for example; in my town a local grocery store chain is a very reliable supporter of local blood drives)

Glad to hear you are OK. My business income has been a bit more volatile lately, but seems to be averaging close to normal. I am actually looking at beginning a new service which I expect to turn a profit fairly soon and - if so - I will be hiring. Doubt I make a dent in the national figures, but every one helps. I just worry about congress passing more retroactive taxes...

Re: Are you changing your behavior in response to current events?

I don't share either the parallel or the presumption. But this is not the occasion to consider the general nature of the corporation, either as a legal construct or as an operating entity. Let's move on.

Things have started picking up lately. We started back on 5 days per week in July and it looks like it is here to stay. Instead of looking for things to do, we are back to wondering how we will get them done. I was kind of getting used to the 3 day weekends though.

The housing market is picking up a bit here, too. I heard we're up 11% from last month, although the median price for homes in our state dropped a bit. Still, I think that this is a good sign.

Well you know California, whenever we do something, we do it big!!!

So we're still well at the bottoming out portion of the recession, very little to no sign of recovery yet, and the state university I work for just announced a gradated pay cut/furlough program for 2009-10. I now will earn 6% less, and receive 16 furlough days for this fiscal year. It's only a one-year proposal, but most everyone who is "in the know" believes it will be two years.

I guess it's a good thing I just bought Logic Studio so I can learn how to record/edit/mix my songs during my furlough days...

Next month, unemployment starts running out for one million plus people across the country. It'll be interesting, for lack of a better word, to see if the signs of recovery get trampled by the sudden onslaught of desperation. The economists are talking about a "jobless recovery," but I don't see how you can have a recovery without people working and buying.

Certainly there's no "buying" in my household.  I'm retired and trying to live off the income from savings, but pushing the interest rates down near zero and holding them there hurts.  I search around at bankrate.com but there's just no good news these days.  A pair of decent paying CDs that I have come up for renewal in a couple of months. 

CDs have always been inadequate as stand-alone income investments - this most recent interest rate cycle only makes it more obvious why.  (the prior being only seven years ago)   You should consult with a competent financial planner to create a more rounded retirement income plan. 

I don't think there is any such thing as a "competent financial planner" in today's market.  Nobody - including the President and his administration - really know what's going on right now.

A financial planner would have put me 100% into stocks and bonds, and I would have lost roughly 50% of my life savings over the past two years.  E.g. the S&P500 dropped from 1400 in January 2008 to 700 in March 2009.  I sold off many things and went into a capital preservation mode in 2006-2007, and I'm glad I did.

Right now there appears to be a rally - is it for real, or just another bear-market sucker rally?

Well I don't think any proffesional financial planner would invest anyone in 100% stocks that is so close, or already into retirement.  Usually that risk starts dropping rapidly when you get within 5-10 years of retirement.  However, now is a very good time to invest.

WHat you describe is a prognosticator - and no - you will never find a competent prognosticator.   Competent financial advisors, however, are very realistic and can make a substantial difference in your financial health.  So long as you believe you already know the answers though - the real solutions will continue to elude you.

Dave,

I don't know if this will be of any help, but I can at least offer what it is that we do.

We use an ELP (endorsed local provider) recommended by Dave Ramsey for all of our investment needs. There has not been a charge for these services thus far. But I think one would have to agree (and/or have some buy-in) to his debt-free mindset in order to feel comfortable with contacting one of them. And in this mindset, one doesn't invest until certain other steps have already been completed.  We didn't begin to think of investing until the first three steps (shown below) were completed:

1. $1,000 to start an emergency fund.
2. Pay off all debt using the debt snowball.
3. 3-6 months of expenses in savings.
4. Invest 15% of household income into Roth IRAs and pre-tax retirement.
5. College funding for children.
6. Pay off home early.
7. Build wealth and give! Continue to invest in mutual funds and real estate.

Guided by the advice of our ELP, we divide our mutual funds over the four areas as recommended by Ramsey (and by extension, any of his ELPs). And we make certain that these have a very long track record of success (not less than five years, and preferably as long as or more than twenty-five years).

Growth Stock
Growth & Income
Agressive Growth
International

The most important part of Scott's post is the debt-free part, or being as close to debt-free as possible. I've been living on a really tight income for about 14 months now. There is no way I would have been able to stay afloat if I'd been in serious debt before things took a turn for the worse. As it currently stands, the only debt I carry month to month is my student loans, and I pay a minimum of 16 percent extra towards the premium each month. Most of what I bring in each month above and bills, food, lodging etc. goes towards those loans because I hate paying interest on anything. The rest of my spending is extremely regimented so that, while I do still spend money going out to the occasional movie or buying the occasional DVD, I know exactly how much money is available when I do. It's also important to build in a cushion for when shit happens; for instance, my front tires shredded a few weeks back and I got a favorable plea deal on a traffic ticket I'd been fighting for months. Having room to cover things like that and still pay off my credit card balance at the end of the month is as much of an art as it is a science. Now I'm looking ahead to the end of October, and making sure the money is there to cover my car insurance when it comes due. I'm surviving now on far less income than I'd ever have thought possible before. And there's still room to cut -- for instance, internet -- if things become even worse down the road.

The upside of this is that by keeping to these practices when times improve, everything extra goes toward the personal safety net. The change in American spending behavior on a macro level has been astounding. The percentage of consumers' disposable income set aside into savings entered negative territory in 2005 -- meaning we were collectively spending more than we were earing -- but has since surged to 6.9% in May, even as wages (and therefore disposable income) have fallen steeply. If these trends continue, the result will be a far slower recovery than we've become accustomed to but also a new check against the ever accelerating boom and bust cycle we've seemed to be trapped in since the post-war period.

My credit card company is helping me curb my spending ... by slashing my credit line by 35% (informed by a letter yesterday from them). 

On the news this morning they were saying that the credit card companies were sending out notices this week in response to the new rules. They expected many rates and fees to increase.

Good feedback in this thread. :)

Needless to say, we don't use credit cards (and haven't for years) any longer. Removing them from our lives (and teaching our children that one does not need them) was one of the most liberating things my wife and I have ever done, and we don't regret it one iota.


Adam,

Yeah, this is what Ramsey refers to as 'blow' money. My wife and I give each other a set amount each month to do just what you're describing above. I think it's wise. And the emergency fund (what I think you refer to as a 'cushion') is very important. We would be in far greater debt if we had not built that up considerably over the years.

Credit cards have been out of my life for quite some time now. I refuse to ever use another one as long as I live. We use good ol' cash or a debit card. If we don't have the money, we don't buy. Simple as that. The only debt I currently have is my car. I have one more year in this lease and then I am purchsing my next vehicle.

Dave,

Yes.  We use our debit card for online items, and cash for everything else.

Lucia,

That's exactly what we do.  If we don't have the money, we don't buy it.  It is that simple.  Congratulations on getting to that point.  Had we known how to achieve debt-free living before we borrowed money to purchase our home, we might have waited a few more years and bought it outright with cash as well.

Several years ago, when my wife and I applied for our first mortgage, we were told by the bank that despite having four credit cards and a balance on them of around 15K, it was our car payment that was holding us back.  The bank was fine with our credit card debt, but not our extravagant car payment.  We paid off the car, and obtaining the mortgage was no problem.

Dave,

It's quite routine for us to bring two or three hundred dollars in cash to stores. And as for furniture, it's interesting that you should mention that, because we're hunting for five or six pieces for our home this week. We'll either write a check or bring the cash to the store.  This enables us to spend only what we have available to us in hand or in our checking (debit card) account.  We keep some cash in our home so that it is readily available to us whenever we need it. We don't have a basic savings account for a variety of reasons.

If you can handle using credit cards, that's great. We cannot, and have learned that over the years. We have no need of them, and one does not need them to establish credit.

As for tracking, our budget is figured down to the dollar each month. And, it often changes from month-to-month given what emergencies might come up. Either way, every dollar is accounted for in writing, so tracking what we spend, whether it be via cash or check, is recorded.

Edited by Ockeghem - 8/19/2009 at 04:43 pm GMT

But, Scott, is it smart to be advertising such with your name and state in plain view on a widely-read internet forum?!? 

Maybe I'm being too much of a worrywart.