By Kevin M

My friend Jay and I were talking about jobs this past weekend and he pointed out something that I hadn’t thought about: There are no astronauts any more! That may not mean too much if you’re under 30, but when he and I were growing up being an astronaut was the ultimate “hero career”. It was, as the kids say today, “the shit” among careers.

Back then it seemed that all of humanity would eventually be going to space—to find resources, to conquer new worlds or at least to alleviate overpopulation here on earth—and astronauts would lead us there. High minded and exciting, yes, except that it never happened!

If a career as cutting edge as astronauts is no longer secure, what can we say about the far more ordinary fields most of us regular folks work in?

You’ve heard it and read it before, and perhaps you’ve even been a casualty of one of the biggest phenomena of our time–the end of job security.

We have to do something about that, but what? Individually, there’s little any of us can do to create job security, but we can gravitate toward it’s close cousin, income security. If we have income security we might not even notice or care that we no longer have job security.

What is job security? What is income security?

Let’s face it, in order to function everyday and to have some sort of certainty about the future we need some measure of security when it comes to earning a living. For at least the past couple of generations that meant having a stable job, but the times they are a-changin’. Fast.

Job security implies that your job is safe for the foreseeable future and hopefully clean through to retirement. Your job IS your income—as well as your source of health insurance, retirement and other benefits, and even your self esteem and your standing in the community. All is well, and you even have income security, as long as your job is secure.

Most people seek job security because it’s a simpler way to earn a living—your employer has your job and your income “covered” freeing you to go about living your life. The downside is when your job is suddenly in jeopardy, because the entire financial component of your life is also at risk. It’s a classic case of having all of your eggs in one basket.

Income security means your income never comes from a single source. If one source fails, you have others to tap, and you can eventually replace the failed sources with new ones. You’re not overly concerned with any one income source, but with creating and maintaining a portfolio of income streams.

In the economic and employment conditions of our time, I think income security is the logical security to pursue.

Creating income security

Its one thing to know the difference between income security and job security, but ultimately it all comes down to making it happen and that’s not as easy. There are various ways you can begin creating income security and that can include just about any revenue sources you can think of.

Self-employment. This is the obvious first choice for providing an additional (or alternative) income source beyond a job. By its very nature, being self-employed is all about creating new revenue streams. If your business income is derived from several or many clients or customers (which it should), you’ll actually have a portfolio of income streams, and that’s the best income security you can have. Even if your income drops, you can still have at least some income from your business, as opposed to a job where your entire income will cease the day you’re let go.

Fortunately, the internet has made self-employment easier than ever and because it’s here and now and growing, that’s probably the first place you should look. It’s where I’ve decided to camp out and it’s working for me—and I’m not exceptional in any way, believe me.

Investment income. In an era of record low interest rates, this is more about turning small amounts of money into larger ones. There are various ways to do this and you should start investigating them. This is not about plunging into the stock market per se, but about developing the ability to identify under-priced securities that have the potential to grow well beyond conventional rates of return—then having the willingness to wait it out. It has nothing to do with get-rich-quick. It’s a skill, just like business- or job-skills are, and once you master it you’ll have created a whole new way to earn a living.

Forming business partnerships or investing in small businesses. One of the things you can do if you have a business is to partner with other businesses in ways that will enable both entities to grow. There are as many ways to do this as there are small businesses and people who own them. It can also be the middle ground between starting your own business and investing. And you can do this with skills as well as with capital.

Let’s say you have some capital but you’re spooked by the stock market; as an alternative you can invest some money in an existing small business (or several) as a way taking partial ownership of a growing business. Small businesses always need capital, but never more than now when getting a bank loan is harder than ever. Conversely, if you have certain skills needed by a small business, you may be able to join that business as an owner/partner. Marrying capital with management and skills is a time honored way for all parties to make money, and very the foundation of free enterprise.

Lowering your cost of living. Not many people think of this as an income source but it really is. When you lower your living expenses, you’re lowering the amount of income you need to earn—that’s the equivalent of a fresh income source, but it gets even better. The less income you need to live on, the less you need to earn, and the less you’ll need to pay in income taxes. That’s a double benefit. The biggest advantage here will come from lowering your biggest expenses, the ones that represent the biggest drain on your income. Less need for income means more freedom to pursue other income sources.

Jobs. I gotcha on this one, didn’t I? If there’s no job security and we need to pursue income security instead, why discuss jobs? Because jobs are, first and foremost, a source of income! The topic of income security isn’t a self-employment is good/having a job is bad debate—any legal income source is a valid one. That includes jobs. Income from a job is good, it’s the complete reliance on it that creates the problems. If you can keep a job while developing additional revenue streams, you’ll achieve income security in addition to having a job. Your job is then part of the income mix, but not the sole source.

One more point about jobs: if you intend to keep one in an era where there is no job security, it’s important that you emphasize skills over the job itself. Transferability is the key, and only a strong set of skills can give you that.

 
You’re creating income security in your life when you start receiving income from sources other than your employer. That point is important in itself—you shouldn’t quit your job to create income security—you can and should do it while you have a job. In fact it will be easier to do it this way, and your job itself can be part of the security you’re working to build.

At a time where there isn’t much in the way of job security, what steps are you taking to build your income security? Are there any ways I didn’t mention?

Related Posts:

How Blogging Solved My Mid-Life Career Crisis
7 Reasons to be Self-Employed
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7 Reasons Why Self-Employment is More Secure than a Job

By Kevin M

The following is a reprint of my Christmas message from last year. I had thought to do a brand new one for this year, but could find no way to improve on the first effort.

I have a theory—I call it my “December theory”—and it goes something like this: every year, beginning about a week before Thanksgiving, and carrying through the entire month of December, the population triples. How else can we explain why the stores are so crowded, why we have to fight for parking spaces in places we usually don’t, why the lines at restaurants are so long and why the highways and airports are so crowded? Where are all these people the rest of the year?

The only logical explanation is that two-thirds of the world lives in some sort of seclusion all year, and only comes out as December approaches.

Every year it seems, Christmas gets more hectic. There’s more going on, more people to buy gifts for, more places to be, more things to do. We rush from place to place to compete with others for suddenly scarce resources and somewhere in that mess attitudes get a little lousy. Admit it–January feels SO good, doesn’t it?

Why to we do put up with all that stress, with all that busyness? And what do we get out of it anyway?

The gifts, the toys, the kids, the family, the food, the music, the decorations, the travel—the TV specials! Is that what Christmas is about? It’s all those things, but there’s something more.

So what IS the real meaning of Christmas? I’ll take a stab. You might recognize this one from the cartoon Christmas classic, Charlie Brown’s Christmas, which was created in 1965 when people weren’t offended by such utterances in public places…

And there were shepherds living out in the fields nearby, keeping watch over their flocks at night. An angel of the Lord appeared to them, and the glory of the Lord shone around them, and they were terrified. But the angel said to them,

“Do not be afraid. I bring you good news that will cause great joy for all the people. Today in the town of David a Savior has been born to you; he is the Messiah, the Lord. This will be a sign to you: You will find a baby wrapped in cloths and lying in a manger.”

Suddenly a great company of the heavenly host appeared with the angel, praising God and saying,

“Glory to God in the highest heaven, and on earth peace to those on whom his favor rests.”
– Luke 2:8-14

An old story? A nice story perhaps? In a world where technology and science are considered to be the ultimate stamps of credibility, cynicism and a willingness to question long held beliefs can often pass as a badge of intelligence. And we all want to be intelligent! I know—I grew up in the same world. But life has taught me one thing: truth can’t be changed by a lack of belief by any of us, or even by all of us.

There’s something more about Christmas, more than the other holidays. What has been faithfully celebrated for nearly 2000 years is too strong—even too obvious—to be ignored or minimized. Maybe it isn’t the presents, the decorations, the music and the merriment; maybe as The Grinch discovered after his famous attempt to squash it, “‘Maybe Christmas’ he thought, ‘doesn’t come from a store…Maybe Christmas… perhaps… means a little bit more!”

That’s a point to ponder this Christmas. And the implications are enormous.

What is it that you celebrate on this highest of holidays?

By Kevin M

Have you ever noticed that some people who have little money seem to live very well—they almost seem to be…rich? Have you also noticed that many people who are rich in terms of money seem to struggle? There are definite reasons for that, and it’s mostly a matter of personal choice. It’s not that money isn’t important; it’s more that we should never measure wealth solely in terms of money.

When we do we can sink ourselves into a Catch-22 that we can never win. After all, how much money will ever be enough? Being rich is more about the quality of a person’s life than it is a certain salary or portfolio level, but only if we dare to consider the alternatives.

I’ve come up with a list of 10 forms of wealth—all of them non-monetary in nature—that can lead to a rich life and require very little emphasis on having or earning a lot of money.

1) Mobility

The ability to live where you want, to travel, and to do what you want to do in your life is a form of wealth. And it has more to do lifestyle than anything else, so even a person of modest means can have it. As an example, think of how young people are often in this position, even if they have little in the way of financial resources.

How do you achieve mobility if you’re already trapped in the “rat race”? Start viewing life in terms of experiences, rather than possessions–they usually cost a lot less than possessions. Begin gradually reducing the possessions you have, especially if they have debt attached to them. Mobility depends mostly on a willingness to travel light in life.

2) Ability to quit a bad job

This might be the most basic reason people feel poor, even if they really aren’t. You can’t quit a job if your budget is too tightly stretched. This can happen to someone making $300,000 a year just as easily as it can happen to someone making $30,000.

Having this ability—this form of wealth—starts with living well beneath your means. If you can live on less than your make, you can afford to leave your job to take one that pays less, or even to take some time off and get your head together for the next push.

3) Liquidity

How we feel about our financial situations has much to do with the sense of control we feel in regard to our money. If our money is tied up and/or if nearly all of the paycheck goes to paying bills, we won’t feel rich no matter how much money we have or earn.

Liquidity is a form of wealth. It’s having the ability, but not the obligation, to spend or to save and invest what we do have. If we have liquidity, we’re more likely to actually feel rich, even if we don’t have a lot of money. Spending less than you earn, having at least a small pile of cash, and being debt free are all it takes to get there.

4) A debt-free position

You can be debt free at just about any income level, but you have to decide that you hate debt more than you love the possessions it will buy. That may mean driving a $2000 car, rather than a $20,000 one, or buying your clothing at thrift shops rather than the mall. Yes, on the outside you may look “poor”, but your finances won’t be dominated by debt, and that’s most definitely a form of wealth. And an absence of debt will help bring about nearly every other form of wealth we’re discussing here.

5) Strong family ties and social connections

This is one of the most overlooked forms of wealth in the modern world, but it’s quickly being degraded by the rapid pace of life. Strong social connections can give us a sense of belonging—that feeling of validation that we might otherwise look to career and money to find. Family ties and social connections are also a part of building a life based on experiences, rather than on possessions. They can add tremendous value to your life but cost very little. Much of the money spent today on entertainment, home security and therapy is an attempt to offset the loss of social connection.

6) Good health

If you’ve never thought of good health as a form of wealth, close your eyes for a few seconds and imagine you don’t have it. No further analysis is necessary.

7) Freedom of thought

Debt, career obsession and complicated investments can and do impact how we think. At times their influence can be so severe that we can’t even perceive reality. Most of our ability to survive, to move forward and to seek happiness in life depends on our ability to think apart from our immediate circumstances. Can we do that when we’re working 70 hours a week, or struggling to service a mountain of debt? Freedom of thought may not be wealth in itself, but it is the launching pad from which all the other riches of life are possible.

8 ) Abundant free time

The whole concept of free time sounds almost frivolous, but on closer examination it’s anything but. Free time is time we spend with others, for maintaining our health, for self-improvement, for planning our next move, and for creating those experiences that make life worth living. The more of it we have, the richer we are.

That may mean spending less time earning a living, and you can start doing that by lowering your cost of living. It’s easy to forget that it isn’t standard of living that we need to chase, but quality of life. That should be the end game, but it requires free time to make it happen.

9) Relative lack of worry

There’s a Bible verse that sums this up perfectly, “The sleep of a laborer is sweet, whether he eats little or much, but the abundance of a rich man permits him no sleep.”–Ecclesiastes 5:12. Worry often comes from living a complicated life, and that’s what happens when you have too many obligations, too many expenses, or too much debt. It can even come from having too many assets–think of people who are over invested in stocks when the market crashes, or those who have exotic investments heavily reliant on certain big picture events breaking in the right direction.

We’ll never be completely worry free, but we can be relatively so if we have confidence in our ability to survive and earn a living, come what may. You don’t have to be rich to have that confidence.

10) Creativity

Creativity is often the very force that generates wealth because you’re using the skills and talents you’re best suited for. If you can be creative in your work—even if it never makes you wealthy—you’ll be tapping your best talents and doing the work you are “meant to do”. That kind of work doesn’t feel like work, which means your career will be more rewarding, less stressful and less of the grind that wears so many people out.

Unfortunately, being creative in your work doesn’t happen for most people—most employers hire you to do “Job X” and not to discover and nurture your hidden talents. You may need to find a new career or be self-employed, and while that comes with risks, it also has enormous rewards. If you can achieve it you will attain a level of “wealth” that most people never do.

 
True wealth is determined by the quality of your life and can’t always be measured or even achieved with money alone.

Can you think of other ways to be “rich” that have little to do with having a lot of money?

Related Posts:

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By Kevin M

If you’re at all like me, you love Christmas, but you could do without the stress and expense of all that holiday shopping. A full years worth of shopping and buying is condensed into a single short 4-5 week space of time that leaves you worn out and nearly broke by the time it’s over. (Are we having fun yet???)

Here are some tips I’ve learned over the years that will save money, time and stress, freeing you up to actually enjoy the season…

Amazon.com and other online retailers

Among a long laundry list of gifts this year, my wife wants the first and second season collections of the TV show Vampire Diaries. We checked them out at Target–$54(!)—but a quick check on Amazon.com shows we can get them for only $12.99, or less than a quarter of the price! I’m not saying we should buy everything online, but we should certainly set a price threshold above which checking out online alternatives becomes routine. The savings can be substantial.

But there’s even more benefit to shopping online: it saves us the time (driving, parking, standing in line) and expenses (gas and a meal on the fly) that are typical when we head out to the mall. If I can save money, and do it from the comfort of my own home, then it’s a no-brainer. Just make sure that you do it in time to allow for delivery; December 24th will be too late!

Shop off-peak

I have a confession. This Thanksgiving—or as it will undoubtedly soon be known, Black Friday Eve—at about 10:30 pm, I took my kids to Walmart to see if we could take advantage of some of their door buster sales. A conscientious objector, my wife stayed home. I wish I had.

Walmart was offering 15 inch HP laptop computers, regularly $388, for $248. Great deal right? That’s what the other 2-3,000 patrons at the store thought too. The operative jargon in their ad flyers was “while supplies last”. Maybe they had 100 of them, maybe they had ten, but however many they had, they were sold out well before midnight when the cash registers officially opened for business.

As a consolation, we ended up buying a printer/scanner for $19 that regularly sells for $58, but somehow that didn’t make the experience any better. We spent about 20 minutes circling the parking lot looking for an available parking space, and then another 10 minutes walking to the store once we found one. Inside the lines had already swamped the cash registers, advertised specials had been cleaned out, and merchandise was strewn all over the floors. We didn’t get out with our “deal” until 1 am.

Some way to spend Thanksgiving night, huh? But it wasn’t as bad for us as for the “winners” in the discount laptop competition—many of them found that the laptops they’d taken were nearly identical in every detail except for one thing: the price! The B version was more then $100 higher. Two hours in line only to find out that they didn’t have the deal they had come in for.

But it wasn’t a total loss, after all the store had record sales that night!

And that’s the whole point. What’s good for the store is usually bad for the customer. Black Friday, weekend specials and other manufactured urgency events are no place for a frugal customer. This season, try to do the bulk of your shopping on early weeknights. Monday and Tuesday are best, but the closer you get to the weekend, the bigger the crowds and the more chaos, neither of which are conducive to a pleasant shopping experience.

I find that by shopping early in the week I experience…

1. Smaller crowds, which means more parking, shorter lines and less stress
2. Because of the above, you’ll be in a better position to take advantage of sales and specials
3. Less likelihood of the empty shelf syndrome that heavy shopping days produce
4. By getting shopping done early in the week, theres less pressure as you move toward the end of the week
5. More free time on weekends for watching Christmas specials and visiting with family and friends and actually enjoying the holiday season!

Check websites for specials and coupons before shopping

With all of the activity that the Christmas season brings, a few things have to go just to make it all doable. For me, that means the mail gets little more than a cursory review, and anything that requires any detailed reading is filed on the “Later Stack”— as in later after the holidays. (When I was in the mortgage business and we’d get people’s credit explanation letters, the volume and slow pace of the mail at Christmas was close to the #1 reason for late bill payments!)

Let’s face it, there’s more junk mail at Christmas than at any other time of the year. Passing it over may save time, but it can also cost money. There are usually valuable specials and coupons in those piles of what we like to call junk mail. But there’s a way around this, even if you don’t have time to sift through the waves of mail that hit during this time of year. Before you go shopping, check out the websites of any stores you plan to hit. They’ll have printable coupons—the same ones that come by mail—and sometimes a special offer or two that won’t be in their printed ads. And with the one day sales most stores offer, checking websites will be the very best way to stay on top of who’s doing it and when.

We shop at JC Penney a good bit and while you can save a lot of money doing so, their coupons and specials tend to be a bit of a matrix. Last night we went there specifically to take advantage of a 20% off coupon special and a $10 customer appreciation coupon, and both are over and above any marked specials in the store. You’d have to go to their website to know which days this combination works, and it changes from day to day like a revolving door. We saved about 50% off of regular prices, so it’s worth the search.

2-3 minutes on each website is all you’ll need. If you have down time at work and your employer doesn’t mind a little bit of web surfing, take advantage of that time to check out what the stores have to offer. You’ll save time and be better organized for your shopping sprees. You might even decide which stores to shop based on which have the better offers that night.

Gift Cards

Do you have a few people on your gift giving list this year that you just don’t know what gift to get them? I’ll bet you do. And can we be completely honest about something else? Sometimes we receive gifts that obviously take a lot of thought and even expense on the part of the gift giver, but…what they got us isn’t something we really like. Have you ever been the gift giver in that exchange? Both situations are uncomfortable, but there’s no need to struggle to get around them. When in doubt, just use gift cards!

Some people don’t like giving gift cards (“there’s no thought in buying someone a gift card”) but if you choose the cards wisely they’re likely to be a bigger hit than buying presents people will neither like nor use, just for the purpose of giving something. I could be wrong, but I suspect that most people would gladly exchange “thought” for gift usability anyway, and gift cards are nothing if not usable.

When gift cards become a problem it’s usually because they’re purchased at stores with limited use and given to someone who either doesn’t have a store in their local area, or has no real interest in- or need for- what the store sells. An example would be buying a gift card to the Sports Authority for a person who doesn’t play sports.

You want to give gift cards that are as universal as possible. Visa gift cards can be used anywhere Visa is accepted, which means they’re especially good for those people on your list who you don’t have a clue what to buy for (teenagers!). They’re available at most large chain stores for the cost of the gift amount plus a small fee, and they come in various denominations.

Here’s another reason to give gift cards: There are many people who have fallen on hard times—people for whom a gift card could be far more valuable than an actual gift. Visa cards, grocery store cards, or gift cards to widely shopped stores such as Target, Walmart or Home Depot would be excellent gifts for struggling families and individuals. If you feel that a gift card might be an acknowledgement of their struggles, buy an inexpensive token gift and attach the gift card to it. They’ll have a present to open, plus a much needed source of ready cash. Perfect!

What are you doing to save on money, time and stress this Christmas season?

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The REAL Meaning of Christmas

By Kevin M

Turkey and all the trimmings. Football games. Family reunions. The official beginning of the Christmas season. The Macy’s parade. That’s what Thanksgiving is all about, right?

Not quite. Thanksgiving, first and foremost, is about giving thanks. In the secular, post modern, science-driven world we live in, that part gets lost in all the other festivities. But all of us have much to be thankful for, and usually much more than we think.

Do you spend time thinking about what it is you’re thankful for this time of year? If you don’t, you should. I’ll even lead off by listing what it is I’m thankful for. If you give it some thought, you’ll probably find yourself being thankful for many of the same things. Some are deeper than others, some are on the light side, but I’m thankful for them all. And if I gave it more thought, I’m sure I could easily double the list.

1) Faith. The older I get the more I come to realize that faith in God is not only a living, breathing aspect of the believer’s life, but it’s also a full blown miracle. Not nearly everyone has it, and everything in the physical and organizational worlds argue against it. It’s a blessing of the highest order.

2) My marriage. 18 years and going strong! With so many marriages either blowing up or teetering on the edge, ours seems to grow no matter the outside stresses. In a world of perpetual stresses and strains, our marriage is like an island hideaway.

3) My kids. Having kids is stressful, no doubt, and I completely understand why anyone would decide not to have them. But for my wife and I, our two kids add a richness to our lives that grows as they grow.

4) Extended family. In ancient times, a large extended family was considered a kind of wealth; in today’s disconnected world it’s nothing less. I have my mom, three sisters, two sisters-in-law, seven brothers-in-law and many nieces and nephews, nearly all of whom I see on a regular basis. Then there are aunts, uncles and cousins. If that isn’t a blessing I don’t know what is.

5) Friends. Most men are lucky to have one person who they can call a best friend—I have at least four and I’d trust each with my life. We have a family that we’ve been friends with for longer than we’ve been married, and they’re as close to us as any blood-related family we have. Does it get any better than this?

We tend to worry about problems we face, but one of the things I’m thankful for are the bad things that never happened to me. Here are three of the biggest:

6) I’ve never been homeless or hungry. Sounds too ordinary, right? But with all the mistakes I’ve made in my life, it’s never been so bad that I haven’t had a place to sleep or a meal to eat. I’m thankful for that in a world where millions of people will experience both this very night.

7) I’ve never been in jail or prison. Some of us might ignore this one under the “I’m too good a person” doctrine. But right now in America, more than 2 million people are incarcerated, more than 7 million are being “supervised by the criminal justice system” (in prison, on parole, or on probation), and more than 65 million people have previous criminal convictions of one sort or another. It’s far more common than most of us think, so yes, I count my blessings to not be among them.

8 ) I’ve never been called to fight in a war. We can agree or disagree that a war is just or not, but the men and women who fight on the front lines are true hero’s and heroine’s. I don’t know that I could rise to that level, and I’m thankful that I’ve never been called and put to the test. Most times, I think I’d fail it.

And the rest…

9) For good health. Somehow we never fully appreciate health until it’s gone—I prefer not to wait. Though I do have high blood pressure, I have no chronic diseases, have had no major surgeries and never even broken a bone. A major health event is a game stopper—I’ll be thankful until that event comes, and even more thankful if it doesn’t.

10) For work. Like health, we never appreciate it until it’s gone. Though we may pine for early retirement or incredible riches, work is a blessing. It’s both my contribution to- and my connection with- the world. If I have work it means I’m getting paid, and I’m thankful for both.

11) For this blog. Three years ago I left the mortgage business, middle-aged and washed up. How do you start over when you’ve spent years working in the same business and it’s mostly not there anymore? Many people in that and other industries that have been casualties of the Great Recession are still trying to work that out. This blog has been the answer for me. It’s the most fulfilling work I’ve ever done, and now it’s paying the bills. I still work at other things here and there, but the blog is now my official career, “my thing” in life. I’m keenly aware that precious few people ever make a living doing work they love.

12) For the cyber friends who helped make my blogging career possible. Coming out of the mortgage business, I had no skills that qualified me to run an income generating blog. I could write, but I’d never written blog posts. And on the technical and marketing sides of the business, I was an absolute zero. There are no schools that teach you how to be a blogger, and it’s largely a new industry at that. But if you find the right people, you’ll learn all you need to. I’m thankful for the many people—past and present—who have made this journey possible for little, old me. I only hope that I can give back even some of what’s been freely shared with me.

13) For the world wide web. I’m especially thankful because it’s the medium in which I make my living. But I’m also thankful for a source of news, information, opinions and people that even presidents, kings and emperors didn’t have access to just 50 years ago.

14) For high school football games. Since my son joined the marching band (he’s a drummer) at his high school four years ago, we’ve been attending Friday night football games for the past four years. I haven’t done that since I was in high school, but there’s a timeless feeling to sitting at a game played outside on a crisp fall evening. Time stands still and your cares disappear for a few hours—that’s something to be thankful for.

15) For Youtube. I’m a Youtube junkie—there I said it. I can listen to any kind of music I like, as many times as I like, and I can even do it while I’m working. It’s made to order for us in the work-at-home crowd.

16) For Starbucks. For the record, I hate their coffee, but I love the atmosphere their coffee shops provide. I’m not a bar person—too much noise, too many TVs (now that they’re all “sports bars”) and too much potential for run-ins with the law. Coffee shops are the perfect alternative if you want to get together with people and really connect. Starbucks has that down to a science.

17) For central air conditioning. I live in Georgia—any questions?

18) For sunsets. Not only are they beautiful, but they remind me that I’m only a small speck in the universe. And that just as the sun sets on this day, so it will one day set for the last time on my life. There’s no better reminder of carpe diem–seize the day.

19) For home cooked meals. Now that eating in restaurants has become the new normal, a good meal cooked at home is the true novelty. In my house, we eat most meals at home, but there’s nothing better than sharing a home cooked meal with family and friends. It never gets old.

20) For Thanksgiving. No presents to buy, no decorations to hang, no dressing up and banging on the neighbors doors looking for candy—we just sit at home, give thanks and eat. And since I’m giving thanks here, all that’s left to do is eat! Perfect.

Happy Thanksgiving!

What are you thankful for this Thanksgiving?

By Jessica Wagner

Earlier this month, the announcement came that American’s triple A credit rating was being downgraded to double A plus status. The Federal Reserve announced that it was making no plans to raise the near zero interest rates that have been set in place for some time now. This announcement came on the heels of the worst drop in market shares since the market collapse that happened back in 2008.

It seems that the FED isn’t planning to raise the interest rates for the foreseeable future and the near zero figure is likely to stay in place for another two years. This has many in the private and public sector seriously concerned as it’s widely seen to be a major factor in sustaining such poor economic results. Keeping the rate low was seen as a way to inspire investment growth, but it appears to have had the opposite effect and seems to be hurting the economy’s ability to recover.

What the Fed HOPED low interest rates would accomplish

This decision wasn’t made lightly, and the Federal Reserve stated that this decision was made based on the grim outlook for the U.S. Economy. After the announcement was made, the market fluctuated greatly and many in the industry were unsure as how to react to the news. The decision was made with the intention of helping out an incredibly weak economy that’s seen static investment and job growth.

Though some areas of the job market have seen bright spots like in nursing schools, most sectors are lagging far behind. The FED wants to buy more Treasury bonds to keep the long-term rates low until things improved, but this move is the sign of a market that has no idea how to come back in the face of such overwhelming issues. Many argue that such a move is good in the short-term but makes for an incredibly poor strategy when you take the overall market into account.

The low interest rates do assist in some areas of the market and this was the hope when the FED made their decision to extend these rates. When the low rates are set in place, it makes it easier for people to receive low fixed-rates on mortgage loans and makes it cheaper to get business loans. This is one positive for the economy, but it doesn’t seem to be working.

Zero interest rates are having the opposite affect

Sales of existing homes dipped in the second quarter and have seen very little movement forward this year. This is due to the increased difficulty for individuals to qualify for a home loan, a factor which is more than offsetting the benefit that would ordinarily be provided by such low mortgage rates. Banks are far less liberal with their lending practices and people, as a whole, are taking a wait and see approach. The move to keep rates low was intended to help, but it only seems to be making a bad situation worse. Perhaps it is that rates so low offer little protection for lenders in the event of borrower default, contributing to strickter loan qualifications.

When you keep interest rates low for such a prolonged period of time, you create stagnation in the market. Where, in some areas, low rates help out buyers, it has the opposite effect for investors. People who’ve invested in treasury bonds and other assets are seeing almost no growth with their investments.

People saving for retirement and other purposes are gaining no traction with their money. And perhaps no group has been more negatively affected by low rates than the elderly, who were counting on interest income to help pay for retirement. Retirees are being forced to either participate heavily in the stock market—with all the risk that goes with it—or to draw down on their investment principal. That last step is having a negative affect on the economy as the nation’s savings base dissipates.

While rate easing and near zero standards might have some salutary effect, it’s only useful in the short-term. These policies create a long-term toxic environment for the financial sector and decrease consumption over all. This low interest approach will not lead to improvement, but will likely lend further to an even larger and deepening economic malaise that will continue for the foreseeable future until more bold economic policies are set in place.

What do you think about low/zero interest rates—are they helping the economy or hurting it?

Related Posts:

The Second Depression Cometh
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Ten Financial Mistakes You Can’t Afford to Make
Where are You Investing Your Money Right Now?
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By Kevin M

Have you ever wondered which is better for couples, joint or separate checking accounts? I’ve written a post over at LendingTree.com on just that topic, pointing out the advantages of each. Weigh in at Joint Checking: Good Idea OR Disaster Waiting to Happen? with your questions or comments.

Beyond Buy-and-Hold #48

By Rob Bennett

We are headed into the second great depression.

I don’t say that to upset you. I of course wish it were not so. And of course I cannot say with certainty that it is so. Anything can happen in this crazy, mixed-up world of ours.

Still, I believe that we all should be using the academic research and the historical stock return data to guide our investing decisions. And the reality is that the research of the past 30 years and the data of the past 140 years both indicate strongly that we are headed into the Second Great Depression. Given that that’s so, we should be talking about it. Given that that’s so, we should be making preparations and thinking through what we will need to do once we are in the Second Great Depression to get out of it.

The Buy-and-Holders will say that it is not possible to predict future economic events. Everyone is entitled to an opinion Perhaps they are right. We certainly should all be saying a prayer that the Buy-and-Holders are proven right re this one. A Second Great Depression is going to cause huge amounts of human suffering. It is serious and scary and sobering stuff that we are pondering in this column.

Why the Second Great Depression is coming

Why do I think that a Second Great Depression can be predicted?

I read Yale Economics Professor Robert Shiller’s book Irrational Exuberance. It follows from that.

Shiller predicted the economic crisis. He was right about that one. Given his track record and the power of the research he has been doing for 30 years now, I think we should be taking his ideas seriously.

Moreover, it’s not only Shiller. There are scores of investing experts who share Shiller’s view that valuations affect long-term returns. They too predicted the economic crisis. They too follow a model for understanding how stock investing works that makes economic events at least somewhat predictable.

It’s actually the idea that economic events are not predictable that is the odd one. Think what it means to say that stocks are massively overvalued. It means that they are massively mispriced.

It is the job of a market to get prices right. So massive mispricing cannot remain in effect indefinitely. As prices work their way back to fair value from insanely high levels, huge amounts of spending power is removed from the economy. Is anyone able to come up with any reason for believing that the loss of massive amounts of spending power could somehow not cause an economic crisis?

The economic crisis became a virtual certainty once we reached the valuation levels that applied in the late 1990s. Predictions that we are on our way to a Second Great Depression are trickier. The Second Great Depression is looking more and more likely the longer we go without making serious efforts to head it off. But it is not a certainty. There are at least in a theoretical sense things we could do to head it off.

The Second Great Depression isn’t certain—but it sure looks as if it is

The economic crisis became a near certainty because stocks were overpriced to the tune of $12 trillion at the top of the bubble and it is hard to imagine a way in which an economy experiencing the loss of that amount of spending power could avoid collapse. The factors pushing us to a Second Great Depression are less unalterable. We could avoid this house of horrors. However, I cannot in honesty report today that it appears at all likely that we will elect to do so.

Stock prices reached fair value levels in early 2009. Had economic and political leaders taken efforts to stabilize stock prices at those levels, there would have been no Second Great Depression. We would be in the early stages of a recovery today.

Unfortunately, our leaders took it just the other way. They talked stocks up, playing once again to the Get RIch Quick impulse within all of us that caused the crisis in the first place. And we fell for the line once again. Stocks are today once again at dangerously high prices.

The Stock Market overshoots the mark—in both directions

And the reality is that we have never had an economic crisis in which prices fell only to fair value. Stock prices always fall to one-half fair value in the wake of an out-of-control bull market. That’s because investors become so frightened by the loss of the Pretend Wealth they came to count on during the bull years that they give up on stocks altogether, sending prices to levels as insane on the low side as the ones that applied on the high side not too long before.

A trip to one-half fair value means a 65 percent price from where we stand today. That sort of hit, felt on top of the Lost Decade and the 2008 crash, is going to leave middle-class investors afraid to resume normal spending patterns for a long time. We are headed into dark and rocky territory.

But we are not without hope!

We know more today about how stock investing really works than any group of investors coming before us was blessed enough to know. We know how to eliminate 80 percent of the risk of stock investing while still obtaining the high returns that make this asset class so appealing. Opposition to the idea of sharing what we know with our fellow investors is going to fade fast once we are in the Second Great Depression. So I am expecting (hoping?) that this will be the shortest Great Depression on record.

It’s always darkest just before the dawn!

Rob Bennett enjoys learning about the best ways to save money. Rob’s bio is here.

Related Posts:

The REAL Reason for Investment Bubbles: Bubble Logic

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By Kevin M

Last week in How Frugality Becomes Counter Productive I wrote about how increasing income was more productive than cutting expenses. But the main take away in the post turned out to be what I thought was a minor point—one that I added just before publishing: micro-frugality and macro-frugality.

Now I don’t know if I’m the first one to introduce that concept, but there’s apparently enough interest in the topic to warrant a deeper discussion.

So what are micro- and macro-frugality, and what implications do they have on our finances?

Micro-frugality

Let’s start by recapping the definition given in the original post:

Micro-frugality. This type of frugality is searching two dozen expenses for savings in each in the hope that collectively they’ll reach the level of real money. While that may (or may not) happen, the effort itself is exhausting, and requires constant vigilance. It has us researching, analyzing, discussing and executing cuts in nearly all expenses that make up our financial lives, and the effort can easily rise to the level of a part time job.

Micro-frugality has us cutting the “rest of life” expenses—food, utilities, clothing, entertainment, travel, etc—the very spending habits that we often derive a sense of well being from. None of us need to be total spendthrifts in any of those areas, but micro-frugality has us looking for ways to squeeze out a few extra dollars in virtually everything we do.

It’s a process of looking for the best deals in many, most or all spending categories, and unless you were raised to handle your money in that manner, it can turn into a real job. And it’s not hard to see that this type of frugality has the potential to become a full blown obsession with money.

Many people use micro-frugality as a way of freeing up money to pay for macro-expenses, like a high priced car or an out-sized house. This is often how people end up being “house poor”, living in an expensive home, but never having much money for anything else.

If after putting the micro-frugality ax on every expense in your budget, you still have a house payment that consumes 35% of your monthly after tax income, and a car payment that eats up another 15%–your budget will still be uncomfortably tight. The nickel and dime expenses have been cut to the bone, but the dollar sized expenses continue to drain your budget.

Macro-frugality

Again, we’ll start out with the definition given in the original post:

Macro-frugality. This is cutting the two or three biggest expenses that have the greatest impact on your finances. If your house is costing you $2000 per month between the basic house payment, utilities and upkeep, you replace it with one that you could live in for $1200 a month. A car with a $600 payment is replaced by a used car with no payment.

Macro-frugality takes aim at the biggest expenses. If the big expenses are under control, it’s often easier to manage everything else, often with less sense of sacrifice.

Consider the decision to own a home; most people choose to buy the most expensive one they can afford—and there are implications to doing that. Look at the expenses that tend to move in tandem with the price of a home:

• Real estate taxes

• Home owners insurance

• Utilities

• Maintenance

• Homeowner’s association dues

• The type and cost of furniture you put in it

• The type and cost of the cars you park in the driveway

• And if I may, higher end homes often draw higher cost friends

Buying a home is never just about the cost of buying a home—there’s a whole battery of expenses that are set in motion. And once they are, it’s much harder to rein them in.

The same is true of a car. It’s not just the price of the car and the monthly payment. Insurance and repair costs also rise with more expensive cars. And more often than not, so do gasoline costs since higher end cars are generally less fuel efficient.

Macro expenses tend to affect a large number of micro-expenses—save money on the macros and many of the micros will take care of themselves. For this reason, greater budgetary control can be had by managing the macros more conservatively.

Which frugality type has the greater financial impact?

You might ask “why introduce micro and macro components to frugality—why not just do both?”

While we all need to live within our means, I’m of the opinion that doing both has the effect of putting you on an across the board, permanent financial diet. That might be necessary at certain times in life—unemployment certainly comes to mind—but sustaining it on a long term basis can sap the life out of you. Having control over our money isn’t just about saving and investing it, it’s also about enjoying at least some of it. That’s what makes it an either/or.

As you can easily tell from my analysis of both, my feeling is that macro-frugality is by far the better course. We control a few big expenses so we don’t have to worry so much about everything else. We’re free to concentrate on other issues in life.

A sense of prosperity is often defined by the freedom we have to spend our money as we please. Because it cuts the big expenses, macro-frugality leaves us with more money for everything else. With a lower house payment, no car payment, and no extraneous costs (boats, second homes, etc) we have more money in our budgets and in our pockets. We can choose to save it or spend it, but it’s the freedom of choice that creates the sense of prosperity.

In addition, since macro-frugality cuts down on the biggest expenses, we often have more freedom of action. For example, is it easier to start a business with a big house payment or a small one? Is it easier to make a geographic move with a big car payment or no car payment?

If you hit on a financial crisis in life, cutting the biggest expenses—macro-frugality—will have the most beneficial impact. Many people are losing their homes in the foreclosure crisis precisely because they attempted to preserve the home at the expense of everything else.

What’s your opinion? Frugality sometimes seems like the new cool in finance, but how much of it can we take? And where can we get the biggest benefit—with micro-frugality or with macro-frugality?

If you think that building a side business might help your cash flow, check out my post, The Freelance Blog Writer Side Hustle. Even if you’ve never written professionally in the past, this post will help you get started converting your passions and interests into an income earning business that you can work in from the comfort of your own home.

Related Posts:

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By Kevin M

I don’t normally write much on economics, largely because I think its one step above fortune telling—maybe. You look into the tea leaves (“economic data”), sift it around a bit and make predictions about what you think is happening and more particularly, about what you think WILL happen.. Hence the fortune telling analogy.

So why am I sticking my hand into this hornets nest of omniscience? Mostly because I write about personal finance, and I’m of the opinion that personal finance without some concept of economics is akin to taking off in an airplane without radar. How do you know what to prepare for if you have no concept of what it is you’re heading into?

Even though my crystal ball is still malfunctioning, I figure I’ll take a stab at what I think is happening in the economy and where I think we’re heading. Heck, even without it I doubt I can do a more laughable job than the people who do it professionally, also known as “economists”.

Warning: this won’t be light reading—and for some, it won’t be at all pleasant.

What I think is happening

We’ve had recessions in the past, many of them in fact, but I think most of us have an idea that there’s something different happening this time, something more ominous. My experience is that when the “little voice inside” is telling you something is wrong, it usually is. Here’s what I dare to think it is…

At the risk of sounding simplistic, we’re now experiencing the end of the Age of Bigness. Sounds goofy, I know, but please read through before dismissing it.

The end of the Age of Bigness is the flip side of the Industrial Revolution. When industrialization began, the apparatus for growing systems—let’s call them mega-systems—began to develop and spread throughout the industrialized world. Once started, they could leverage people, capital and resources in a way that enabled them to go on permanent growth trajectories. Consider the following.

Big Government. Up until 150 years ago, government was little more than a monarch of some sort, his ruling council and a small army that could grow only during war. Today we have all-encompassing government which not only makes laws and maintains national defense, but also provides cradle to grave benefits for the populace and is somehow involved in nearly every aspect of our lives right down to the most personal level.

Big Business. For thousands of years the economy of the world was based on cottage industry and family farms. Today we have conglomerates with operations in dozens of countries but loyal to none of them.

Big Education. Not even 100 years ago, one room school houses were the backbone of education, and career training was based on the apprentice system. Today we have statewide public school systems and university systems with multiple campuses and tens of thousands of students.

Big Media. Until radio came out in the early 1900s, the only trace of a media was the local independent newspaper. Before that it was gossip and the town crier. Today, not only do we have radio and TV, but most of it is joined in media conglomerates with global reach.

Big Healthcare. Long gone is the witch doctor or high priest, or even the country doctor. And increasingly, so is the local general practitioner. They’ve been replaced by expansive healthcare systems run as Big Business. The patient is sent from specialist to specialist, rarely having more than a few minutes with any.

These are just the most prominent examples of the modern age trend toward bigness, but there are others. Each provides certain benefits to the population, but the cost of maintaining the systems themselves is now exceeding those benefits. The de facto evidence is found in the perpetual rise in prices and the need to use debt to keep them afloat.

That system of bigness, I believe, is coming to an end and represents the source of the dislocations we’re now seeing and trying to deal with.

Evidence of mega-system failure at all levels is all around us. Consider the following:

• National governments are existing in a state of perpetual deficit—in the US alone, more than 40% of the federal budget is “funded” by borrowing

• Local governments have turned to police citations to fund operations

• Big healthcare runs almost entirely on government and private health insurance plans (as opposed to cash payments) which now carry premiums the size of house payments; tens of millions are going without them for lack of ability to pay

• Virtually the entire pension system in the US, both public and private, is facing a massive funding crisis

• The university system, which has exploded in size and scope, is funded largely by student debt that can leave the student with a six figure liability upon graduation

• The value of any system is in its simplicity, but mega-systems have become increasingly complex, often requiring thick manuals or the hiring of lawyers to navigate

• Most debate in regard to the various mega-systems centers not on improving them, but in keeping them afloat!

Far from being synergistic, maintaining The System is now both cumbersome and prohibitively expensive. Not only are the various sub-systems straining to keep themselves afloat, but the citizenry is struggling to comply with supporting them.

The Industrial Revolution-inspired model of increasingly large systems that facilitated growth for a century and a half is broken. “The System” can no longer fix itself and is an obstacle to progress. The System is now in survival mode.

Where I think this will lead

There might be a temptation to consider this as a bad news assessment, and while it is in the near term, I think it will ultimately lead to a better place.

We went from “smallness” to bigness during and since the Industrial Revolution, and now we’re likely to return back to smallness. Cottage industry, in the form of at-home self-employment will gradually replace big employment centers, as nearly anything done in a large organization can be done by a one man or woman shop from home and done at less cost.

The at home revolution will force more self-reliance and reliance on local community—where it had been for most of human history. Meanwhile, technology—the magic bullet many expect to solve our biggest problems within the scope of The System—far from fixing it, will hasten it’s end.

Consider what technology is doing and what we can reasonably expect it to do in the near future:

• Computers and the Internet—These technologies are already here and having a major impact moving into the world I’m describing. They have taken commerce out of the ivory tower and put it back in the home, launching a revolution in the modern equivalent of cottage industry.

• Electric cars—We’re not quite there yet, but we’re on our way. This has been talked about for 30 years but it’s finally hitting the scene for real. Current batteries for all-electric cars can’t sustain 100 mile charges now but they’re improving quickly. When a battery that can go 200+ miles between charges arrives for real it will break big oil and it’s monopoly on motor fuel, and empower the individual.

• Renewable energy—wind and solar—Again, we’re getting to the point where renewables will be cheap enough to compete with fossil fuels, and once that happens in earnest, utility monopolies will be broken and individuals will be empowered.

Consider the combination of electric cars with renewable energy generated from at-home solar panels or windmills serving as the power source; now combine this with the income generating capability that computers and the internet afford. All will enhance individual economic, political and personal freedom, but the decentralization will prove crippling to The System.

How things are likely to play out between now and then

It would be a massive advantage if we could jump from where we are now—with an anemic and declining economy—to the future I just described—but it won’t happen that way and that’s where things are likely to get a lot worse than they are now. Here is what we’re likely to see play out between now and the better future

1. System based debt structures are already unsustainable but will be even more so in a decentralized economy and will have to unravel; the meltdown since 2007 was probably the start of a process that’s likely to get much worse.

2. The System can be fully expected to dig in and resist its own destruction. Collectively, the majority will continue to look to The System for salvation—to their own peril.

3. Massive economic dislocation and disenfranchisement will occur as the unraveling of The System moves more quickly than the shift to individual reliance.

4. One man/one job will be coming to an end as income from traditional jobs continues to erode and workers are forced into involuntary self-employment and the pursuit of multiple income streams.

5. Contrary to popular belief and in spite of populist speeches by politicians, the state will resist—not facilitate change. Big systems are far easier to tax and to regulate than an economy based on tens of millions of self-employed individuals.

6. Government budget issues are likely to get worse, even much worse, as change moves through the economy.

7. Colleges and universities will be unable to provide educations relevant to a decentralized economy that runs on millions of unique businesses. Nor will they be able to compete with online training that will be only a fraction of the cost. Meanwhile The System has abandoned training or retraining. Self-study will become the preferred route to “higher education”.

Most of these aren’t even a stretch—we’re already seeing them play out to one degree or another. This is just a matter of projecting current trends out to their logical extremes.

Strategies

This is a time for neither blind optimism nor gloom and doom, but openness to change, flexibility, and a willingness to grow and take chances. Specific strategies are difficult to project since the situation is in a state of flux. But going forward, strategies that will attempt to work in this direction will make up much of the content on this website.

What do you think? Do you see any of this playing out? Do you see things going in a radically different direction? Or do you think that The System will ultimately cure itself and keep us on a more traditional path?

Can you offer any strategies to help us deal with these changes? If you’d like to write a post, either challenging my predictions, supporting them or proposing strategies, feel free to contact me at kevin (at) outofyourrut (dot) net and I’ll publish it.

If you’d like to start developing your own home business, check out my post, The Freelance Blog Writer Side Hustle. Even if you’ve never written professionally in the past, this post will help get show you how to convert your passions and interests into an income earning business that you can work in from the comfort of your own home.

Related Posts:

How Are You faring in the “Jobless Recovery”?

How Frugality Becomes Counterproductive

Buy a Business OR Build One From the Ground Up?

All Jobs are Temporary! (And What You Can Do About It)

A Successful Online Business Requires Realistic Expectations

Multiple Income Streams to replace One Man-One Job?