How to look good on paper aka National Debt as a percentage of GDP

I have to dispell a terrible myth that seems to be running around the entire country on every blog. My objective is to show how to look good on paper by viewing the National Debt as a percentage of GDP. Please understand that this is NOT a politically motivated writing, nor should it seem that I am specifically affiliated with any particular political party. If it matters to anyone in particular, I actually voted for him to be President.
In my humble opinion, the National Debt did NOT go down during President Clinton’s term in office. Did he have a budget surplus, YES! Did the debt go down while he was in office, NO! The devil is in the details, so please follow me in a we walk through some of the basic math here.
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Posted in budget, budgeting, economics | Tagged , , , | 2 Comments

I sat in a Tesla car and enjoyed it!

A week or so ago, I sat in a Tesla model car and enjoyed it in a mall near me. They allowed anyone to sit in, and I enjoyed it along with our kids. These were both Tesla ‘S’ models and obviously had additional options not provided for in the list price of $75k-$80k.

Now, keep in mind that with a family of 6, we’d have to worry about having enough room to transport us around safely, so my wife and I were somewhat impressed when we found that we could fit 7 people (the last 2 cannot be very tall though), comfortably. Continue reading

Posted in budget, financial directive, fun finances | Tagged , , , | 2 Comments

Method of buy low and sell high strategy

We all know that you want to buy low and sell high, I presume. So let’s examine what that may mean for the individual investor.
Using the buy low and sell high strategy, you have to offset 1 or more of the following items:

  1. transaction fees
  2. income taxes – if it is contained within a brokerage account and contains short term gains
  3. capital gains taxes – in a brokerage account and if it is long term capital gains, which is holding an investment for 366 days or more (here’s a more thorough explanation of capital gains taxes

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Posted in 401k, Fees, financial directive, Income Tax, IRA, Retirement Savings | Tagged , , , , | 2 Comments

Vehicle maintenance choices to make

I thought I’d write up this article, since we currently have some regular vehicle maintenance choices to make regarding replacement of tires since they are getting rather thin on our car. Keep in mind that when I mention mounting and balancing below I am also referring to purchasing the tires, mounting, balancing, and road hazard fee as part of the cost that I’m writing about below.

I have had this performed at the dealer where I typically get most of the maintenance done on the vehicle for several reasons. They take care of the items quickly, alert me to any potential items that that may need replacement, and they provide a courtesy shuttle so that I can drop it off to get to work on time and be picked up to return to where my vehicle is being serviced.

The cost to have tires replaced at the dealer have run approximately $650 to replace, mount and balance 4 new tires. The mileage that I have managed to get out of them seems to be 38,000-40,000 miles, which is about average. So I decided to see the cost and guarantees provided by another facility (in this case Firestone). They offered mounting and balancing 4 new tires for the price of $487 for all that work, This was for tires that had a a guarantee of 40,000 miles or they would pro-rate the wear on replacement tires if they were needed. They also offered another option at a price of $583 for mounting and balancing 4 new tires with virtually the same guarantee, except the fact that they would have a guarantee of 70,000 miles before needing replacement.

So I decided to analyze which choice to make based off of the information given above. The dealer cost is undoubtedly much higher than the tire dealer by at least $160 for effectively the same cost as the lower mileage rating. But would it be as cost effective to almost double the mileage that I could drive the vehicle before having to replace the tires again. So let’s see how much it costs for each mile that would be driven before replacement.
$487 / 40,000 = 1.22¢ per mile
$583 / 70,000 = 0.83¢ per mile

Well, there appears to be a clear winner in this analysis highlighted in green above. :-)

Feel free to leave a comment below if you follow the same method of calculating vehicle repair expenses for all repairs, or do you do this on specific items like tires?

Posted in budget, spending plan, vehicle maintenance | Tagged , | 1 Comment

Bankruptcy filing and Detroit woes

By now you’ve heard about the bankruptcy filing and woes that Detroit is facing. This article from the Wall Street Journal mentions that the city has worked out a plan to pay creditors back 75ยข/$1. That’s a 25% reduction, but I’d imagine that the various financial establishments can manage to cover some of their losses since they’ve been stockpiling money in the Federal Reserve anyway … well at least the larger banks. That is because the Federal reserve has been sending the banks some $85M/month to help their balance sheets and to help them be able to lend money, thanks to Uncle Ben.

I only intended to focus on one specific part of this article, and that is the fact that they are planning on paying creditors back $340M in debt, and the fact that there are about 700,000 people living in that city. That would mean that $485 from each of the people that work there would completely payoff that debt! That’s fantastic, aside from the fact that 36% of the population is below the poverty level. Poverty level in 2011 according to the Bureau of Labor and Statistics is $22,811 for 2 adults and 2 children. Personally that’s barely enough to scrape by on for 4 people IMHO. Then $485 / $22,811 = 2.1% of folks living in poverty in that city.

I don’t believe that this once great city made this decision on a whim, and I am sure that it wasn’t an easy decision to make for Governor Rick Snyder. The same can usually be said about personal bankruptcy for most people. Guess I’m a pessimist when it comes to people, at least I try to be. :-)

Final thoughts: If the city is that desperate for monies, is this a viable option so that their bankruptcy filing is worth it? After all, it’s a one time hit to bring the city back to $0 on this portion of their indebtedness. That still doesn’t cover the ongoing costs for services that are necessary for the city as a whole, but even if it’s $243 one year, and $242 the next year, they’d still be much more squarely on their feet within 24 months. This unfortunately doesn’t address their total $18B in debt. :-(

Posted in bankruptcy, budget, Fees | Tagged , , | 2 Comments

Looking ahead in your financial life

You think about what’s on TV next week, what to wear to weddings or other events, what to pay for gifts to weddings, what you are going to do for your next vacation if you are so blessed, etc. Never forget to be looking ahead in your financial life and not just TV shows or vacations all the time. Well, unless of course you have a plan of putting away 30% or more of your paycheck.

Some people are so frugal that they don’t even watch TV, and maybe don’t even take vacations. It doesn’t matter as much if you always get a lot of money back at tax season, which is just for this tax year. It doesn’t matter what you paid first unless it is you. Continue reading

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Basic math is so complex to some people

This is a simple scenario to prove that basic math is so complex to some people. Sorry to my readers for not posting anything over the past month, but I had a little too much on my plate (including a kidney stone that I’m still carrying and having to do a lot of outdoor work at our house and my in-law’s house) and something had to give.

On the way to work this morning, I went to a local department store (Kmart in this case), to purchase some snacks and something to drink while I’m at work. The total came to $9.36, so I handed the cashier a $10 bill. Then I started reaching into my pocket to see if I had the change. The cashier ended up entering $10 into the register and ringing it out. With the drawer still open, I handed him the $0.36, and he grabbed $0.28 additional cents out of the drawer and gave me the change. I immediately recognized that it wasn’t the $1 bill I expected, and it wasn’t even $1 in change, it was merely the amount of money that the machine told him to pay me back.

Before leaving the register and walking off, I mentioned that he had given me the incorrect amount of change. He started saying that he put the $10 in first, and then gave me the change for the $10. I said that I appreciated what he thought he did, but that he should have given me $1 back, and taken the change I gave him in addition to the $10 bill otherwise his drawer would have been over when it was counted up at the end of his shift. He started to get a little upset and reiterate what he had already told me, when I had to cut him off, and explain that I gave him $10.36 and that I should be receiving $1 back, whether it was in change or as a $1 bill.

If it wasn’t for me saying something, for that single transaction I would have left with 3.8% fee due to the inability of the cashier to use basic math in his head, and realize that $10.36 – $9.36 = $1.00, or payment – cost = change

Have you ever had this happen to you before?

Posted in CustomerService | Tagged , | 2 Comments

Is the Fed helping or hurting our economy

I was reading this article which was reposted from Reuters, and stating that the U.S. added 175,000 jobs last month. And in following paragraph it mentioned that unemployment ticked 1/10 point higher. One only has to ask a simple question of whether the Fed is helping or hurting our economy.

I am speaking with reference to the QE program that Uncle Ben (Bernanke) has been following for several years now. The other side of the QE coin could point to another potential avenue where unemployment ticks up almost the same amount that the U.S. is adding jobs. All that seems to come out of that side of the coin is that they are short term jobs that opened up and then those that were employed turned around and filed for unemployment again, resetting the time that they could extend their benefits once again. Both are detrimental to our economy IMHO.

The same article also mentions "Still, after a winter in which the economy seemed to be turning a corner, May was the third straight month that payrolls outside the farm sector increased by less than 200,000.". Well we all know that the economy should ramp up a little in the winter, since: a) heating costs go up in the northern parts of the U.S., b) people tend to spend more around the holidays, c) people are likely watching more TV and purchasing even more items that they didn’t plan on since it is colder outside.

Here is a nice little chart that we may not like, but it (and the associated Exploring Money Supply Over the Past 10 Years Through Chartsarticle posted on Seeking Alpha) shows the overall trend of the dollar has gone down significantly since 2000.

My personal opinion is that Uncle Ben does need to start lowering the QE program that he keeps pushing, or he’ll single-handidly be causing another housing bubble that is even larger than it was previously. That one may take decades to get over and housing prices to plummet. I don’t believe it would be in the best interest to stop the QE program quickly, however lowering it to $65B-$75B/month would give investors and homeowners more comfort in seeing how solid their investments are without all the propping up from the Fed. So my belief is that the Fed is hurting our economy, even if it is with good intentions that I believe Ben Bernanke has.

Final thoughts: Are you helping or hurting our economy by saving for your future? Are you helping or hurting our economy by spending more money than you have in the past on goods and services because you now can after having saved enough?

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Using math you learned in school another way

Do you remember any of those old formulas that you learned in school like the area of a circle (πr2), or perimeter of a circle (2πr or πd)? What about the formula that goes by the dreaded slope of a line and other terrifying names? But let’s see how we can start using math you learned in another way – on our finances.

The formula is: y = mx + b
This can tell us quickly if our finances are heading in the right direction (up vs. down), and how quickly it may get to the target that we want.
Here’s a basic graph of a line starting at zero.

y in the formula is how much money we want to accumulate, or have accumulated.
m in the formula is how quickly it goes up (or down), and this is known as the slope of a line.
x in the formula is what time interval we choose to look at the line, so it can be each paycheck, each month, each year, etc.
b in the formula is where we start at, so we’ll set that to zero.

Final thoughts: I’m not sure if something like this is helping people, or if it is scaring them. It is my sincerest hope that it doesn’t scare anyone because after all, using math you learned is what everyone is doing since they first started learning addition/subtraction/multiplication/division in school.

If you enjoy this post (or any of the others), please feel free to subscribe using the link on the lower right hand side of the web page.

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Are we a nation of overworked people

After reading this article, I have to disagree and state that I don’t believe that we are a nation of overworked people. The reason that I say this is because I do know that most people that have raised themselves out of beginner’s salaries (i.e. minimum wage), myself included, which do have some time off whether it is paid or unpaid.

Evidently other countries have the government mandate a minimum amount of time off. For instance, France is required to have a minimum of 30 days off, while Japan and Canada require a minimum of 10 days off from the employer. It also mentions that John Schmitt of the CEPR (Center for Economic and Policy Research) states that this is relatively unchanged from 6 years ago.
A link to the full report in either PDF or Flash format is available here:

From what I’ve read around the Internet, the Japanese or perhaps it was the Chinese wouldn’t really compare, if they are working 10-12 hour days and then getting 10 days off. Traditional jobs in the U.S. work 8-10 hours per day, and since the Great Recession occurred that is evidently dropping down to 7-8 hours per day. So if we are working 8 hours per day on average even if we aren’t provided time off, in comparison to someone who works 10 hour days but gets a mandatory 10 days off per year would appear to state that we in fact are not a nation of overworked people.

The CEPR article sited above also mentions that the average low-wage U.S. worker has 4 days paid off, whereas the high-wage workers get 14 days. Since we apparently get some paid time off, why should the government mandate that we have time off? After all, doesn’t it seem to work for the U.S. currently?

A direct quote from this CEPR link provided above states: "The United States is the only advanced economy that does not guarantee its workers any paid vacation time and is one of only a few rich countries that does not require employers to offer at least some paid holidays.", which seems to insinuate that perhaps we may be the one that should be leading as opposed to the one that follows the other advanced economic societies.

Final thoughts: I must admit that I’ve been out of the minimum wage category for quite some time now and because of that I am a little withdrawn from that level and any associated difficulties making such a low amount of compensation for my time. However I did spend 4-5 years at that level and while I can remember it was no "picnic", striving to get out of the minimum wage rut required a certain level of work that builds character. Living in a nation of overworked people definitely has it’s own caveats.

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