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Will 4.5% mortgage rates jumpstart the housing market?

Xin Lu — Thu, 04 Dec 2008 19:44:59 +0000

It seems like everyday the folks in Washington are rolling out a new plan to fix our economy. The Federal Reserve is running out of room to cut their federal funds rate, so now the news reports that the Treasury is planning to forcibly cut mortgage interest rates to 4.5% on new mortgages. The details about the plan still remains unclear, but will this boost the sagging housing market? Also, how could this help you as a consumer?

First, it is unclear if the 4.5% interest rate can be applied to refinancing a mortgage. From the sound of the CNN article the 4.5% rate would be available to those who try to refinance, but a new article in the Washington Post states that the dirt cheap mortgage rate would only be available for new loans on home purchases. If this is only available for new home purchases then it would not help anyone with unaffordable mortgage payments.

I think this artificially depressed mortgage rate could help people that have capital to buy a home, but it could also artificially prop prices up so that the benefit a potential homebuyer could receive gets cancelled out by the inflated price. The big winners would potentially be investors in real estate that could rent out their homes for returns more than the interest rate they pay, but once again, these are people who already have money and do not need any help.

According to the Census Bureau, the homeownership rate in America is 67.9%, and that means most people are not exactly jumping to buy a place to live because they already have a mortgage or two. So if these low rates are not made available to the majority of existing homeowners, then there may be more seething anger in the future. Even if the lower rate were offered to everyone, as the CNN article pointed out, many who do not have enough equity in their homes may not qualify for a refinance.

The CNN article seems to indicate that this move is being driven by lobbyists from the home building industry. There is also another more drastic program called "Fix Housing First" that is being pushed by builders that proposes subsidized loan rates of 2.99% on new home purchases made next year. I do not know about you, but this seems like an attempt by builders to prop up the prices of their unfinished units.

In light of this, I guess my only advice to those of you that have not bought a home yet is to keep as much cash as you can because prices are still falling in most of the country and having a significant downpayment and a good credit history is key to qualifying for a mortgage. For those of you that already have a home with an interest rate higher than 4.5%, perhaps all you can do is complain to your representatives later. If it turns out that you could refinance to more than 1% below your current rate, then you could save quite a bundle over the term of your loan.

Some people will definitely profit from all of this price fixing, but odds are these people are not everyday folks who just want a home of their own to live in.

Permalink | 4 comments | Xin Lu's blog | Channel: Personal Finance, Consumer Affairs, Real Estate and Housing

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Do you know how to use a parking meter? Serious question.

Paul Michael — Thu, 04 Dec 2008 18:03:57 +0000

By Paul Michael

I thought I knew the answer to that. Admittedly, I’ve only been driving for seven years and rarely park in downtown Denver, where most of our parking meters are located. But I had familiarized myself with the rules before I took my driving test. I thought I had it down. I guess I was wrong.

My family and I decided to spend Monday doing a little shopping in a terrific area of Denver that has all sorts of funky old stores. Of course, old stores means no parking lots. Instead, it’s street parking with plenty of meters.

We found a meter, put in enough money for two hours and went on our merry way. We did some shopping, had a bite to eat, watched our two girls argue over a piece of battered fish, you know, the usual stuff. I looked at my watch and was worried we didn’t have enough time to get back to the car, but when there was still 20 minutes on the meter when we opened the car door.

We strapped the kids into the car seats, talked about our next destination and then I checked my mirrors before pulling out. That’s when I noticed the obnoxious yellow envelope jammed into my left wing mirror.

We thought it was a piece of crappy advertising at first, but sure enough, it was a violation. We couldn’t figure it out. We had plenty of time left, we hadn’t parked crooked or too far out into the road, we were genuinely puzzled.

So, we called the toll-free number at the bottom and spoke to a representative of the city. She asked how much the fine was for and what the officer’s notes were. Then she told me exactly what my violation was; my front bumper wasn’t fully behind the parking meter. This was a violation of something called ordinance number 54-513. Here’s the write-up:

Improper Use of Meter Space, ordinance number 54-513, was enacted to ensure that citizens park in such a way as to occupy only one parking space. Your front bumper must not extend past the meter pole.

A couple of things really bugged me about this. First, I was maybe a foot in front of the pole, due to the fact that the guy behind me wasn’t obeying ordinance number 54-513 and I had to give him room to pull out. Second, and even more annoying, was that I was at the end of the street. There were no spaces in front of me, just 10ft of curb and a corner. So, I wasn’t occupying anyone else’s space anyway.

However, I had violated ordinance number 54-513 and I now have to pay the $25 asap, or it becomes a $50 fine. I can, of course, take time off work and spend half a day waiting to see a magistrate so that I can dispute this violation, but I just don’t have the time.

Does ordinance number 54-513 apply in your city? I really don’t know. It may have a different name, it may not apply at all. But I would definitely play it safe and make sure no part of your bumper is extending past the parking meter pole. You don’t want to pay a silly fine, especially at this time of year.

And, while we’re on the subject of parking meters, here are some other basic rules and guidelines that we all should know.

1: Most meters give you around two hours of parking. Some give you less. In really busy areas, it may be only 30 minutes.

2: Rates vary according to the meter and location. Some give you way more time for your quarter than others, so check that out before you pull away.

3: You shouldn’t feed the meter: If the regulation allows for a certain amount of time, usually two hours, you are not supposed to run back to the meter and add more quarters. This is being a meter hog and it can get you a violation if the parking control officer is keeping an eye on your length of stay.

4: There are NO free all-day parking passes. If you’re at a meter that’s broken, you can’t claim ignorance and park for the whole day. In NYC specifically, you’re allowed one hour at a broken meter, even if the meter allows longer stays. In your city, it may be longer. And if your meter is missing completely (a pole with no meter) don’t take this as free all-day parking either. Usually, that missing meter means you can park for the allotted time on that street. Any more and you’re risking the wrath of the meter maid.

5: Don’t park on someone’s dime. Even if there's plenty of time left on the meter that was paid by a previous driver, you are supposed to add their own money on top of that. No free parking folks.

6: Don’t top up someone else’s meter. Why would you, right? But if you see some old lady struggling to walk back to her car, and the meter has ran out, you can’t go topping it up to help her avoid a ticket. In NYC, these random acts of kindness obstruct official business. By adding money, you’re robbing the city of potential revenue. And the last thing you want to do is get in between a city and its cash.

7: If you’re in a busy city with lots of meters, keep plenty of change in the car at all times. You don’t want to park, run and get change, and come back to a parking ticket.

8: Some new electronic parking meters let you pay with change or a debit card. Miami is one city that’s testing this out.

9: Meters are free in my city on Sundays. Check your meter to see if/when the meter allows free parking.

10: And if there are no meters, you’re not off the hook. Unmetered parking has plenty of potential landmines to avoid, too. Here are just a few:

Make sure there are no “restricted parking” signs or “no parking” signs on the block.
On some days, parking is prohibited for street cleaning.
Keep your wheels off the curb or sidewalk, for obvious reasons.
Don’t park next to a hydrant. Expect a ticket at the very least, or something worse if the fire department needs to use that hydrant.
Some streets require that you move your car after two hours. Don’t move, get a ticket.
In parking lots, make sure it’s not restricted to employees or pass-holders. You could get towed.
Some sneaky towing firms will hide warnings behind trees or put them above your natural eye line. Look around carefully before parking.

If you have any more tips or parking meter knowledge, let us know. And if you’re a parking control officer, let us in on some of your fabulous inside info.

Permalink | 13 comments | Paul Michael's blog | Channel: Cars and Transportation, General Tips

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Flexible Holidays Are Much Cheaper (And Less Stressful)

Thursday Bram — Thu, 04 Dec 2008 14:43:47 +0000

By Thursday Bram

My family doesn't exactly respect the calendar. We've held Thanksgiving on a Friday, moved Mother's Day to the last week of April and moved around just about every other holiday to suit ourselves. This adaptability has saved us an unbelievable amount of money. For Thanksgiving alone, the savings can be in the hundreds of dollars — just because we're not flying on days that the rest of the U.S. is trying to cram itself on a plane.

Suggesting a more flexible schedule is often as simple as telling those relatives that you want to spend time with that you just can't figure out how to manage it on a specific day — so why not the day before, or the day after? If you've got a few frugal relatives, it's easy to argue the savings: if you hold your celebration after everyone else, traditional foods and decorations are often on sale. Big meals out (like a Mother's Day brunch) are cheaper when you aren't paying a holiday premium, either.

There's also a lot to be said for being flexible to cut the stress of the holidays. I spent my childhood shuttling between divorced parents — and endured plenty of bickering about who got what holiday. I often had to rush out of my dad's Thanksgiving get-together to make it to my mom's. Let's just say that a good time was not had by all. Convincing at least one part of my family to hold Thanksgiving on a different day cut my stress, and it might cut yours too.

While everyone else is off celebrating, you may need to fill some hours. Luckily, there are plenty of options:

Volunteer. Especially for big holidays like Christmas, just about everyone takes off to be with their families. That means a lot of vital services are understaffed — even hospitals can have a skeleton staff for the holidays.
Accept an invitation. Many years, we get far more invitations than we can accept. But if we're spending a different day with our families, we can accept invitations from friends.
Work. I may be alone in enjoying working when everyone else is gone — but I can often get enough done to justify taking off at least the day I'm planning to celebrate (if not more).

Now, we don't move every holiday, every year. We're scattered over the country and may only get together for one or two big get-togethers each year. There is something to be said about observing many holidays along with the rest of the world. Getting out of sync for St. Patty's Day or New Year's Eve just gets you some odd looks. We tend to keep religious observances exactly where they're scheduled as well. But being flexible on just when you observe holidays can make them a bit easier to handle.

Permalink | 8 comments | Thursday Bram's blog | Channel: Frugal Living

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Surviving the Holiday Season: Entertaining (and Being Entertained) on a Budget

Nora Dunn — Thu, 04 Dec 2008 00:01:16 +0000

By Nora Dunn

With the holiday season upon us, invitations to dinner parties – and expectations of reciprocating invitations – are on the increase. You bring a nice bottle of wine or bouquet of flowers (or even a Christmas present for closer acquaintances) to every home you visit. And you whip up a marvelous meal for those who visit you. Before you know it – without even starting your Christmas shopping, you have blown your holiday budget.

So how do you navigate this season of dinner parties and other seasonal cultural expectations without going broke at the end of the day? The answer to this question is as much a mystery to me as it is to anybody else. But here are a few ideas:

Gifts for your Host

Common etiquette prescribes that we bring along a gift when invited over for dinner (or lunch, or tea, or whatever). But what to bring?

Scrap the Flowers

Cut flowers are pretty and all, but they don’t last, they shed petals and pollen everywhere, and are bloody expensive to buy. Your host will appreciate them for about the first two days and then it will just be more of a nuisance than anything else. Save your budget – and think of something else to bring along as a gift.

If you insist on bringing something living, a potted plant can sometimes be a better bet, less expensive, and will last longer. This is ideal if you know your host enjoys cultivating plants, and may even wish to transplant it to their garden.

Know Your Wine

If you don’t know your wine, and/or your host does, your attempt to be budget friendly by buying the cheap stuff will be foiled and tacky. But how much do you spend on a bottle? This largely depends on the circles of friends you keep. I believe that a $15 bottle would be more than acceptable for most people. It still ain’t cheap, but it’s a quick fix for a last minute invitation.

And what about the wine bags, which add an extra few bucks to the price tag? Unless you have a stack saved from bottles previously given to you, do your wallet – and the environment – a favor and find alternate forms of wrapping up your bottle if you must wrap it at all.

Sugary Sweets

Wildly popular during holiday time are home-baked goods and other candies. These are often a good bet, most people love them (even if they’re on a diet – it is the holiday season after all), and it shows that personal touch which goes a long way beyond even pricier store-bought gifts. The down side? You have to bake. Hopefully you’re good at it.

Scrumptious Savory

For a twist on bringing bad-for-you cookies and cakes, you could bake a loaf of bread instead (made fancy with nice herbs or other flavors), or even concoct a cream cheese dip from scratch. Try this one: whip up some plain cream cheese with a little lime juice, add green onions or chives, then spread it in a (recycled) plastic container (the kind you get from the deli). Top it with sweet chili sauce, and you have a dip that will make you a hit at parties for a fraction of what you would pay to buy the manufactured stuff.

Other Consumables

Don’t know what to get the host with the most? Join the club. Stop guessing and simply get (or even better – make yourself) something consumable. Do you have an herb and flower garden that is on its last legs? Make a dried loose leaf tea mix and give it to them in a nice bottle with a tea strainer (both purchased at a dollar store or equivalent). Can’t cook to save your life? Then make up a gift basket if you must. Fill it with inexpensive but nice staples and wrap it up nicely. The basket and bows can be purchased at the dollar store, and the contents don’t have to be extravagant. A total purchase price can even be under $10 if you’re smart about it and your host will appreciate this creative grab bag of goodies. They may even be able to turn around and serve those crackers you gave them at their next dinner party.

Entertaining

This is where being budget minded can get a little more tricky. You want to put on a good show – crackers and cheese (and wine) to start, then a two or three course meal (with more wine), and all of a sudden you spent the entire day in the kitchen, spent a small fortune on ingredients, and have one hell of a mess to clean up. Sounds like enough to turn your stomach from entertaining any day. A few tips to reduce your cost and burden:

Simple Snacks

Buying just two or three nice cheeses and crackers could cost you $20 if you aren’t careful, and you haven’t even touched upon the drinks or the actual meal to be served. Instead, placing out a bowl of nuts (bought in the bulk section – they’re cheaper) can whet the appetite just as well. Serve the kind of nuts that need shelling (like pistachios or even walnuts for a treat), and your guests will be nicely occupied and won’t fill up on the pre-dinner stuff.

Easy Apps

Unless you keep company with high-brow folks (in which case you will always have a problem satisfying both your budget and your friends) your guests won’t be horribly offended if you skip the appetizer course altogether. Go straight to dinner if you can. Otherwise, choose ingredients you can whip together easily and inexpensively.

Done Like Dinner

Pasta is always a great bet for a budget-friendly main course: it fills your guests up, is inexpensive, and can be presented in a very luxurious manner.

Delicious Desserts

Unlike appetizers, rarely can you skip serving dessert without at least a few raised eyebrows. Baking something yourself is usually the least expensive and shows the most care and personal flair.

Drinks

Serving drinks all night is where you can end up spending the most money. Stocking up with wine, beer, and other beverages in an attempt to anticipate what your guests might like will fill your fridge, but empty your wallet. Get a bottle of wine to serve with dinner, and stick to non-alcoholic drinks for the rest of the occasion. Before dinner, you can prepare a non-alcoholic cocktail of various fruit juices and soda water for fizz. Serve it up in a big punch bowl with lots of ice and nobody will notice the lack of alcohol and will come back for seconds and thirds. Tea or coffee after dinner is the perfect way to compliment dessert, cap off the night, and stop the drinking in its tracks. This is also good protocol for guests who have to drive home…

This is a simple collection of ideas on how to keep your holiday entertaining budget to a minimum. But we want to hear from you! What are your tips, techniques, and recipes for getting through the holiday entertaining season financially unscathed?

Permalink | 10 comments | Nora Dunn's blog | Channel: Art and Leisure, Food and Drink, Lifestyle

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Job Hunting Tips for the Recently Laid Off

Lynn Truong — Wed, 03 Dec 2008 06:37:35 +0000

By Lynn Truong

As the economy continues to nosedive, folks are finding themselves out of a job all over the country. Expect things to get worse before they get better. Here are 11 Wise Bread articles that can help the recently laid off bounce back. Plus links to job search engines and job boards.

Permalink | Comments | Lynn Truong's blog

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Double Coupons – They Could Cost You!

Linsey Knerl — Wed, 03 Dec 2008 05:31:50 +0000

By Linsey Knerl

I recently tried (and failed) a recent Super Double Coupon promotion at my local Kmart. The bad news: I was unable to check out due to a glitch in their system, and I left all my items at the register. The good news: I shopped elsewhere and (surprisingly) saved so much more money.

To make a long story short, I prepared for the Super Double Coupon promotion at Kmart for days. I cut, sorted, stacked, and planned. I was so stoked to be able to double all my manufacturer's coupons up to and including $2. There was money to be saved! After hours of shopping, however, I was faced with not being able to check out (details to come at a later date.) I left the store dismayed and headed over to Walmart, where they gladly accepted my coupons, my preferred method of payment, and my gratitude.

The experience was trying, but valuable. I learned a lot about store promotions and coupons in general. Here's the dirt on a (sometimes) dirty practice:

Stores that double are often higher priced to begin with. An example is the $4.98 bottle of shampoo that I was going to buy at Kmart with a $1.00 manufacturer's coupon (which doubled, would have made the shampoo $2.98.) At Walmart, this same shampoo was only $3.89. With the same coupon (not doubled), it was only $2.89, and I didn't need a special “promotion” to get it. Another example is the “sale priced” candle kit for “only” $8.99 at Kmart. With my $5 coupon (which didn't double), it still cost me $3.99. Across the street at Target, they were selling it for an every day low price of $5.99. With my coupon, it was 99 cents. (No kidding.)
Stores that offer select promotions don't always keep product in stock. I was so pumped to see a particular body wash on sale for $2 at Kmart. With my $1 off coupon, the product would have been free. I say “would have” because they only carried a few on the shelf at a time. Less than a few hours after the promotion began, they were all gone. (It does me no good to get a “great deal” on something out of stock.) Rainchecks don't help in this case, either.
These same stores can sometimes be selective in the sizes and styles they offer. An example is my favorite pain reliever, which comes in 24 caplets, 40 caplets, or 100 caplets. With a doubled $2 coupon, I should be able to buy the smallest sized bottle (priced at $3.98) for free – if Kmart even carried it. Walmart, on the other hand, carried all 3 sizes, and even had an exclusively-packaged size that included another sample for free. It was only a few cents more for this bonus package, and I walked away with far more product, for less money.
Some stores are not equipped to deal with coupons. The most aggravating part of the Kmart experience was how the register rang up the coupons. For about 50% of the coupons, they wouldn't “attach” to the product they were being redeemed for. This prompted a little screen to pop up, asking the cashier which one of the 100 products it was intended for. She would then ask, “Was this for the bodywash, toothpaste, diapers, etc, etc,” going down the whole list. I would simply reply, “look at the coupon. It has a picture of diapers on it.” Walmart, on the other hand (and stores like Target) just scan the coupon and they are done.

Are there advantages to stores like Kmart offering Super Double Coupons? Sure, if you can go in for a few odd items and be satisfied. I, however, like to buy all my goods at one location. I tend NOT to stockpile 56 bottles of shampoo. I prefer to use coupons only on things I'm buying anyway. I'm simple like that.

So for now, I'll stick to my old couponing ways. These ways actually SAVE me money. They don't lead me into buying hundreds of dollars of overpriced stuff to begin with.

For those of you who were able to take advantage of the Kmart deal and made out ahead, I'm really happy for you. Seriously. (But did you have to take ALL of the bodywash?)

Permalink | 11 comments | Linsey Knerl's blog | Channel: Personal Finance, Frugal Living, Budgeting, Consumer Affairs, Shopping

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Best of Personal Finance Roundup: Cyber Tuesday

Andrea Dickson — Wed, 03 Dec 2008 00:01:04 +0000

By Andrea Dickson

Using cash during financially-strapped times. Why cash is king in a way that Elvis never was. Get Rich Slowly

Did Cyber Monday live up to the hype? Does anything, ever? Well, anyway, internet traffic was up 30%. Market Watch

Converting a traditional IRA into a Roth IRA. Is now a good time to convert your traditional IRA into a Roth? Five Cent Nickel thinks a down market might be a good time to do it. Five Cent Nickel

Gettin' on Ford. The CEO of Ford promises not to sleep on a bed of caviar for the next four years. CNN Money

OPEC Deathwatch. Is this the end of the oil cartels as we know it? MSN Money

Is it cheaper to travel than to live where you do? The enticing idea that you can travel the world and live on less money than where you currently reside. MSN Money

But don't bother traveling to Germany. Things suck there, too. Business Week

Cutting back is the key to surviving this financial crisis. You're not alone, stop pouting. Everyone will be brown bagging it for the next few years. Motley Fool

Online shopping keeps you out of the mall. Why Christmas shopping can be done from the comfort of your computer. No Credit Needed

Why making more money won't keep you out of bankruptcy. It's not what you make, it's what you save. Sure, you can save more if you make more, but will you? Free Money Finance

Consumerism at its worst. Black Friday turns deadly. Consumerism Commentary

Oh hai. You can get Walmart deals online this Cyber Tuesday, since none of us will ever want to stand in line at a Walmart again. I4U

Campaign's over, I can't here you lalalalala! Turns out that Palin wasn't the only candidate who spent campaign money on clothing - she just spent more than everyone else combined. CBS News

Happy Birthday, Recession! It turns out that our recession actually started LAST December, so we should bake it a cake and pat it on its cute little head and then cry ourselves to sleep. The End. Financial Times

Oh, and it might last until 2010! Stupid recession. LA Times

Trent done wrote his first book! Our friend Trent Hamm from The Simple Dollar has written his first book about frugality, 365 Ways to Live Cheap. The book itself is affordable, too. You can get it on Amazon.

You don't want to think about it, but you have to: how long could you make it without working? Here's how to plan ahead for the possibility. Dumb Little Man

Ford sales drop by nearly 1/3. Reuters

Cut commute expenses by 40%. I Will Teach You To Be Rich

California's budget crisis isn't going anywhere. BBC News

Read this far? Ready to go drink yourself into a stupor and ignore the depressing news of how the economy is about to hit rock bottom? Watch this video of an adorable kitten and see if you don't just about explode from teh cute. Cute Overload

Permalink | 1 comment | Andrea Dickson's blog | Channel: Personal Finance

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Holiday Gift Ideas Straight Out of Your Pantry

Thursday Bram — Tue, 02 Dec 2008 19:26:48 +0000

By Thursday Bram

When it comes to thinking up creative holiday gifts, it's worth taking a look in your pantry. If you're looking for a way to make your own holiday gift from scratch, consumables — better known as food — can be the way to go. After all, you're giving something that shows that you're willing to spend time on a gift, something that tastes great and something the recipient doesn't have to find a way to store.

The Traditional Baked Goods

When it comes to holiday gifts, it's hard to go wrong with cookies. I've long made a habit of handing out plates of cookies to people I want to acknowledge during the holiday season — but who I might not know well enough for a personalized gift, such as co-workers or professors. I've found that if I start baking cookies a little early and freeze them, I can make a surprising variety. Then I defrost just in time to put together plates and drop them off with my friends. Be absolutely certain of what ingredients you use, though — setting off someone's allergies doesn't quite share holiday cheer the way you might hope.

Don't limit yourself to cookies, though: cakes, pies and other baked goods can definitely make great gifts. If you're worried about giving gifts on a budget, baked goods can be an easy way to stretch your money. Even chocolate chips are fairly inexpensive — and it's been my experience that people feel good when a friend shows that they're willing to take time to make a gift.

Savory Treats

It's pretty easy to get tired of sweets during the holidays. Not as many people offer up savory treats, making them a nice change. One of my favorite savory treats that I've received at the holidays was a bag of beef jerky seasoned with a super-secret combination of spices. It was homemade and absolutely wonderful. There are plenty of other possibilities (some of which will work a little better for vegetarian friends and family members).

Make Up A Mix

Have a friend or relative who isn't the handiest in the kitchen? Grab a couple of jars and put together some baking mixes for them. When I was first learning to cook, I got several mixes of my grandmother's cookie recipes. There was a card with them, instructing me on what wet ingredients to add and how to bake my cookies. Even better, these mixes were for cookies not found at my local grocery store. I've also seen pancake, bread and other mixes — matched to the recipients' favorite treats when they come for a visit.

Rain Checks

With certain family members, a rain check for a few home-cooked meals can come in handy. I know my cousin was actually grateful not to get a present one year: instead, the family kept her freezer filled with meals she could pop into the oven — especially useful because she was pregnant and not always up to cooking herself.

Other Ideas

The ideas above are just a few examples. Over the years, I've received and given big blocks of fudge, jams and jellies, candies and — on one memorable occasion — a huge box of fruit. These gifts are appreciated just as much as less consumable presents, and they often work better with your budget. So, before you finish up your Christmas shopping, crack open a cookbook.

Permalink | 4 comments | Thursday Bram's blog | Channel: Food and Drink

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Getting by without a job, part 3--cut spending

Philip Brewer — Sun, 30 Nov 2008 22:04:38 +0000

By Philip Brewer

With the economy tanking, more and more people will be not just losing their job, but will be finding themselves without one for an extended period. When that happens it's not good enough to just cut back a little and use debt to make ends meet until the economy recovers. Getting by without a job is possible, even for an extended period--but it requires taking drastic measures to cut spending, and it requires taking them early, while you've still got some cash.

This is part three of a four-part series. Part 1 was on the first things to do if you lose your job and part two was on boosting your income. Part 4 will be on getting what you need without money. Look for it here in a few days.

Despite the fact that it's kind of hiding here as number 3 in a four-part series, this is really the kernel of how to get by without a job--you need to get your expenses low enough that you can cover them with just the money you can earn though casual labor plus whatever you can realize from whatever assets you've managed to hang on to (interest, dividends, rents, etc.).

Last year, when I suggested that it was possible to get by on a minimum wage job, I drew a considerable bit of mockery, so I'm expecting much the same when I suggest ways to get by without a job at all. Let me restate what I said then: We have a name for the standard of living that results from living on a minimum wage income. We call it "Living in poverty." Getting by with no job at all does not result in a higher standard of living--it is though, to my mind, an improvement. Minimum wage work is often difficult or dull (or both), and is too often dangerous as well. Eking out a meager existence on what you can earn through casual labor has the huge advantage of allowing you much greater choice in just what that labor is.

The biggest problem when it comes to surviving without a regular job is that most households have a terribly inflexible cost structure: Their bare minimum fixed expenses exceed any income that could be earned with casual labor. There is no getting around this except to completely change the cost structure of the household.

Most people resist this step until they've done permanent damage to their finances--run up debts that they'll never be able to pay back, had the heat and power turned off, or even been evicted.

It's a hard step, but you're way ahead of the game if you do this early rather than late.

Cutting fixed expenses

Most of the fixed costs for a household are tied up with housing. There's the rent or mortgage, there's the utilities, and there's the insurance. If you own a house free and clear with no mortgage (or if the payments are very low), then it may make sense to stay there (even though just utilities and insurance can add up to as much as the cost of a cheap apartment). If you're renting or have a mortgage, you need to look seriously at moving to the lowest-cost housing you can find--and start looking the instant you begin to suspect that this period of unemployment won't be the sort of brief sojourn that people can generally expect during good economic times.

The most obvious thing to do is to move in with relatives. Many people view this as the sort of ignominious defeat that's little better than ending up living in their car, but it's a step that can turn a catastrophe into just a bump in the road--if you do it early enough. If you wait until your savings are exhausted and you've run up a bunch of credit card debt, you can put yourself into a hole that you may not be able to get out of short of bankruptcy. One thing to keep in mind is that it is temporary. You're not moving in with relatives forever, just until the economy improves enough that you can find steady work again.

If you don't have relatives (or they won't take you in), other sorts of house-sharing arrangements are possible, such as splitting costs with a roommate or renting a room in someone else's house. Last year Myscha suggested twelve ways to house yourself for free.

The other really large expense for a lot of people is transportation. Owning a car costs thousands of dollars a year--and only about half the expense is the purchase price and financing; the rest is just fuel, maintenance, taxes, and so on.

If your car is paid off, it may make sense to keep it; it would put some opportunities to earn money within reach that wouldn't be if you had to rely on public transport or a bicycle or walking. But owing money on a car is just about untenable for someone without a job. (Owing money on anything is just about untenable for someone without a job; a car is simply one thing that many people buy on credit.)

Those are the big ones. If you can reduce your cost of housing enough (and you don't have other debt that you have to make payments on), you can cover your other living expenses at some level, even with a very low income. In fact, if you live in a rich country and can find a place to live for free, you can very possibly reduce your other expenses almost to zero as well, at least temporarily.

Cutting variable expenses

My recent emergency belt-tightening post covered cutting variable expenses on an emergency basis, and that's a good place to start. If you're at the point of getting by without a job for an extended period, though, you actually need to ease up from those drastic measures. In an emergency you sometimes have to defer necessary expenses simply because you don't have the cash. Doing that, though, often costs more in the long run. If this isn't an emergency, but rather is the way you're going to be living for a while, you need to start taking the long view.

Figure out what you absolutely have to have. Then figure out the absolute cheapest way to get it. Things like buying in bulk and stocking up during sales can yield large returns. Wise Bread is full of tactical ideas for satisfying your needs as cheaply as possible.

Even if you don't have a regular job, if you have some income and really cheap housing, you can fund all your needs, and still have a little left over to satisfy a few of your wants. The key is to draw the line before your spending exceeds your income. That may mean that you don't satisfy very many wants at all, but "more than none" is really pretty good, in the grand scheme of things.

Don't screw up

When you're getting by without a job, you have much less margin for error.

For one thing, especially in the year after you lose a job, you have to be careful about taxes. If you don't have a regular job, you probably don't have any money being withheld. Looking on the bright side, if you're not making much money, you probably don't owe a lot. However, if you get any severance pay (especially if you get it late in the year), it can make the year in which you lose your job the highest-paid year of your life. Be sure that enough gets set aside to cover the taxes. If you dip into a tax-advantaged plan like a 401(k) or an IRA, be sure you know what the tax consequences are. If getting out of a house you can't afford involves giving it back to the bank, be aware that the IRS can treat any loan balance that the bank forgives as income.

For another thing, you probably have a lot less stuff. Some things you sold to raise cash. Other things you gave away or donated or simply tossed when you moved into much smaller housing. Little things like breaking a dish, that used to mean that you had an eleven place setting instead of twelve, now mean that someone has to eat out of a bowl until you can scrounge up a free replacement.

A minor car accident that used to mean dining out less for a few weeks until you'd covered the deductible, now means that you've permanently lost the interest that the deductible money would have been earning--if you haven't lost the use of the car altogether.

In fact, though, being careful not to break stuff and using things gently so that they last is just good sense--a wise habit that will be worth preserving even when times get better.

Enjoy it

Is there any overlap between living in poverty and living large? Personally, I think there is. Being forced by hard economic times to eke out a meager existence--that's not much like living large. But choosing to eke out a meager existence, because it's the best way to live according to your own values? That's living about as large as you possibly can.

Most people never think about what they most want to do with their lives. They find something that they're okay at that pays enough money to support them, and then let a rising income drive a rising standard of living with no real thought even to the possibility that there might be alternatives. In hard times, though, the alternatives may be all you've got. Fortunately, there's a good chance that one of those alternatives is actually a better choice than whatever you ended up doing.

You can get by without a job if you cut your spending enough. And if you do that, you open up a universe of possibilities that most people don't even know is out there. Take advantage of the opportunity to explore those previously uncontemplated choices. If you don't like what you find, you can go back to working a regular job just as soon as you find one. Maybe, though, you'll find the alternatives as alluring as I do.

Permalink | 24 comments | Philip Brewer's blog | Channel: Frugal Living, Cars and Transportation, Real Estate and Housing

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How many human lives is a flat panel TV worth?

Andrea Dickson — Sun, 30 Nov 2008 11:20:11 +0000

By Andrea Dickson

I think that the iPhone is a neato gadget. I couldn't believe that people stood in line for them. The final Star Wars movie was decent - I waited for the DVD. Some people camped outside the damn theater.

There are very few things that are important enough, to me, to stand in line to purchase. This is partly because I don't like people, and thus try to avoid milling among them for any amount of time. This is also because there's just no purchasable item that I find worth my time. It's also, partly, a product of my upbringing. My mother is simply not much of a bargain shopper, and certainly never waited outside of a store for more than a few minutes (nevermind hours) in order to get inside and snatch up the first discounted television set that she saw.

This is why I am so completely baffled that a 270 pound man was trampled to death by rabid shopopers at a Wal-mart in Long Island this past Friday.

Now, stampedes happen. Whenever people desperately flee to a new area and arrive at a bottleneck of somekind, someone is going to get hurt. You hear about it occasionally on the news: pligrims trampled in Ramadan pilgrimage. Nigerians tramped in riot. These are stampedes that make a tiny bit more sense in m brain: religious pilgrimages are emotional events, involving lots of activity and numerous people. While I am not religious, I can see why this might happen in, say, Mecca. Or in a poor country where people are scrounging for food.

But this happened in Long Island. In the USA. Over Walmart merchandise.

Let me repeat this: a man was trampled to death. A temporary employee of Wal-mart, Jdimytai Damour, was crushed under the feet of shoppers eager to get their hands on cheap. Chinese-made goods. Shopper literally broke down the glass doors to the Wal-mart where Damour was working, and he remained under the door as hundreds of people clambored over the top of him. Imagine stepping over a man lying prone beneath a sheet of glass. Can you fathom that? Could you? For what? What could possibly allow human beings to behave like homicidal lemmings.

I don't doubt that many people shop at Wal-mart in order to save money, but I seriously doubt that this insane mob of people consisted mostly of suburban mothers looking for jumbo-sized diaper packs. No, these were people looking for slashed prices on electronics, outdoor gear, and clothing. These were bargain shoppers, for sure, but no one who stepped on Damour's chest was there because they had run out of bread and heating oil.

What have we come to? Is 20% off of a LCD television really worth the life of a man like Damour? Is it worth anything? How can anyone stand in line for this stuff? Wal-mart, really? Listen, I know I can be an elitist sometimes, but I occasionally shop at Walmart. But regardless of how good the deals are, how could any, or all, of the merchadise inside a Wal-mart be worth the life of a single person?

Permalink | 46 comments | Andrea Dickson's blog | Channel: Shopping

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Getting by without a job, part 2--boost income

Philip Brewer — Sat, 29 Nov 2008 22:38:57 +0000

By Philip Brewer

If there's one fundamental rule for financial success, it's "spend less than you earn." That rule applies whether you have a job or not. But, if you're used to having a job, the adjustments to getting by without one are going to be huge. It can be done, though. I suggest a three-pronged strategy, the first prong being to boost your income.

This is part two of a four-part series. Part 1 was on the first things to do if you lose your job. Parts 3 and 4 will be on cutting expense and getting what you need without money. Look for them here over the next few days.

There are countless ways to raise your income, besides the obvious one of getting a job (which I assume that you're already applying yourself to in a workman-like fashion). Here are a few categories, and a few suggestions.

Casual labor

The most obvious option is working--just outside the framework of a regular job. Some kinds of work are traditionally structured this way and others are freelance versions of work that is just as often done by employees. Either way there's a long list of possibilities. Here are just a few:

handyman
house cleaner
house painter
gardener
writer
editor
web designer
massage therapist
dog walker
photographer
tutor
bicycle messenger

None of these are likely to be well-paid and all are likely to be facing a drop in demand (because the potential buyers are also suffering in the economic crunch) at just the same moment that there'll be a surge in supply (as all the other unemployed folks try to pick up a little extra cash). Still, an income above zero is better than an income of zero.

Seasonal and temporary work

This category covers everything from detasseling corn to being a department store Santa. Although in many cases people are technically hired as employees for these sorts of jobs, I'm including it because it's not like having a permanent job.

There are seasonal jobs for every season. In the weeks leading up to Christmas, stores hire extra sales help and delivery companies hire extra package loaders and sorters. There is agricultural work at almost any season except the dead of winter. These sorts of jobs are usually very hard work for not much pay.

Especially early in hard economic times, temporary work tends to dry up--temps are the first to be let go, during the phase when employers are still hoping to avoid layoffs. But there continues to be some temp work right along, because companies always need some things done and don't want to hire employees when they can't offer long-term employment. In particular, as a recession winds down--but while companies are still waiting to see if this is really a lasting increase in business--they often hire temps in large numbers.

Seasonal workers are usually hired directly. Temporary workers are more often hired through a temporary agency.

Employ yourself

Some people already have a small business that they were running on the side while working at a regular job, in which case ramping up the small business to bring in more money can be a great option. Other people have always wanted to run a small business, and losing a job can give them the freedom to take a chance on doing so sooner rather than later.

If you don't already have a small business--or at least have some kind of small business in mind--this may not be the best choice. Starting a small business requires capital, and unless running a business is what you really want to do, you might be better off just investing the capital in something that pays interest.

Sell assets

Another place to get some money, at least for a while, is to sell stuff that you've got that has some value. Sadly, it's probably the case that most of your stuff is worth only a tiny fraction of what you paid for it, but a lot of it will nevertheless be salable. Depending on the item, consider:

vintage clothing stores
consignment shops
pawn shops
used bookstores
garage sales
internet classifieds and auction sites

This is a limited source--you've only go so much stuff--but you can pick up some money here.

Sell crafts

More sustainable than selling your used stuff is selling stuff you make. Almost any hobby that produces an actual thing (quilts, sweaters, mugs, earrings, jam) can produce some cash income--sometimes quite a bit. Even when it isn't particularly profitable--when the selling price barely covers the cost of materials or maps to a ridiculously low hourly wage--it can still be a way to turn stuff you bought back when you had a job (fabric, yarn, beads) into more money than you could make trying to sell the raw materials.

Stuff you make is also good for bartering, something that I'll talk about in part 4 of this series.

Other hobby-related income

Related to selling things you produce, many hobbies also provide other ways to pick up some extra cash by teaching, writing, speaking, and so on. I wrote about this a while back in Make your hobby pay its way.

Rent out assets

Some assets can be rented out in a way that produces a sustainable income rather than the one-time cash payment you'd get from a sale. Your savings earns some amount of interest (until you spend it). A spare room in your house can be rented out to a boarder. There are legal issues involved--if you rent your car to someone, you're probably taking on considerable liability if he gets into an accident--but if you've got stuff that people will rent, it's worth considering.

Not a complete solution

For most people, the sort of money you can pick up through casual labor or by selling crafts will never match what you could make at a regular job. That means that, if you want to get by without a job, you're almost certainly going to have to cut your cost of living--the topic of the next post in this series:

Getting by without a job, part 3--cut spending

Permalink | 11 comments | Philip Brewer's blog | Channel: Career and Income, DIY

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