Last year, I was freshly into CVS and excited enough about working their ExtraBucks program that I was piling up TONS of extra free stuff. Shampoo, body wash, razors, toothpaste, etc.
I threw in a couple things I'd actually paid for (after a hefty coupon/sale discount, of course) like laundry detergent, added a roll of quarters, and put it all in a laundry basket. Viola! My cousin's kid was set for dorm life.
I think what I thought was interesting about Friedman's theory is that many people were borrowing with eventual plans to repay based on income generated from a home sale, which was supposed to increase in value to pay off all debt and generate a lump sum that could then generate earnings through investments. In many cases, the "permanent income" projections turned out to either be wrong or possibly unsustainable for certain periods of time. Btw I had already written a post on credit that mentioned considering not just the cost of credit per month (which is the first thing to do) but consider the entire cost of credit over the life of the loan for the Financial Literacy project (my date is April 27.)
As a future grad, I am only expecting a gift from my parents, and that is because they gave one to my sister last year. Honestly, I would prefer cash as I really don't NEED anything right now, and I could invest it in an RRSP or something. So that's my suggestion, help them get started on their retirement savings.
Good article. Thanks for the read. I found your writing on the Chicago School to be pretty interesting. I would like to note though, that the Austrian School of Economics is a bit of both the Friedman and 'behavioral' ideas, only more so. In the Austrian School, economics is looked at, not in terms of number, but as a form of human interaction. In that way, it recognizes that there are certain 'laws' that influence those actions. For instance, the law of supply and demand would be considered one such observation.
What I find so interesting about the Austrian School, and it's followers like Ludwig von Mises and Thomas Woods, is that their observations hold true to all people in all times. Like gravity, it can predict outcomes, not in terms of numbers, but in terms of eventual outcomes.
In terms of stimuli for the economy, the question should really be, does the economy need to be stimulated, why and how. What has gotten us to this point in our economy was the overspending that people and businesses made, and their inability to pay back on all of their hedged bets. It was a house of cards that, once it made its way all the way down to the sub-prime real estate market, collapsed. Hedge after hedge fell.
What seems to be sadly seen as the fault of our problems now is that we didn't spend enough! So the solution has been to spend more. Two wrong won't make things right. The reality is that our economy needs to contract. Our economy has been living as if it thought that it's credit cards were actually a source of income. We're now having to figure out how much each of us is worth without having them. And the reality is, we're a lot poorer than we thought.
So back to the article. The thing that this article may be trying to answer, but seems to have missed, is not how people will spend their money, but if spending more money will help anything at all. I believe that answer to be no.
Credit is not capital. Capital is only created through savings, which banks then lend out to people to be turned into productive business. You can't fake it. And right now, we're being faked. Faked into believing that we can spend our way out of this.
So spend away everyone. Chances are inflation is on its way and your savings will be dropping in value soon enough anyway.
I love the idea of giving practical "real world" gifts for grads!!!
At my own graduation last year, I asked friends and family to give me their old gently used household items that they no longer needed. Sure, my CrocPot is burnt orange and is fairly ugly, but it works wonderfully! Some people have problems with using used items as gifts, but it's better than your old things collecting dust in a cabinet and it saves the gift givers money as well!
Be careful :
If you have a problem with a machine and call Apple, they will need the certificate (you receive it by email after the registration of the code, so no problem for that) AND the bill to prove the legality of your purchase...
The problem is that a reseller on ebay never send you a bill.
I wonder if anyone has a make-it-yourself solution for those "topsy turvy" tomato tubes that you hang from your balcony. I want to try growing my tomato plants that way this year, but they sell for $10 each.
I'm not sure, exactly, how they work so I don't know what material might work to replicate the container and hanger.
I only think gift registeries are tacky if they're forced on guests/relatives/etc. They are useful, just not "traditional", but what is tradition anyway except what we continue to do?
I basically give only cash gifts and I really only want cash for gifts. This lets me decide what 'stuff' I will have in my home; I can buy what *I* want-not what someone thinks/hopes I want-and I can buy it when I want it. Say I want or need a watch. I'd rather pick out my own than have someone pick one they hope I will like. Also, I can buy a watch when I find one on sale rather than just going straight out and paying full price. I also enjoy just depositing cash and padding my savings account. Or I might decide to use a cash gift to pay a bill; this also makes me happy.
Gift registries are tacky, as far as I'm concerned. It's pretty presumptuous to assume that just because you're having a life event people should buy you gifts.
Gifts are supposed to be spontaneous -- not an expected exchange.
I'm graduating from college in a few months, and it would never even occur to me to sign up for a gift registry. I hope people come to graduation and then eat lots of cake with me afterwards to celebrate. That's it. I don't need people to buy me crap or give me money to celebrate or feel good about graduating college.
I've worked with the IRS for years, on behalf of taxpayers of all types and size. Folks who do not regularly deal with the IRS or taxes often fail to realize that Congress keeps the IRS on a very short leash --
The IRS only has the ability to do the things which Congress has specifically authorized it to do. It does not enjoy discretion to exceed the bounds of law. For example, there are statutes that allow the IRS to forgiven taxes and penalties owed by some taxpayers in some situations. The applicable statutes delineate the facts that must exist before the IRS can forgive the debt. If one's situation does not meet the facts laid out in the statute, then the IRS is not permitted to forgive the debt. Even if the situation is truly compelling, and one that Congress inadvertantly omitted from the law, the IRS is not permitted to forgive the debt.
This is why it is critical to meet the letter, not just the spirit, of the tax laws. The Treasury will not go bankrupt if you file your taxes in the wee hours of the morning of April 16. Surely that's good enough to meet the spirit of filing on time! But the IRS isn't allowed to treat you as if you had filed one day earlier because, in fact, you didn't file on April 15. Congress hasn't enacted the laws that would permit them to do so. So save yourself the trouble, and meet the letter of the deadlines.
Some other great gifts would be items to help them jump start their careers, like nice leatherbound portfolios to use at interviews or even a giftcard to a nice department store so they can purchase a nice suit!
I do think cash is sometimes an easy cop out when people do not want to spend time, but in actuality, good gift ideas usually smack us right in the face rather quickly when walking around the mall on browsing the internet!
Since I base my fun spending on how much is in the spending account, I would totally have spent that extra cash - except I knew about it ahead of time, so instead I upped the amount that goes into the "savings" account.
My paycheck is auto-deposited, part into the joint account we pay our bills into, part into the "savings" account, and whatever's left over into my fun spending account. So if this wasn't all over the news, I would have just looked at the number in the "fun spending" account and thought, hey, we should go out to dinner!
Managing my *own* irrational behavior is a big part of why I follow financial news & blogs like Wise Bread.
As an extension to the idea of helping someone get established in the real world, what about gifts that help someone who is entering the job market? An interview outfit, for example. A gift certificate for a resume writer...lame examples but you know what I am saying.
As an example that is a little more current, videoBIO.com offers an opportunity to incorporate video as a tool in a job search. Prices here start from free - and the grad would also be able to take advantage of the community aspect in refining and sharing their video online. As a gift you could pay for some additional professional help for the grad to enhance their video so that it can be something that sets them apart in the job market.
More and more people understand the difference between term and whole/universal - this part of education duty of insurance professionals is almost done. But most of the potential clients still have no idea about the difference between whole and universal life. I am glad that after "Term articles wave" there are emerging more and more articles like this one
I am also a huge fan of gift registries! When you register, you should make sure to include things you would like from a wide variety of price ranges. Most people want to get the best gift they can for you at the cheapest price. You would be surprised, however, how many people are willing to get you really nice gifts that you would never ask for directly. Registries give people the option to choose how much they are willing to spend while also guaranteeing that they are buying something you will enjoy. My favorite registries are Target and Bed Bath and Beyond.
This is an excellent post -- I am familiar with the general ideas (spending based on expectations over the course of a lifetime vs. monthly spending) but hadn't really considered that there was such a discipline as behavioral economics. Nice theoretical reflection with discussion of practical implementations of policy.
Although I would certainly prefer to get my tax break in a lump sum, I actually think that giving us $13/week is a better idea in terms of "stimulating the economy." I can guarantee that if I got a check in the mail for $400, it would either go straight into my savings account or towards paying down my student loans. With a measly $13/week that I'll barely notice, I'm much more likely to spend the money. I imagine all those people who think they're going to save their tax break money will find it much more difficult to do so with this disbursement method.
And they got by very well through college this way.
I found a box of Harlem Rennaissance and Black Power (from the 60s) books--all first editions once and then lived off of the sale of them for two semesters.
In one of your past posts, you stated you had a lot of cash, but you were not sure what to do with it. Now you buy this computer. Some people are frugal because they do not have the money to pay for things and others are frugal because they just do not want to spend their money, even though they have the ability to spend it. You state that you saved money to buy this computer, even though based on your past article you already had the money. Is there really a difference how you buy it, when you already have the money? Aren't just finding a different excuse to buy something? It would be different if you did not already have the money and then saved it.
This lady is just plain clueless. How can you advise people to stay in debt in case there is an emergency so you could pile on more debt? How can you tell people with a clear conscience to stuff money into a savings account earning 1% and keep debt at 10+%? And the idiots who are sitting in front of daytime television suck it up and go wild with it. Sheesh......
Last year, I was freshly into CVS and excited enough about working their ExtraBucks program that I was piling up TONS of extra free stuff. Shampoo, body wash, razors, toothpaste, etc.
I threw in a couple things I'd actually paid for (after a hefty coupon/sale discount, of course) like laundry detergent, added a roll of quarters, and put it all in a laundry basket. Viola! My cousin's kid was set for dorm life.
I think what I thought was interesting about Friedman's theory is that many people were borrowing with eventual plans to repay based on income generated from a home sale, which was supposed to increase in value to pay off all debt and generate a lump sum that could then generate earnings through investments. In many cases, the "permanent income" projections turned out to either be wrong or possibly unsustainable for certain periods of time. Btw I had already written a post on credit that mentioned considering not just the cost of credit per month (which is the first thing to do) but consider the entire cost of credit over the life of the loan for the Financial Literacy project (my date is April 27.)
As a future grad, I am only expecting a gift from my parents, and that is because they gave one to my sister last year. Honestly, I would prefer cash as I really don't NEED anything right now, and I could invest it in an RRSP or something. So that's my suggestion, help them get started on their retirement savings.
Good article. Thanks for the read. I found your writing on the Chicago School to be pretty interesting. I would like to note though, that the Austrian School of Economics is a bit of both the Friedman and 'behavioral' ideas, only more so. In the Austrian School, economics is looked at, not in terms of number, but as a form of human interaction. In that way, it recognizes that there are certain 'laws' that influence those actions. For instance, the law of supply and demand would be considered one such observation.
What I find so interesting about the Austrian School, and it's followers like Ludwig von Mises and Thomas Woods, is that their observations hold true to all people in all times. Like gravity, it can predict outcomes, not in terms of numbers, but in terms of eventual outcomes.
In terms of stimuli for the economy, the question should really be, does the economy need to be stimulated, why and how. What has gotten us to this point in our economy was the overspending that people and businesses made, and their inability to pay back on all of their hedged bets. It was a house of cards that, once it made its way all the way down to the sub-prime real estate market, collapsed. Hedge after hedge fell.
What seems to be sadly seen as the fault of our problems now is that we didn't spend enough! So the solution has been to spend more. Two wrong won't make things right. The reality is that our economy needs to contract. Our economy has been living as if it thought that it's credit cards were actually a source of income. We're now having to figure out how much each of us is worth without having them. And the reality is, we're a lot poorer than we thought.
So back to the article. The thing that this article may be trying to answer, but seems to have missed, is not how people will spend their money, but if spending more money will help anything at all. I believe that answer to be no.
Credit is not capital. Capital is only created through savings, which banks then lend out to people to be turned into productive business. You can't fake it. And right now, we're being faked. Faked into believing that we can spend our way out of this.
So spend away everyone. Chances are inflation is on its way and your savings will be dropping in value soon enough anyway.
I love the idea of giving practical "real world" gifts for grads!!!
At my own graduation last year, I asked friends and family to give me their old gently used household items that they no longer needed. Sure, my CrocPot is burnt orange and is fairly ugly, but it works wonderfully! Some people have problems with using used items as gifts, but it's better than your old things collecting dust in a cabinet and it saves the gift givers money as well!
Be careful :
If you have a problem with a machine and call Apple, they will need the certificate (you receive it by email after the registration of the code, so no problem for that) AND the bill to prove the legality of your purchase...
The problem is that a reseller on ebay never send you a bill.
(sorry for mistakes I'm not english)
I wonder if anyone has a make-it-yourself solution for those "topsy turvy" tomato tubes that you hang from your balcony. I want to try growing my tomato plants that way this year, but they sell for $10 each.
I'm not sure, exactly, how they work so I don't know what material might work to replicate the container and hanger.
I only think gift registeries are tacky if they're forced on guests/relatives/etc. They are useful, just not "traditional", but what is tradition anyway except what we continue to do?
I basically give only cash gifts and I really only want cash for gifts. This lets me decide what 'stuff' I will have in my home; I can buy what *I* want-not what someone thinks/hopes I want-and I can buy it when I want it. Say I want or need a watch. I'd rather pick out my own than have someone pick one they hope I will like. Also, I can buy a watch when I find one on sale rather than just going straight out and paying full price. I also enjoy just depositing cash and padding my savings account. Or I might decide to use a cash gift to pay a bill; this also makes me happy.
Gift registries are tacky, as far as I'm concerned. It's pretty presumptuous to assume that just because you're having a life event people should buy you gifts.
Gifts are supposed to be spontaneous -- not an expected exchange.
I'm graduating from college in a few months, and it would never even occur to me to sign up for a gift registry. I hope people come to graduation and then eat lots of cake with me afterwards to celebrate. That's it. I don't need people to buy me crap or give me money to celebrate or feel good about graduating college.
I've worked with the IRS for years, on behalf of taxpayers of all types and size. Folks who do not regularly deal with the IRS or taxes often fail to realize that Congress keeps the IRS on a very short leash --
The IRS only has the ability to do the things which Congress has specifically authorized it to do. It does not enjoy discretion to exceed the bounds of law. For example, there are statutes that allow the IRS to forgiven taxes and penalties owed by some taxpayers in some situations. The applicable statutes delineate the facts that must exist before the IRS can forgive the debt. If one's situation does not meet the facts laid out in the statute, then the IRS is not permitted to forgive the debt. Even if the situation is truly compelling, and one that Congress inadvertantly omitted from the law, the IRS is not permitted to forgive the debt.
This is why it is critical to meet the letter, not just the spirit, of the tax laws. The Treasury will not go bankrupt if you file your taxes in the wee hours of the morning of April 16. Surely that's good enough to meet the spirit of filing on time! But the IRS isn't allowed to treat you as if you had filed one day earlier because, in fact, you didn't file on April 15. Congress hasn't enacted the laws that would permit them to do so. So save yourself the trouble, and meet the letter of the deadlines.
Some other great gifts would be items to help them jump start their careers, like nice leatherbound portfolios to use at interviews or even a giftcard to a nice department store so they can purchase a nice suit!
I do think cash is sometimes an easy cop out when people do not want to spend time, but in actuality, good gift ideas usually smack us right in the face rather quickly when walking around the mall on browsing the internet!
While I understand the whole idea of effective gift-giving, I hate them--pure and simple.
Since I base my fun spending on how much is in the spending account, I would totally have spent that extra cash - except I knew about it ahead of time, so instead I upped the amount that goes into the "savings" account.
My paycheck is auto-deposited, part into the joint account we pay our bills into, part into the "savings" account, and whatever's left over into my fun spending account. So if this wasn't all over the news, I would have just looked at the number in the "fun spending" account and thought, hey, we should go out to dinner!
Managing my *own* irrational behavior is a big part of why I follow financial news & blogs like Wise Bread.
As an extension to the idea of helping someone get established in the real world, what about gifts that help someone who is entering the job market? An interview outfit, for example. A gift certificate for a resume writer...lame examples but you know what I am saying.
As an example that is a little more current, videoBIO.com offers an opportunity to incorporate video as a tool in a job search. Prices here start from free - and the grad would also be able to take advantage of the community aspect in refining and sharing their video online. As a gift you could pay for some additional professional help for the grad to enhance their video so that it can be something that sets them apart in the job market.
More and more people understand the difference between term and whole/universal - this part of education duty of insurance professionals is almost done. But most of the potential clients still have no idea about the difference between whole and universal life. I am glad that after "Term articles wave" there are emerging more and more articles like this one
My favorite gift registry is Amazon.com. Get books and other things for less!
Thanks,
Nate
I am also a huge fan of gift registries! When you register, you should make sure to include things you would like from a wide variety of price ranges. Most people want to get the best gift they can for you at the cheapest price. You would be surprised, however, how many people are willing to get you really nice gifts that you would never ask for directly. Registries give people the option to choose how much they are willing to spend while also guaranteeing that they are buying something you will enjoy. My favorite registries are Target and Bed Bath and Beyond.
This is an excellent post -- I am familiar with the general ideas (spending based on expectations over the course of a lifetime vs. monthly spending) but hadn't really considered that there was such a discipline as behavioral economics. Nice theoretical reflection with discussion of practical implementations of policy.
Although I would certainly prefer to get my tax break in a lump sum, I actually think that giving us $13/week is a better idea in terms of "stimulating the economy." I can guarantee that if I got a check in the mail for $400, it would either go straight into my savings account or towards paying down my student loans. With a measly $13/week that I'll barely notice, I'm much more likely to spend the money. I imagine all those people who think they're going to save their tax break money will find it much more difficult to do so with this disbursement method.
I have found out my phone dont have an antenna jack is ther a way to boost signal with that.
And they got by very well through college this way.
I found a box of Harlem Rennaissance and Black Power (from the 60s) books--all first editions once and then lived off of the sale of them for two semesters.
Margaret Garcia-Couoh
In one of your past posts, you stated you had a lot of cash, but you were not sure what to do with it. Now you buy this computer. Some people are frugal because they do not have the money to pay for things and others are frugal because they just do not want to spend their money, even though they have the ability to spend it. You state that you saved money to buy this computer, even though based on your past article you already had the money. Is there really a difference how you buy it, when you already have the money? Aren't just finding a different excuse to buy something? It would be different if you did not already have the money and then saved it.
I use a nokia e 63 but cant find the antenna hole can i i get loads of wire / tape and just wrap it all the way around the phone?
This lady is just plain clueless. How can you advise people to stay in debt in case there is an emergency so you could pile on more debt? How can you tell people with a clear conscience to stuff money into a savings account earning 1% and keep debt at 10+%? And the idiots who are sitting in front of daytime television suck it up and go wild with it. Sheesh......