Tuesday, February 1, 2011

Hamster Huey and Pinewood Derby lessons.

This time last year I was diligently blogging pretty much once a week. Life gets in the way and interest can wain, so it seems now I'm registering once a month lately give-or-take. I'd like to use the excuse that it was the holidays, but given that it's now February that ship ain't gonna sail no more.
I've got a few things to discuss this time around, and, as always, will include Kim K at the end for your entertainment. She's kind of like a bad reality TV show - hard to fathom why it captures our attention but oh-so-hard to ignore. Oh wait...didn't she have a bad reality TV show that we actually DID ignore? So much for analogies.
Let's dive right in to the Middle Class Money Muddle. I've given this a bit more thought and decided instead of talking about this or that money-saving tip (which can be found all over the place online), I'd instead take a recent bit of financial/economic news and analyze it's impact on the daily life of the average guy. Disclaimer!! - I'm not a financial advisor or Nobel Laureate in economics, however I do follow the financial and economic news closely and have an MBA in finance and BA in economics (although my career choice of real estate development means my financial/economic analysis skills are a bit rusty). That being said, my analysis could be way off base and have about as much relevance to your life as the price of tea in China (although in today's global economy and the rise of China, this expression may be losing some of its former steam as the price of tea in China probably does have an impact on your life.)
 The big decision is choosing what to pull apart with all that going on in Egypt, the new Congress coming into office, the ongoing housing crisis, and on and on...
So how about this? The first possible "whiff of inflation" in the economy. Yikes! Inflation? That's rising prices and that's bad! right? Well, yes and no. For much of the past 2+ years, inflation has been so low as to cause concern of possible "deflation" or a drop in prices. But wait - that's good right? Again - yes and no. Good for your wallet in the short term, bad for the economy and your financial well-being in the long term. When expectations are that prices will drop in the future, both people and businesses stop spending now on the expectation of paying less later. This means money stops flowing in the economy. Bad. When businesses and people stop spending...well, we've been down that path the last few years and we know where that leads us and it's certainly not Nirvana.
There is a "healthy level of inflation"* What? How, you ask, can inflation be healthy? For one, people will spend now instead of later if they expect prices to rise. That gets money flowing in the economy which in turn keeps the economy growing, companies hiring and people working. It's a virtuous cycle. However, its a tricky business keeping to that healthy level. Too much inflation (called hyperinflation) and the economy overheats, prices keep rising ridiculously fast causing people to spend even more now to try and stay ahead of the curve. General craziness ensues until everything goes kablooie.
It's also important to separate out different kinds of inflation (to over-simplify it). As a consumer, your primary interest should be in the CPI or Consumer Price Index. Very briefly, this shows a rise (or fall) over time in the price of a pre-selected "basket of goods" the typical household buys. From the perspective of a business, they are concerned with the PPI or Producer Price Index or the change in cost of the materials, good and services they must buy to produce their products. On a day-to-day basis, you don't need to be overly concerned about the PPI if you hear it's rising. The reason is that as a general rule of thumb, most producers will absorb small rises in costs without passing them along to the customer so as not to affect sales in the short to mid-term (remember - a company lays out an annual business plan with sales projections so any monkey wrench in that is a big no-no unless absolutely necessary). If however, the PPI is consistently rising or suddenly rises, then you can probably expect price increases at the store in the not-too-distant future. And to bring it full circle, the "whiff of inflation" article linked above is about producer costs. The very question of if those costs will be passed along to the consumer is central to the discussion especially given the fragile nature of the economic recovery. My guess is "not yet".
A rise in energy prices has one of the biggest overall effects on general pricing. It takes energy to make everything, energy to transport it, energy to light and heat the stores where stuff is sold. So the price of oil is one thing to watch if you're concerned about your wallet. No doubt you've felt the pain in recent months as the price at the pump has gone back above $3/gal. This is also one of the driving factors (pun intended) behind trying to reduce our dependence on oil. It's not just the price of gas or global warming. If we can develop a reliable, cheaper alternative, the cost of nearly everything will go down (but this would be different than deflation as this overall drop would be more akin to an increase in efficiency as monetary resources could be reallocated toward uses other than energy).
*What level that is, is somewhat debatable but the Fed likes it to be somewhere around 2% per year give-or-take. Here's a more detailed explanation from Investopedia and a table showing the annual inflation rates at each month during the year. Note: you can't add the months up for an annual rate! The rate for each month was the overall calculated annual rate at that point in time. The primary source of information about the economy is the Bureau of Labor Statistics website. Lots of analysis and data. 
OK...so you got all that? Good. Let's move on to some more easily digestible fare.
How about the every-exciting, sexy and highly charged world of refurbishing old tools? Yes? Good. So a friend of mine is a carpenter and when I was over at his shop a short while back I saw a rusty old handplane sitting off to the side. I asked him about it and he said he got it from his uncle when he'd done work for him. A couple weeks later I asked him if I could take a stab at bringing it back to life. Needless to say, he got back a nice, very serviceable 85-year-old Stanley #5c jack plane that is good to go for another 85 years with proper care. He was quite amazed because he didn't think it could ever work again. Let me just say it took a lot of elbow grease and sandpaper. Probably not collector quality (yes, people collect old tools and often pay quite a bit for them!), but it's very functional.
Two weekends ago my two younger sons' Cub Scout Pack had its annual Pinewood Derby. For those of you not familiar with Scouting, this is one of the highlights of the year. Parents and boys spend many hours on their cars (let's call it what it is - dad spends a lot of time on the car), fine tuning them for maximum speed as I did. Being the somewhat handy type, I volunteered to work the "tune up table" which is supposed to be to help make those final adjustments to the cars - a little extra weight, make sure the wheels are straight, etc. Then there are the parents who either don't have either the time, interest or skills necessary. These are the ones who show up at the weigh-in the night before with a half-built car. No joke, cars still smelling of fresh paint and no wheels or weight were handed over to me by hopeless-looking parents. The line backed up 5 or 6 deep. I resorted to quickly sticking the wheels on, pushing the axles (nails) into the pre-cut slots with my thumb, then crudely hot-gluing weight to the bottom of the car. Given the fact I was  working with cars the parents had clearly done little work on, you'd think some would be a bit less particular about ensuring I got it exactly to the legal limit of 5 oz. Needless to say I managed the evening with a smile...which turned to a grimace the next day at the races when, sonofabit ch, my sons' two cars only did mediocre and several of the cars I jammed the wheels on at the last minute wound up with trophies...next year my boys will race a plain wooden block.
How often do you spend time playing? Probably not enough. Well, there's growing evidence that adults need to make more time for it in order to remain happy and healthy. Not only that, but while knowledge may be gained from working, real wisdom most likely comes from play when you are able to deeply dive into who you truly are, be happy and build self-esteem. You then bring those qualities with you into the workplace, making you more effective.
Finally, we at last get to Kim. Seems she's upset over a recent photo spreadSo here's the deal - she poses for W Magazine then is upset because of "full-on nipple" showing. This from a woman who has a sex tape, posed for Playboy and puts herself in the public spotlight at every opportunity?  So here's one of the pics from the spread...but somewhat censored from its original version via "strategic" stars. I think that given the lifestyle she's chosen she needs to, as the pic references at the bottom, face her reality. As Harry Truman said "If you can't stand the heat, get out of the kitchen."

Tuesday, January 11, 2011

I must be deranged and the Middle-Class Money Muddle

I've completely slacked on this thing the last month over the holidays...below the single line is a bit I started but completely bagged on while I was off work after Christmas. Meh. Below the double line is something I wrote this week. Having trouble finding anything worth writing about. No. Scratch that. Having trouble being inspired enough to write.

So I offer this completely sub-par installment for your laughter and enjoyment (no...not laugh with me, but AT me for how lame this is, and enjoyment in the fact that you'll feel far superior to me and better about yourself for being such after reading.)

Oh...I'm reading this book about Poland right now. Pretty interesting.

And this one about Wall Street was pretty boring. Now I've read quite a few about the financial crisis and enjoyed most but just couldn't get into this one and never finished it before I returned it to the library.


We (you, me and all of us) are collectively awash in the Holiday tidal wave. For some reason there were more desserts at our house this year than I can ever recall. A self-induced food coma was only partly achieved two days after Christmas when my mother and my sister and her family came to visit.

Thank God I'm on a fitness mission after officially signing up for the Tough Mudder on April 9 in Allentown, PA. While I followed an agressive cardio regime between Thanksgiving and Christmas Eve thanks to Concept2, today I did my first Tough Mudder workout. All I can say is "Ouch." The past few years I've stuck pretty much to cardio and have done very little strength training despite many years of weight lifting in the past. All I can say is I could feel it! Actually it's a fantastic workout you can do in your family room with just a few low-weight dumbbells. Even if you aren't tackling the Tough Mudder, I highly recommend it!


This recession has affected me personally in many ways, job loss among them along with a short sale of our home in Florida (if you're wondering, I worked in the homebuilding industry in SW FL, one of the epicenters of the housing crisis. The Ft Myers area was recently ranked by the non-profit Brookings Institution as the second-worst regional economy in the country.) Yet I also have a professional/academic interest in the economy due to my MBA-Finance and BA-Economics education. It seems there is a never-ending litany of stories about how the business world is doing, the job market, the growing income gap in the US, ad nauseam. There are great websites like CNBC, Bloomberg and The Wall Street Journal for mainstream business news, and there are plenty of news stories (and even whole sections of news sites) about how bad it is for the shrinking middle class and below.
I find this all to be troublesome.
Look. The chances of me ever becoming part of the so-called "global elite" or "├╝ber-rich" are slim-to-none and so reading about them is akin to becoming a medieval flagellant or beating myself about the head with a brick. And really, for most of us (unless you're in finance for a living) knowing the results of the latest Treasury Bond auction or how many units of widgets the Very Big Corporation sold last quarter may be intellectually interesting, but it really has very little impact on our daily lives (and I'm not going to get into a discussion of how the health of the economy affects us personally....believe me, I know firsthand). 
At the same time, after all the BS I've been through the last few years, I've emerged a more patient and hopefully wiser person who is also aware that despite the challenges my family and I have faced, there are still people in a lot more dire straights than we are. And so I chose to be a bit more, respectively, realistic and optimistic while not putting on blinders.
With this in mind, I ask "where are the blogs, article and websites geared for the middle class"? Not that I'm not trying to achieve a level of wealth such that I can afford to give it away, but in the meantime I'm also trying to get the monthly bills paid and wondering how I'm going to afford college for my kids. I think this is most of you as well and it's what I call the "Middle-Class Money Muddle". We're (fortunately) employed but not rich. We still have to carefully manage our monthly budgets. The future is somewhat uncertain (we aren't wearing shades unlike that 1986 song by Timbuk3). In short, we're doing the best we can and muddling through the times we find ourselves in, making the most of them. I don't seem to see a whole lot about this in the news. It's either about how well the rich seem to be doing or about how dismal those are that have gone past 99 weeks of unemployment benefits. As an aside, there's a funny (very funny, but not for young ears) video which states "when God hands you lemons, FIND. A. NEW. GOD!!" as opposed to the trite "make lemonade".
So let's turn this into a source of information for the rest of us. Henceforth, be it declared that The Balanced Guy will try to incorporate a section on the Middle-Class Money Muddle with each installment of the blog. While I can't promise anything, it'll be mostly about managing your daily money, not about investing, the stock market, foreclosures, unemployment benefits or food stamps. In short, we'll avoid the tails and stick to the middle of the bell curve. Boring to be sure, but applicable.
So let's start with the basics. Really basic. Like having a monthly budget. Do you have one? If you do, more importantly - do you stick to it? For years I battled my wife over this as I used Quicken and tried to account for every penny and to what category of spending it went to. She fought it tooth and nail, mostly because I couldn't communicate what I was trying to do well enough. Finally I just got to the point of saying "Look. We have X dollars left over each month after our recurring, mandatory expenses are paid (savings, rent, groceries, insurance, gas, utilities, etc). That's all we have to spend on things like clothes, gifts, activities, unexpected expenses, etc. I don't care how you spend it but just mark it down on this dry-erase board to ensure we don't go over-budget. Voila! It was like a light-bulb went on. Now she's on-board with it and I've more-or-less given up on tracking how much is spent on groceries vs utilities, etc. As the person who pays the bills each month I have very good working knowledge of what goes out the door and it makes little difference if we spent $1,186 on groceries this month or $1,204. As long as we don't make dramatic changes in how we live our lives, those expenses stay relatively constant. Now a couple-few times a year I go through and make sure expenses really are what I think they are.
Keeping track of how you spend that "left over" money each month is actually a great way to NOT spend it. I've already mentioned the dry-erase board. It's inside the door in the kitchen that leads down to the basement. Since our laundry room is down there, it reminds us every day. As spending is tracked and the monthly "left over" money balance goes down, you can't but help say to yourself when you're in the store "Do I REALLY need that $10 DVD?" because you know it'll have to go up on the board and drop the balance. And now I'll let you in on a little secret - at the end of each month we actually have more, not much, but definitely more than I've let on. In this way, if we do go over-budget for some reason there's a bit of a buffer and in the meantime we're building up a bit of a reserve.
OK - extra money-saving tip for this entry: For many of the activities you and your kids do there is a participation fee which can range from a few to hundreds of dollars. Depending on how much spare time and gumption you have, you might be able to trade your time for that money (remember, Time = $). See if volunteering to help out with the organization or event gets you a discount or even makes it free. Think of it this way: if it's an activity for your child, there's a good chance you're going to be sitting there watching, reading, talking with other parents or messing with your smartphone...AND paying for your kid to participate. Since you'll be there anyway, if you volunteer there's a chance you won't have to pay, probably meet some nice people and provide always-needed assistance.
For a change I thought I'd post an unflattering pic of Kim K...
And here's an interesting (to say the least) article about raising children...