I had the pleasure to interview Anja Winikka, editor at the well-known wedding website TheKnot.com. We discussed affordable weddings and how the current economy is affecting wedding decisions.
Hope you enjoy!
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Wedding Questions With Anja Winikka Editor At TheKnot.com – Presented By Married On MySpace
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Car Allowance Rebate System – Cash For Clunkers
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In late June President Obama signed into law the the Car Allowance Rebate System or as it’s also known: Cash for Clunkers. This is a program that encourages people to trade in their cars for more efficient models. It also helps to stimulate the economy (similar to the first time home buyer tax credit) at a time when car sales are lagging.
The program runs from July 1st through November 1st 2009. Cars traded in during that time could be eligible for a credit of either $3500 or $4500 depending on the car and the increase in mileage the new vehicle provides.
Use The First Time Home Buyer Tax Credit Now!
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Were you considering buying a home this year and claiming the first time home buyer’s tax credit? If you were, a recent change to the credit may allow you to use it now rather than waiting until next year’s tax return.
The American Recovery and Reinvestment Act of 2009 allowed for a first time home buyer’s tax credit of up to $8000. This would be money that could be claimed on your tax return. Recent changes now allow a first time home buyer to apply the tax credit toward their down payment or closing costs.
What Is A Ponzi Scheme – In Simple Terms
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With all of the talk about Bernie Madoff heading off to jail for a few years (a century or so) the thought on a lot of people’s minds is How did he do it? and What is a Ponzi scheme?
I came across the post Explaining the Ponzi Scheme to a Fifth Grader recently. I think the explanation pretty much nails it! Here it is:
Say you went to your sister and told her, if she gives you a dollar to invest today, you will give it back to her on Tuesday next week and she will get $1.25. Then you go to your other sister and tell her the same thing only you will give her $1.25 Wednesday. Then you go on to your dad and every person you know and tell them the same thing. As you’re going around asking for money from other people you know, you give your first sister her $1.25 and she’s happy to have twenty five cents extra just for letting you invest her $1. So she says, why don’t you keep my dollar and invest it some more? So you say, OK.
But the thing is, you weren’t really investing it were you? You were just using other people’s money to make it look like you are earning money for them. Do you see how you will eventually run out of money especially if they all ask for their money at the same time?
So she answers, Yeah, but can’t I just ask more money from more people? Yeah, you can do that but what if you ran out of people to ask and also ran out of time? That’s what happened to Bernie Maddox and that’s why he’s going to jail.
She then said, but they said he still has millions of dollars and he’s not really in jail. True.
About $68 billion lost summed up pretty nice!
The are a couple of lessons in this:
Know what you are investing in AND There’s no such thing as a free lunch!
You have to know where your money is going. If not then you are asking for trouble. From what I’ve been hearing people were throwing their money at Madoff so he could invest it. They didn’t care how he did it so long as they got back huge returns. I feel horrible for those people who lost their retirements and for all of the charitable organizations that were hurt. But you have to ask the big questions and in this case the questions is Where is the money going to get those returns?!?
It may not be fun learning about personal finance and investing but a little knowledge goes a long way. Sure it’s fun to say you’re getting 15% every year on your investment but you have to questions how!
Am I being too harsh?
I don’t mean to be. These people were swindled and hurt! The whole situation bothers me. It seems there’s no real accountability with Wall Street any more. There were warnings going back a decade about Madoff’s “investments” that went ignored.
Here’s a little lighter side that I also picked up from AMoores (where I saw the simple Ponzi explanation):
How do you feel about it all?
Is Saving 8 to 12 Months Expenses Even Possible Or Practical?
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I recently brought up the question of whether we now need 8-12 months expenses saved rather than the old three to six months that used to be convention. I think in these economic times, where we are seeing unemployment hitting rates we haven’t seen in decades, that three to six months isn’t enough.
I received a lot of great comments on the article. Many agreed that 8-12 months expense savings is a good idea while others agreed that we need to re-evaluate how much we have saved but that 8-12 may be reaching. Some questioned if it was even possible or practical.
A big question that comes up: How does a person save up 8-12 months of expenses?!?
Let me first say I know it’s tough saving even 3-6 months of expenses. I wouldn’t be surprised if most families don’t have even 3 months expenses saved no less 8-12 (please prove me wrong!). But with unemployment rising it’s something we all have to think about.
I think it can be done!
The sooner you can put together your expense savings the better. But that doesn’t mean you have to do it right this minute. Don’t stress out completely because you can’t cover a year’s worth of expenses right now. But at the same time look at what you do have socked away and ask yourself if you could save more, even if it’s only a little bit. Work your way up. Do you have three months expenses saved up? No? Set that as your goal. If you do have three months work your way to six months expenses. Squirrel away until you reach your goal. If you never need it then great but should you have to use it you will be happy for everything you could save.
But does it have to be 8-12 months saved?
You need to look at your own situation. Here are some questions to ask yourself:
- What will happen if I lose my job?
- Realistically how long would it take to find a new job at the same salary?
- How much more will I need if I have to take a pay-cut?
- How long can I support myself while looking for work?
- How has my industry been affected by the economy? Are whole companies going out of business or is it growing?
- How is your company doing? Are they hiring or letting people go?
- What is the likelihood that I could get laid off (tough one to answer but be honest with this one. Most people think a company can’t do without them but in most cases they are probably wrong).
- What savings do I already have?
- What would I get in unemployment benefits?
- Are there any other money sources you could tap if needed (Stocks, bonds)?
- Would or could you work part-time until you find full-time work?
And here are some items to think about when figuring out your expenses:
- What must get paid every month (mortgage, car payment, electricity, phone bill, water)?
- What do you spend on food every month?
- What will health care cost?
- What costs will there be in finding a new job (transportation, resumes, dry cleaning, clothes, fax, phone calls).
- What other expenses will you have (car maintenance, home maintenance)?
- What do you actually spend every month?
- What can you cut back should you lose your job (cable, eating out, vacations, etc…)?
- How many mouths does your income support?
Be honest with yourself. You may find that you don’t need 8-12 expenses. But you’ll be better served to save a bit more than a bit less.
What do you think?
photo credit: TheTruthAbout…
How The American Recovery And Reinvesment Act Of 2009 Can Help You
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Last week President Obama signed into law the American Recovery And Reinvestment Bill, otherwise known as the 2009 Economic Stimulus. A big question in the minds of the average American is How can it help me?!?
Here are some ways the American Recovery and Reinvestment Act of 2009 can help you:
- Unemployment – In 2009 you will not have to pay pay taxes on the first $2400 in benefits you receive.
- Social Security – Some social security recipients will receive a $250 refundable tax credit mailed to them within 120 days of the bill’s signing.
- Pell Grant – The maximum benefit for Pell Grants will rise to $5,350 in 2009 and $5,550 in 2010.
- More Liberal 529 Plan – In 2009 and 2010 students can withdraw money or computers and related technology such as educational software or internet service for students living at home.
- Transportation Accounts – Your employers are able to increase transportation spending accounts up to $230 a month. This is money you can have set aside from your paycheck tax free. (Check with your employer to see if they participate and raised their limits.)
- New Car Buyer Tax Deduction – In 2009 you, if you purchase a new car you can deduct the state, local, and excise taxes off of your federal return.
- Higher Tax Credit For Education – A credit of up to $2500 of college tuition and related expenses in 2009 and 2010. You need to spend at least $4000 in the year for the credit and 40% is refundable (which means you can qualify for 40% if you don’t have taxable income).
- First Time Home Buyer Credit - A first-time home buyer credit of 10% of the purchase price of the home up to $8,000 for homes bought in 2009.
- Health Insurance Help for Laid Off Workers – If you were laid off between September 1, 2008 and December 31, 2009 the government will subsidize 65% of your COBRA premiums.
The American Recovery and Reinvestment Act is going to be expensive for the country but at least people get to see some of it.
What do you think? Is it enough for the average person?
Source: NY Times
Why Economic Stimulus Handouts Are Bad – It Kills Innovation
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The economic stimulus has been a hot topic in the news in recent months. Banks and investment firms are getting bailed out. Auto makers are getting bailed out. Even the adult entertainment industry is asking for money. But there’s a big problem with handing out money to try to help the economy – It Kills Innovation!
Here’s my take on why handing out stimulus money hurts innovation:
- Companies ask for money rather than innovate – This is a bit of social Darwinism here. Companies that can’t hack it should fail. A company has to keep growing or it gets eaten up by competitors. Look at Apple for instance – Imagine they only stuck to computers? Without the iPod, iTunes, or the iPhone the company would be severely hurting. But they moved beyond just making computers and now their computers are gaining a stronger market hold. They innovated! When a company gets a hand out it makes them lazy.
- People follow the lead of companies – When companies get handouts individuals expect the same. I’ve heard it many times already that the government should give people money because the economy is bad. But that doesn’t really help. Just like a company people have to grow and innovate. They need to create new income streams, become better at their jobs, and increase their knowledge. When they don’t others come up and pass them by. Or new technology comes along to make their jobs obsolete. Or they get their jobs outsourced.
- It shifts blame – When a company sees that money is being handed out they have the temptation to blame the economy for their troubles in order to get a handout. This shifts the blame to the “economy” rather than their own business model. When blame is shifted a company is basically saying outside forces are causing their issues. Instead a company needs to look at what they can do to improve their process and products to grow stronger and avoid economic problems.
- Some companies would be bad anyway – If a company isn’t already looking to be ahead of the curve and succeeding in some way then what would throwing more money at them accomplish? For example: The auto makers have been in trouble for some time. Rather than find a way to be ahead of the curve they have continued their old models with not much success. When you think of a “green” car what do you think of? Hummer? No, you think of the Toyota Prius. Toyota continues to innovate and re-define themselves and that’s why for the first time they are the largest auto maker in the world, taking over GM. Throwing money at a bad company doesn’t help it; it just extends it’s expiration date and wastes money.
Yes, the economy is bad. Yes, it hurts everyone. But the economy is supposed to move in cycles of growth and contraction. This is natural. It’s like nature’s way of getting rid of the dead weight so hungrier companies have a shot. But when we start handing money out it kills innovation and in turn ruins the whole idea of capitalism.
I hope Obama’s new plan will not keep the fat, fat. Hopefully it’s used to encourage innovation. Time will tell.
Obama 2009 Economic Stimulus Plan – It’s Gonna Be Big!
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The economic stimulus plan that President-Elect Obama is working is estimated to be between $675 and $775 Billion. The stimulus plan will be geared towards job growth and infrastructure. Some have argued that work should be done to increase short-term spending but Obama’s economic stimulus plan looks to have long-term effects. This sounds reasonable as short-term spending would only be a small band-aid at best. We have to move away from this idea that we can spend our way out of trouble!
The administration will look to give money to projects that have a plan to move us away from being energy dependent on other countries as well as projects to help build up schools. If done correctly this could be similar to what was achieved under FDR where many buildings and schools were built during the depression that are in use today.
Getting an economic stimulus package will be the top priority for Obama and his team once they are in office.
But is it enough?
Economics Nobel-Laureate Paul Krugman wonders if we don’t need closer to $1 Trillion. He says:
“I understand that there’s difficulty in actually spending that much money, and I–they’re also afraid of the–of the T word. They’re afraid of a trillion dollar for the two-year number. But you know, the back of my envelope says it takes roughly 200 billion a year to cut the unemployment rate by 1 percent from what it would otherwise be. In the absence of this program, we could very easily be looking at a 10 percent unemployment rate. So you do the math and you say, you know, even these enormous numbers we’re hearing about are probably enough to mitigate but by no means to reverse the slump we’re heading into. So this is–you know, I–they’re thinking about it straight.”
Wow. That is a lot of money. According to Obama, any taxes involved would amount to tax cuts for the middle class with many former tax cuts for wealthier folk repealed.
Clearly we are in the middle of a huge economic situation. Attempts to fix the problem up to now seem to have done little stem the bleeding. But if the money is used well to grow new industry, create long-term jobs, and develop much needed infrastructure then perhaps this can can work.
How do you feel about Obama’s new economic stimulus plan? Is it much needed or a waste of resources?
8 Ways The Economic Crisis Can Be Good For You
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Times are tough out there. The economy is at the forefront of the news every day. Companies that were believed to be stalwarts are turning out to be broke. Many are saying this is the worst the economy as been since the Great Depression. Is there a silver lining to this economy?!? Yes.
8 Ways The Economic Crisis Can Be Good For You:
- Lower House Prices and Lower Mortgage Rates – If you don’t already own a home now may be a great time to buy one! Housing prices have been dropping. The bloated home prices of the past few years are finally reversing. If your finances are sound and you can make the payments you might find yourself with a house bargain. Add to that dropping mortgage rates and this might be the time to buy if you’ve been waiting but couldn’t afford it before. If you have a variable rate mortgage it could be the right time to lock in your rate. Mortgages are already low so you figure they have to go up eventually!
- Buying A New Car – If you have been in the market for a new car then now is a great time to buy! The big three American car makers are hurting and are basically giving their cars away at cost just to keep their inventory moving. To compete, foreign car makers are offering deals as well. Most companies are offering 0% interest for qualified buyers. That’s a free loan o buy their car.
- Sales – Just like the car manufacturers many other companies and stores are hurting and are doing whatever they can to sell their products. Forecast are already low on consumer spending for the holidays. This means we’re going to see some great sales coming up. Don’t go out spending just because prices are low but if there was something you were going to get anyway this coming season may be the time to buy it.
- Low Credit Card Rates – Lower credit card rates doesn’t mean you should go on a spending spree! But if you are carrying debt ad making your payments you may be able to negotiate a lower rate with your credit card company. If your rate is already low you still might be able to find a card offering 0% to transfer your balance to. Remember, the point is to shrink your debt not increase it!
- Change Bad Spending Habits – What does it take to break out of the cycle of spending and debt?!? If this bad economy doesn’t convince you that carrying a lot of debt is bad then what will? Cash is king in any economy but wen you have a cushion for yourself then bad economies are less stressful. Let what you see in the news be an eye opener for you if your spending habits aren’t so great. Make a commitment to put yourself in charge of your finances!
- Cut the Corporate Fat – Only the strong will survive in this economy (well, except for those that get bailed out). The companies that come through this will end up with a stronger presence in their industries. Also, as inefficient companies close up shop they leave open room for newer, smaller companies to take up the market void left over.
- Cheap Gas – I just filled up the tank on our mini van and it cost us $35. That would have given us a half tank earlier in the Summer. Man does it feel good to not pay so much for gas! One way to take advantage of this is take what the gas would have cost you in the summer and put the difference in what you pay now into a savings account every time you fill up. Home fuel costs will also be lower this Winter than last Winter.
- Stocks Are Cheaper – Prices have dropped to where if you invested at the turn of the century you might just have the same amount now; basically a zero return. Not so good if you’ve lost a lot in stocks but if your starting out investing you could be getting stocks and funds near the bottom when prices are low. You still need to do your research to find good funds and companies. If you’re dollar cost averaging your investments you’re getting more stock for your dollar these days.
It’s scary to hear economic news these days. But if your finances are in good shape then now can be a good time for you! If your finances aren’t then get working on it now!
What do you think? What other ways could this bad economy be good for you?
Never Mind A New Economic Stimulus Package – Save Yourself!
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There’s been a lot of talk in the news about a new economic stimulus package. Some are talking about a new one being approved this year while others speculate that it won’t happen until President-Elect Obama takes office. There’s been talk that a new economic stimulus package would be more infrastructure and not checks as the last package was. And there definitely has been a lot of talk of whether we even need a new economic stimulus package; questioning if it even makes a difference. Here’s what I say:
Never mind a new economic stimulus package – Save yourself!
Don’t count on the government to come through with legislation to help you make ends meet. That attitude will never get you ahead. You need to take matters into your own hands. If you are in a bad financial situation you need take control and ownership of the problem and fix it yourself.
Here are 12 ways you can take matters in your own hands and save yourself:
- Get your finances in order. If you haven’t done so get all of your monthly bills and expenses together and figure out what you are really spending. Put together a realistic budget that you will follow.
- Make sure you excel at your job. Unemployment is the highest it’s been in quite a while and I’m sure there will be many more layoffs to come. Don’t be the robot at work that does just enough to get by. Get yourself interested and make yourself valuable to your company. Don’t just get your job done – get it done well! If layoffs are coming you may be able to save yourself from the chopping block. Hey, maybe you could even get a promotion?
- Build networking relationships with friends and co-workers. Sometimes, as unfair as it seems, it’s not what you know but who you know. Keep up with co-workers when they move to other jobs. They can be your foot in the door if you leave your current job. Stay in contact with friends as well. Even if they don’t work in your industry they could prove to be a valuable contact. Network!
- Pay your bills on time. Lenders are getting shy about giving out their money these days. If you pay late you may find your interest skyrocketing. Universal default allows one credit company to raise your interest rate if you’re late on a different company’s card. A late payment can make all of your credit cards have high rates. If you aren’t paying off your balances every month you can find yourself sinking faster into debt.
- Put money away for emergency savings. Really you don’t know what the future holds and as the saying goes: “when it rains it pours!” What happens if you find yourself out of a job? Then the car breaks? Then you need a doctor’s appointment? Hopefully you don’t need your savings but put yourself in good shape by having savings in place.
- Make sure your credit report is clean. Errors on your credit report can be costing you in higher interest rates on your credit cards and loans. Make sure your credit report is accurate.
- Check you credit score. Your credit score is like your code of honor among credit agencies. A low score means higher interest rates and could also mean you won’t get a needed loan or credit. Credit scores are also used in housing and in job hunting. Get that score up!
- Cut costs. Remember that emergency savings? A way to help build that up is to cut costs. Cut a few corners here and there and you can find yourself with significant savings!
- Analyze your tax withholding. Are you paying too much? Pay what you need to and no more. Many like to get a big tax refund but you’re better off having that money in each of your paychecks instead. You don’t earn any interest when the government is holding your money! Adjust your tax withholding so you maximize your paycheck.
- Re-evaluate your holiday spending. The holiday spending frenzy is starting. Don’t get caught up in the current! You don’t need to spend exorbitant amounts on every person you know this holiday season (here’s a challenge: see if you can keep a $100 holiday). What really the point in spending so much if it puts you in a bad financial situation? Budget what you can spend on gifts and don’t go over. Make sure your budget is within reason of your financial situation (don’t spend more than you have!).
- Go to school. Yes, school is an expense. But taking some extra courses or pursuing/finishing up a degree can help make yourself more marketable to employers. This can be as simple as taking an advanced Excel course to working on a higher degree.
- Work on building alternate sources of income. Try your hand at blogging. Work on developing a hobby that could earn money such as photography. Other streams of income are a good thing, especially when money is tight. And you never know, what you start could develop into something bigger.
It always sounds nice when the government offers to give us money back but we have to remember there’s a price to this. It could mean less services somewhere else or more taxes down the line. Remember the money has to come from somewhere!
Don’t hope the government will do something to ease your situation. Get a hold of your finances and take care of it yourself!