Free From Broke

A Personal Finance Blog for Regular Folks

Glen Craig

Why Economic Stimulus Handouts Are Bad – It Kills Innovation

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Technology

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.

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Are Your New Year’s Resolutions SMART?

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Measurable Goal

Kudos to you if you are still keeping up with your New Year’s resolutions! But most people who make New Year’s resolutions aren’t keeping them by month’s end.

Why? They weren’t SMART!

What are SMART goals?

S – Specific

M – Measurable

A – Attainable

R – Realistic

T – Time-Bound

Specific – Your goals should be as detailed and specific as possible.  It’s not enough to say you have a goal of saving lots of money.  You need to give it a figure like “I will save $3000 this year.”  Without specifics you are just floating out there.  If you only say your goal is to save then did you achieve your goal by putting fifty cents in a jar?  Didn’t accomplish much with that.

Measurable – To continue with the savings example, how will you get that $3000?  In one lump sum?  Or perhaps in measurable terms like “I will save $250 a month.  This will be $125 from each of my pay periods in the monthly.”  Being able to measure your progress will help you move along in your goal.

Attainable – Can you achieve this goal?  Will you be able to break it up into smaller achievements that will add up to the goal?  In our example we save $125 per paycheck in order to attain the big goal of $ 3000 in savings for the year.

Realistic – Do you believe your goal can be reached?  For our example you have to be able to save $250 a month.  If you currently only save about $50 a month then you either have to figure out a way to squeeze out more savings or you might need to make your goal more realistic.  When a goal is unrealistic you’ll become frustrated before long and give up the goal.

Time-Bound – Give yourself a pre-determined time frame for your goal.  Back to out example – It’s great to want to save $3000 but it’s very different to do that in year and to do it in ten years.

The SMART system is a great guideline for you to set goals with.  Ask yourself if your New Year’s resolutions are SMART.  If they are you have a much better chance of accomplishing them!

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Ask And Save On Your Cable Bill

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Cable

My wife was getting sick of the cable bill.

It’s gone up recently to the point where we had to question whether it was worth keeping or not.

I mean, remember when TV was free? 

Now to get reception you have to pay (at least until the digital boxes take effect in February).

So my wife said it was time to get rid of cable!

Whoa!  I gotta admit, I’m an addict.  I’ve been glued to the TV since I was a wee little pea.  I know that’s not the best thing but I wasn’t ready to go cold turkey just yet.  But I also understand that we’re spending way too much money for the privilege of watching a ton of commercials on shows we mostly don’t care too much about.

I told my wife to let me take a shot at calling the cable company to see what they can do for us.

So I grabbed our latest bill, a pen, and some paper and gave them a call.

I got a friendly woman who asked how she can help me.  I asked her what can be done to lower the bill as the rates have gotten real high and we were ready to drop cable if the rates continued as they were.

Immediately she said they had a 12 month promotion that would save us $25!

Oh yeah!

I checked with the Mrs to see if this was acceptable (we’re cool like that in that we clear money issues with each other).  I got the yes nod and told the woman we’d take it.

Just like that we saved roughly $25 a month on our cable!

I took the person’s name and company number in case any issues arise on the next bill.  I also wrote the details down so I can refer to then when the next bill comes in.

Lesson – If you want something to change you have to ask!  It won’t happen on it’s own.

Some things to keep in mind if you’re calling to change your cable bill:

  • Calmly but firmly state that you want to find out how your bill can be lowered.
  • Always remain friendly when speaking to the customer representative.  If the person you get can’t help you ask to speak to their superior or someone that can.
  • Be nice!  Customer service probably gets hundreds of calls in a day, many of which are not too friendly.  Being nice can go a long way in getting what you need.
  • If needed, state that you are prepared to drop their service or go to another service provider.  Have an example of a competitors lower prices if possible.  Many companies have a customer retention department who are equipped for these kind of calls.  Remember, only go the drop route if you are really prepared to drop their service.
  • You might not get the answer you want the first time through.  Nicely hang up and call back in a few minutes to see if you get another rep.
  • Ask about combination packages.  You might get a lower cable rate if you combine cable service with internet and/or telephone service.
  • Get the rep’s name and customer number or ID.  They should have some sort of ID to trace the call back to them.  Write down the details and repeat them back to make sure you understand correctly.  Watch for deals that require a contracted time.  That might not be an ideal situation for you.

Do you have any other tips?  Let me know what’s worked for you!

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Obama 2009 Economic Stimulus Plan – It’s Gonna Be Big!

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Economic Stimulus!

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?

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