Can You Make Your Payments?

Recently there has been much talk among governments and economists about the household debt to disposable income level in both Canada and the USA. The latest numbers show that in the USA household debt is 147.2 per cent and in Canada it is slightly higher at 148.1 per cent. That means that for dollar earned the household is caring about a buck and a half of debt. So a 2 income family earning $65,000.00 a year would have debt of almost one hundred thousand dollars.

They go on to break this down saying it is not so bad when you look at good debt vs. bad debt, and when you look at what was purchased. One economist was pointing out that it is not so bad if you did not go out and buy speed boats or motorhomes but cars and house.

A lot of talk about how things are not so bad when you look at net worth which has been going up of late.

All those discussions are totally mute in my option. The only thing that matters is CAN YOU MAKE THE PAYMENTS? It doesn't matter if your net worth is high if you can't afford to make the payments.

The scary thing is a lot of people are right on the edge, they are making the payments but just barely. If anything was to happen to decrease income, like getting laid off or downsized or have to take a pay cut, or if the cost of debt / payments was to go up, then things would not be so good. The governor of the Bank of Canada recently warned that one of these days interest rates are going to be going up. They can't go any lower, and are only being kept this low to try to spar on business investment. His comments were “When the reckoning comes, it could be swift and brutal.”

So my advise, get out of debt and stay out of debt. Keep your payments as low as you can by not spending money on things you don't need and can't afford. With Christmas just around the corner it is extra critical that you keep an eye on what you spend.

Have a very Merry Christmas and a Happy New Year, but watch what you spend and put those credit cards away.

Cheap-O Economics.

Nothing Is Ever Simple

There has been a lot of discussion lately about the 100 mile diet and shop locally. That to be environmentally responsible one has to buy there food from the surrounding area and save all that fuel and greenhouse gases from trucking produce thousands of miles from the grower to your stores shelves.

As usual nothing is as simple as it sounds. I recently listened to an analyst talking about the fact that over half the greenhouse gases and fuel used was not the usage of the trucks, planes or ships that were used to transport the products, but, rather it was the 5 and 6 miles traveled from home to the supermarket that used the fuel and added so much to the greenhouse gases.

Additionally the land use issues were in favor of growing products where it was best suited. For example wheat grows best in the “wheat belt” area of the prairies in Canada and the USA, were it would take 2 or 3 or 4 or more times as much land to grow the same amount in other places. Things like lettuce and strawberries ect take a fraction of the land in California to grow as they would in places like Vermont or Colorado.

All in all a very good argument for going ahead and buying without guilt the things that have been shipped halfway across the nation. BUT only if you peddle your bike to the store and leave the car at home (not going to happen here, this morning it was -27C or 14 below Zero F) and NO WAY am I not taking the car to the store.

Like I said nothing is ever simple.

However the buy local people do have a point. Take that package of hamburger that is sitting in my freezer. The cattlemen here in our area ship cattle just over a 600 KM (400 miles) to the slaughter house, from there it is shipped another 1000KM to the distribution center and warehouse, then shipped another 1000KM back to the store that is less then 20 miles from the cattle operation where the cow started its journey. I agree that in that case far better to get to know the rancher and the local meat cutter and enjoy that fine hamburger or steak. BUT like I said nothing is simple. If we all did that, then the truck driver would be out of a job, and hundreds of people at the packing plant would be out of a job, and 100s in the warehouse would be looking for a new job and the clerk at the store would get a lot less hours.

The point I want to make is less about how far things are shipped (and something only grow in the tropics or in the middle of the ocean, some things have to be shipped if we are going to enjoy them at all) but that we know where they come from, how they are grown and under what conditions are they being grown. This would be the spot where the Free Trade coffee people, and the Rain Forest Alliance people would put an Ad.

I strongly suggest that yes you support your local Farmers Market where you can buy the best locally grown produce right from the people that grew it, in season, but in January in Canada the lettuce comes from California or Texas as the gardens here are under a couple of feet of snow. Just like the Wheat used in that dish of pasta likely came from my neighbors field.

It is the lack of awareness of where produces come from and how they get to market that is my issue. When you hear people talking about milk, bread and hamburger like they are produced in a factory and not on a farm, that just shows how far removed people are from the reality of life. When it is traumatic for a child to learn that their running shoes are the hide of a cow. When there is no connection between where it was produced or grown and the end user, we have gotten to far removed.

Cheap-O Economics.

New Wind Generator Installed

At the end of last winter we had a major blizzard with winds gusting over 100 MPH and my small wind generator was ripped apart and smashed. I then went all summer without a wind generator.

This fall I installed a new Malard 800 Watt low wind unit. This is designed to start in a fairly low wind but to handle the higher winds as well. So far so good. The folks at Mike's Wind Mill Shop (http://mikeswindmillshop.com) know what they are doing. I have also purchased inverters from them. They are great to deal with.

They say the blades have been tested to 0 degrees F, so far I have field tested the unit down to -27C or about 18 degrees F below zero. I am sure by the end of the winter we will have tested the blades to 40 below zero. Will keep you posted as to how the unit holds up in sub zero temps.

Having a wind generator sure changes the way you feel about wind. Now you enjoy the wind as it is putting power into the battery bank.

Cheap-O Economics

Credit Card - what not to do if you have one.

Credit Card - What not to do if you have one. Do you really need one?

Recently Marcia Frellick, CreditCards.com wrote on Yahoo fiance about 15 times you should not use your Credit Card, you can view the complete article here It is important that all Credit Card users read this. However I want to highlight a couple that I think are extra important.

You should not be using your Credit Card, If you're paying off one card with another, and it's a habit. I have seen bumper stickers that say “What do you mean I can't pay off my MasterCard with my Visa Card” If that is your thinking it is time to step back and take a long hard look at your spending habits.

You should not be using your Credit Card, If you don't have a plan for paying it off this is something a lot of people do not take into consideration. NO thought is given to how to pay off the Credit Card bill for that impulse purchase of a wide screen TV.

You should not be using your Credit Card, If you're charging things that you used to pay cash for. This should set the alarm bells to ringing, This is a sure sign that there are some issues that need to be looked at closely. This would include groceries even if you are getting reward points or even 2% cash back.

These are just three of his 15 times not to use a Credit Card. I would add to his list.

If you are just making the minimum payments on your Credit Card then it is time to put it away and not run up anymore debt. As it is it is going to take you years and years to pay off that Credit Card debt and cost several times what your original debt was.

Credit Card debt is unsecured debt, meaning that you can not sell an item to pay it off. With secured debt you can sell the item. like a house or car, and pay it off. You can not sell that restaurant meal you just eat, to pay it off, you can not sell that clothing or shoes and pay off the debt. Credit Card debt is bad debt with high interest.

I have heard all the reasons to have a Credit Card, for emergencies - I saw a sign in a business the other day that said “a lack of planning on your part, does NOT constitute an emergency on our part” the same can be said about a lot of so called emergencies, the car needs tires every 80k miles, so plan for that. The car is going to need repairs, so build that into your budget ahead of time rather then pay off the Credit Card after the fact.

For convenience, use a debit card rather then a Credit Card and when you run out of money stop spending, It is really amazing how simple that is.

There are just some things you have to have a Credit Card. - That is very true, but maybe a hard look at life style choices is needed at this point. I know you can not rent a car with out a Credit Card, but I have not needed to rent a car in the last 20 years so that is a pretty mute issue.

You have to have a Credit Card to reserve a motel room. That is can true and as well I have run across motels that won't even register you without a Credit Card, but you know what, the motel across the street will be glad to take your debit card, and yes I do have to give a deposit sometimes, but I can get by without the Credit Card,

It is possible to manage without a Credit Card, and if you can't keep a handle on your Credit Card usage then you might need to go to straight cash for a while. This is especially relevant with Christmas season just around the corner. You can't spend what you don't have if you are not carrying a Credit Card in your wallet.

Cheap-O Economics

Interesting trends

Some interesting trends I am noticing out there.

The first is a survey by the Canadian Payroll Assoc. who are telling us that 60 percent of people would be in “Financial Difficulties” if their paycheck was just one week late, as well as 40 percent of people have given up even trying to save any money for emergency or retirement.

The second thing I noticed was an advertisement from a Wealth Management Company that was hosting a seminar on “Protecting Your Wealth”. Not on growing your wealth or the newest hot stock tip, but on keeping what you have.

An article on unemployment* showed that as of late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number.

For every job opening in the U.S., six people are actively looking for work. That systemic unemployment is going to be a fact of life in a lot of geographic areas as well as within some industries.

Most recessions end when consumers regain confidence in the economy and start spending again, but for the foreseeable future, U.S. consumer demand is unlikely to propel strong economic growth. As of November, one in seven mortgages was delinquent, up from one in 10 a year earlier. Heavy debt and large losses of wealth have forced consumers to curtail their spending and to delay if not forgo large purchases.

These trends really show that while the “Experts” are saying that the recession is over, on the streets of the country the recession is in a lot of ways far from over. There are some permanent changes to the way companies will hire employees, and the lose of wealth and retirement income has forced many people that were hoping to retire back into the workplace to compete for the available jobs.

Now is a good time to step back and take a good hard look at your financial situation and see where you stand. Can you survive if were to lose your job? Do you have skills that employers will want? Is your pantry full so you can eat while looking for work? How deep in debt are you? Are your credit cards already maxed out, are you currently using credit cards to meet day to day expenses? Is your car paid for?

Time to maybe make some changes in your lifestyle so you are better prepared to face a financial challenge. Can you trade down on your car and cut your payments in half? Can you walk to work and not need a car? Can you take public transit rather then have a car?

Each and everyone of us needs to reass where we are financially, and realise that your job may not be as secure as you think. Interest rates are not always going to be this low, are you prepared for a jump in the cost of your debt? Do you have a plan B or C or D so you can deal with life in the post recession still no jobs world?

This is not the time to panic, but it is the time to pay attention and decide what you can do now to help yourself later.

Cheap-0 Economics
*http://www.theatlantic.com/doc/201003/jobless-america-future
This is an excellent read that goes into great detail about the impact of unemployment

And I thought I was a Cheap-o

I pride myself on being a cheap-O, I am always on the look out for the best deal and things I can pick up for free. This last month I have gotten a piano for free, and then had to learn to tune it, as I was to cheap to pay to have it done. Then picked up a bunch of soap making supplies from some people that were moving, all I had to do was haul the stuff away.

But I was reading the news and discovered that I have a lot to learn about living without money. In a recent article on Yahoo News I read about a man that has lived for a year with NO MONEY at all. .

Man has lived without money since 2008

Module body

Michael Bolen
Yahoo! Canada News

If a serious person puts their money where their mouth is then Mark Boyle is the world's most serious man.

Inspired by Gandhi's famous words to be the change you wish to see in the world, the economics graduate from the U.K. has been living entirely without money since 2008.

He has written a book about the experience titled 'The Moneyless Man: A Year of Freeconomic Living' in order to share both the philosophy which led to his drastic decision and the tactics he has used to survive.

Living in a trailer given to him for free by someone on freecycle.org, Boyle cooks food which he either grows himself, barters for or forages from the land. He bathes in a solar shower, uses a compost toilet and even makes his own paper.

Despite his challenging lifestyle, Boyle has no plans to return to civilzation. He says the time he has spent away from money has been the happiest of his life.

That just goes to show that a person can make difficult choices and take control of their money or lack of money. I have a long ways to go to be in Marks league but every step I take in the right direction is a step closer.

Cheap-O Economics

The Great Advantage of Having NO Money

The Great Advantage of Having NO Money

I know it seems weird to think of not having money to be an advantage, but it is in fact one of the biggest advantages that a person can have.

When you don't have money, it expands your horizons, as you have to find other ways to get things done. You learn to make do with what you have, you learn to improvise, you learn that time and talent can make up for lack of money, you learn to do it yourself rather then pay someone to do it for you.

The biggest advantage of not having money, is that money never is part of the decision making process. If you don;t have money then the lack of money is never a reason to decide not to do something or not to under take a task. It just means you have to be inventive and find a way.

Over the years we have done things anyway, money or no money. In fact my first business was started when the total family bank account had less then $200.00 dollars in it. I just had to find the right people (a guy that was retiring and who just wanted to get rid of his inventory and who didn't need money, just needed to get out on the golf course.) the right situation (a landlord who so badly wanted to get some one to rent his building that he made me an unbelievable deal - mind you his building had been empty for 2 years so he was very open to being supportive.)

The best part about not having a ton of money. It is so much more fun to find other ways to get a project done. So much more fun to hunt for and find that special treasure and find it at a bargain price or even better find it for free.

So when you are thinking about starting a business or buying a house or a car or undertaking a project, Don't let the lack of money stop you before you have gotten started. If the deal or the project makes sense and is something that you really want to do or that is going to benifit you and others then, stand back and think of all the ways you could get it done without money. Maybe you can trade your talents for work you need done. Maybe you can sell something you own and buy what you need. Perhaps if you ask around you can find it for free.

The list of things I have gotten for free, just for the asking or for the hauling away would run into pages and pages. The treasures that I have found at yard sales, thrift stores, and auctions would be even longer. The work I have done for other people who in turn did work for me would make interesting reading.

The bottom line, money is no object. Just that unlike the man at the Rolls Royce dealerships it is the lack of money that makes it no object, Not the over abundance of money that makes it no object.

Cheap-O Economics

When Good News is really Not Good

When Good News is really Not Good

I was reading the headlines, some business articles and just had to shake my head. Since when is Bad News good? The news on the economy sounds like the Doctor that tells you how lucky you are that you only broke 4 bones, not the 8 or 10 bones they normally see in that kind of a crash.

This is the Headline U.S. layoffs fall in February
This is what it says in the body of the article.

A widely watched measure of U.S. employment came up positive Wednesday.

Outplacement consultants Challenger, Gray & Christmas announced that planned layoffs for private businesses in the U.S. fell 41 per cent in February compared with the month before to 42,090, their lowest level since July 2006.

In another employment report, ADP, a major payroll processing company, said that the U.S. private sector shed 20,000 positions during February, which was in line with expectations. It was a drop from 60,000 in January.

Last month, the Labour Department reported that the January unemployment rate in the U.S. was 9.7 per cent.

Now call me funny but planned layoffs of 42,090 people doesn't sound all that positive to me, and that is the lowest monthly layoff number since July 2006, lets see 5 months in 2006 and 12 months in 2007, 2008, 2009, and Jan of 2010, so all together that is 42 months all being higher layoffs then the 42,000 in Feb of this year. Even just using the 42K number that works out to be 1,764,000 people have been laid-off since July 2006 and that is on the way low side.

So where is the good news in that? Oh yes. that is right it could have been worse.

Now good news would have had a headline like “Jobless rate drops to 5% and private business adds 40000 new jobs in Feb.” Now to me that would be good news.

So the plan should be to pay off all your debts, stay out of debt, plan for the day that you are one of the lucky FEW that lose your job, be very careful about spending on anything that isn't necessary, and stock up the pantry. (P.S. - a new larger plasma HDTV is not a nessesity!)

We may be slowing down on how fast we fall off the edge of the economic cliff, but we are still falling, and it is going to be a long, long climb to get even part way back.

Don't just read the headlines, read the article. Don't just read the article, examine it. Don't just examine it, understand what it is talking about and do you own math and then read other articles.

Cheap-o Economics

Pollyanna Economics

Pollyanna Economics
Everyday in Every way Things are Getting Better and Better - NOT!


After the melt down of 2009 I am amazed to read and to hear on TV that the economic recovery while slow in getting here is right around the corner and that by the second quarter of the year we will be sitting pretty and will all be driving brand new cars. That everything is just peachy. That like Pollyanna things are just getting better and better.

Well folks, it is time to take off the rose colored glasses and that a long cold hard look at reality. Yea I know reality bites, but it is reality and far better to be prepared then to blindly stumble into collective poverty.

Fact one. The patient (The Economy) is on life support, if not dead, it just doesn't know it yet. All that is holding things together is smoke, mirrors, compounding debt and creative accounting. That and the desire of most people to believe that all is well and that someone, somewhere has things well in hand.

The unemployment rate is at an all time high despite billions of dollars being spent on job stimulus. The number of home loans in default, range up to 25% (mortgages from 2007 are 24% in default and 2008 loan are 20% in default the FHA reported) and most loans are technology in default as the underlying value of the property is no longer able to support the mortgage.

Did I mention that no one is in control and the ones we think should be, Presidents, Prime Ministers, Finance Ministers and the heads of the Central Banks of the Major Nations, are as clueless as anyone else. It is a case of - as long as we all believe that the bubble won't bust then it won't bust, but like the little boy in “The Emperor's New Clothes”, someone is going to point out that, BUBBLE what Bubble, and it will all come crashing down.

Fact Two. The only person that can look after you is you. Repeatedly FEMA, the National Guard, Local and State / Provincial, and Federal Governments have shown that they are helpless in the face of Disaster, natural or man made. So we need to look back a couple of generations and see how our forefathers managed to survive with no phone, no power, no TV, no interstate highway system, no car. They can show us how to cope with life with no modern conveniences and ways to get things done without electricity..

Fact Three. The only real assets you have is your knowledge and the ground you can use to grow food. Everything else is only of value if you can con someone else into buying it. In economics this is known as “The Greater Fool Theory”

The best things you can do for yourself is learn a new skill, and that doesn't mean mastering a new video game, I am talking about learning to weave, or blacksmith, welding, how to build a house, auto mechanics, gardening, skills that you will need to survive and prosper in the new economy.

It comes down to being prepared for and ready to take on the challenge of a life after the bubble bursts.

Cheap-O Economics