Is the Worst Over?
So far, indications are that sales were strong for Black Friday, the stock market has been going up all week, and gas prices seem to be steadying so are we over the worst of this financial crisis?
While not normally a pessimistic person, this seems to quick and easy to be a long term fix. One weekend of strong sales will not fix the entire economy. One weekend of strong sales will not make up for the thousands of people who have lost their jobs over the past two months.
I went out to a few stores on Black Friday like any woman in need of a shopping fix at prices that won’t crush my budget, however, while I saw spending, most stores were selling only their holiday bonus items. The items that are marked down to uneblievable prices to lure shoppers into the store in hopes that they would impulse shop as well. However, to my surprise, these specials were not selling out. At Wal-Mart, there were several sale items that lasted until 11:00 AM, however, when my husband and I were there at 10:30 AM, there were still some of these items available. In past years these would have been gone by 8:00 AM.
We also stopped by the Midnight Madness at the local outlet malls for a free pair of pajamas and some early discounts. While the mall parking lot was so full that people were making their own parking spaces in the grass, there were surprisingly few bags in people’s hands as they walked through the outlet. Rather than becoming a shopping frenzy, this special looked like any day at the mall with people walking around and hanging out. Yes some stores had huge lines to get into the stores, but there were very few people exiting with shopping bags in their hands.
This Christmas is going to be all about priorities. People will find the money to spend or put on their credit cards for what is most important to them. However, in January when the bills come rolling around to pay for this stuff, I have a feeling that the market will not be as happy as it has been this week.
If you were wise this weekend, you didn’t use your credit cards for things you don’t need because those purchases will have to be paid sometime.
Giving Thanks for Government Spending
Thank goodness the government has money to spend. The current administration is trying to stay afloat by throwing money at every large company that gives a hint of bankruptcy because we all know that the best way to teach a spendthrift how to become responsible with money is to give the person more money.
There are many different economic theories, one of which is budgeting. Some say that the best way to teach someone how to manage money efficiently is to give the person a budget and if they use up the money before paying for all their bills, they will know better next time and be more careful with their money.
However, large corporations in the United States don’t have that problem. Every time they looked close to running out of money, they would sell an asset, borrow from the bank, or issue more stocks. Now, those options just aren’t available. Money is tight so there are less people and companies with the money to buy stock and even those who do have the money are scared.
Look at Warren Buffet, considered a market genius. He purchased a large stake in Goldman Sachs last month and now, just a month later, their shares are trading at half what they were. If someone of Warren Buffet’s caliber can lose money in this market why should I think I can make something? Why risk my future and retirement buying stocks that might be worthless next week.
Obviously the companies aren’t going to make money issuing new stock, instead that will likely make their current stock prices drop even further so what’s the next option. Oh yeah, borrow money from the banks. Except for one little problem, the banks aren’t lending money. Yes, they claim they are. In fact there are even reports that some entrepreneuring banks are even lending money for home purchases, but is that just an urban legend? Besides, banks are scared silly right now because of all their bad mortgage debt so do you really think they are going to lend money to a business in this economy where nobody can afford to buy more than the necessities.
The companies could also try to sell off some assets, perhaps gets rid of a division that isn’t as profitable. But once again, nobody’s buying. Unfortunately, this vicious cycle will keep repeating itself unless there are some major changes. Yes, keeping the companies in business now will save some jobs but that isn’t enough. While saving jobs is great, we need to concentrate on ways to create more jobs to really kick start this economy.
Preparing for Tax Time
If you are going to itemize your expenses for tax time, document everything. If you are audited, you will need the documentation to prove the deductions that you are trying to take.
1. Non-reimbursed business deduction
If you have business related expenses that are not reimbursed by your employer, keep the receipts and you can deduct 50% of these expenses on your taxes. Examples of expenses that are allowed under this deduction are business meals, entertainment, uniforms, and many others. However, there are requirements that must be met in order for these deductions to be taken. For example, uniforms are allowed to be deducted, including the cost to dry clean the uniforms, if the uniform isn’t the type you would wear outside your workplace environment, such as a policeman’s uniform. Be carefule though. A suit doesn’t apply as even though you may not want to wear it once you leave work, you can still wear it out to dinner.
2. Non-reimbursed health care deduction
Target receipts make this deduction much easier to track. At the bottom of their receipts, they now tract the amounts of each transaction that can be deducted as a health care expense or for which you can be reimbursed if you have a health savings account. This is extremely helpful. I didn’t realize that I could deduct the cost of my lip balm until I saw it added to the deduction amount at the bottom of my receipt. Again, you need to keep your receipt to prove you had the expense. This expense is also only for taxpayers who itemize.
Mortgage Problems? Check this out!
To combat the issue of rising foreclosure, Congress recently enacted HOPE for Homeowners. This program is designed to help homeowners who are at least three payments behind on their mortgage but have not filed for bankruptcy.
If you qualify, the program extends the terms of the loan, meaning you will be paying a lot more interest over the term of the loan but will have lower monthly payments. This plan helps the taxpayer by keeping the monthly payments lower so that hopefully the taxpayer will be able to continue to make the payments and avoid foreclosure. Also, the extended term of the loan does increase the interest payments, however, that interest can be deducted from the taxpayer’s federal income tax.
As long as the taxpayer isn’t trying to move anytime soon this sounds like a great alternative. However, for taxpayers who might be moving in the next few years, this option means that you will likely be trying to sell your house for less than your mortgage. Because the program extends the term of the loan, taxpayers are paying less each month on the balance of the loan and instead a large chunk goes to interest. Thus, due to the lower housing values if you try to sell in the next few years, your mortgage will be more than the value of your house.
It is great that Congress is coming up with programs to help prevent foreclose, but this plan won’t fit everyone’s needs and you need to be aware of the limitations when considering whether it is right for you.
Tradeoffs: Beware What You Wish For
6 months ago, we were all griping about the high prices of gas and how that was causing inflation. Now we are griping about everything else. However, 6 months ago at least we had more jobs. Every time you pick up the paper now or turn on the news you hear about someone laying off employees or another firm going bankrupt. Its sad that we are actually missing the days of months past where we had no pocket money but at least there were more jobs. So what is a person to do?
Is school the answer? Many people are taking this opportunity to go back to school hoping that by the time they graduate the market will be better. However, things haven’t been great for awhile so there are already plenty of people back in college now for an additional degree who are now graduating. If you want to get an MBA and have been thinking about it for awhile, I am not trying to talk you out of it, but going back to school is not a sure answer to finding a job, it just postpones the search.
Should I start my own business? The first thing to consider is whether you have capital. You may not have heard but there is a credit crunch and getting financing is difficult. Many new businesses take a couple of years before they make enough money for the owners to live off. To start a new business, you should have other sources of income for the first two to three years.
I can’t give a definite answer, I can only tell what I see and know, which is this: yes, things are bad now but they will get better. It probably won’t be this year and maybe not next year but it will get better. For now, just do what you can to reduce your cash outflow and expenses in order to survive.
Alternative ways to pay for Christmas
Many stores are touting their layaway plans this year as well as store credit cards. While these are both ok options, I prefer to stay away from credit cards and thus avoid the temptation to overspend. So this year, instead of throwing Christmas on your credit cards or putting something on layaway, check out these great ways to save or make a few extra bucks that you can put towards the Santa fund.
1. http://www.volition.com/
This site offers information on getting paid to surf the web, freebies from a variety of websites, coupons, and much more. I often use Volition to sign up for mystery shops when I have some free time. While mystery shops will not pay the bills, they are great if you want some extra cash. Many sites make you pay to have access to this information but with Volition you get it all for free. So if you are interested in making some extra money shopping or eating out, don’t pay for the info, check it out here instead.
2. http://riveroffers.com/?cogid=frend&refid=
This site offers everything you can imagine, If you are tired of your current cellphone provider, check this site out. You get the newest phones free from all the name brand providers plus free shipping and accessories as well! My husband and I don’t shop anywhere else when it comes to cellphones because nobody has been able to beat these deals. They also offer over 25 different credit cards sorted by what you want out of your card, ie points, low interest rate, cash back, etc. They also offer web hosting, domain names, high speed internet and much more. The best part, you can become an agent for free and then purchase what you need from yourself for additional discounts. Check it out.
3. www.couponmom.com
While not as exciting as the other two, this website offers a variety of ways to save money on your grocery bill and nights out on the town. Their weekly emails give you the best sales in town and options to print out coupons for additional savings.
Going, Going, Gone. House sold for $10,000!
Pinch me, I must be dreaming. A 4 bedroom 2.5 bath home with over 2,000 square feet built in 2006 is going on auction starting at $10,000. This isn’t just a rare deal, there are plenty of others available as well.
In this current market life is pretty tough if you don’t have any savings to fall back on. For those that do have a little cash lying around though, there are plenty of opportunities to invest for retirement. One of the best options that I have seen is the Florida housing market. Yes, house values are falling like crazy in Florida and getting a mortgage is incredibly difficult, however, rental rates have not fallen and people who have been foreclosed on still need a place to live.
The Cape Coral/Fort Myers area has 58 houses and 44 lots going up for auction this month. Many of these homes have never been lived in and the auctions are starting at $10,000 or $25,000 for houses and $1,000 for a lot. With so many homes being auctioned at once and the market already saturated, it is very possible that people will be walking away next weekend with a house for only $10,000 plus closing costs!
A quick check on Craigslist shows that houses in the area are renting for $950 a month for a house or $500 a month for a two bedroom condo. Even if you rent the house out for $500 a month, the potential for future earnings is enormous.
Florida isn’t the only area in the country with some great auctions going on. Check out the following website for more info.
http://www.williamsauction.com/Search/SearchResultsState.aspx?statusid=1&CategoryID=1&p=1.2
Making a Budget Stick
Budgeting is like dieting, people always start out with good intentions but often fail to see it through. One reason for this is unrealistic expectations. The best way to budget is to make it a life change by doing a lot of little things to save money and live within or under your means.
One problem I have noticed is debit cards. Yes, they make life easier, but people no longer keep track of everything in the bank account. With checks you saw the money coming out of your account with each purchase, at least if you kept a running balance in your checkbook. If you aren’t keeping track of what you make and what you spend, you will be more likely to run up excessive fees for overdraft or other bank goodies. One way to avoid this is to create envelopes.
Envelopes? Yes, when you deposit your check, take out your money budgeted for food, groceries, and other items you usually purchase with your debit card. Put the amount for each category into an envelope and when you go to the store, don’t take your debit card. Instead, take only your envelope so that you can’t spend more than budgeted. This way, when you are tempted to purchase those chocolate chip cookies and the roasted chicken, you will have to decide what you can really afford and which item you can live without.
As an added bonus, put all the money left in the envelopes at the end of a month in a special savings account to save for a rainy day and watch the funds grow.
Christmas without breaking the bank
Everyone knows about the deals offered on Black Friday and this year will be no expection, however, many stores have already started discounting for the holiday season. Due to lower sales figures and less money in consumers pockets, many stores have started offering those great holiday specials extremely early this year.
In order to get the best deals, check out the website for the stores you visit the most. Many of these websites will offer subscription that email you when they are having a sale or even send you special offers and discounts occasionally. I have already seen twice the number of sales and shopping incentives from my favorite stores this year as compares to last year.
Another great tip when thinking Christmas is to begin shopping early. If you start early, you can shop a little at a time when you have a few extra dollars. That way, when the bills roll around in January it won’t be such a shock.
If things are really tight this year, try to refrain from using credit cards. Yes, they are very tempting, but the interest rates are not your friend. Instead, join different points clubs that allow you to collect points on purchases that you need that can them be used to purchase gift certificates or other items for Christmas. One great example is mypoints.com.
There are plenty of ways to have an economical but still very memorable Christmas holiday.