Entries for November 2008

While retailers are doing everything they can to lure you into their stores on Black Friday, you might want to consider staying home anyway. Here are four reasons why:

• It will be crowded. According to a poll by Consumer Reports, one in four consumers plan to hit the shops Friday. That means long lines, messy merchandize, and cranky salespeople.

• You can get better deals online. Some stores, including BestBuy.com and WalMart.com, are saving some of their biggest discounts for virtual visitors. So you can munch on those turkey leftovers while clicking your way down your shopping list.

Few actions stir up greater feelings of appreciation for what we have than giving to others, whether with time or money. Somehow, the very act of giving can make us feel richer. And this year, with so many people in need, it’s also more important than ever, even when we feel financially strained ourselves.

So, in the spirit of Thanksgiving, here are three ways to give this season. Please share your own suggestions below.

This weekend, I spoke with WTOP in Washington about what to do if Thanksgiving turns into an awkward family discussion about whether you can lend money to needy relatives. We talked about why it's OK to say "No," how to reject requests firmly, and the best ways to go about giving money if you decide to do so.

After writing about how to lend (or not to lend) money to family members who ask for help, I’ve heard more stories from people who have struggled with this very difficult issue.

One interesting perspective comes from Donald Cox, professor of economics at Boston College. He says that people who give or lend money to relatives are usually motivated by altruism, but sometimes something is expected in return. For example, if a parent gives money to their child for a down payment for a house or college tuition, then they may expect assistance later. “Many adult children who are providing care for needy, elderly parents say they are doing this out of a sense of reciprocity,” he says.

Here are more stories from readers:

Today's guest post comes from Trisha Wagner, a freelance writer for DestroyDebt.com, a debt community and debt forum. Trisha writes regularly on the topics of getting out of debt and personal finance.

Long before the current economic woes, millions of Americans have been without health insurance. Unfortunately, due to massive layoffs, affordable health care is an even bigger concern for many families now.

Even for people fortunate to still have jobs with health care coverage, the cost of insuring a family is twice as much as it was several years ago. 

Doctors are concerned that people are skipping routine health care visits to save money and may in fact be setting themselves up for larger and more costly health issues down the road. Before you cancel your next doctor's appointment, consider the following tips to cut costs without cutting coverage.

Did you hit the stores this weekend to get an early start on holiday shopping? I did, and for the most part, I was not impressed. Long lines and messy merchandize do not bode well for the start of the season.

Here’s my review of the six stores I visited in the Washington, DC area:

In response to our ongoing discussion on how people are feeling the effects of the financial crisis, Ryan Taylor at Millionaire Money Habits sent me a couple of his recent posts. His own brother, a mortgage loan officer, recently lost his home. Taylor writes:

Was he one of the foolish who bought more than he could afford? At the time he bought a home that was completely in reason with his income and he had saved several months in emergency savings. My brother did everything we are taught to do financially, and he thought he had achieved “the American Dream.” Months later he realized just how quickly the economy and the snowball effect of the market can take the American Dream away from you.

Read more of Taylor's thoughts here and here.

Oprah, who often lavishes her studio audience with pricy presents, says she will stick with cheaper options this year. She didn't name any specifics -- although Alpha Consumer readers could offer a few suggestions -- but chances are no one will be walking away with a new car or camcorder, as they have in the past.

(Maybe she'll also pick one of these books for her next book club selection.)

In dire times, consumers turn to books -- at least certain kinds of books.

Guides to living simply, do-it-yourself projects such as making clothes, and affordable hobbies such as gardening are flying off the shelves, says Jed Lyons, chief executive of the Rowman & Littlefield Publishing Group. In fact, the topics are so popular that he’s also reissuing books that are decades old because they reflect current mood.

One of those old books enjoying new life is The Guide to Good Cheap Hunting, first published in 1978.

Much to his surprise, says Lyons, Americans suddenly want to learn how to hunt and trap rabbit, waterfowl, and squirrel to feed their families. “There will be a revival of this kind of small game hunting to put food on table,” he says.

After her parents' car broke down earlier this year, Tarah, a 28-year-old working mom in the Midwest, struggled over whether to help buy them a new one. She and her husband were working hard to stick to a five-year plan for paying off their own debts.

So she told them she couldn't. "I don't want to think about dealing with that while I'm trying to stay focused on getting out of debt," says Tarah, who asked that only her first name be used.

This single mom from Colorado responds to the question: How has the financial crisis affected you?

The economy is affecting the non-profit where I work. Donations have dropped noticeably, and I assume this drop will continue and worsen. People who do give money in tough times tend to give more to organizations such as local food banks, Red Cross, Salvation Army, etc. The organization for which I work does great things around the world but not usually in humanitarian/relief areas.

For this week's Alpha Consumer Podcast, I interviewed Danny Kofke, author of How to Survive (and Perhaps Thrive) on a Teachers Salary. The concept appealed to me because so many people—including nonteachers—are trying to get by on less right now. Kofke's strategy includes saving up money in advance before big purchases. Before he and his wife purchased their first home, for example, they set aside money each month for years. The same goes for televisions.

Kofke also says no to things he can't afford, including things he'd like to buy, such as dance lessons for his young daughter. Part of his approach involves passing on the lessons of frugality and thrift to his kids.

You can also pick up the Alpha Consumer Tip of the Week on battling shopping addictions, which get worse around the holidays. The top suggestion: Ask friends for help, even it means admitting to some embarrassing behavior.

Jennifer, a writer for The Next Rich Girl who lives in Baltimore, responds to the question: How has the financial crisis affected you?

Recession 2.0 hit me hard and fast, long before news of foreclosures and bailouts started headlining the nightly news.

Here's the video segment from Channel 9 News in Washington, where I negotiated deals at the farmer's market as well as on a homeowners' insurance bill. It's often just as simple as asking for a discount.

According to the Agriculture Department, several types of Lean Cuisine meals may contain "foreign materials" that could be deadly. The recall applies to frozen chicken meals, including pesto chicken with bow tie pasta and chicken Mediterranean. At least one consumer has reported an injury from small pieces of plastic found in the meals.

One of my colleagues tells me that her grocery store, Harris Teeter, has already given her a call warning her about the recall since she has purchased Lean Cuisine meals recently. Giant Food has also issued a recall.

Curiously, I cannot find any reference to the recalls on Lean Cuisine's website. If your retailer acted quickly to warn you about the risk, please let us know.

SVB from The Digerati Life responds to the question: How is the financial crisis affecting you?

So how are we coping during this recession? To be honest, we're much more affected by the slowdown than we'd like to be. Here's our situation: We're both self-employed—my spouse left his job two years ago to launch a start-up, while I quit my job around eight months ago to pursue a full-time career in "blogging" (or, as I would euphemistically call it, a stint as an accidental entrepreneur). Unfortunately, as we both work to build our incomes through our current endeavors, we're seeing ourselves caught in the grip of the economic slump.

Before we tried to strike off on our own a couple of years ago, we decided to give ourselves a year or two to get solvent through our businesses, and if we didn't make it work (have our cash flow equal what we were receiving as full-time employees), then we'd seriously consider returning to salaried jobs or finding additional ways to make money. Well, that two-year allowance has since past, and we're only halfway there. So we're definitely feeling the strain of being new business owners during this current economic period.

Over the weekend, I spoke with WTOP about how wealthy people can prepare for potential tax increases under the Obama administration. While President-elect Barack Obama has emphasized that he would not increase taxes for anyone earning less than $250,000, he has also said that he supports tax increases for the wealthiest 2 percent. Those increases would most likely come in the form of income taxes as well as capital-gains taxes.

If you're wealthy enough to fall into that 2 percent category, then you can try to protect your assets by pulling as much income as possible into 2008, which is governed by the current tax codes. Highly paid basketball stars, for example, may want to speed up their contract negotiations so they have those signing bonuses in hand by December 31.

Today's interview with Amy Mittelman, author of Brewing Battles: A History of American Beer, continues the business-of-pleasure series, which explores industries that create products we enjoy. Not included in the published interview: Mittelman's own beverage habits. She says she regularly drinks beer, especially craft brews such as Smutty Nose and High and Mighty, which her friend makes.

Craft beer, made by small, independent brewers, has surged in popularity over the past few years. Do you have a favorite? Or are you sticking with cheaper brews in light of the economy?

Last week, I spent the morning at a local farmer's market with a shopper working on her negotiating skills for a segment for Channel 9 News. To get the best deal possible, we followed the golden rule of negotiating: Just ask. Simply saying "Could you give me a discount on that?" knocked a couple dollars off each purchase, from jewelry to food.

After buying a salmon dinner and two pairs of earrings for a total of $20, the camera crew and I visited a woman who was trying to get a better deal on her homeowners' insurance. It had gone up by about $20 from the previous year and she wanted to see if she could persuade Allstate to lower the price. So, once again, we called, she asked, and they said yes—they knocked $12 off right away, and offered a bigger discount if she also purchased her auto insurance through the company.

Do you Twitter? The online tool lets you share your thoughts with the world in 140 characters or less, sort of like a mini-blog entry. And in addition to the social benefits -- you can let all your friends know how you spent your morning -- it may also be the best way to communicate with companies.

Starbucks, for example, updates its Twitter feed regularly, and even uses it to respond to customer questions. In the last day, it gave advice on brewing a proper cup of coffee, announced the company's new book club, and clarified the benefits of its new Gold card. The blogging company Six Apart and cable provider Comcast are also on Twitter. If you've found other companies, please let us know by commenting below.

You can find my own Twitter feed at www.twitter.com/alphaconsumer. Come Tweet with me!

If you're planning on applying for a job with the incoming Obama administration, be prepared to share your financial records, credit history, and a variety of other personal details. Transition officials want to know almost everything about potential candidates, and that includes their consumer behavior. Also on the list: mortgage specifics, investments, and gifts from relatives in excess of $50.

What do you think -- is it curiosity-gone-mad, or are these legitimate questions for future appointees?

Treasury Secretary Henry Paulson announced yesterday that the bailout will no longer involve buying up banks’ distressed assets. Now, the money will still go to banks, but the goal will be to more directly free up money for consumers.

In theory, that sounds like great news for anyone interested in a student loan, auto loan, or mortgage. But what does it really mean?

The details are still shrouded in mystery, at least partly because Treasury officials have been reluctant to speak at length to the press. They also say they are still working out the details themselves. But this much is clear: Congress wants the bailout money to help consumers who are currently unable to take out loans at reasonable rates, and Treasury is trying to figure out a way to do that.

Ben from MoneySmartLife.com responds to the question : How is the financial crisis affecting you?

As an eBay seller, I depend heavily on the UPS Store for major parts of my part-time business, so I was alarmed to hear the other night that my local UPS Store is struggling.

I've become friends with the store owners over the last several years, and after dropping off some packages the other night, we began talking about the economy and the financial crisis.

Michael Rubin, author of Beyond Paycheck to Paycheck, urges people to embrace activities that cost nothing, like exercise or playing with kids, and to connect "emotionally" with our money by using cash, not plastic, to make purchases. He recently responded to my questions about his book and overall approach to money. Excerpts:

Why did you write this book—what inspired you?
Generally, people never learn about money, either from school or from parents. Then, once you get into the real world, your sources for financial education are extremely limited. Because of monetary incentives, the large majority of financial advisers target affluent clients. They're not trying to work with regular folks who have credit card debts, student loans, and a couple of grand in their 401(k). Unfortunately, this leaves 99 percent of the population without an unbiased source of financial education.

Veronica, a graduate student in Brooklyn, N.Y., responds to the question : How is the financial crisis affecting you?

I'm actually not sure how much I am affected by recession 2.0 and how much is my own bad judgment. I owe balances on my credit cards, but that was because the school failed to give me enough money to live on this summer, and I had to resort to living on credit. It's not a strategy I recommend in a good economy, let alone a so-so economy.

The three things that have impacted me the most are higher food prices, higher transportation prices and the hiring freeze in city and state governments. Just today, I was at the grocery store, where they were advertising "everyday low prices" on spaghetti. The "everyday low price" was $1.59. I remember when spaghetti was less than a dollar. Even with comparison shopping and buying only what's on sale, I am spending about $10 to $15 more a week than I was at this time last year. That's an extra $40 to $60 a month. That's $40 to $60 a month I can't use to pay down my debt.

Over the weekend, I spoke with WTOP about how to take control of shopping addiction. Compulsive shopping—not to be confused with harmless "retail therapy" after a bad day—is a serious condition that leads people to spend more money than they should and often results in major debt. To help a friend or family member suffering from it, offer to take control of their checkbook for them or participate in activities far from the shopping mall, such as soccer or knitting. In some severe cases, therapy and medication can help.

While only about 5 percent of the population suffers from shopping addiction, experts believe a far greater number, perhaps as many as 1 in 10 consumers, experience a lesser form of it that involves spending more than they really want to.

Today's guest post comes from Jim at Blueprint for Financial Prosperity, a personal finance blog that follows the money decisions of a young professional in th ese challenging financial times.

With the economy in a slump and the Federal Reserve lowering interest rates, it's becoming harder and harder to save. If you're like me, you have a checking and savings account at a traditional bank that is earning an interest rate so low it might as well be zero. In our current economic climate, that's probably not going to change anytime soon. Chances are you've looked toward certificates of deposit as one option for your money, trading in some of your short-term liquidity for a more appealing interest rate, but balked because you are concerned you might need that money before the CD matures.

The Prime Time Money blogger responds to the question: How is the financial crisis affecting you?

My 401(k) balance has been temporarily affected. I'm a long time from retirement (30 years), so I think it might just be able to rebound by then. :) Still, it's not fun looking at the balance. But this hasn't caused me to alter my retirement contributions. If anything, it's made me want to contribute more, because I think stocks are on sale at these prices. In addition to my 401(k), I'm going to try to fully fund our 2008 IRAs before the rebound.  Overall, I think timing the market is a fool's game, but these are strange times where price declines don't seem to be rational. I may be wrong, but I doubt it.

My wife's school expenses were also affected. She attends a masters program at a state university that is normally fully funded by federal grants. This current fall semester the grants were not approved. I suspect (but don't really know) that this was caused by the crisis. We ended up having to pay more than $3,000 after initially thinking it would be free. The remainder of her program will likely go unfunded as well, so that stinks. We're simply planning to put back more short-term cash savings. With more savings required comes a little bit more living below our means.  This equals less dining out, smaller Christmas gifts (for each other), and no big vacation plans this winter.

Send in your thoughts—either a brief description or essay up to 600 words—to alphaconsumer@usnews.com. Please include your name and location.

Check out this week's Carnival of Personal Finance, hosted by one of my favorite blogs, The Digerati Life. Topics include credit card forgiveness, free entertainment, and getting laid off -- unfortunately a timely subject, with DHL announcing almost 10,000 job cuts this morning.

This week's Alpha Consumer Podcast features Sara Bongiorni, author of A Year Without "Made in China": One Family's True Life Adventure in the Global Economy. As the title suggests, Bongiorni and her family spent an entire year avoiding products that had been manufactured in China to see just how global the marketplace has become. Bongiorni, a business reporter, found herself trapping a mouse in a makeshift device, getting creative about toys for her kids, and taking good care of her cellphone, since finding a replacement would have been tricky.

You can also hear the Alpha Consumer Tip of the Week on how to keep your mood up when stocks go down.