There are many quotes that go something like this, “Everything old is new again,” and, “What comes around, goes around,” and also, “History tends to repeat itself.” Well, I’ve been reading many articles comparing this recession with the one from the early 80’s (1983 to be exact), and also articles comparing our current economic downturn to the Great Depression. Of course, so many things have changed since 1929 that I don’t think it’s fair to accurately compare our current situation to that of 1929. I also wasn’t alive then, so I have no personal experience to draw from. However, I was alive in 1983, so I can sort of use this as a point of reference and compare it to today’s economy.

In 1983 I was in the 5th grade. My stepfather was already retired, due to a bad back, and my mother was working part-time as an undercover security guard. She went through a phase where she wanted to do something with law enforcement. They were very middle-class, per se.  My stepfather’s pension was enough for them to live comfortably off of, and he also owned a 4-unit apartment building that he had inherited, this brought in a little income every month. However, that year, we were planning to make a big move to a huge house closer to the ocean.

My stepfather had invested in a solar company, he had a lot riding on his investment that year. The profit he was going to make off these stocks, once he realized the profit by selling his shares, was enough to cover the majority of the new house that we were waiting on. He was going with a “put all your eggs in one basket” approach to investing. (You can see where this is leading!) We would visit the house every couple of weeks and check on the progress of the building. It was exciting, it had an atrium in the center, a formal dining and living room, and a huge family room. The four bedrooms were enough for the four of us plus an office. My mother couldn’t wait to have a huge bathroom.

Then, that same year, the solar company folded, and my stepfather lost all of his investments due to some insider trading. I came home one afternoon from school to find him crawling on the floor screaming. My mother told me to go to my room and not bother them for a little while. Needless to say, we didn’t move into the large house with the atrium.

However, we weren’t as bad off as others. We still had our smaller house, that was almost paid off, and we lived like we always had, comfortably, but very middle-class. My parents were, and still are, very frugal. They only purchased cars in cash, and only when they absolutely had to. They only ever took one exotic vacation that I remember, and they weren’t trying to keep up with the ‘Joneses’ or our neighbors. They also had no debt, except the small amount they owed on their mortgage.

So how does this relate to this year’s economic turmoil? It seems that those who have always lived frugally are doing better than those that lived it up during the ‘good ole times.’ Their lifestyles haven’t changed much, as long as they were able to keep their jobs, and not have too much debt hanging over their heads. Those people who stayed put, in their slightly smaller homes, are also not facing foreclosure as frequently as those individuals who traded up or bought a house much too large for their pocket books. So, living frugally and not having any debt seems to keep those heads above water for a longer time.

Perhaps, my next post will focus more comparing the job outlook of 1983 to today’s. I think this is the one area where we differ from 1983. Also, my perspective from my parent’s lifestyle doesn’t really address this, since they really weren’t working full time. To be continued…..

I have a personal dislike for JP Morgan Chase Bank. They canceled my husband’s credit card, even though it was paid in full, and paid in a timely manner without any late payments. They closed his card for very vague reasons that we still don’t understand. However, they recently posted a profit that made the stock market zoom off the charts. So, does this mean our economy is now recovering (in part due to JP Morgan Chase)?

Stock Market October 14th, 2009

I’m slightly hesitant to say we’re in a recovery, even with the profits posted and the stocks improving.  In my opinion, I think the economy has seen the worst, in terms of banks losing so much money on irresponsible loan practices, which negatively impacted our economy. Yet, with a high unemployment rate, or people living in fear of losing their jobs, consumers aren’t yet ready to spend like there’s no tomorrow (nor do I hope this happens anytime too soon). I, personally, feel like the majority of the population will become more financially aware and avoid sinking further into debt given the lessons learned from their own individual mistakes and the mistakes of large banks.

My view of the population’s habits may seem a bit optimistic, I guess I’m just a “glass is half full” kind of gal. In contrast however, I’m not nearly as optimistic as some realtor’s seem. For instance, my husband was searching for homes in our price range (mid $200’s) through Craig’s list the other day. Many homes in my neighborhood have fallen into foreclosure and banks are now trying to sell them for half of what the original owner paid for them a few years ago. But, some of the homes realtor’s are trying to sell are still around $700,000 or more. I understand how some homeowners may be desperate to sell their homes and do not want to lose much money on them. However, this is quite unrealistic given the current housing market and economy (especially California’s  state economy!).

So where does our economy go from here? And, when will we truly see a marked improvement? In a perfect world, our economy would shrink slightly, compared to what it was. Consumers would be more thoughtful about their purchases, instead of excessively consuming. Our country would begin to manufacture some of our own items, instead of relying entirely on imports from other countries. (Maybe this is too general of a statement, but I’m trying to make a point). Cities and towns alike would build a network around local businesses, supporting each other’s goods and services, generating income that moves within a city and across a county, state, or internationally (new money obviously needs to enter any city or town to drive the economy). Cities and towns would also work on building a better infrastructure of transportation, incorporating pedestrian friendly centers and bike friendly towns to reduce pollution.

When people can feel confident that they are not in jeopardy of losing their jobs, can save money for rainy days, and purchase items using cash, not credit, then I think we will be in the black and on our way to a healthy economy. The lessons learned during the depression of the 1930’s are similar to the lesson’s we are relearning today, don’t over extend yourself, your income, or your credit: live frugally.

Time Management Skills, or Budgeting Your Time Wisely

Now that I’m back in school, opening a special education class in a week, and continuing to help my husband on a few projects, I really need to budget and manage my time wisely. Just like setting up a financial budget, budgeting time is one item I consider extremely important. No longer can I surf the web for random stories, browse sites I like to call my “junk” sites, basically celebrity gossip sites I quickly glance at, or search for my next new hair color. My time between now and mid-December needs to be managed down to the minute, or I will end up having panic attacks and procrastinating on items that have due dates.

One thing that has worked for me in the past is staying on top of my email. For example, most of the projects my husband throws my way are smaller projects I can handle on my own; a postcard design,  client website updates, a revised brochure, etc. To keep in contact with these clients on the progress of their project, I check my email daily and make sure I respond to their questions and comments within the same day. For the most part, I  keep this up by checking my email as soon as I get home at 3:00pm. Most projects only take an hour or so, and I can squeeze in some time before dinner. The clients I work with directly are  satisfied with the due date of their project as long as I am fairly accurate on when they can expect to see something completed.

After working on a website revision or postcard design, I budget 2 hours for reading school assignments. Since I’m only attending school part-time and taking 2 courses, I’m not overloaded with a full-time schedule. Luckily I’m a proficient and fast reader, most likely because I was encouraged to read a lot as a child (but this is a whole other topic), and can keep up with the reading requirements for this semester. Reports and summaries can be included in this 2-hour block if I take notes while reading, a terrific activity to remembering what I’ve read. Note-taking is also helpful if a test is coming up.

On the weekends, I can spend a few hours each day catching up on my reading, reporting and summarizing. Only recently have my husband and I been able to take a weekend off, a rare advantage to being self-employed. The remainder of the weekend I can use to clean, not very fun I know, but this post isn’t about having fun really. My husband and I turbo clean the house, he vacuums while I clean the bathrooms. We jointly clean the kitchen and can have the house cleaned with in an hour or so.  Laundry is something I can do all week, throwing in a load here and there between phone calls and reading. If I manage to complete all of my tasks and reading, I might even have a few hours in the evening to sit on the patio, drink a beer, and cook out – now that’s my idea of fun!

I guess the best way to finish all of my work, now that I have a many obligations, is not waste any time. I’m a person who doesn’t procrastinate, unless I begin to panic, and I outline a lot of my ideas, articles, summaries, etc. before I begin writing. Most of the work is finished by the time I complete an outline and my thoughts are somewhat organized. So in summary, and to show off my outlining-time managing skills:

• 6:30 am: wake up, get ready for class (the special ed class I’m opening – this has a daily schedule all on its own written in a plan book)
• come home, check email, respond to clients
• finish client projects (1-2 hours)
• read assigned books and summarize (1-2 hours)
• spend half an hour to an hour making sure I’ve written a post for my blog and commented on blogs I like to read
• have dinner, a beer, and watch a movie (do sit ups while watching a movie to squeeze in exercise and negate that beer)
• go to bed by 10pm
• start all over again the next day (if I’m feeling enthusiastic, wake up 45 minutes earlier and ride my bike to school)

I need a nap now. I got tired just outlining what my day will be like in a week.

Dip and Dive

Every June, school children are ecstatic to see summer come. Heck, by this time of year, I’m ecstatic to see summer come.  But that means, for me at least, I am out of a job. As a substitute teacher, I only get paid when I work. When summer rolls around, as happy as I am to get a break, I don’t earn any money. Especially over these last two years with budget cuts, many schools aren’t hosting summer school anymore; this use to be my saving grace.

My husband and I have gotten accustomed to a reduced, and highly erratic,  income from July through November. In the past, when our income slowed down, we would use our credit cards to keep our heads above water and our bills paid. This, of course, would just feed into our overall debt we owed. However, this year, instead of sinking deeper into a hole, we had to dip into our ‘house’ savings account instead. As guilty as I felt using some of our savings to pay all of our bills, at least I could feel a slight relief that we weren’t accumulating any debt.

Highly erratic Income: 2008 and 2009

Status Quo

Luckily, with my husband’s business trucking along (no, he’s not a truck driver, so there’s no pun), we didn’t have to exhaust our savings. We modestly ‘borrowed’ from it only when it was necessary. We were able to only borrow small amounts because we reduced our spending in other areas, namely:

• we didn’t drive as much
• we ate at home more
• we only purchased necessities

We were even able to increase our investment account and continue trading stocks to build our over-all wealth.

New Savings Goals

Since September is right around the corner, and I have a job lined up for the beginning of the school year, we should see our income increase by October. My original savings goal was to have $20,000 saved by the end of the year. However, I’ve had to readjust this goal. My new goal is to save an additional $3,500 by November, since I’ll be a couple of months in to teaching, this should be reasonable. To some, this may seem like a lofty goal, but we should see quite a bit of income streaming in over the next 3 months combined with my husband’s income (there is definitely a seasonal trend based on past years  QuickBooks reports – another nice thing about QuickBooks).

My revised year-end goal is a modest $12,000, this also includes our brokerage account. The initial $20,000 that I had hoped to save by years end will have to be pushed back a few months. By March 31st I should have the $20,000 saved, possibly enough for a down payment, though not the 20% we would like to see. Drats to PMI!

Over the last 8 months, my husband and I have been saving for a down payment. We had a nice little start and needed to place it somewhere safer than under the bed or in a boot. So the question came up, where should we put this extra money we saved? We couldn’t leave it in our checking account, it would be far too easy for us to ‘accidentally’ spend and it wouldn’t make us any money.

A savings account was obviously the better place for it. We searched Bankrate’s savings accounts by interest rate, and decided to place it in a Capital One high yield savings account. They don’t have the highest interest rate of all the possible banks, but at least I had heard of them and their rate wasn’t much lower, at 1.75%, than any of the unknown banks. Flashback for a moment, I remember when I was a teenager and rates were 6-8%, those were the days! Too bad I didn’t have much money then.

A month ago, while our savings account was slowly accruing a little interest, my husband had a brilliant plan for us to make more than the pitiful 1.75% interest, invest in stocks. Yes, this is slightly risky, however we decided to take a small mount from our savings (25% of our savings to be exact), now that we actually had a savings, and invest using an online broker. So far, my husband has made some good choices and has been consistently profiting 8-9% on his investments.

The goal is to continue profiting more than our 1.75% savings rate so that in the next 6-12 months, the stock investments will contribute toward our down payment. If we can stick to our savings plan, we might even be able to continue investing after purchasing our little house in the valley.