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.

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!

My husband has been dabbling in the stock market a bit (since the end of June), mostly so that we can earn more than our paltry 1.75% interest on our savings account. He opened an account with an online broker and made some stock choices based on his own knowledge of some companies. He’s done quite well, profiting at about 16% (give or take a couple percentage points). However the companies he originally picked out are ones that will slowly simmer over the next few months and he isn’t ready to sell his shares. So he decided it would be best to expand his portfolio and begin day trading more volatile stocks. We originally only had 25% of our savings in his online stock account, that amount had to increase a little so he could begin day trading. We increased our investment amount to 40% of our savings, 60% of the money we saved is still sitting in our savings account. We felt this was still a safe amount that we could use toward trading.

Current Stock Holdings-Not too shabby

Before investing in any company, he began studying various investment sites; YahooFinance, Google Finance, Fool.com looking for affordable stocks that were increasing by an outrageous amount daily. When he found a company he thought looked promising, he would compare their weekly growth, volume, and a few other variables and would make his choice and write it on a post-it note. Since our online broker takes a while to transfer funds, he wasn’t actually investing any money, just making notes at the end of one business day and checking at the start of  the next business day, sort of practicing his day trading skills. After a week of green post-it notes all over his desk he realized that every company he picked gained a minimum of 34% in one day. One company he selected  grew 74% in one day! Too bad he hadn’t actually invested yet.

So the day came when he had a little extra money floating around in his brokerage account. He had done his homework and picked a company he felt would profit the next morning. He placed his order with the online broker and put in a bid: if the stock hit $1.21, buy 100 shares. This was a small test to see if he could profit in real life and not just on paper. The next morning he got up at the crack of dawn (we’re on the west coast) and was so excited his stock choice had gained 34%!  He placed his order to sell, and…..realized the purchase had not gone through. He quickly emailed the brokerage account and asked why his purchase order never went through. He soon realized his mistake, he had placed a market bid. The stock had closed at $1.18 and opened at $1.25. It never hit $1.21.

At least the order that never went through was a small one. While we’re waiting for our money to credit to our account, my husband is continuing to practice his stock trading skills and now knows that he either has to place his market bid slightly higher than he thinks the stock might hit, or place a limit bid. Good thing this is something he is learning, I don’t think I have the patience for all the homework!

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.