Feb 26 2013

What Does Sequestration Really Mean?

By |February 26th, 2013|Blog, Economics / Politics|16 Comments|

If you have been watching the news then you know that the federal government is going to be required to cut $85 billion out of their budget unless congress passes a law to avoid or change it before March 1st.

$85 billion is a heck of a lot of money. It’s so big it’s hard to understand what it really means. Here are a few comparisons that might make sense.

With $85 billion the government could buy UPS, which currently has a market cap of about $78 billion. That’s about the 70th largest company in the world. Wowzers.

It’s also enough to send every single household in America a check for $642.42. Instead of cutting that spending, the government could reduce spending elsewhere by $85 billion, and then send everyone those checks. Talk about stimulating the economy!

$85 billion is also enough money to pay off 10% of the total American consumer credit card debt. Imagine how awesome people with credit card debt would feel if the government wiped out 10% of their credit card debt!

This $85 billion sounds like a whole lot of money. Heck, it sounds like so much maybe this will solve our debt problem and return America to financial sustainability.

Or maybe not.

$85 Billion is a Drop in the Bucket for the U.S. Government

Let’s pretend that we actually go through with cutting $85 billion out of the federal budget (which I personally can’t possibly see happening. Politicians always kick the can down the road).

To make it easier to understand, let’s scale the numbers to reflect a typical American family.

us capitol

photo credit: ThatMakesThree

The U.S. Government is like a family that currently has $166, 217 in debt. That’s a lot of debt, and unfortunately the family only makes $29,000 a year (tax revenue). To make matters worse, this family spends $38,000 a year (federal spending), meaning they have to go $9,000 deeper in debt every year (federal deficit) just to pay their bills.

If this “family” were to bite the bullet and go through sequestration cuts, it would cut a whopping $850 out of their budget. They would go from spending $38,000 a year to $37,150 a year. They would still have to borrow $8,150 and add that much to their debt (which is already at $166,000!).

If a family came to you and said they had $166,000 in debt and wanted to borrow another $9,000, would you give it to them? I would hope not! Is borrowing $8,150 really much better? Again it’s pretty clear the answer is “no”.

The Government Isn’t Serious about Fiscal Responsibility

Unfortunately the federal government isn’t serious about fiscal responsibility. The sequestration cuts are less than 10% of our current deficit. We’d still need to cut another $815 billion just to stop borrowing money.

This has a serious impact on your personal finances. If the government becomes financially insolvent then you and your family won’t get social security or medicare when you get older. If US government debt gets downgraded again then many “safe” investment vehicles like treasury bonds will become very risky and could lose money.

The US government needs to make drastic spending cuts to become financially solvent (and no, $85 billion isn’t drastic) or else we could be in for a world of trouble when our federal government can’t pay its bills.

Readers: Are you worried about the US government’s spending problem? If not, how much further in debt can the country go before you’ll start to get worried?

Feb 25 2013

Savings Tips for Kids

By |February 25th, 2013|General Personal Finance|5 Comments|

It’s never too soon to start saving. Financial experts will tell you to start saving for retirement when you get your first job, to save for a home long before you’re married, and for college when your first child is born. The same advice goes for teaching kids to save. Getting them on the right path early on means they’ll have formed positive saving habits for bigger life goals.

Pick out a piggy bank

Take your kids shopping to find a creative piggy bank that matches their personality, or decorate a plain one together. Go on a coin hunt around the house, any loose change they can find goes right into the jar. This sets the perception that saving is fun, not a chore, and something they can be proud of.

Take it to the bank

Open a savings account when your child starts elementary school. While this may seem a little early, it’ll give you a chance to give their savings a little boost and make them feel a little more grown up. Start by giving them the minimum deposit; then, add whatever they’ve saved up so far. They’ll be at the age where they’re learning about coins and the value of a dollar in school, and they’ve probably started pitching in around the house – making beds, picking up toys, and setting the table. Each of these chores can be used to earn a little extra income, which means a little more savings in their deposit account.

Set up incentives

There are a few ways to do this, and you may choose just one or work in a combination of all three.

  • Start a matching program for your deposit account. For example: Each time they make a deposit of ten dollars, you’ll add in another ten. You could also choose to do a percentage of what they add, just like a 401k contribution.
  • Make saving a game. For each milestone your children reach, $50, 100, $150, $200, they receive a different reward. Some ideas could be being treated to ice cream, getting a new toy, or getting a week’s allowance without having to do any chores. Let them pick out some of the rewards so they feel invested in what they’re earning.
  • Go for the goal. As they get older, change it up a little. If there’s something they want, like a new guitar or a video game, encourage them to save for it. Once they’ve saved up what they need, agree to pay 25-50% of the cost if they save the rest. This helps them feel like they’ve accomplished something on their own, and doesn’t drain the account every time they make a purchase.

Open a high-yield savings account

By the time your kids are in middle school, they could have some pretty significant cash lined up. You might even be a little jealous. Take this time to teach them more about savings account interest rates. On a standard savings account, the interest rates are pretty low, and they aren’t earning much more than they put in. However, with a high-yield savings account, their return on investment will be much higher. High-yield savings accounts have a minimum balance to open, which means you may need to wait until they have a few thousand dollars put aside, but it’ll be worth the investment in the long run.

Talk to them about their long-range goals

A high-yield savings account could help your children save up for college or a new car. As they get older, ask them what they want to use their savings for, and be honest about where you expect them to pitch in. Maybe they need to buy their own gas, or pay for their music lessons; or, maybe it’s time to open up a joint checking account to give them more access to their savings. Work out their saving and spending needs together; then, talk to a representative at your local bank to find out which savings account interest rates and options are best for you and your children.

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Feb 19 2013

I Saved $100 By Making Companies Compete

By |February 19th, 2013|Blog|9 Comments|

About a month ago I was installing a new dishwasher and I was using Tag’s cell phone as a flashlight. Being the handyman that I am, I got water all over the place and it destroyed Tag’s phone.

We had been talking about getting on the same cell phone plan for a while, and my little mistake made “someday” become “today”.

I had dropped my phone in the toilet a few weeks earlier (oops) so we both needed new cell phones at that point. We decided to spend a Saturday shopping around for new phones at the four big companies: AT&T, T-Mobile, Sprint, and Verizon.

Four Companies, Four Options

Our first stop was at AT&T and they were offering a promotion for buy one Galaxy S3, get a second for $100 off. We weren’t thrilled about the plans, but we had our first option.

Next we went to Sprint. They had a little bit cheaper plans but didn’t have the phones we wanted at the right price.

Third we went to T-Mobile. At this point we had the brochures from the first two places in our hands and we were comparing the T-Mobile plans to the other two right on the spot. We didn’t like what T-Mobile had to say but they did offer us a $50 discount if we signed a contract that day. They knew we were shopping around and they wanted to stop us from looking elsewhere. Of course we still left.

Finally we went to Verizon. Their plan was better than AT&T and about the same as Sprint (after my company’s corporate discount), and they did have the phones we wanted but they weren’t on sale.

Make Them Compete

Instead of just picking the best option and going with it, we wanted it all. We liked Verizon the best but we didn’t like paying full price for two phones.

competition

photo credit: Paolo Camera

We told them that if they could match the AT&T promotion ($100 off) then we would probably choose to go with them. The salesman said he’d have to talk to his manager.

We left to think things over and the Verizon salesman called me back and said they wanted our business and they were going to match the AT&T promotion.

We saved $100 just like that.

Competition is Good for YOU

I guarantee if we had just gone to Verizon and said we wanted two phones that they wouldn’t have even considered giving us a deal. They don’t make money by handing out deals when they don’t have to.

The only reason they gave us the deal is because we asked for it and we were willing to go elsewhere if they didn’t match it.

Don’t be afraid to let companies know that they need to compete for your business. I used to think it was an insult to tell one company that you are also considering another. Now I’ve realized it’s just honesty and it’s good business.

Companies know they are in competition for your business, and they all want to win. If you give them a path to the finish line (give me this and I’ll pick you) then there’s a good chance you’re going to get it.

Readers: How have you pitted one company against another to save yourself money?

Feb 19 2013

Substandard Care from GP’s

By |February 19th, 2013|General Personal Finance|Comments Off|

When you are unwell you go to a doctor and you trust their medical opinion and the way they look after you. However, more and more GP’s are under pressure to meet targets, they are struggling with strict budgets and rising workloads. The head of the Royal College of GP’s has estimated that the NHS needs another 10,000 GP’s to cope with increased workloads and provide adequate out of hours patient care. Is this increased pressure on GP’s leading to more cases of medical malpractice as doctors are overworked, stressed and tired? Since 2004 most doctor surgeries chose to opt of providing out of hours care, leaving the Primary Care Trusts to provide the care. As budgets for out of hours care are getting cut, some PCT’s are also using just one doctor to cover areas with thousands of patients in out of hours times. A report by the Daily Mail showed that some nights in Cornwall one GP was covering 535,000 patients and one in Mid Essex 370,000 between 7pm and 8am. If these doctors had a lot of call outs you can see how they would become stressed, tired and easily miss an easy diagnosis if they are thinking of the other five patients they need to see.

More private companies are being used by the care trusts to provide locum doctors to cover out of hours times. Some out of hours providers have been found to employ doctors from overseas without checking they have the necessary medical skills or can even speak a comprehensive level of English. Some of the private companies are also using skeleton staff to ensure they maximize profits; the emphasis is very much on money and not at all on patient care.

health pillsThese factors are leading to more and more legal cases against GP’s as more fatal mistakes are being made. In 2008 pensioner David Gray died after being administered ten times the recommended dose of a painkiller by a German GP. Then a baby was misdiagnosed at an out of hours clinic in Ipswich and died of whooping cough after being sent home with an inhaler. A locum out of hours doctor has recently been jailed for two and a half years after failing to send a seriously ill man to hospital.

If you have been a victim of poor GP care then be sure to get legal advice on this matter as you may be entitled to compensation if you have suffered as a result of the care. Solicitors at Bolt Burdon Kemp are medical compensation claim specialists who could help progress a compensation claim.

Feb 14 2013

40 Days of Eating In

By |February 14th, 2013|Blog, Life|6 Comments|

Yesterday was the first day of Lent, which means it was the first day of mine and Tag’s Lenten sacrifice.

There are about a billion things I could do to make myself a better person, but Tag is almost perfect so it was hard to find something we could do together. However, after a little discussion we decided that we wouldn’t eat out for the next 40 days.

Stop Eating Out to Save Money

One of the best reasons to stop eating out is simply because it will save money. I have no idea exactly how much money you can save by saving money, but I do know it’s pretty substantial. A meal at a fast food restaurant is always around $5-10 and is usually terribly unhealthy.

healthy dinner

photo credit: anneheathen

A loaf of bread and a pound of deli meat is also around $10. Add a few bucks for chips and fruit and you can eat lunch all week for less than what it costs to eat lunch out for two days.

For dinner we can save even more money. We typically spend more money on something a bit nicer when we get dinner, so let’s call it $10 a person. That’s a lot of money for just one meal. I’m sure I can at least cut that in half and still have a great meal at home.

It looks like we are talking about over $100 a month just by cooking food at home. That’s not bad.

Stop Eating Out to Stop Getting Fat

Full disclosure: I’m surprised I’m not dead from all the chicken nuggets and french fries I’ve eaten in the course of my life.

Just try to find someplace that serves a healthy vegetable at a restaurant. If you find that, you’re probably at a crazy fancy place that is going to run you $20+ per meal.

By eating at home we are going to be able to control our portions better, include more fruits and vegetables, and stop giving our hard earned money to Mr. McDonald and Mrs. Wendy.

Give Up Something for Lent!

Whether you are a christian or not, now is as good a time as any to spend the next 40 days (not including Sundays) giving up a bad habit or committing to a good habit.

Try to pick something that’s easy to keep track of. “Work out more” or “eat healthier” are bad examples because there’s not a good way to measure them. Something like “don’t eat out” or “go to the gym 5 times a week” are much better because either you did it or you didn’t.

Finally, remember that it’s only 40 days and you get to cheat on Sundays. If you count the number of days between Ash Wednesday and Easter Sunday there are 46 days; remove the Sundays (because they are for celebration, not fasting) and you get the 40 days of Lent.

I think New Year’s resolutions fail so often because there’s no end in sight. With this, you get 40 days and you’re done.

If you want to keep going after 40 days, tell someone to give you a high five. If you get to 40 and go back to normal, then at least you saved money or got healthier for 40 days, right?

Readers: Share your Lenten sacrifices or resolutions.

Feb 13 2013

Would the Skyfall on James Bond If He Were To Insure His Car

By |February 13th, 2013|General Personal Finance|Comments Off|

The following is a guest post on behalf of Shreya

Hello. Mr. Bond, is it? Mr. James Bond. We here at Double Oh Insurance are most glad that you have decided to contact us as a part of your effort to compare the market for coverage on your latest vehicle, the Jaguar XJ L. I see you have some questions as to the amount you were quoted. Very well, let’s go over the facts, shall we?

The Car Itself

James BondThe, as you put it, Bondmobile is a Jaguar XJ L. As you know, this is a very expensive vehicle. The average motorist will not putt about in a Jaguar XJ L with a 3.0L v6 diesel engine. You are looking at a luxury car here, Mr. Bond.

However, to further complicate matters, the so-called “Bondmobile” is not just an expensive luxury car. I see that you have had many customisations applied to the vehicle. Those ejector seats, guns and other gadgets you say are for work all add to the value of the car and, thus, to the insurance premium’s cost. Just what is it you said you did for a living again? Ah yes — civil servant is it?

Bond, James Bond

In addition to the value of the car, we must also look to you, Mr. Bond. It says here that you live in the SW3 region of Chelsea in London. You claim to be 40 years old and, as we have established, you are a civil servant. Your age, area of residence and employment are all in your favour as these are all signs of a good, safe driver. This is good, but your driving record? Well let’s just say it’s not so good.

Spying Ain’t Easy, But It Sure Is Fun

What’s so wrong with your driving record? Let’s start with the many Aston Martins you have wrecked over the years. Although you claim each and every one of these accidents are “work related,” we fail to see how a car that got destroyed by a rocket propelled grenade could possibly be related to the work of a civil servant. Perhaps you’re a super spy or something, but that is silly – isn’t it?

Furthermore, your driving record is questionable at best. There is a long list of traffic offenses attached to your record, Mr. Bond. Running traffic lights, excessively mind you, is only the tip of the iceberg. Other traffic offenses include driving at high and dangerous speeds and performing dangerous stunts while driving. Worse yet, you appear to have done all of these things while talking on your mobile phone. I’m afraid these things all add up, Mr. Bond.

In addition to being a danger to yourself, you apparently have quite the history of being dangerous to other drivers on the road as well as pedestrians. There are many accounts in your record of dangerously driving through heavily populated areas, all the while forcing drivers off of the road. Additionally, your antics have caused many injury claims to be filed against you by pedestrians as well as property damage claims resulting from your high-speed antics. Then there is the foreign use insurance you have requested. I’m afraid that, due to the frequency with which your employment seems to take you to strange and exotic locales, not the least of which is underwater, that will also lead to an increase in your insurance premium.

In Conclusion

Taking into account all of these factors you can expect to pay nearly 20 times the car insurance premium of what an average person would have. I realise that this might be disappointing to you, as you were hoping to find an inexpensive solution to your insurance needs. I would strongly suggest that you continue to shop around and compare insurance rates. You never know what deals might be available from other companies, and you might be able to find a premium amount that is hopefully less than what we have quoted you.

We wish you all the best in your hunt for inexpensive car insurance, Mr. Bond. If you are unable to
find a lower rate, please keep us at Double Oh Insurance in mind. Good day, sir.