Sunday, May 31, 2009

Losing your job, keeping your house.

Forecasters are bracing for unemployment rates to hit a 15-year high 9-percent-plus when the numbers come out Friday. And real estate watchers are nervously looking to see how many previously solid home mortgages might hit the fan as a result.

It's scary stuff. Authorities have sensed for years that many of us really don't know much about the mechanics of those loans that put roofs over our heads. Now we may need to use some of those same loan mechanisms to fight to keep them there.

But what else can we do? The best defense is a good offense. The cheapest, least time consuming and most successful defense is to not get into that particular jam in the first place. Mortgage payments should be among the very last you cut when you go onto your emergency budget.

There are still things you can do of avoiding foreclosure isn't a choice anymore. I recently found a new blog with the unfortunate name of Living Lies that includes a pretty good pared-down-for-consumers version of what lawyers study when they fight foreclosures.

Seek out other foreclosure fighters too. The 37-year-old People Improving Communities through Organizing, or PICO, is just one of many groups marshaling strength in numbers to fight on behalf of homeowners, including those in Kansas City.

Friday, May 29, 2009

There may be extra cash hiding in your pay stub

Need extra cash? Now is a good time to check your pay stub to find it.

Many U.S. wage earners already have piled up refunds for next April, reports Kiplinger's Kevin McCormally. If you are among them, now is a good time to dial down your withholding and bring home a little more of your money in your next paycheck.

It's not hard work. At the simplest, you check last year's tax return to compare the taxes you owed then against what your pay stub says has been collected year-to-date. Then, if your income and tax situation hasn't changed much from 2008 and year-to-date is bigger, go ahead and ask your employer to reduce your withholding.

Don't forget to scope the same numbers on your state income tax returns too. Budget problems have delayed 2008 refund payments in both Missouri and Kansas. We don't know that will happen again, but it's another good reason to get your money now instead of later.

The IRS provides free online instructions, forms and a quick calculator to help you figure how much to change to keep up with stimulus plan tax changes.

And while you are wonking out anyway, why not give all your finances a midyear once over, asks Bankrate Monitor's Kay Bell. Her basic 2003 rundown of what to look for is still good, but some tax rates and other details have changed since then.

Tuesday, May 26, 2009

Looking on the bright side of poverty level...

So, who's better with money, Warren Buffett or Slumdog Millionaire?

The answer might be surprising, say some contributors to The Economist, who found some (to them) unexpectedly sophisticated financial decision making by people living on less than $2 a day.

It makes sense when you think about it. None of us want what we eat tonight to depend entirely on what we earn or find today. So we all engage in what economic deep thinkers call consumption smoothing. That's the set of tricks we play to try saving money as we juggle replacing drafty windows against upping our retirement plan contributions next year.

Some of the smoothing and saving techniques in the $2-a-day world may seem strange. Savers there pay someone to hold money for them instead of collecting interest. But don't sneer. Check cashing is a $1.6 billion industry in the U.S. according to the trade group Financial Service Centers of America. Nearly three in four of us who filed income taxes last April got refunds, IRS reports.

Borrowing microloans from third world developers isn't that strange either. We tap our relatives. And like third world borrowers, many of us put sweat equity into some of our investments too.

So, Slumdog or Buffet? Much as I love Buffett-backed Dairy Queen, I'm voting Slumdog. They're plowing more of their profits into infrastructure for better long term results. More of their kids will likely graduate high school than their parents did. More of our kids may not, reports the Education Trust in Washington.

Sunday, May 24, 2009

Finding a new financial row to hoe

Mrs. Ktnomics and I spent $6.78 at our favorite garden center this morning - a lot less than the $180 or so we've spent for plants and supplies other years.

That's a bargain at either price, say gardening advocates who tout some significant health benefits from puttering around in the back yard. But we've got less money coming in right now, so we're going with the lower price and making up the difference by dividing and transplanting perennials we've added in the past.

We aren't yet going the vegetable gardening route like some other families whose jobs have changed recently, though about half of what we spent this morning is for herbs we'll cook with later. But even putting in flowers and other non-edible ground cover can be economically rewarding. Make it part of an ongoing landscaping plan to preserve or increase your home's market value.

Gardening can save you money on health care costs, authorities say. Probably so, but as an old news guy, I've gotta think that organizations like the American Horticultural Therapy Association have vested interests in making us think so.

Our new challenge is figuring how to do this on the really cheap. Gardening economically is always challenging. But this time around we've really got to do more with a lot less, even though some costs are coming down. Recycling and using found objects kicking around the garage are becoming big parts of our plan. And, like many things we've learned since being downsized, this also often requires spending time to save money.

Oh, and about that nude gardening website I linked to a paragraph back. I suspected when I checked it out that it wouldn't be what you first think of. After all, there are chiggers out there too.

Friday, May 22, 2009

You can't afford to be poor. Avoid it now

Rats. I wish I had written this.

It's a Washington Post piece by DeNeen L. Brown outlining how and why our neighbors below the poverty line pay many dollars more for stuff that those of us who are merely financially inconvenienced can buy on sale. If you've been there, you know.

Researchers at the Brookings Institution and elsewhere have been watching this situation for a long time. The progressive leaning Center for American Progress estimates some 12 million more of us will get an unfortunately first-hand look at the problem in the next 12 months unless unemployment trends improve a lot faster than anyone expects.

Our own individual personal solutions to that problem are obvious. Don't become poor. Doing that with really limited resources, like when you are out of work, is possible. Not easy, but possible. The trick is building a cash reserve. You may not be able to build a big one. But you only need enough to buy a little more time.

Here are some things that have worked for me since September.

First, write down everything you spend. That helps you identify stuff you really don't need to buy, of course. And that, in turn, will help you map out a workable budget if you haven't already. But for me, it also helps curb spending. I really have to want something to go to the extra step of logging the purchase.

Second, give yourself a pay cut. Again it's a budgeting aid. The only way I can think of to save stashable cash, realistically, is to hold spending to 5 percent or 10 percent less than what's coming in.

Third, plan your spending carefully. There are lots of ideas how out there. But, for example, we're stretching our sub-$50 a week grocery budget noticeably by planning how to use leftovers, building menus around supermarket loss leaders, buying store brands instead of big names, and stocking up on staples when those are on sale.

And, goofy as it might sound, buy gas often. We try to not let our tanks drop below half full. Again, what you are really buying is time - to take advantage of the best price you see on the way to wherever you go normally, or to ride it out a little longer if other expenses run high. That beats scrounging change from the cup holders because you are really, really low.

Wednesday, May 20, 2009

When credit cards are outlawed, will only outlaws have credit cards?

All Hades will break loose when the credit card reforms now whistling through Congress become law, our banking friends imply.

Worthy borrowers may find it harder to get loans, the American Bankers Association frets. The estimated 60 percent or so of us who pay off our monthly balances in full may be whacked with annual fees and other irritations like eliminating interest-free grace periods, other industry sources worry.

Yeah, maybe. But I'm not betting on it.

First, this isn't a new debate. It wasn't even new when Kiplinger quoted commentators mewling on it 11 years ago. The end of that world is a long time coming.

Also, card users who pay full balances on time are significant revenue sources for financial services providers. Each time we swipe a card, the financial services industry collects what's known as an interchange fee, usually equal to between 2 percent and 3 percent of the transaction's value. When I paid $173.83 for some auto maintenance a couple weeks ago, about $4.35 of the money went to some guy halfway across the country to cover handling.

We, and specifically the merchants who actually collect the money, paid the banks almost twice as much in interchange fees as the banks collect on penalties that Washington wants to crack down on, the Government Accountability Office calculated in 2006.

And while our two to three cents worth is far smaller than the interest banks collect on card balances, it's also far more dependable. Borrowers can welsh on loans. We pay the fees to use the cards. Lenders aren't going to walk away from easy money like that, say commentators such as Barbara Kiviak at The Curious Capitalist, Rick Newman at U.S. News & World Report and others.

Plus we have good repayment records, which means we generally get some first cracks at the best new offers the lenders make. So if someone tries to slap an annual fee on our cards, we'll walk. And if all the lenders start charging annual fees or abolishing grace periods, that's not a big problem either. Mrs. KTnomics and I are old enough that we get free checks from our bank anyway. They often have free pens in the lobby too.

Tuesday, May 19, 2009

Cheap car keys...a deeper personal finance puzzle

Good luck if you are thinking of buying a new car anytime soon.

Finding deals won't be a problem. Vanishing and merging GM and Chrysler dealers presumably will offer acres of them. Figuring out which are best in the long run could be tougher. Last winter's often complicated rebate offers seem simple compared to what's merging in the on-ramp now.

First, Detroit seems to be trying to borrow Japan's strategy for selling more cars through fewer dealers more profitably. The problem is that this only works when car sales are going up, long time auto industry observer Jerry Flint writes in Forbes. That isn't happening now.

Second, car prices already are so cockeyed that some new models sell for less than comparable year-old trade-ins. Getting rid of what you are driving now could get trickier when acres more new cars hit the market.

Third, new higher fuel economy standards may be kicking in starting in 2012. If so, you already may be driving your best deal until then. Your maintenance, taxes, insurance and similar costs won't go up as much before you buy a new gas sipper. We're already driving our cars a record median 9.4 years, reports auto statistician R.L. Polk & Co. It may be 2012 before sales rebound to pre crisis levels anyway, Polk estimates.

So plan ahead if you're thinking of doing any tire kicking soon. Check out Web sites such as to scout what broadly is out there. And shop around. Stimulus plan creators of cash-for-clunkers programs still may offer more for your trade-in someday than Bud's Auto Auction will.

Sunday, May 17, 2009

Sometimes you need to spend money to save it

I've been patching drywall this weekend.

It's a new skill I've learned because we thought we saved money on some electrical rewiring a few years back. We hired a friend of a friend who interpreted wiring codes creatively. When a short developed a couple weeks ago, the real electrician who came to fix it was only able to find the short by doing some educated guessing and then punching holes in our bathroom wall until he found the improperly hidden connection causing the problem.

The service call cost a couple hundred dollars, plus I'm out $47 more for stuff I needed to fix the unwanted giant colander look in the bathroom.

But I've had time to read while waiting for coats of joint compound to dry. Turns out that growing numbers of homeowners, like me, are learning new skills - or not learning them well enough, in some cases - in this economy. Sometimes the results are funny. Sometimes they are painful.

And sometimes, you just have to spend money to save it, especially if you don't have much to work with. Blowing the money I saved on wiring is a case in point. It would have been cheaper to do it right the first time.

It's pretty easy to come up with other stuff you shouldn't overskimp on too. Car maintenance is just one example. You need to get to work when you find some and a transmission job or other major repair will really burn through your emergency fund. Car insurance is important too. You need to carry as much as you can reasonably afford because, in this economy, other drivers aren't.

Similar choices will become obvious as you think through your budget. Basically, you want to spend a little money now, and spend as little of it as you can get by with, to avoid spending a bunch more later. You'll probably make some personal choices too. My wife and I decided today that we'd probably give up cable TV before our museum membership. Cable is easier to replace and it's much harder to bootleg fine art.

Friday, May 15, 2009

When car dealers close, what's in it for me?

Yep, that is a self-serving question. But there is a lot about the Chrysler and GM dealer closings that I don't understand. And while I feel for guys I know at area dealerships, I gotta wonder exactly how this might bite the rest of us too.

First, what happens to the cars?

The last industry figures I saw showed that GM, Chrysler and other dealers had maybe 111 to 114 days of unsold inventory in the pipeline. You can't sell all those just by slapping a "Bud's Auto Sales" banner over the old corporate logo. My guess is that GM and Chrysler buy a lot of them back, using our taxpayer dollars. Maybe to reduce national budget deficits, the government can gin up a version of the old payment-in-kind farm programs and mail us Chevies instead of tax refunds next spring.

Also, how hard might dealers fight being pushed out of business?

They have options other than curling up in a fetal position. Theoretically, state franchise laws protect dealers from forced closings; that's one of the things GM and Chrysler have been struggling with in the back-and-forth so far. Plus dealers should have political allies. Auto dealers generate about 18 percent of retail sales taxes collected in the U.S. and many states. Some already are enroute to Washington to remind lawmakers.

And finally, how will the changing cost structure affect us at the tire-kicking level?

You may see some pretty amazing deals during the transition. But National Automobile Dealers Assocation chairman John McEleney, already warns of maybe driving 50 miles for oil changes and other warranty work. I don't see that exactly. When Kansas City's Saturn dealers dropped that franchise recently, virtually everyone with a wrench flooded our mail boxes and e-mails with invitations to come see them.

Come to think of it, some of them maybe talked to Congress too. Or at least robo-called them.

Wednesday, May 13, 2009

What's rotting in your wallet?

Okay, so biodegradable credit cards don't work the way I hoped for a moment.

The idea of having a credit card that falls apart before you hit your limit seemed intriguing. But what Discover actually came up with a few months ago is a card that spiffs up the local landfill after expiration.

Some of the credit card reforms apparently headed for passage in Washington may be similarly misleading. Curbing some of the tackier things card companies do to consumers probably helps, but consumer watchers say we still need to take control of our credit ourselves.

Plus, the proposed reforms won't help one group of borrowers who are among the fastest growing users - nearly six in 10 small business owners who are using plastic to keep their enterprises going until the stimulus kicks in. These guys may be heading for a real jam, because a major lender announced it's cutting off credit to maybe a million of these businesses because of soaring default rates. That leaves borrowers scrambling for other sources.

The surest solution to potential credit problems, obviously, remains paying off loans on time. But if that isn't possible, know what you are getting into, financial author Jennifer Openshaw recommends. And start scouting for alternate credit sources ahead of time, she advises.

Monday, May 11, 2009

Skipping Starbucks won't save much money. Go hardcore

Thrift is chic. We've heard that a lot lately. So the question is, how serious are you about saving money?

America Saves recently uncorked some of favorite money-stretching tips it solicited recently. Some of them seem better in theory than fact to me. I've never gardened, for example, because it's cheaper to have friends who do and, in the course of things, become desperate about unloading zucchini. Plus it's hard enough to keep wild life out of the tulips at our house. Who knows what would happen if we planted real veggies.

I don't get the fascination with raising chickens that's gripping the next suburb over either. At best, you're going to need one bird per family per day to make breakfast. As for other meals, I've actually helped butcher, gut and pluck entree chicken as a farm kid. As hobbies go today, that one's got to be shorter lived than home haircuts.

Long time personal finance blogger Trent Hamm recently posted better techniques on It's a free 49 page book outlining how to take control of your money and your life, based on his and other contributors' real life experiences. The basics? Spend less than you earn. Earn more. Live frugally. Manage your income. Control your destinyy.

It's a lot better than cleaning up after the chickens. Believe me.

Friday, May 8, 2009

Stimulus money - there may be strings attached

You know that extra money that started showing up in your paycheck last month? Uncle Sam may want some of it back.

But first - perhaps within a few weeks - the Internal Revenue Service plans to uncork a big educational campaign to help you figure out how to keep as much of the cash as possible. It will deal with the potentially eye-glazing topic of income tax withholding calculations, but watch for it anyway. Whether you get a refund next year and how much or how little may be riding on it.

"This one's a hot burner issue," said Michael Devine, IRS's spokesman in St. Louis.

Here's the deal. To help stimulate the economy, Congress and President Obama earlier this year ordered a tweaking of tax withholding rules so that most everyone's take-home pay would be maybe $8 or $9 fatter, and work out to as much as an additional $400 2009 tax cut on earned income for single taxpayers and $800 for couples. Multiply that times a few hundred million taxpayers and you get some real stimulus working, the theory went.

But real life isn't always as simple as lawmakers like to imagine. Tax professionals and others soon realized many of the changes might get really messy when we calculate taxes next April. That's because the tax withholding tables employers use to calculate our net pay often don't match our individual situations.

A single worker holding down two $20,000 a year jobs at different employers, for example, might get a $400 bigger paycheck from each of them. But the law only allows that worker to keep $400 of the tax cut. He or she would then have to repay the other $400 next April and either get a much smaller refund or owe a larger balance due.

Many of the nation's 33 million dual income married couples are headed for similar trouble. If they both work and are eligible for an $800 tax credit, their employers could refund them as much as $1,200. Then the couple get to figure how to come up with an unexpected $400 more they'll owe at tax time.

Retirees who work part time to supplement their Social Security income, or who are having taxes withheld from their pension checks, may get nailed too. Both are getting extra money now, but may have to give some of it back later. Social Security and pension benefits don't count as earned income, which is what the $400 and $800 credits are based on.

Details of the IRS campaign to help taxpayers avoid these jams will come soon, said Devine in St. Louis. Meantime, IRS already offers an online calculator at its Web site to help you sort out the right amounts of withholding for your situation.

Tuesday, May 5, 2009

Kicking the tires on recession-proof auto financing

Promising to cover your car payments if you lose your job seems at first like the slickest idea automakers have come up with since they began offering cash back a few years ago.

It's probably a better deal for them than for us, though.

Hyundai, which kicked off the plans, offers to cover up to three months of payments and to buy back your car if a financial calamity happens. Ford basically offers to make up to 12 payments at up to $700 a pop. General Motors will pay as much as $500 a month for nine months.

All three plans come with some restrictions. They don't kick in if you leave your job voluntarily or if you lose your job too soon --45 days or so-- after you drive off the showroom floor. And you generally will need to file for unemployment benefits to qualify, according to Consumer Reports.

And unlike cash back offers, the recession-proof financing plans don't seem to cost auto companies much. Hyundai is laying off its potential costs with third-party insurance to cover the $5,000 or so depreciation that can occur when your new car becomes a gently used one. And none of the automakers have actually had to pay much in claims, so far at least.

Meantime, the idea is spreading. Airlines, cell phone companies, clothiers and even the low cost Walgreens in-store minor care health clinics offer versions of the plan, The New York Times reports.

So far, there aren't many takers, though. If your job is shaky enough to potentially qualify, you probably are worried about the parts of the payments that aren't covered by the offers too.

Monday, May 4, 2009

For Mothers Day retailers, it's not the thought that counts

The latest word from the National Retail Federation is a head scratcher. There's a recession on and Mom will understand if we're chintzier with the celebration next weekend, the trade group says.

So, do they really believe that or are they trying to guilt trip us into spending more to help revive the economy? Retail spending traditionally accounts for about two thirds of U.S. economic activity and, as economist Paul Krugman reminds us, too much of anything, including thrift, isn't good for us.

And, boy, are we getting thrifty. I saw something in a Wal-Mart a couple Sundays ago I've never seen before. Six open checkout lanes and not one customer in any of them. I wished I were picking up more than shoe strings and shaving cream; Wal-Mart probably wishes so too. Officially, the retailing giant insists things are looking okay, all things considered.

Other retailers are hurting, though. Retailers hope things will pick up later this year. We'll find out next week if sales are making any recovery from a big drop in March. I'm betting any recovery will modest. Googling frugal in fashion will get you 214,000 hits to choose from.

And I'm checking out dollar stores to see if their prices beat Wal-Mart.

Friday, May 1, 2009

Streetwalking for fun and spare money

You who've been visiting this site lately know I haven't posted to kitchentablenomics for a few weeks. I've been exploring how bleak my economic future might be. Working survival jobs is not bad, but it is busy.

Briefly, I've been canvassing northeastern Kansas residential addresses for the U.S. Census Bureau in preparation for next year's big decennial nose count. I first took the job because it pays more than unemployment benefits. But it's interesting work, plus walking door-to-door for 100 to 200 homes a day is good for the waistline. And, no, Uncle Sam won't reimburse me for the smaller belt I need to buy.

But survival jobs like that one seem to be becoming more of a fixture, especially for those of us who are passing middle age or past it. Deep thinkers tell us that unemployment is a lagging economic indicator; not picking up until the economy is really beginning to hum again. All I know is that there seem to be a lot of us out there holding things together as best we can.

Maybe a fourth of my 20 crew mates were working survival jobs like I was. Numbers of different studies show that there are more of us out of work than normal, even for a recession, and that jobs are scarcer.

So more of us likely will be working short term, relatively low paying jobs to hold things together as best we can. Survival jobs offer some advantages - you feel like you are really working again and there is always faint hope it may lead to something real. There are drawbacks too. Time becomes as precious as money when you juggle survival jobs with job hunting and family time.
And, from a financial planning perspective, you also end up rejiggering budgets more often to adjust to frequent changes in income.