Beating Broke

Personal Finance from the Broke Perspective

Keeping Up With the Smiths

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Keeping up with the Joneses is bad.  We know that.  From a financial perspective, we spend a great deal of our time overcoming the green monster called envy in order to keep our lives in some semblance of financial order.  We know the Joneses down the street with their big, fancy new SUV.  We see them going on long family vacations.  And we know the guy that mows their lawn.  But, we also know that there’s a pretty high probability that they still owe a ton of money on that SUV.  That that family vacation likely was financed through a credit card.  Their entire financial life depends on them keeping their well-paying jobs.

Forget the Joneses

I’d like to talk about another family.  The Smiths.  You don’t know them.  We don’t talk about them like we do the Joneses.  Why don’t we?  Because, outwardly, their lives are nothing to be envious of.  They don’t own a big house on a double lot.  They don’t drive a brand new Escalade.  Their family vacations consist of weekend trips to state parks or trips to visit family a couple of counties over.  Outwardly, they may even seem a bit downtrodden.  They may seem (GASP!) a bit poor.

Sometimes they are.  Sometimes, they are truly victims of their circumstance, or their poor financial choices along the way.  But, for every one of those families, there’s at least two that aren’t poor.  They have well paying jobs.  They have money in the bank.  And they occasionally barbeque a steak on the cheap grill they have on their back deck.  It’s those Smiths I’d like to talk about.

It’s the Quiet Ones You Have to Watch Out For

Why don’t we know the Smiths?  Because we live in a society that is enamored of our celebrity.  We hang on every word that that famous athlete, or famous actress says.  We try and model our lives after theirs.  They live a glamorous life, full of flashing photography, red carpets, and any number of endorsement deals.

Keeping up with the Smiths

Who wouldn’t want to be like that?  Short of being famous, we decide that we’ll see how close we can get.  The bank doesn’t turn us down for that big house, big car, or vacation to the same beach that the celebrities hang out on.  Maybe we’ll even get to see one of them!

But, it’s the Smiths we should know.  We should know people who live their lives responsibly within their means.  We should know people who live for more than having our fellow neighbors think about how rich we are, and how rich our lives must be.  We should be the Smiths.  We should be the people who drive the reliable older car without the flashy rims and booming sound system.  We should be the people who live in the smaller house that we try and repair ourselves.

Society may push us towards that Joneses sort of lifestyle.  After all, what would become of some of the companies if we stopped trying to keep up with the Joneses and stopped buying all their luxury goods?  What would the news and tabloids cover if we weren’t constantly buying their rags in order to find out what sort of clothes the princes and princesses of some foreign country were wearing this spring?

Shiny Facades, Crumbling Foundations

All around us, there are Smiths.  We don’t notice them, and we rarely get to know them.  We’re surrounded by the Joneses, and the shiny facades of businesses and economies that are driven by their reckless spending.  But, under those shiny facades is a crumbling foundation.  The economy of the world is on shaky ground.  We saw just how shaky it really was in 2008.  When the housing market crashed, it very nearly brought the entire world economy with it.  Luckily, the economy was strong enough at the time to take a beating.  It wasn’t strong enough to bounce right back.  It’s been a long slog back to where we were.  We aren’t even back there yet.  There are still parts of the world that are hurting economically.

Imagine, for a moment, if we rebuilt that economy, not on the sands of bailouts and extended unemployment benefits, and instead built it on the bedrock of hard work and frugality that got us where we were in the first place.  Imagine if we had seen the folly of our loose spending ways and tightened our belts, stuck to our budgets, and started building an economy that doesn’t shake and quiver at the smallest rise in unemployment, or the slightest miss in an earnings report?

What if, instead of running around willy-nilly chasing the lifestyle of the Joneses, we were calmly working ourselves into the stable economy of the Smiths?  What if we all didn’t have wait for our next paycheck to buy gas because our last paycheck went to our mortgage and car payments?  What if we were able to fill a tank of gas from the cash in our bank account and know that we still had our emergency funds to help us along should a real emergency come along?

We can.  We can bring our spending in line with our earning.  We can sell the fancy car that we don’t need.  We can downsize our house to something that we can afford.  Sure, the dependable used car you buy might not have as much chrome as the fancy one.  It might not have the same heated seats.  And the house you downsize to might not have a walk-in closet, or a jacuzzi bath tub.  I’ll let you in on a little secret.  You don’t need them.  They’re luxuries.  You only think that it’s normal to have those things because the Joneses told you it was.

We should be keeping up with the Smiths.

We can be the Smiths.

American Economy on the Brink of Collapse?

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I think it’s normal, during hard times, to consider what might happen should the worst happen.  A recent post by Crystal, asking “Will You See the Collapse of America“, brought the question to the forefront for me.  Is the American Economy on the Brink of Collapse?  Will we see the collapse of America?

First, the optimist in me immediately says no.  There are too many good things going on in our country for it to collapse completely.  The stock market just came off of a really good year.  The job market is, if not rising, holding somewhat steady and certainly isn’t gushing jobs like it was in 2008-2009.  And, up here in North Dakota, we’re working on providing lots and lots of oil.  We just need a little bit more refining capacity to do even better.

But, those aren’t the only indicators.  Crystal points to the slow degradation of our rights, and our ever increasing consumerism as reasons that America might collapse in 100-200 years.  While the loss of rights is something that we have to do something about, our consumerism had shown signs of slowing down.  With the crash of the housing market, the average saving rate had been rising.  From a low in 2005 of 1.5%, to a rate of 5.4% in 2008.  Since then, it’s begun to slowly work it’s way lower, but is still close to 4%.  At the same time, the average consumer debt held has continued to decline.  Maybe, just maybe, we’re making a difference and a better educated population is starting to make the changes that are necessary to be more financially stable.  Now, if only we could convince the government to do the same.

An Economy, Broken.

And, really, when we start talking about the American economy, it’s going to be the government that makes it or breaks it.  After all, you and I can save 100% of our income, but it won’t do a bit of good against a $17 Trillion dollar (and growing) debt.  The truth is, with debt that increases by several Billion each day, the rate of personal savings won’t do a bit of good.  At some point, the countries of the world that use the Dollar as a basis for trade will cease to do so.  The continual weakening of the dollar against the other world currencies (even BitCoin), makes for a potentially disastrous recipe.  It’s very possible that, if spending (and that debt) don’t come down, that the American economy could find itself between a rock and a hard place very soon.  And that could spell a major recession or depression.  How the government reacts to such a thing could be the only indicator of whether the economy ever comes back out of it, and, ultimately, whether the America we know and love continues to exist.

Like Crystal, I think the eventual collapse of the economy is unavoidable.  The government hasn’t made any meaningful steps to reduce debt or spending.  And the majority of the population either don’t see it, or believe that the people that we are electing are going to save us.  Frankly, without a major overhaul of the government, and some changes to who we elect, it may be too late.  Really, it just comes down to how quickly the collapse will come.

Crystal thinks it’s 100-200 years from now.  She may be right as far as the collapse of America.  The country itself might last that long.  The Roman empire lasted for many years before finally collapsing completely, but the signs were there for a very long time.  If I’m being optimistic, I think we might have 4 or 5 years before we see any major collapse of the economy.  But, we’ll start seeing signs even sooner than that.

American Economy on the Brink of Collapse

Signs of the Collapse

What signs, you ask?  There are some broad indicators, like the overall housing market and the stock market.  The rate of inflation as well.  But, unless you’re heavily invested in the stock market, that indicator might not make much difference to you.  Watch for more simple indicators.  The price of gas.  The cost of a gallon of milk.  The cost of produce.  When you combine all the simple indicators that you notice every day with the overall indicators, you should be able to make a pretty good guess which direction the economy is heading.

What next?

Let’s say that I’m right.  In 4-5 years, the American economy collapses.  Maybe it’ll be gradual, or maybe it’ll be a crash for the ages.  Either way, what can you and I do about it?  On the grander scale, not much.  We’re not going to stop the collapse by ourselves.  But, we can push it further off, and we can prepare.

Delaying the Collapse

I’m already taking some steps to delay the collapse of the economy.  How?  By talking about it.  By making people aware of how to best handle their money.  You are too!  By being a good steward of your money, and telling your money how to work for you instead of your money telling you what to do, you’re making your own contribution to the betterment of the overall economy.  We can get involved in politics (I know that sounds like a lot of fun… or not.)  and push our representatives to work harder to reduce debt, reduce deficit spending, and to get it done without any partisan politics.  Just don’t hold your breath that it will happen.  We can also help by not only helping our own finances out, but by also helping our friends and family get their financial houses in order.  It’s a touchy subject, but, ask yourself this; how many of your friends and family do you want knocking on your door when the economy collapses?

Preparing for the Collapse

Even with all that work, the collapse might (probably will) still come. Surviving it will depend wholly on your preparation for it.  I’m not saying you have to go out today and become a prepper.  What I am saying, though, is that you need to start taking steps to be ready.  Start learning how to be more self-reliant.  Learn how to grow some of your own food.  Then learn how to can it and preserve it.  Yes, that might mean creating a little bit of a stockpile like a prepper, but I happen to think we could all do with a bit more sustainability in our lives.

Most of all, have a plan.  What happens in an emergency?  Even if it isn’t caused by the economic collapse of America?  If you were without power for days, how would you keep warm?  How would you eat?  What would you do for a bathroom?  These questions don’t require anything more than a little thought, and maybe some research on solutions!  Have a plan.

What do you think?  Is the American economy on the brink of collapse?

Capitalism Requires Participation

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I recently had a small discussion on Facebook with Glen, of Free From Broke.  It started when he mentioned in his status that he had been at the doctors office waiting on his appointment for 44 minutes.  He asked if he should just say to heck with it and reschedule the appointment.  I suggested that he wait it out, then send the doctor a bill for his time spent waiting.  Most people, when I make a similar suggestion, think that I’m joking.  That’s only half true.  I honestly think that if you’re waiting for a long enough time, you ought to send a bill.  I’m not the only one, either.  Check out this article, and this one on CNN.

Now, I’ll be completely honest.  I’ve spent plenty of time waiting on doctors, dentists, and the DMV.  I’ve never once sent a bill.  I’m chicken.  🙂  Really, I think that we’re preconditioned to expect that we’ll wait for a doctor, and since we’re paying them for the service, and we need the service, we don’t dare rock the boat.  But, there’s a couple of good arguments against that being true.  The biggest of which is that capitalism requires participation.

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Merriam-Webster

Capitalism and the Free Market

In particular, I’d like to point out the last part of that.  “determined mainly by competition in a free market”.  What drives that competition, and as a result, the free market?  The law of supply and demand.  In the law of supply and demand, the prices of goods and services are determined by the supply that exists for a good or service, and the demand that exists for that same good or service.  If demand is high for something, and the supply is low, or limited, the people who have the supply can charge more because the ratio of supply to demand is higher.  But, what about something like a doctors visit?  Doctors aren’t exactly in a low enough supply to warrant higher prices.  While our insurance companies are able to negotiate cheaper prices for services with a doctor, we very rarely will even ask if there’s a better rate.  And, we’ll willingly sit in a waiting room for extended periods of time, which, anyone familiar with the concept of time cost will tell you, costs money.

Participating in Capitalism

In order to change that status quo, we need to start participating in our capitalism.  The clinics and hospitals that many of the doctors work at are requiring their doctors to schedule appointments in 15 minute or 30 minute increments.  How many times have you gone to the doctor and spent more time than that in the exam room?  I know I probably do at least every other time.  Obviously, that’s not a very efficient way to schedule the time.  But, they do it so that the doctors can squeeze in as many patients as possible.  It’s ruled by profit.  The more patients a doctor sees in an hour, the higher the profit is for the clinic.  They’ll never change that unless the profit starts to go away.  How does the profit go away?  Well, either the doctors become so expensive that they’d have to see many more patients in a day than physically possible (they’d just raise rates), or they start getting bills for the patient time they are wasting.

If patients begin billing for the time they spend in a waiting room, eventually, it becomes more expensive to keep patients waiting than it does to change the way they schedule appointments.  Consider the last time you had cable hooked up in your home.  You likely called the cable company to set up an appointment, and they gave you a 4-5 hour window when the technician would be there.  What if you then told them that your time is valuable to you, and that they can expect a bill for every half hour past the beginning of that window that you’re kept waiting on the technician?  Do you think he’d make you wait the full 5 hours?  Not very likely.

The prices of goods and services, including the time those services take to perform, are determined by what the market will bear.  As long as the market continues to pay the cost of the goods or services, the provider can continue to charge that price.  Sometimes they’ll start increasing it.  But, when we begin to value our time, and hold service providers accountable for the cost of time wasted waiting on them to perform a service, we can begin to tell those providers that the market will no longer bear the cost of lost time.  In short, we begin to participate in the free market economy we call capitalism.

Would you ever bill a service provider, doctor or otherwise, for time spent waiting on them?  If not, is it because you don’t value your time, or because you believe that the service provider is truly doing all they can to proved the best services?  Is the service providers time more valuable than yours, and that’s why you won’t bill for your time?

img credit: mishra-ajay, on Flickr