Sunday, December 14th, 2008
Saving money around the holiday season is a very common theme this year and retailers are doing their best to entice consumers to open their wallets with sales and discounts that many thought we would never see.
Many, if not all, online stores are offering free shipping and the savings on non-essential items like video games and electronics is virtually unheard of.
Holiday Incentives
Many traditional retailers are offering incentives on financing. Just what a nation that has lived on credit for the last ten years needs – more debt. I do believe that the main stream media, with a the constant barrage of negativity toward the economy, has scared the average person into saving more money. (The only good thing the media has accomplished over the last few months.)
Some recent statistics show that many Americans are not taking on any credit card debt this holiday season and that is certainly something that has changed from recent years. With mortgages getting harder to qualify for, the importance of a good credit score has finally hit home with American consumers.
Many consumers have also said that they are planning to spend significantly less money this holiday season overall. Again, a profound change from the overspending that plagued recent years.
Will this Be Lasting Change?
One has to wonder if these changes will become habits that will last and be ingrained in the generation like the spendthrift and frugal survivors of the great depression era, or if the ideals of the recent “have it now” ideology will return with a vengeance at the end of this economic downturn.
I must say that I personally do not know which one is the lesser of the two evils? There must be a reasonable balance between spending and saving that will both benefit the economy and businesses as a whole and the individual. That is the balance that we seek as a society.
Today’s Investors Will Benefit
I am certain that this economic downturn will offer today’s young investors, who continue to buy stocks, an opportunity at wealth in their later years.
No matter how much money you spend this holiday season, I urge you to not only look in your favorite stores, but look at them as well. Who knows, the best bargain you find this season may be that beaten down retail store stock you’ve always shopped at!
Posted in Saving Money | 3 Comments »
Thursday, September 18th, 2008
I certainly consider myself to be a frugal person. Not obsessively frugal, but my money and I are fairly close. From time to time in my life I have been called cheap, a term which I have some dislike for. My belief is that there is a difference between being cheap and being frugal.
Putting my personal ideas of ”cheap” and ”frugal” aside, I’d like your opinion on whether or not I crossed the line on this one.
In the interest of fairness, let’s visit Wikipedia to get neutral definitions for both terms.
Cheap: Wikipedia re-directs the word “cheap” to Miser
A miser is a person who is reluctant to spend money, sometimes to the point of forgoing even basic comforts. The term derives from the Latin miser, meaning “poor” or “wretched,” comparable to the modern word “miserable”.
Frugal:
Frugality includes the reduction of waste, curbing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options, using barter, and staying well-informed about local circumstances and both market and product/service realities.
The Scenario
Yesterday my office had a guest speaker in during lunch hour to discuss a product that we have been under utilizing in our office. It was very apparent that the product provides the company with significant revenues and provides great value to a certain number of our clients. One of the rare instances that these “learning” sessions provide significant value.
Due to this session being held over lunch hour, the company picked up the tab for lunch and had sandwiches and refreshments delivered to the board room for the meeting. We all enjoyed the food and refreshments as well as the information that was delivered during the meeting.
Honey, Supper Is On Me Tonight
At the end of the day I noticed a few sandwiches left over and asked our administrative assistant what she was planning to do with them. When she responded that they were likely going to be thrown away, I asked (maybe too quickly) if I could take them home.
To make a long story short, my wife and I enjoyed sandwiches (me for the second time that day) for supper yesterday evening.
It wasn’t until after we finished eating that I told her how I had obtained the sandwiches, to which she responded “you are soooooooo cheap”!
(Expletives have been removed in the interest of good taste)
I pose this question to you
Did I cross the line from being frugal to being cheap?
Tell me your cheap vs. Frugal stories or leave a comment and let me know if I crossed the line.
Posted in Saving Money | 12 Comments »
Saturday, May 10th, 2008
I recently had a conversation with a gentleman who really “gets” dividend investing and he provided me with a synopsis of what is going on on a macroscopic scale in the world today. He came up with a “fictitious” conversation that will hopefully make sense to you all. Maybe it will even assist you in determining that you should buy dividend stocks now?
A General Overview
The central banks around the world are dealing with a liquidity crisis by lowering interest rates or injecting money into the financial system.
The Fed has been the most aggressive in cutting rates and injecting dollars into the system, causing the U.S. dollar to fall.
To the U.S., this means that its exports become cheaper and imports become more expensive.
While the world is fighting a credit crunch, inflation is creeping higher. Over time, as the cost of goods and services increase, the value of the dollar is going to fall because people won’t be able to purchase as much with their dollars as they did previously.
The Conversation
(PS – I live in Canada,so the gas price is in liters or litres 
)
“Wait a minute,” Bob said. “I recently read that both Canada’s and the U.S. CPI (consumer price index) is roughly two per cent.”
“You’re partially right,” I replied. “Core inflation is roughly two per cent, but it excludes certain items that are considered too volatile, including food and energy.”
“How can that be?” Bob asked. “Eve (Bob’s wife) told me eggs have jumped 62 per cent in price over the last two years and our food bill has increased more than four per cent over the last year.
“If memory serves me correctly, it cost 94 cents a litre to fill up my car last year.
“Now I am paying $1.18 per litre. If my math is correct, that’s roughly a 25 percent increase,” Bob said.
“Including food and energy, inflation in North America is running closer to four per cent,” I said.
“If oil and food commodities keep rising, then higher inflation and eventually rising interest rates will eventually follow. This is one reason why European countries are reluctant to cut their bank rates.”
A recent report from Bloomberg indicated that CPI in Ukraine was running at 19.4 per cent, in Vietnam it stood at 14.1 per cent, Russia was 12.6 per cent. Inflation in India is at 5.1 per cent and in China currently stands at 6.5 per cent.
These numbers are rising, not declining and there has been social unrest throughout the world because of rising food costs, even in some of the oil exporting nations.
“So what your are saying is that this sub-prime mess is temporarily forcing the central banks to reduce interest rates to help the economy get through this slowdown and credit crisis,” Bob said.
“But eventually, if food and oil costs remain high or continue to rise, interest rates will eventually follow suit.”
What this Means For Investors
(Hint: Buy Dividend Stocks)
As a result, the biggest dilemma savers face today is that at four per cent guaranteed investment rates on products, like GICs, they are only breaking even.
When you include income tax, these savers are likely losing money.
But an equity investor can invest in companies providing a four-per-cent dividend that also have growth potential at, or greater than, the rate of inflation.
So if inflation does rear its ugly head, ultra-conservative savers will be hurt, while with increasing dividends, equity investors will, at least, keep pace with inflation.
Posted in Investor Education | 3 Comments »
