Well, this is it kids. Below is the last installment of the column, First Steps: Personal Finance for 20- and 30-Somethings. And this is the last blog entry. We’re ending the blog and column after about a year and a half. I hope you had as much fun reading it as I had writing it. And remember, keep saving.
November 30, 2007 - 1:32 PM
Do Your Duty (Wink) and Spend, Spend, Spend
My latest column, on holiday consumerism…
There’s a new TV ad for a chain of jewelry stores that features a guy painting his wife’s toenails.
“And since you’re not that guy,” the ad says, you’d better drop $2,500 on another diamond ring if you want to stay married.
And really, why stop at $2,500? Better make it $5,000.
Our economy’s health now largely depends on our overspending on things we cannot afford. A disproportionate amount of these purchases occurs
during the holidays. Jewelry retailers, for example, do a third of their business during November and December.
So let’s do our duty as Americans. If we spend enough, we might stave off a recession for another quarter. Ready? Everyone get to the mall!
You there. Hang back a second. Is everyone else headed off to shop? Good.
That was just a ruse. You and I, we’re going to eliminate the vast majority of guilt-driven, budget-busting holiday purchases this year.
We can’t have everyone following suit, though, lest our economy collapse. Americans will spend a half trillion - that’s trillion, with a t - on the holidays this year, just under $1,000 per family.
Here’s my holiday shopping list this year. Feel free to copy:
--For my wife, one small gift costing no more than $20.
That’s it.
My family - that is, my parents and my sister - will buy nothing for each other this year. Instead, we’ll take some of the money we would normally spend on presents, and take a family vacation together next year.
I’ve made a no-gift pact with friends with whom I’d normally exchange meaningless $25 gift certificates.
This minimalist Christmas feels right, but I struggled to get here.
I was raised as a latchkey kid to two hardworking parents, who used a boatload of presents at Christmas to silently apologize for long hours at the office.
For me, Christmas gifts represented an important way to show love and affection. In my mid-20s, I recognized that concept as absurd, but cutting back has been hard.
Every year, a voice told me to just buy one more gift, to keep from disappointing people I care about. And inevitably, I’d wake up on Dec. 26 with a serious financial hangover. So this year, I’m going cold turkey (almost). Who’s with me?
I expect some of you will write “Dear Scrooge” letters, so let me shoot down your arguments now:
--Buying lots of presents is traditional.
Traditional does not necessarily equal good. Slavery was traditional, too. While not exactly at the same level of evil, overspending is never good.
--The Bible makes clear that giving gifts is part of Christmas.
I’ll leave it to others to debate the wisdom of basing financial decisions on the Bible. But I will point out that the three wise men each gave one small gift to a baby. They did not give Olive Garden gift certificates to the innkeeper, their in-laws and the guy who cleaned their camels.
So, should a messiah or messiahs show up this year, I’ll consider adding a box of Frankincense to my holiday shopping list.
--You obviously do not have children.
True, I do not. Unfortunately, we equate skimpy spending with bad parenting. Gather ‘round Uncle Sean, children. Ready? Your mom still loves you, even though she does not go bankrupt buying you presents. If she drives you out to the middle of the desert and leaves you behind, that means she doesn’t love you.
November 16, 2007 - 6:03 PM
Who Deserves to Whine About Gas Prices?
In my column this week, I argued that we spend way too much time worrying about gas prices given how small a percentage they take up in the average person's budget. Today, the average person spends about five percent of income on gas prices, according to the Oil Price Information Service, up from about 2.5 percent in 2002.
Even at current levels, that's less than we spend on food, housing, health care, and entertainment.
But there are those who deserve to complain about rising gas prices, because they have caused real damage to household budgets. Who are they? Poor people who have to drive to work.
The impact of gasoline usage is extremely regressive. Poor people, middle-income people and rich people tend to spend the same amount on gas, according to spending data from the bureau of labor statistics. For poor people, that means spending a far higher percentage of income on gas, which leaves less to spend on food, shelter, clothing and more.
While the national average for percentage of income spent on gas is about 5 percent, in some richer counties, the average is under one percent. Meanwhile, in some of the nation's poorest counties, the average person spends 10 percent or more of income on gas, up from five percent in 2002. Now that's a big jump. Below is a table of the 13 counties -- out of more than 3,000 -- that spent more than 10 percent of income on gas in 2002.
November 16, 2007 - 5:42 AM
Enough About Gas Prices Already
My latest column…
By SEAN MUSSENDEN
Media General News Service
Check out those gas station signs. The average gallon of gas crept up to $3.11 last week. We could soon break the all-time, inflation-adjusted gas price record.
This means, of course, that we will also soon break the all-time, inflation-adjusted record for complaining about the price of gas.
Few products engender more fear and worry than gasoline. Some of us expend an incredible amount of emotional energy tracking gas prices, spending hours online or driving long distances to save three cents per gallon.
The ratio of the amount of money we spend on gas to the amount of time we worry and whine about gas is severely out of whack.
A new study from the Oil Price Information Service found that the percentage of income the average person spends on gas doubled over the last five years.
That seems like a huge increase and, in fact, it is. If only our 401k accounts mirrored that 100 percent jump. Perhaps we should have invested exclusively in oil companies.
Look at the actual numbers, though. In 2002, we spent about 2.5 percent of income on gas. This year, we spent about five.
Let’s put that in perspective. We spent far more on housing than gas. We spent more eating out. We spent more eating at home, or on health care, or on Social Security taxes and retirement savings.
We spent an equal amount on entertainment.
Those things have more impact on our budget. Yet some of us spend far more time thinking about gas prices - and attempting to save money on gas - than everything else.
I created a totally unscientific index to track this. I call it the Whining/Income Index - “The Wii.” Nintendo’s lawyers should be telephoning any day now.
The average percentage on income spent on each category - like housing, or health care or food - comes from the Bureau of Labor Statistics. The amount of whining - the whine factor - is based on personal observation. Thus, totally unscientific.
WHINE FACTOR: HIGH
--Gas prices (5 percent of income): Complaining about gas prices has officially replaced the weather as the most boring subject in the world. We get it. They’re high.
--Alcohol and tobacco (2 percent of income): Sometimes, it seems like the only thing discussed in bars is the cost of a beer and a pack of smokes - and terrible pickup lines.
WHINE FACTOR: MEDIUM
--Entertainment (5 percent of income): The only complaints about the cost of movie tickets come at the movies.
--Takeout and groceries (13 percent of income): Food prices are going up in part because of higher shipping costs - caused by higher gas prices. Yet the food spike gets far less attention.
WHINE FACTOR: LOW
--Housing (32 percent of income): We certainly complain about the cost of shelter. But given how large a percentage of income it eats, it deserves a lot more.
--Health Care (6 percent of income): As these costs grow too, the complaints will become much louder.
***
We focus attention on gas prices because they have jumped so rapidly over the last five years. The percentage of income we spend on everything else has gone up slightly, stayed flat or dropped during that time. Also, it’s easy to track the price of gas. Every time we drive, we pass large signs that display the price.
Higher pump prices mean that we have less - but only slightly less, as a percentage of income - to spend on food, entertainment or put in a savings account.
What’s my point here? We only have so much time and energy to work at saving money in each category in our budget.
And by focusing too much worry and energy on gas prices, we miss opportunities to reduce spending in other areas - food and housing - that could save a lot more money.
If you only have an hour to spare, there’s more bang for the buck in searching the Web for a cheaper apartment instead of browsing Gasbuddy.com to find a gas station charging three cents less per gallon.
One caveat: there are groups of people out there who deserve to complain about gas prices as much as they like. To find out who they are, check out my blog, firststeps.mgblogs.com.
In my column this week, I discussed the concept of generational income mobility, or movement up and down the income ladder. It’s getting harder for poor children to escape poverty. Here’s one paper on the topic worth an extra look (Link).
