Saving money when you don't make much

Dan Danford regularly records podcasts for Dad's Divorce.com, a web site that helps men going through the divorce process. Here's his latest, which is advice on saving for those who don't make a lot.

A No-Brainer: Stimulate Job Creation

By Dr. Jason White
Director of Investments
Family Investment Center

With one-sixth of 2010 already behind us – can you believe that?! – and Spring at our doorstep, I think it is a fitting time to again take a look into the economic crystal ball for emerging forces that will drive the domestic and global economy and markets.

Central bankers in the United States have their hand gripping the monetary tightening lever but have yet to give it a yank. The 25-basis point increase in the discount rate, the rate of interest that the Federal Reserve receives on loans to commercial banks, had many chicken-littles in the business media screaming that inflation must be coming in higher than forecast and that higher interest rates for businesses and consumers are coming soon.

In fact, this 0.25 percent increase was little more than a technical adjust by the Fed, with little broad monetary policy implications. Kansas City Federal Reserve President Tom Hoenig is voting for tighter monetary policy, but thus far, he is the only Fed policy-maker to go on the record with this view.

Don’t be surprised if interest rates remain where they are for all of 2010. This is a Congressional election year, and the Federal Reserve has tried very hard in past election cycles to remain monetarily-neutral as to avoid the appearance of favoring one party or another.

Inflation remains tame and unemployment high. These conditions support the thesis that easy money and low interest rates will be with us for the “foreseeable future” as Fed officials have stated.

Job growth has finally clawed its way near the top of the Congressional legislative agenda. Placing divisive health care proposals on the back-burner and coming up with an economic incentive bill for business hiring would make the President considerably more popular AND also be the best use of the legislative agenda at this time. The economy is still losing jobs, as unemployment numbers on Friday will likely show. We need a spark in the private sector, and I don’t think that a health care bill that doesn’t take full effect for several years is going to provide the juice.

A private sector job tax credit makes the most sense to me. Many firms I work with are on the fence with regard to hiring. They are nervous to add to their labor costs but also aware that the economy is growing and product demand will rise soon. A job tax credit for employers lowers the risk of hiring workers, gets people off unemployment and puts more spendable income in their wallets.

Corporate down-sizing has already wrung about as much cost-savings as we are likely to see, which has been reflected in higher than expected corporate earnings. Reduction in leverage and interest expense has also helped, but we are now at the stage in the economic cycle where businesses need top-line sales revenue growth, and that will come sooner rather than later – especially if a job stimulus tax credit is put into effect soon.

Politicians have the power to reduce unemployment, accelerate the economy recovery, and pay for it all from the higher tax revenues (not rates!) that will flow into the Treasury if a jobs stimulus bill is enacted and quickly signed to into law. My next bit of writing will be “Dear President Obama….” It can’t hurt to try!

Lake Forest stunner: Secret millionaire leaves fortune for Lake Forest College scholarships - chicagotribune.com

By Robyn Davis Sekula

Everyone loves a story about someone who lives frugally and after their death, a huge fortune is discovered and donated to a worthy cause. We love to think about who would get such a fortune if we had it - and how surprising them with the funds would be deliciously satisfying.

But I have a problem with these stories. They don't always reflect the near-abject-poverty that some of these donors choose to live in. They deny themselves every single luxury - including vacations, good food, a better home - to do something after they die, something they'll never see.

We are better served by living somewhat frugally, and yes, saving and investing, as this woman in Lake Forest, Illinois, did. But living that sparsely makes me sad. Our money is designed to give us some pleasure in life.

I wouldn't mind to have a sizable gift go to a cause I love after I die. But I want to live a little, too. I believe that healthy investing means you get to do both.


Lake Forest stunner: Secret millionaire leaves fortune for Lake Forest College scholarships - chicagotribune.com

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The Death of Secrets

By Dan Danford, MBA, CRSP

It’s one of the profound bits of wisdom that comes with age. I’ve been walking this earth for over 50 years, and God has revealed a few truths in that time. Most were revealed bit by bit over decades of observation. Some are still unfolding, and I’ll grant that there are some lessons I may never learn (as my wife would gladly testify).

There are no secrets. Is the boss a bully? People already know. Is that neighbor creepy? People know. Is your child’s teacher lazy? People know. Does a colleague take unfair credit for projects or successes? Does a contractor use inferior materials? Did an insurance agent fudge the truth? Ditto. Ditto. Ditto.

Nothing drives this point home like the recent assassination of Hamas leader Mahmoud al-Mabhouh in Dubai. A team of (at least) 25 assassins killed al-Mabhouh in January, and the entire supposedly clandestine episode was captured by multiple cameras over a 24-hour period. Spies typically cover their tracks and carefully protect their identity, but this operation is fully documented by video. Almost as if the team decided in advance that secrecy was impossible, so why even bother?

Think about it. Who loves secrets? People who do bad things, mostly. Bribers and bribees. Spies. Crooks. Snotty teenagers, and people cheating on their spouses.
But truth is noble, and it rises above petty human manipulations and eventually bubbles up for all to see. Secrets are a force bred and borne in the dark, and they scurry for cover when the lights come on. And - this is very important - bright lights shine 24 hours a day in today’s world.

Celebrities know this. Paparazzi plague their lives with constant surveillance. From scandalous to tedious, a posse of photographers stands watch every minute to record the details of everyday life. Try something bad, or even something good, and it’s instantly posted to some website where it eventually worms its way into our common experience. There really are no secrets.

It’s not just celebrities, though. Do any of us truly believe we can avoid scrutiny? Most of us don’t have photographers lurking in the shadows, but we don’t live in the dark, either. People surround us, and they are instantly, powerfully, intertwined through social and technology connections. If any of us does anything that merits discussing, then someone, somewhere, will immediately discuss it.

I know a woman who is mean and vile and vindictive. But she can also be funny and charming and interesting when it suits her. Over several decades, I’ve watched her churn through assorted friends. Most of her friendships start innocently, but they all eventually sour and end badly. Those of us who know her watch the cycle repeat over and over again. We nod knowingly as she lures new victims, and wince as the inevitable unfolds. The same instinct that makes us want to help them also acknowledges that her initial charm is too powerful to overcome with a friendly warning.

A sincere friend once tried to warn me about another bad egg. “Everyone in our neighborhood was glad to see him move away,” he explained. I foolishly ignored this warning, only to regret it later. The truth was there all along; I just needed some personal experience to confirm that early warning. It was a very painful personal experience, just as helpfully hinted.

College athletics reinforces this point. Coaches come and coaches go, and the ones who are fired – which are many, actually – demand legal secrecy as a matter of course. This dark shroud is designed to protect both coach and university, but, in truth, protects neither one. See, the light of day shone brightly for years before the firing, and any wrongdoing by either party is generally known. The secrecy clause serves to fuel increased speculation, and prevents any official statements by anyone, but it’s a good bet that everyone already knows the truth. There are no secrets.

You might argue that these rotten people continue those bad patterns (as I noted above). Serial badness, if you please. And it is true that a planet with 7 billion people creates lots of new opportunities for them. My simple point is this: we know precisely who they are and what they do because there are no secrets. They think they are clever, but they’re not.

Narcissistic types always believe the world revolves around them, and because of that, they alone control the flow of information. Their world contains manipulation, and spin, and carefully constructed half-truths. As stars of their own movie, they tend to overlook that we’ve been observing them for years.

That’s the huge point they miss. We’ve already branded them as jerks, and bullies, and creeps. We know the crappy things they’ve already done and the secrets they hope to protect. It’s virtually impossible to hide something after it’s already seen the bright light of day.

Really. There are no secrets. That truth is rock solid. People are always watching, and they’ve been watching for a very long time. There are no secrets.

Earned Income Tax Credit helps workers with low incomes

By Robyn Davis Sekula
For most of our readers, the Earned Income Tax Credit is not something they'll be able to claim. It's specifically designed for low-income families - for those who work but don't make much. There's been some articles written about it lately because it isn't claimed as often as it could be, and of course because April 15 is rushing right for us. We think it's relevant not directly to our core readership, but perhaps for their children, grandchildren, or friends and extended family. Our hope is that our readers will pass along this information to those who they think can use it.

Bankrate.com has a great series of articles exploring various tax-related topics, and today's is on the EITC. To read the article, go here:

Earned Income Tax Credit

Canceling credit cards won't hurt your FICO score

There are plenty of folks out there who would like to cancel their credit cards - maybe they've got too many, or they're not using them - but won't do so for fear of it dinging their credit. We found an insightful look at the elements of how a credit score is calculated on CNNMoney.com today. It goes into how credit cards affect a credit score, and I think it's worth looking at. Here's the article:

http://moremoney.blogs.money.cnn.com/2010/03/02/dont-sweat-it-canceling-a-credit-card-wont-hurt-your-score/

Search for good deals on credit cards

Editor's note: Each week we answer a question from a follower on Twitter or blog reader. This week, we got a question on Twitter that we thought deserved more than 140 characters worth of an answer.

Question from @jimmyfaseler : I'm 24, graduated college loan/debt free, have no credit history and need a credit card for the first time. Suggestions?

Answer from Dan Danford: First of all, congrats on making it to age 24 without debt. That's no small accomplishment in today's world. My guess is that - even without credit cards or debt - you have some payment history from utility or phone payments. Typically, lenders look for a few things before making a loan. The want you to have a regular job, an they like to see that you've paid your bills on time.

My suggestion is to get a decent credit card and pay it off each month. You'll build credit without incurring a lot of debt. Or, you could take out a small loan at the bank and pay it off. Either way, you'll build some good credit history. Bank loans are fairly easy to get if you have collateral. It's easy for them to repossess a car if you miss payments.

Getting a credit car isn't so tough either, but it's complicated by the number of issuers. A MasterCard or Visa, for instance, is issued by a bank. And each bank has different terms and conditions. So there are hundreds of different Visa cards with different terms. Some of them aren't so favorable.

My suggestion is to research credit cards on the Internet. Don't disregard American Express or Discover. American Express particularly can be a good way to build your credit score, as it is in fact a charge card that requires you to pay off the entire balance each month, although it does sometimes have an annual fee. Search for a card with low or no annual fees, and favorable terms if you pay it off each month. Card issuers make some money from merchants, too, so you can actually find a reasonable card if you look. Good luck!