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When did making money become a bad thing?  Making money is the point of business.  What’s the point of running a business if you don’t have any profits?  Sure, I see the value in non profit organizations, but that isn’t what I’m talking about here.  I’m talking about the millions of businesses that provide the goods and services to us all.  We depend on these companies a great deal and we should want them to be profitable.  Being profitable means they will stick around!  We need them to stick around.  I certainly don’t want the oil companies going out of business.  Or the grocery stores, or any of the companies that make my life what it is today.

Capitalism.org writes:

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.  Under capitalism the state is separated from economics (production and trade), just like the state is separated from  religion. Capitalism is the  system of of laissez faire. It is the system of political freedom.

Sounds good to me.  I’m all for individual rights and private property.

Walmart is often protrayed as evil.  Why?  I just don’t get it.  They are profitable, wildly profitable.   We should celebrate in thier ingenuity and efficiency.  Walmart goes to great lengths to keep costs down and therefore keep prices down.  They are now being rewarded with growth while poorly run companies are looking for bailouts.  Walmart should be rewarded with profits and growth.  They earned it.

I know there are complaints against Walmart.  Dozens of complaints.  I can’t possibly be up on each and every one, but as the world’s largest empolyer it only stands to reason that they would also have the most employee complaints.

People and companies shouldn’t be punished for their creativity and profits.  They should be rewarded!  They should get rich, very very rich.  Apparently people disagree with this idea, but I believe everyone benefits when it’s easy to make money.  Risk should equal reward.  Take big risks, get big rewards.  Take small risks, get small rewards.  When we take away the big rewards from those who take big risks we hurt everyone.  Those who take small risks should not get big rewards.

But on the other hand, when the big risk takers fail, we should not mitigate their losses.  Their losses are theirs and theirs alone.  The people who took small risks should not be subject to the risk takers losses, just as they do not have claim to the risk takers gains.

Pic by: dawvon

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  • Filed under: economics
  • Rate Cuts: What does it mean?

    As soon as my alarm went off this morning I hear a lady talking about the Fed cutting rates.  The federal funds rate was cut from 2% to 1.5%.  The federal funds rate is the rate that banks borrow money from each other.  I figure this probably isn’t good news, but honestly, I didn’t know exactly what that means for me, for you, for the average every day person.

    I thought this was interesting.  A look at the federal funds rate from July 1954 to December 2007.

    So I went looking for some answers and found this article.  It talks about the rate cut and what it means for you, and how long it will be until you see the effects.  Just what I was looking for!  The general rule seems to be that adjustable rates are affected, fixed rates are not.

    My first thought was that maybe fixed rate mortgages will be cheaper and maybe we should refinance.  But no, fixed rate mortgages to not move with the federal funds rate.  Bummer.  Adjustable mortgage rates do, however, so if you have an ARM then you are in luck.  You should see your payment go down a bit next month.

    Home Equity Lines of Credit will also be affected by the rate cut.  Most HELOCs are based on the prime rate, and the prime moves with the federal funds rate, so your HELOC rate should drop within the next few months.  This is nice since I do have a HELOC, but I don’t have a balance on it so it really doesn’t matter.  But it’s nice to know.

    The rate cut may or may not affect your credit card rates.  Since the prime rate will also be lower due to the rate cut you probably will see a reduction in interest (yay!).  But it depends on the terms of your account.  Some cards have a minimum interest rate, or are based on the LIBOR (London interbank offer rate) rate, rather than prime.  Also, if you have a fixed rate you will not see a drop.   The article suggest calling your credit card company in a few months if you haven’t seen a drop in your rate.  Find out why, and ask for a lower rate.

    Financing a car probably won’t get cheaper.  The article says that in normal times a reduction in the federal funds rate will lower the cost of a car loan, however these are not normal times.  If auto loans get cheaper it will happen in the next week or so.

    Certificate of Deposits and Money Market Accounts move with the federal funds rate.  Not good news for us savers out there.  Long term CD’s move in anticipation of a rate change.  Short term CDs and Money Market Accounts will see their rates reduced soon.

    So the bottom line in our house is that we will not be affected except for getting lower rates on our savings.  I’m obviously not pleased with this.  But if it helps the economy then that is something that will benefit everyone.

  • Filed under: economics
  • My thoughts on the bailouts

    Everyone, everyone, everyone has been talking about the bailouts and I’ve been trying to stay out of it.  But the thought of writing about another topic just seems strange.  Everything I think of seems like I’m trying to avoid the bailout topic.  I mean, how can I write a personal finance blog and not talk about this past week? Writing a post about the 5 most expensive cars to maintain seems kinda frivolous right now.  You know what I’m sayin’.

    My thoughts… First off, I try to refrain from feeling to strongly in one direction or the other mostly because I don’t trust the news.  I don’t think I can really get all riled up unless I have all the facts, and I don’t think I’m getting all the facts from the news.  I know what they want me to know, which may or may not be the whole truth.  Or even the truth at all.  So that is my general feelings about everything that is in the news.

    So that said… I’m pretty mad.  I think it’s ridiculous that the government is bailing out private companies.  Why on earth would I want to pay to keep these faulty companies afloat when the exact people who ruined them walk away with millions?  Meanwhile I’m also paying for my healthcare and education.  Are we capitalists or not?  Pick a side already.  (I’m all capitalist by the way.)

    On the other hand… I certainly don’t want total collapse of our financial system.  I like my house, my husband’s job, being able to put food on the table, and I don’t want those things taken away because of stupid decisions other people made.  So if that means bailouts… then by all means, bail them out!

    Yes, I know those feelings contradict themselves.  I’m a complicated person, what can I say.  ;)  That is where my hatred of the news comes in.  If I knew the truth, the whole truth, and nothing but the truth I might be able to pick a side.  Maybe no one knows what will happen if these companies were to fail.  I sure as heck don’t.

    But the bottom line is what’s done is done.  So where does that leave us?  I still have faith in the markets.  I do believe we will get through this time.  In the mean time, it might not be the best time to sell your house, quit your job, start a business, or take on extra debt if you don’t have to.  But definitely keep investing in your retirement accounts, keep paying off that debt, keep saving, keep working, and keep living.  And try to keep in mind that the news loves to scare you, they love impending doom.  Try not to get caught up in it too much.

    Photo: Elsie Esq.

  • Filed under: economics
  • Hey guys!  What do bulls, bears, an elliptical machine and dead trees all have in common?  They are all topics in today’s post!  I have some random thoughts that I wanted to share.  None of them really make a whole post individually, so I thought I would just group them all together for some randomness on this great Friday.

    First off, really quick, I wanted to give an easy way to remember what Bull and Bear mean when talking about the stock market.  Bull means the stock market is going up.  Bear means the stock market is going down. Maybe everyone has this down pat already, but when I was taking a class on investing I had the hardest time remembering which was which.   There isn’t anything inherent about a bull that makes you think, “going up”.  And same for a bear.  Maybe they should call it Eagle and Groundhog or something.  That would make more sense.  Anyways, so I started thinking of the L’s in bull like arrows pointing up.  And the R in bear, like an arrow that has curved and is now pointing down.  I made that super awesome graphic to illustrate. (I think I missed my calling in graphic design, don’t you?)  It might be corny, but it works.  So if someone is “feeling bullish” about a stock that means they think it’s going up.  Or if someone is “feeling bearish” about a stock, that means they think it’s going down.  I think everyone is feeling pretty bearish right now.

    The second thing I wanted to talk about was to give you an update on my love affair with Mr. Elliptical.  First off, it’s settled into a slow comfortable desire, rather than an intense “got to have it now” infatuation.  I’ve also devised a two part plan to make him mine.  Part one is that I’m going to save up my online income to pay for him.  That way there isn’t any money coming out of the household budget, which eases my guilt.  I have between $250 and $300 saved up so far.  My goal is to have the full $750 by May.  I would like to have it before next summer.  We’ll see.  The second part is that I’ve started walking every day.  It’s still really hot here, so I’ve been going for walks in the early morning and then again after the kids are in bed.  I was going at about 2 in the afternoon but I got heat exhaustion.  Lesson learned there.  I’m going to wait til it’s under 95 before I go walking during the day again.  If I can walk consistently between now and May and I have the money saved up, I will go ahead and buy him. That way I know I will be able to afford it and I’ll be pretty sure that I will use it.  When it gets too hot to go for walks even at night I will want something to do inside.

    Ok, the last thing is about my homeowners association.  I jokingly threatened earlier that I was going to kill the tree in my front yard and make my association replace it.  Well, it is seriously the most spindly little tree and I’ve always blamed the watering system.  Or even the drainage, maybe the water just runs right off and the tree doesn’t get any?  But I’ve noticed a lot of trees in our subdivision are that way.  Spindly.  Some are growing just fine, but lots of them just don’t seem to grow.  Poor little trees just hanging on for dear life.  Well, I walk with another mom in the neighborhood and she is involved with the association.  All into everyone’s business.  (Wow… so typical, two stay at home moms pushing strollers around the block gossiping about the neighbors and getting riled up about the home owner’s association.  It’s enough to make me puke. lol)  But she was telling me that the landscapers who planted the trees planted them in the boxes they are shipped in.  Dur.  So that explains it.  Our association is suing the landscapers to make them come back and replace the trees that are dying.  I thought that was interesting.  I didn’t really know that associations did that sort of thing.  I thought it was more of a policing system than an actual advocate for the neighborhood kind of thing.

    My Gallons

    Last night my husband was watching the news and they did a piece on MyGallons.com. I had never heard of it but I had a look around their website. I have mixed feelings (more bad than good) about this service.

    Here’s the scoop: With their service you basically prepay for your gas. On their website you can buy a certain number of gallons and they give you a “debit card” to use at the pump. The price you pay for the gas is set by them, but they say it is an average price for your area with estimated taxes. Let’s just go ahead and assume they set a fair price for the gas. So for example, right now let’s say you buy 20 gallons at $4 each for a grand total of $80. You put it aside and in 6 months (or however long) gas has gone up to $4.75. You pull out your prepaid gas card and pump 10 gallons worth of gas. You just saved $7.50 and still have 10 gallons left to pump. There is a fee for the service, of course. There is an annual fee of either $30 or $40 depending on your service level. Then they also charge a $1.95 fee to reload the card.

    Sounds ok right? I know recently on the news I’ve heard about people blowing up their houses because they’ve been stockpiling gas. So apparently there is a market for this.

    My first concern is the fact that this is such a new service who knows if they will still be around when you go to actually redeem your prepaid gas. That alone is reason enough to wait and see. Add that to the fact that the bank they originally had a contract with has already backed out and all my warm fuzzies are headed for the hills.

    But even besides the fact that this company has no bank backing (which they need in order for you to redeem your gallons, the bank pays the gas station when you redeem your gallons) is the question “How is My Gallons making money?” They certainly won’t be around long if they can’t make money. A customer isn’t going to pay for this service if they aren’t going to save money overall. So profit isn’t really coming from the customer. Ads maybe? They would make a ton of money if gas goes down in price. If you pay $4 today for gas and in 6 months gas is only $3.50 then they are raking it in. So is that what they are banking on? If so then I don’t feel great about prepaying my gas today.

    So overall I’m giving MyGallons.com a thumbs down. I’m just not feeling it. To many “what ifs”.

    pic by: bitzceit

  • Filed under: economics
  • The economics of Radiator Springs

    Having a two year old boy in my house means that Disney’s movie Cars plays on a continuous loop in my family room. I’ve seen that movie about 700 times in the last month. I’ve noticed it actually teaches a little something about the economy.

    Ok, in the movie the main character, Lightening McQueen (the world’s fastest race car), gets lost and ends up stuck in this little town in the middle of nowhere called Radiator Springs. The town is basically a closed system, economically speaking. No one ever leaves the town and no one ever comes in. Each character has their own business in the town and the limited amount of money just flows around between them all. (I’m not going too in-depth here, ignore the fact they would be paying taxes and buying supplies from outside their town.)

    Flo owns the gas station. Ramon owns the body shop. Guido and Luigi own the tire shop. Sally owns the motel. Filmore owns an organic/ hippy store. Sarge owns a military surplus store. If Flo buys tires from Guido some money flows from Flo to Guido. Guido might use that money to buy something from Sarge, who then gets some body work done at Ramon’s shop. Ramon then uses the money to buy gas and the money has returned back to Flo and the cycle continues.

    In one part of the movie a pair of lost tourists actually comes wandering though town and everyone does their best to sell their wares to the pair. Unfortunately they leave without spending a dime, but lets say they stopped and got gas. The money they spent would have been money added to the system. More money for everyone, it would be Flo’s money at first but if she spends it in the town everyone gets a little bit richer. If Flo decides not to spend it in town and instead takes that extra money and goes on vacation to Mexico then no one in the town benefits. The money leaves and doesn’t come back. It’s as if the tourists never came by.

    Now if you think of Radiator Springs as our country you can see why it’s important to buy American made products and why we want other countries to buy the stuff we have to sell. We want to keep our money in our town and bring in money from outside. It benefits everyone, not just the businesses that made the initial sale.

    This is the idea behind he stimulus checks we will all be getting soon, to add money to the system. They could have done the same thing with some government spending, but sending a check to everyone is just so much cooler.

  • Filed under: economics

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