Category Archives: Frugality101

Dire Warning

Here is the last paragraph from a financial pages essay. I think we should pay attention to it.

I’ve maintained throughout our time together that the mother of all bubbles – debt — would be the final frontier before free market forces shocked asset classes back towards equilibrium. With total debt-to-GDP stretched towards 400%, we reached the zenith of that elasticity in 2008 and the system unwound with great vengeance and furious anger; the gig was up.

It’s hard to say what would have happened if we let the market do what the market was in the process of doing. It could have created a domino effect that toppled corporate America from J.P. Morgan Chase and General Electric to Target Corp. , Goldman Sachs Group and AT&T ; the commercial paper market was frozen, payrolls would have halted and citizens may have taken to the streets to feed their families.

We’re talking potential anarchy here and I’m not prone to hyperbole.

The alternative scenario — the one the created a chasm of discord throughout the land — was the evolution of the last gasp bubble, that of Government.com. We’ve got $800 billion here, $1 trillion there, numbers so enormous they seem silly; the reality is they’re anything but.

While we remain in the eye of the storm — the relative calm between the banking crisis and the cumulative comeuppance — a simple yet scary truth remains. We haven’t cured the disease; we’re simply masking the symptoms.

I will again remind you that the opposite of love isn’t hate, its apathy. We’ve noted the lower volume during rallies and the higher traffic during the declines — a sign of distribution — but a simpler truth may be emerging, that of burnout. After four — or five, or six — bubbles and bursts, folks are both bitten and shy by the gamesmanship in the marketplace.

Perhaps that’s a function of financial fatigue or maybe it’s an intended consequence of the war on capitalism; to be honest, it’s tough to tell. As the machines take over and the secular bear chews through victims, it’s hard to blame the average American for wanting to walk away.

I’ll simply say this; the greatest trick the devil ever pulled was convincing the world he didn’t exist. While financial markets seem docile or worse, backstopped by the powers that be for the foreseeable future, the time to pay attention, remain engaged and prepare for what’s to come has perhaps never been more acute.

~By Todd Harrison of ‘Marketwatch’

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Missing From Our Education

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I may not agree 100% with everything that Robert Kiyosaki writes, but he gets some basic things very,very right. He wrote “Rich Dad Poor Dad”, which benefited my family with some common sense ideas that put finances in a perspective that is easy to grasp. He has made some trend forecasting for the next decade, and I think He may be onto something.

I especially agree with this quote:

Financial education is an important objective for this next decade. We cannot allow the gap to grow bigger. We must have financial education in our schools. Money will not close the gap — only financial education will.

This is something that parents need to gain and pass on to their children, and schools need to help.

I was raised by a frugal father, and he passed on some wise sayings to me about finances, but one thing that was of benefit to him that he did not pass on was investing information with the stocks that were in his estate. So I knew how to squeeze a dollar, but I didn’t know how to grow that savings. I had no idea about stocks, or understanding all those symbols and talk about fundamentals, etc.

How many other women out there find that they don’t know very much about finances? Suze Orman has made a career out of that demographic.

I had to learn quickly. The past few years have been quite an education for everyone, but one thing is certain…. most of us will need to understand how finances work as we near “retirement” age. I put that in quotes because many will join the ranks of my husband and I… needing to work as long as we can, without truly “retiring” from the workworld. With Social Security running out, all generations are going to have to make real adjustments in what they view as the costs, and the people they are financially responsible for.

Schools will need to teach about finances in a whole new and rigorous way. And we will all need to deconstruct the old thinking that government will take care of us, or that hard work is enough. We need real skills in understanding the debility of debt, and the way wealth increases and is preserved. We need it for our individual lives, and we need it for our country.