Thoughts on Debt

The DOW Jones is up and then it’s down, so what should you do, should you take your money out now or wait.  Well recently while listening to a financial analyst he said some things that really made quite a bit of good sense to me.  First, he said that if you have money in the stock market and you can afford to leave it in there for the next 5 years, without drawing any of it out, then you should be fine, as this is the period of time that market analysts predict that it will take for the market to completely recover.  However, he said that if you have money in the market that you will need either for a child’s college education or for retirement during the next 5 years, then you should probably take it out now, while there is still some money in there.

I thought this was some really sound advice, especially since we have learned from past experiences in this country that pulling every dime out of the market will only cause it to further decline, so that really doesn’t benefit anyone.  Pulling out just what you think you will need during the next 5 years, makes some good sense.  After that if things improve you could have a much larger sum of money available to you.  Also, investing in the market now, while the cost of stocks remains low, is a great opportunity to buy in low and make a bundle in the long run.

It is not advisable to watch your stocks everyday, especially during the next few months it will be up and then down.  It is still working on balancing out, however it will get back on level ground before long, and wouldn’t you like to be one of the one’s who come out of this mess making a bundle? I know I would.

Okay, so we realize that the banks in this country are going under, but how will that effect the average consumer.  Well, it will mean that the whole credit system will need to be revamped and this may or may not be a good thing depending on who you are.  The credit card and loan companies don’t have any more money left to lend and are in the process of actually recalling the credit that they have overextended to everyone.  If you don’t have all your credit used, the bank may close down the credit lines that you have available to you right now.  For some people, this is devastating, while others are taking clear advantage of the system and maxing out all their credit turning it to cash for use later.  Only one problem, you are putting that money where? Of course in the bank, so what you are really doing is giving them the money back anyway.  Now that is not a problem until everyone doesn’t pay back their debts.  Then the banks will be left without money and whose money do you think they are going to use? Of course, your money (which essentially is really their money).

The problem is now, people are realizing that unless they have exemplary credit and no outstanding balances, they won’t be getting any new lines of credit.  This means that they won’t pay back what they have outstanding now because the banks really have no recourse, and there is no more money coming.  Debt collectors are getting desperate, since they really can’t collect on outstanding balances owed and they are going to have to cut enormous deals to get people to pay.  After all, most people are thinking the country just fronted them huge amounts of money, why should we pay them again? The only problem with this, is that our country will never have any type of credit card or loan system again, because if this one can’t be saved and things only get worse, people will only be able to buy what they can afford, and at the wages we are making people it ain’t much.  I personally think that is the way it should have been all along, but the banks and credit card companies decided to get greedy, leaving just about everyone in a hole that they can’t get out of.

You do realize that we practically live in a virtual world, don’t you? The fact is nothing is what it seems and what you are being told is probably not the truth, so let’s look at the facts— The crude oil prices are dropping rapidly and the price on gas at the pump has come down some.  Did you know that it can take about 3-4 months for the pumps to have a decrease from a drop in the oil prices today.  Also, did you know that part of the reason for the increase in gas prices, aside from the economy and the war, is that the demand for gasoline has been rising and the supply has not.  The United States has not built even one oil refinery since 1976 which is 32 years of ignoring that we need more oil and not taking any action.  Also, in fairness to the average gas station, they make very little money on their gasoline sales and rake in a much bigger profit from keeping their gas prices competitively low, to encourage you to come to them and buy something to drink, cigarettes, lottery tickets and so forth.  It is the mini marts themselves that bring in the revenue in these places and not so much on the gas.

I still personally see a big difference from region to region on gas prices and in my travels this past weekend found gasoline prices that ranged from the highest price I saw at $3.39 per gallon for regular unleaded to $2.95 per gallon.  A savings of .44 per gallon is not laughing matter.  Especially when you consider, I didn’t go on a massive country wide trip, I only drove down the highway about an hour and that is how much the gas prices varied on a short drive.  I don’t care what they say in the news, I know that some of this must be price gouging, I don’t mind when the prices vary a little but when I can drive to the next town over and spend .20 less per gallon, something is rotten in Denmark!

On some level, I think that we are trying to fool ourselves, or at the very least the government is trying to fool us, about our current financial standing.  I think that the bail out package that just went through was really just a way for our government to save face through these tough financial times, this way when we really do hit rock bottom, they can say we tried.  I think that also George W. really wants to get out of office, before the American public realizes how bad our economic situation truly is due to this war that he has use wrapped in.  In any case, I think that it is time for all of us to come clean.  We need to face the facts that as individuals and as a nation, we have not been financially solid for quite some time.  The availability of credit has allowed all of us to live well above our means for a long time, when in essence we never should be spending more than we have.  If we had stuck to this type of plan, then all this financial nonsense would have little or no effect on us, however, ours is a society of wealth solely based on credit.  The more credit you can attain the wealthier you can become, even without much actual money.  It is interesting at best.

Now in addition to the lies we have been telling ourselves and the ones that our government has been spouting, I am now seeing television ads that are again trying to trick us into spending more money than we have to for things.  For instance, I just saw a commercial for Kentucky Fried Chicken last night, and they show a family who is considering buying their complete dinner for 4 people for $9.99.  They go to the grocery store to see if they can buy all the ingredients for making the same meal, and it will actually cost them more than it would to go to KFC, so they just go there instead.  Now listen up, they show these people starting out by buying a $3 bag of flour.  First, it does not take $3 worth of flour to make chicken, secondly, most of us already have flour in our houses, so that cost is over inflated.  Don’t be fooled people, for $9.99 you are getting the drumsticks, which if you are a smart shopper you can get for a song.  Then throw on some instant mashed potatoes, and even some dinner rolls or boxed mac & cheese, or even beans, you can definitely make this meal for about half the price of what they are making it for.  Don’t buy into this type of advertising, they are just trying to get you to spend the money.  Walmart and Food Lion are both trying to do the same thing also, and trying to convince you that buying their premade food is much cheaper than doing it yourself.  Don’t buy it.  Shop the sales, cook ahead, make a meal plan, but don’t give in to buying fast food or prepackaged meals, the ones you make yourself are still more economical and premaking and freezing your own food will save you a lot of money in the long run.  It is time we were honest with ourselves.  We know what we have to do, but are we all too lazy to do it?