(If you have a true love, then you have thirty of them from last Christmas! Most people really only need twenty-nine French hens.)

Regifting this year is up.  Way up. A Consumer Reports survey found that a little over a third (36%) of American adults said they’d recycle a gift this year, which is a 50% increase from two years ago.  Regifting is an art and MP Dunleavey has a dozen good tips for learning that art.

With Christmas decorations hitting Costco in August, and “leaked” Black Friday ads popping up, and overt announcements from Walmart a month ago promising 100 toys for $10, it’s clear that stores really, really want to sell stuff badly.  (Not that they haven’t always wanted to sell stuff, but the retail wars seem to be getting more heated.)

So the realization that more people still want to give stuff that they already have in their possession is a little telling about how bad things are, no?  This increased regifting behavior will be a drag on year-end sales:  each re-gift means, roughly, a gift that wasn’t purchased.  If there are roughly 200 million American adults, and 5% of them re-gift one $10 gift (5% is the increase of “would re-gift” adults from last year), then that’s $100 million less that retailers will get this year, just due to regifting. Add to this outright lost sales, and pretty soon we’re talking real money, real hits to the bottom line, and real downsizing.

But you know what?  That’s what should happen. When people overspend, they need to underspend.  When people underspend, businesses that rely on people spending will run into hard times.  It’s not our duty to keep businesses afloat.  We should use the fruits of our labor in ways that benefit ourselves, and right now that includes reducing debt and saving for retirement.

So dust off those Christmas knickknacks, rewrap them, and pass them on, preferably to people other than the those who gave you said knickknacks.  Lots of others are doing it!

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This economic downturn hasn’t been kind to a lot of people.  Jobs that haven’t been taken away from people have had their hours cut, their workload increased, or their cost of living allowances taken away.  Jobs that people used to be able to count on are on very fragile ground.

If this US Debt Clock is accurate, we’re getting a new person on the unemployment roster every 17 seconds now.

What can you count on in this economy?  I think the only thing that you can absolutely count on in this economy is that you can’t count on anything in this economy. Retirements have been upended by plummeting 401(k)s and IRAs.  Nest eggs have been cracked by crashing home values.  Many people, all of a sudden, won’t be able to retire.

It’s foolish to take anything for granted.  There’s far less within our control than we probably realize, and proposed solutions that aim to make things better will almost certainly just make them worse.

When you think about “preparing for the future,” think instead of “hedging against the future.”  How?

• Cushions, cushions. Bolster that emergency fund to buy time in the face of job loss.  Bolster your food supply in case price controls cause shortages.  (Price controls are another solution that will backfire.  Think gas station lines in the 1970s.)
• Diversify your investments. If you’re heavy in anything (or only have a couple of asset classes) look around some more.  And don’t forget to invest in yourself.
• Diversify your income streams. Only have one income stream?  Start working on another!  And then another.  Your one income stream can go bye-bye at any time.
• Retire into something rather than just retire. It would be great if one of your new income streams involves something you really enjoy, and can do well into the traditional retirement age.
• Take care of your health. I’ve recommitted to this. The less you need health care, the better, because it will be more expensive, and you’ll wait longer to get it.
• Pray.

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In better times, a yard sale is a good way to clear the junk out of the closets and make a little bit of extra money.  And what doesn’t sell will find a good hope at the Salvation Army thrift store or something similar.

This past weekend there was a yard sale that was initially advertised for Friday and Saturday.  The folks taped over the sign the next day: “Sun.”  So we stopped by there after church, and bought a couple of things.  I recognized some of the collectible plates they had as being at the previous day’s flea market.

On my way to work yesterday, they had replaced the taped-over sign: “Mon.”

This morning: “Tue.”

That’s not normal, but even more so, there was another yard sale just down the road that also had had their stuff out for five days.

What’s up?

It could be a number of things:

• The weather is getting colder and they’re taking advantage of it before they have to wait until spring to sell their stuff again like this.
• They really like running yard sales. Hey, nothing wrong with that at all!
• They own a business (maybe an eBay business) and they’re trying to unload some inventory at more reasonable prices, without making the buyers pay shipping.
• They are just selling off their stuff because they need to. If it were just to get rid of stuff, there was a thrift store just down the road where they could have dropped it off.  But that’s not what they did.  They tried to sell it, five days in a row.

In any case, these are all great things to do, and I’m not to judge these folks or what they’re trying to do.  If the reason they’re selling their stuff this way is because they need the money, then it’s probably a sign of the times:  People have bought more stuff than they need, with money they didn’t have, and now need the money more than the stuff.

There will be a whole lot of liquidation before the economy turns up again.

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Liz Pulliam Weston had an article today on the new tip-jar economy — that new business practice of putting out the tip jar, raising the “customary” tipping percentage, and adding other tip-like fees that are no longer discretionary, but mandatory.

Her take regarding the tip jars was, in essence:  Ignore the tip jars at businesses where the employees shouldn’t be tipped as a matter of custom, unless you have a good reason to tip, such as really superior service.

I have a few more thoughts on why they’re coming out in force:

• Tip jars and “mandatory gratuities” are a way of raising prices without looking like they’re raising prices. The massage parlor can still advertise prices of $35 for a massage, but tack on a mandatory $10 tip to raise the actual cost of the massage to $45.
• Tip jars are ways of paying employees more without actually paying them more. Employers have fixed costs for labor, including wages and mandatory taxes for Social Security, Medicare, and unemployment.  By setting out a tip jar they are relieving themselves of the burden of providing a raise to their employees.  (All other things being equal of course:  They could very well lose business because customers feel put upon.)  Dishonest employers that just tell the employees to divide up the tip jar at the end of the shift without counting it themselves are also getting out of paying these taxes on the tip income (which they are obligated to pay under most circumstances).  Oh, and it leaves the employees on the hook for keeping track of it themselves, as they are obligated to pay tax on those tips.
• Tip jars are a gentle form of social conditioning. People used to pump gas for us.  Now it’s rare when they do (unless you live in New Jersey).  Just like “20% is the new 15%” pretty soon tip jars will be acceptable just about everywhere — and employees will give you a disapproving look if you don’t chip in.

Ultimately, though, I have to support a business’s freedom to do this kind of thing.  If the business were my livelihood, I’d do whatever I needed to (within the spirit of law) in order to keep things going.  A tip jar buys a little bit of time for a business owner.  It isn’t quite as noticeable an affront as raising prices, but it’s not unnoticeable either.  It’s more a sign of the times:  The costs of doing business are going up, and business volume is going down, so do what you can.

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Dawn over at Frugal For Life discusses some of the ethical implications of stockpiling foods.  She gets into a few rules of thumb for testing to see whether stockpiling has crossed into greed, or just plain inconsideration.  Talking to the store to have them do a special large-quantity order is much more considerate than cleaning out the shelves, for example.  We even scored a small bulk grocery discount when we took this route.

Done properly, stocking up on food (6 months’ worth, or more) is wise, not only for you and your family, but also for your community.  It’s not being greedy at all. Some positive benefits of building up a decent pantry:

• Emergency preparedness. Hurricanes, tornadoes, floods — and worse — can disrupt supply lines, making things either very expensive, or just simply unavailable at any price.  At this point, if you have it, you have it, and if you don’t, you won’t until the danger passes.
• Reduced demand in times of emergency. If you have what you need, you won’t need to run out to buy necessities at the eleventh hour and compete with everyone else who’s doing the same.  This means more of your community can get what they need.
• More local business now, when they can replace their supply. If you’re buying now, you don’t have to buy later, and they can sell to you now rather than only wish that they could sell to you later.
• Self-sufficiency. Following this thought further results in a heightened level of long-term preparedness.  Less reliance on conventional supply lines like grocery stores means less personal risk.
• Opportunities for outreach. Being able to feed people in an emergency allows chances to share beliefs like the Gospel message.  Giving a meal and an eternal gift = good deal.
• Inflation hedging. If salaries don’t keep up with inflation, everything will be relatively more expensive.  Locking in items at today’s prices hedges against this scenario.

Howard Ruff’s How to Prosper During the Coming Bad Years in the 21st Century runs through many of the big pitfalls in long-term food storage.  He discusses how some foods lose their nutritional value far before they actually go bad, as well as how to ease into this kind of diet should it become necessary to rely on it.

So please, pounce (wisely) on those food deals and invest in some food.

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I tell you:  It just doesn’t pay to be human anymore.  Big or small.

I’m well aware of how being fat costs money.  But there are now rumblings on the possibility of the following:  If an individual, or family, can reasonably afford health insurance, but does not get it, they face the possibility of being fined: $950 for an individual, and up to $3,800 for a family.  (These are the current numbers as of 9/9/09.)

Presumably the people that would opt out of health coverage would be healthy people, right?  Those that take care of themselves and go to doctors for maintenance visits only?  Either that, or people who are rich enough that they not only don’t need health insurance, but can also pay out of pocket to get treated correctly, and immediately?

You’re fined if you do, and you’re fined if you don’t. You pay to play the game, and you pay to not play the game.  “Make your choice.”

Just in case this appears too lucrative for the insurance companies, with all of the extra business driven to them because consumers were made offers they couldn’t refuse, they’re not off the hook.  As of now (9/9/09), there’s a $6 billion tax that’s in the works for them.

When you hear “health care reform,” think of stuff like this.  Think about whether this is going to help things or hurt things, and for whom.  Think about who’s going to get soaked in the process.

Then, plan accordingly.

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Five Cent Nickel published a post that discussed what things to consider when you have both debt to pay and money in the bank.  The main problem is that the difference in what the bank pays in interest is far below what one would pay on a typical credit card balance.  Holding on to a large bank account while slowing paying down a credit card balance means that there are a lot of interest expenses being paid to the credit card company.

Nickel’s advice isn’t one-size-fits-all, which is good:

… sit down and carefully consider how much money you really need to have sitting in the bank. $1000? Six months of expenses? Twelve months of expenses? The “right” answer will vary. But if you’ve got more than that amount stashed away, use the excess to attack your debt.

Not a thing wrong with this advice.  Some specific questions I would ask as you “carefully consider how much money you really need to have sitting in the bank” are these:

• How safe is your job?
• Do you have an independent source of income, either in a second job or a side business?
• Are you in an industry that is slashing hours or slashing jobs?
• Are you important enough to the revenue stream of your company that your job is safe?
• If you were to lose your biggest paycheck tomorrow, how long would your emergency fund last based on your current expenses?

If you have cash, this is your ace in the hole for weathering a long recession. An excess of money in the bank buys you time to replace a lost income source.  The more cash you have, the more time you have before bad things like late payments, defaults, foreclosure, and bankruptcy happen.

Here’s a specific example.  Let’s say you have $10,000 in the bank, and $15,000 in credit card debt, at some interest rate.  Your minimum monthly payment on the debt is, say, 2% of the balance, or $300, but let’s say you’re whittling it down a little faster than that, say $500/month.  Your monthly expenses are $2,000 per month, and you’re just about breaking even right now:  outflows match inflows.

So, at the moment, you have enough to cover five months’ worth of expenses ($2,000 per month times 5 months = $10,000) should you lose your job today.  You can even squeeze another two weeks out if you cut your debt repayment back down to the minimum.

Now, say instead that you threw $5,000 at that debt.  Your minimum payment drops to 2% or $10,000, or $200, which is great.  But your bank account now stretches less than three months. You have only about half the time to replace that income should it go away.  Not a good position to be in.

Cash in the bank is recession insurance. It does carry a cost if you have debt to pay off: interest spread.  But once you make the decision to pay down your debt with your cash in the bank, it’s not available to you anymore. The credit card company won’t give it back to you, and if they loan it to you, it will be at very high interest rate.  You may as well start charging on your card again.

People questioned Suze Orman when she advised not paying down debt as quickly as she had advised before, but I don’t think it’s bad advice at all.  A bolstered emergency fund is an excellent idea in this economic climate.  I might go so far as to say that you can’t have enough emergency fund right now.

If you should lose your job, you’ll be glad that you have as much as you do.

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Bargaineering addressed some tax consequences of the CARS (”Cash for Clunkers”) rebate program for Maryland.

Virginia’s sales tax consequences are similar to Maryland’s:  Sales tax is assessed on the full price, not the price after being reduced by the voucher.  In this way it’s similar to the way grocery store coupons are handled some places.  “Just because the manufacturer is offering 75 cents off doesn’t imply that I have to tax you less.”

Other states assess tax on the post-rebate price.

It’s already clear that the rebate is not treated as income at the federal level, so the open issues will be how the rebate is treated at the state and local levels.  What happens at the state and local levels will depend on how the individual states’ tax laws are worded, and whether the legislatures enact adjustments to what is already on the books.  (Here is a running chart of where the states stand now.  Maryland isn’t mentioned in this chart, but Jim’s right.)

So, if you took advantage of the Cash for Clunkers program, any of the following could be true:

• You’ve already paid sales tax on the voucher. (This is the case in Virginia and several other states.)
• You didn’t pay sales tax on the voucher.
• You might pay state income tax if your legislature enacts an add-in.
• You might not pay state income tax.

In short, you might be looking at a few hundred dollars either way if you took advantage of the program, but you won’t know for sure until you do your 2009 taxes.  So, enjoy your new ride and don’t worry about this now.

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DINKs Finance jogged my memory of this U.S. National Debt Clock in a recent post, so I popped over to check it out.

Of course, it’s mostly really bad news:  $11.7 trillion on the national debt; another person gets unemployed every 20 seconds; the unfunded liabilities like Social Security, Medicare, and the prescription drug benefit, are pushing $59 trillion.

But there was one piece of good news – perhaps an indication of some responsible American behavior, or perhaps merely a micro-drop of Wite-Out® for the reams of red ink, perhaps just a statistical anomaly.  USDebtClock.org’s take is that credit card debt is decreasing.

This is known in the personal finance world as a Very Good Thing.  We’ll see how long it continues.

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We drove up to my parents this weekend.  On the way through central PA my wife saw a sign in someone’s lawn:

Cash for Clunkers is War on the Middle Class

There was an interesting discussion over at Money Quantum (request a pre-launch invitation) on the topic of economic stimulus.  Flexo posed the question:

Do you think the measures the government has taken to stimulate the economy has been worthwhile?

Furthermore, should those who disagree with the economic stimulus, in order to show that they stand by their convictions, reject all the benefits personally? Can someone who takes advantage of Cash for Clunkers, for example, truly reject the concept of economic stimulus?

Basically, is it hypocritical to oppose economic stimulus and take advantage of economic stimulus at the same time?

We weren’t in a position to take advantage of C4C but I don’t see any problem with doing so if it makes economic sense for my family.  I also see that economic stimulus (a fancy word for bailout) is invariably going to make us poorer as a whole.  Over the course of my life there will be a handful of such economic stimuli that I’ll be able to take advantage of.  There will be far more that I can’t take advantage of, yet will pay for indirectly through rising deficits, rising federal debt, devauled currency, higher taxes, and less choice in what I can buy.

My recent jazz concert was another great example.  Everyone in this country pays to maintain all of these (awesome) military musicians, but only a few people take advantage of it.  I mean, heck, the concert is already put on, the jazz is some of the best most people will hear anyway, so why not?

“Wait a minute,” you might say.  “Isn’t the military just subsidizing an art form that just isn’t economically viable anymore?  Why can’t these guys get jobs in the real world?”  Well, it is harder than it used to be to support a big band, and gas is getting atrocious, but hey, it’s still really cool!  So why not?

But it goes beyond taking advantage of your own personal favorite government freebies.  I contend that it’s just about impossible to avoid stimulus altogether.  Do you take deductions for your charitable donations?  Did you take advantage of that $8,000 homebuyers’ credit?  Tax credits for adoptions?  Deduct your mortgage interest?  These are all stimuli designed to encourage consumer spending in one particular area.  If you didn’t take advantage of these, there are probably others that you did take advanage of.

 Might as well funnel some of your own money back into your own pocket.  It’s leaving it ever faster.

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