Somehow, investing now seems like a really important thing.  I think I’m convincing myself that I’m buying at the bottom.  Plus it helps to be focusing on getting a bargin and ignoring what is happening to my other investments.  And buying a relatively risky investment means that swings in value are normal, so I can just go on pretending things are okay.

I know staying in the market, with the investments I already have, is the right thing to do.  This just helps me take my mind off of it.

Anyway, I ordered the cheapest machine over the weekend (got the free shipping on orders over $50 and discovered a $20 rebate during checkout, so it should come to about $40 total).  It arrived on Tuesday and I just went to set it up to scan something.  Plugged it in, beep, beep, beep.  You can’t do anything until you insert four ink cartridges (black, yellow, cyan, magenta).  Literally nothing can be done, I tried holding down the power button but it won’t power off, just beeps.

Okay, I dig those out of the box.  Insert all four, and it goes into some sort of ink setup process.  I check the manual…that will last four minutes!  Four whole minutes!  Plenty of time to write this post.

But mostly this was idle speculation and pessimism.  Until I read a Freakonomics blog post today.  They linked to three studies of the 2001 rebate.  The first said basically what you’d expect.  Some people planned to spend it (1/4 of respondents) and the rest were going to pay down debt or save.  They seem surprised that the richest folks were most likely to spend it, but those are the folks who have their savings and debt all planned out and know they have it to spend. 

But the third had the most interesting information.  Here’s the recap from the Freakonomics blog:

This paper begins with one particularly compelling observation: credit card companies know our social security numbers (and hence who got their rebates when), and they also know a lot about our spending and saving patterns.

And so once the authors were able to get a large credit card company to share with them (anonymized) data, their research project was made.

Recall that paper #1 had found that nearly half of all respondents expected to use the rebate to pay down their debt. It turns out that this was the initial response of many, but then over the ensuing nine months, spending rose by enough to account for around two-fifths of the average rebate. And for those who were liquidity constrained, spending rose even further.

Yup, they paid it down and then spend at least 2/5 of it later.  Actually a lower percentage than I thought, so maybe I’m too pessimistic.

Most of the coupons on my sheet were for things like store brand ice cream.  Not something I buy, but one coupon was special this week for earth day…$2 off of any 2 “full circle organic” products.  Since Full Circle has canned beans for 99c, I picked up two free cans of beans.  Not bad for a quick investigation of a new machine. 

They have cheaper competitors in China, they are having trouble getting paid by buyers, heating costs are going up, it doesn’t look good.  They’ve got to economize and adapt, or close.  They’re dipping into personal savings right now.

“With the recent pay cut that we both just took at the business, I’m concerned that by now our outgo is more than our income and that means it would only get worse, not better,” Diane says. “If it should come to another round of layoffs, my son is next on the list. And that would break my heart.”

I understand that she feels bad, but maybe your son should take a look at what it’s doing to you and go get a different job.

Diane says she is constantly assessing what she calls “the point of no return” for the company and she says she is determined not to let things get so bad they would face insolvency. But some weeks now — to stay afloat and make payroll — they dip into their personal savings.

While that takes the pressure off at work, it adds to the stress at home. The Dearings are more than $100,000 over budget and wondering how to make a dent in that debt.

“The business is in difficult straits,” Diane says. “We are overextended personally because there is no profit to bring home.”

Sounds like they’ve got some difficult choices to make.

“Small investors always make the worst timing decisions because emotion is involved,” Mr. Tysk said. “This is precisely the wrong time to move to safer options. The stock market has dropped dramatically and now is the time to invest — don’t close the stable door after the horse has left.”

They do talk about TIPS, which is something I hadn’t seen much of in the press until very recently.   They’re a good choice for folks who need stable money, such as folks past retirement who have a significant chunk of their portfolio in bonds but need to worry about inflation as well.

Treasury Inflation Protected Securities, known as TIPS, are securities whose principal is tied to the Consumer Price Index.

With inflation, the principal increases, while with deflation, it decreases. When the security matures, the United States Treasury pays the original or adjusted principal, whichever is greater.  

The one thing they just gloss over is job security.  It would probably be a stronger article if they left it out entirely, here is everything about your job:

The first thing to do is take stock of your life. Determine how secure your job is, which, in these uncertain times, may not be easy.

If your job is relatively safe, step back and look at your financial situation.

And if your job isn’t safe?  That advice must be in a different article, because it’s not in this one. 

I have an emergency fund set aside, and I could increase it but it covers 6 months and increasing it isn’t a priority.  I’m covering all my bills out of current income, including the outrageous heating bills (not on budget plan this year), so my frugality has seemed a little wan and lackluster.

There are some (personal) reasons that I don’t have a medium term goal.  There are some very good reasons for abandoning my previously set one, and I’ve accomplished the one before that, so I’m kinda adrift.  So I did some brainstorming.  Originally I was just going to pick one of the goals I brainstormed and go for it.  But it’s hard to go after a goal with gusto if you’re not committed.  Brainstorming is a fun procrastination technique, so I did it anyway.  Out of all those ideas there are a couple of winners, and a couple that are exciting to think about (e.g. I could buy a boat and sail around the world) but wouldn’t necessarily be that great to live (I get seasick).  I took all the ideas that were either rational or very exciting, and figured out what the next steps would be.  And in most of the cases they really are the same.  Save up some cash, get rid of clutter, get things in order, get a better job, finish up here. 

Having all the goals need the same steps seemed like a clear sign that those steps needed to be done no matter what.  In six months or so I’ll be in a better position to choose a medium term goal, and I’ll be part way there already.  Obviously the goal will dictate the amounts (e.g. amount of money, amount of clutter to get rid of), but I can still head in the right direction.  So I printed out a few things to remind me of all of the goals and stuck them up on a bulletin board.  I’m sure most of you out there use this technique, but I heartily recommend it.  So now there’s a picture of a lake house, an apartment building, a boat and a flat in Paris.  Instead of feeling adrift, goalless, and spending money frivolously I’m looking at the board excited with all the possibilities. 

The website is relatively easy to use, though sometimes it takes me an extra click or two to find a feature.  The billpay works great, I like that it reminds you what you paid last time when you are setting up the next payment.  It’s quite easy to have multiple accounts and change the nicknames on those accounts (”emergency fund”, “vacation”, etc).   It’s easy to set up recurring transfers from one account to another.  All these are great features for saving and paying bills.

Now the downside: no checks.  This isn’t a big deal if you’re paying VISA for example.  You put your account number in the little box and click “pay”, and VISA handles it quite nicely.  But I live in a relatively small town.  When you get your water bill it doesn’t have a return envelope.  You’re expected to take the two part form down to town hall where there is one clerk and have her take your check and stamp one half of the form as your receipt.  I suppose mailing a check is acceptable, but the water department doesn’t have account numbers, just name/addresses, so I don’t know what I’d put for account number (can I fit my whole name/address in that box?) nor do I know what they’d do with the billpay at town hall.

So, to make my life easier (hah), I now have two checking accounts.  One is Electric Orange and the other is a local account with real checks (but no interest).  It makes it easy to deposit checks and cash, and to write checks for occasional things like the quarterly water bill or the handwritten renewal notice for a local magazine.  I can transfer money to/from Electric Orange using ING’s system.

One other interesting thing that has turned up is the difference in overpaying my mortgage.  I have a standard first mortgage and then a second mortgage which is technically a home equity loan (I got it at the closing, and it has a 30 year amortization).  Both are with the same company.  Both have tickets you’re supposed to send in with the check indicating the amount of the check that’s for “current payment”, “principal”, and “late fees”.  But those tickets are different and go to different places.  And when I overpay my primary mortgage using the E.O. billpay they apply the overage (without a ticket to guide them) to the principal. 

When I overpay the second mortgage, they apply it to the next payment.  It took a while for me to discover this, but my last bill from them showed my next payment due in August.  In other words, the amount I’ve overpaid in the last six months is equal to the payments for April, May, June and July.  Oops.  Anyway, to make a principal-only payment, I have to send a letter asking them to apply the enclosed check to principal, and send it to different address.  Hard to enclose a letter with billpay.  So I’ll be using my local account for that as well.

I’m single, and while I’m confident in my ability to find another job, I’m not confident in my ability to find another job HERE.  Since I own a house, that could be trouble.  Actually I could find a job, just not a job that pays all the bills.  I could be employed in retail just above minumum wage in less than a week.  

It’s hard to immediately cut back (if you had a sudden job loss) because everything has a final bill.  Drop cable and you get one more bill.  Drop the land line and, yes, one more bill.  And I put everything on a rewards card and pay it the next month, so that bill too will come after the day I decide to cut back.  So when you plan, you probably need to include one month at your current spending levels before assuming you’d cut back. 

I’ve decided on an amount that works for me.  My current e-fund amount will cover 3 months of living like I do now, plus three more months of bare-bones living.  I’d probably cut back to bare bones after 1 month, so it might stretch to 7 months total.  I do have friends and family I could lean on in a pinch.  Specifically several folks a few hours away near lots of jobs.  I could crash on various couches during the week if I ended up getting a job down there while I was waiting to sell my house.  If I didn’t have that fallback plan, I might want a few more months of bare-bones living in that fund.