I stumbled on to Mint’s infographic about all the pitfalls of credit cards. I especially like how they compare it to falling down a very deep ravine until you hit fire at the bottom. If you haven’t seen it, it’s worth checking out: http://www.mint.com/blog/finance-core/the-descent-into-credit-card-debt/

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Mint’s Descent in to Credit Card Hell

Sorry for the lack of posts over the last week or so. I just got back from a business trip in Southern California. I spent a week down there working 11 hour days locked up in a conference room. The days were long but rewarding. As it happened, the conference room we were using all week was the executive board room. I’m far from an executive so it was interesting to see how things go there. The seats were incredibly comfortable. Plump and leather would be a good way to describe them. There was a break room with a refrigerator crammed full of soda, waters etc. They had their own professional grade coffee machines and every kind of tea on the planet. On top of the nice conference room, I happened to be staying in the Huntington Beach area. My hotel was directly across the street from the beach and was very nice. Luckily my company had negotiated a ridiculously cheap rate. My only regret was that I didn’t have more time to enjoy the area. Every morning there was a mass of surfers swimming out in to the surf to catch the amazing waves that crashed against the shore 24 hours a day. No wonder this is such a popular surfing destination. At night the beach was full of people enjoying bonfires all along the beach. I sat out on my balcony with a cocktail trying to relax after the long days and kept finding myself wondering what all these people did for a living……… (Had they just worked all day too?) I did manage to get out a bit in the evenings. On one night, a friend of mine and I drove down to Newport Beach to drool at some of the high end car dealerships there. We’re both car nuts so it was a fun trip to make. I couldn’t help but notice how wealthy the area seemed to be. I think that BMW’s were considered the economy car around there. I was absolutely amazed at how many there were. I can’t even count how many Bentleys, Mercedes and even exotic cars like Ferraris, Aston Martins and others there were. Either everyone down there is rich, or there is a TON of debt in that town. My friend and I were talking about how incredibly wealthy it seemed to be there and he said, “There must be a ton of millionaires around here”. I thought about it for a second and said, “Yeah, either that or there are a ton of debtonaires around here”. My guess is that it’s a bit of both. On Tuesday night the main street was crammed with booths for a street party. Again, I wondered, “What do all of these people do for a living?” I mean, rent down there has to be incredibly high. Modest houses were upwards of $1M. I suppose if you drive far enough inland the prices probably come down enough that middle class families can afford them. If you live in Southern California near the water, I’d be very interested to get your input on the local economies there. It could be that I just happened to be in one of the wealthier areas of Southern California during that week. I will say that if I had a choice and could afford it, I would live there. The waves were mesmerizing and the climate is exactly what I like. Unfortunately I don’t think I’ll ever be able to afford that lifestyle. As aggressive as we are being at saving, I don’t think we’ll ever amass enough money to live in that area.

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Are You a Millionaire or a Debtonaire?

These days it seems like everything costs “Just $10 a month”. You can have a subscription to just about anything these days. While $10 a month doesn’t seem like much, over time it really adds up. When you add up all the little costs each month and then multiply that times 12, it can be significant. I don’t think a lot of people realize how much they bleed each month. Sure, the services that they are receiving are giving them a reward, but sometimes I think things end up on autopilot and you forget you are even using the product or service that you are paying monthly for. Here are a few of our “little monthly costs” Tivo: $6.95 a month Netflix: $8.99 a month Milk delivery: $20.00 a month (double the price of store bought so $10 premium) Health club: $10 a month (have had this forever so I have a low rate) Individually none of them are significant. Add them up and all of a sudden I can see where over $400 a year goes. I think our house is somewhat unusual in that we don’t have a lot of small expenses like this because we watch it so closely. A typical household might have: Tivo/DVR: $12 (regular rate) Netflix/Blockbuster: $16.99 (3 movies at a time) Health club: $40 a month (fairly typical) Cel phone texting: $20 per month (family plan) Cel phone data plan: $30 per month Lawn service: $60 per month Cleaning service: $150 a month Caller ID: $6.50 Call Waiting: $5 I’m sure there are a ton more services that people subscribe to on a monthly basis. Most of these are convenience type expenses that make life just a little bit better. In the example above, which I don’t think is a-typical, a family would be shelling out nearly $4000 a year in what I would term convenience fees. It’s obviously up for debate what is really a convenience and what is “needed” but that’s a very personal decision. What’s even more interesting to me is that pretty much every expense I list above didn’t even exist 100 years ago. That means a typical household today is spending upwards of $4000 on things that no one ever even had the option to buy 100 years ago. That tells me that it’s much more in the “want” department than the “need” department. I guess the reason that I’m thinking so much about these kinds of convenience fees is because I made the decision to buy an Iphone awhile back. I haven’t bought it yet because I have been waiting for the new Iphone 3G S to come out. That happens next Friday. I’m still planning on buying it but I do find myself dreading signing up for another monthly cost that really isn’t a necessity. I will be increasing my cellular phone bill by around $30 a month, or $360 a year. My hope is that once I have the Iphone for awhile, it will feel like the best money I’ve ever spent. If it doesn’t, I’ll be paying the penalty for two years………..

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The Neverending Battle of Leaking Money

So the NHS has yet another head honcho - Andy Burnham. As BOM readers will know, 39 year old Andy is chiefly known for his Shakin’ Stevens tribute act , although his day job has always been unions and Labour politics. Yet here he is now, in charge of the biggest employer outside the Chinese Army and Indian Railways, controlling a mega-budget approaching 10% of our GDP. As Sir Robin Day put it three decades ago, “why should the public believe you, a transient, here-today and, if I may say so, gone-tomorrow politician?” Why indeed? Andy is the twelfth Health Secretary since 1985 - the TWELFTH. Each has averaged two years in post, and not a single one has ever worked at the sharp-end in healthcare. Not one. And yet for some unfathomable reason, we have entrusted them with one of the biggest jobs in Britain. A job that directly impacts the quality of all our lives. Why? Why do we go along with such lunacy? As we’ve said many times (we even made the vid about it), real customer service businesses, such as Tesco, could not possibly survive under here-today-gone-tomorrow amateurs like Burnham. As the vid says, since 1985, Tesco has had just two Chief Execs. Two. Both joined the company straight from college, and both learned the biz from the bottom up. So WTF do we still allow essential industries like healthcare and education, to be managed by ignorant, trough-guzzling, self-serving, spineless, ridiculous, gahdegahdegahdah politicos? We wouldn’t even consider letting them loose on our supermarkets.

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Here Today, Gone Tomorrow

Some inflation survival tips from Ray By common consent, the Second Great Depression has been averted. Thanks to Decisive Action by Great Statesmen, the green shoots are back in view. As Mr Kaletsky puts it : “Green shoots are sprouting into a jungle around the world… British house prices have risen in two of the past three months. Japan has experienced its biggest monthly increase in industrial production since the Fifties. Consumer and business sentiment are rising strongly in the United States and Britain and are even showing some signs of life in Europe. In America, where all the trouble started, unemployment claims have fallen, durable goods orders and property sales have bounced back and house prices have stabilised… …world share prices have enjoyed a three-month rally, led by commodities, retailers and financials, capital markets have re-opened, with record issuance of equities and corporate bonds, credit spreads have narrowed and government bond prices have fallen in exactly the way they did at the start of the recovery in 2003.” So hurrah! The Depression is behind us, and the relief boom is about to lift off. On Saturday, Tyler experienced the forthcoming boom first hand. Accompanying a couple of first-time home buyers (junior Tyler and his young lady) he journied to Sarf London, where they met with a financial advisor blandishing large wodges of freshly printed mortgage cash. The advisor was alarmingly young - certainly no more than 14 - and bore a striking resemblence to the Artful Dodger. Clacking away on his keyboard he maintained a terrific apples and pears patter: “A free bed house for less than two-fifty? You can’t go wrong. I’ll tell you what - back in ‘07 you’d have paid free two five for that. Free two five! Cuh!” Clack clack. “As it ‘appens, one of my clients - love him to bits - just bought half of Mitcham for free seventy. We did the deal, bish bosh. Course, he’ll split it into flats. Not that you’d like Mitcham - it’s a bit of a jungle. Cuh!” He swivelled the screen so we could see the deals he’d pulled up. “There we go - looks like Northern Rock is gonna be best - two year fix on 3.9%, or five years on 4.8%. Course, back in ‘07, I could have got you ten years on 2.4% - unless you’d been an asylum seeker, that is… then it might have cost 2.5%. Lovely stuff.” Tyler furrowed his brow. “Sorry, did you say Northern Rock? I thought Northern Rock had gone bust… surely they’re in no position to offer the best deal.” Dodger tapped the side of his nose. “You’d be surprised! As long as your credit record is OK, they love you to bits. Love you to bits! Course, my mate who got divorced and had his Porsche repossessed, he gets letters all the time from Northern Rock asking if he’d like to switch his existing mortgage to someone else. Love him to bits! Cuh! ” The bottom line was quite clear - as long as you can scrape a deposit together, and as long as you have a job, and as long as your credit history is OK, mortgage finance is flowing again. And house prices? Certainly in Sarf London, prices for first-time buyers seem to be bottoming. Cutprice offers are being rejected, houses “priced to sell” are selling, and the agents seem to be doing business again. Which is exactly what we’d expect. Let’s just remind ourselves of some highlights from Teach Yourself Monetary Economics . When the government/central bank pumps up the money supply, the first big visible impact is on asset prices - with money flooding the markets, the value of things like stocks and shares, and houses gets bid up. Which is pretty well what’s happening right now. But what happens next? Ideally, what you want is for the uplift in asset prices to stimulate new investment - as for example, companies find it cheaper to borrow. But given what’s been happening recently, do people want to invest right now? Probably not. Instead, they might well decide to consume more. Fine - in a recession, that’s exactly what the government wants. But what if large chunks of that consumption are imported? And what if that puts further downward pressure on the currency? And what if the markets take fright at that prospect and accelerate the process? And what if some of the initial uplift in asset prices worldwide spills into commodities? And what if that gives a upward push to inflation? You can see where this is going… Those green shoots may well be sprouting into a jungle. But Ray Mears aside, jungles are not terribly hospitable places. The giant snakes of inflation wait coiled behind every tree, ready to strike. PS Guilty pleasures - if you haven’t seen the revival of Oliver! you really should. Meanwhile, I’m quite convinced this guy is our financial advisor:

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Down In The Jungle

A few years ago (at least 5) I set up four accounts at my credit union. One account is my main checking account, one is a debit card account and two of the accounts are savings accounts. One savings account is tied to our main checking account and one is tied to our debit account. You may be wondering why we have separate checking and debit accounts when most people just have one account for both. The reason we do this is because I’ve read one too many articles about people’s debit card number getting stolen and their account being emptied. Once their account was emptied they spent a chunk of time working with the bank to get the funds restored and dealt with bounced checks and all the fees that go along with them. We try to keep $500 in our debit account at all times and the savings account that backs it up only has about $1000 in it. The majority of our money is kept in our main checking and savings accounts. By doing this, we feel safer against potential debit card number theft and never have too much money at risk. We also don’t have any other transactions happening in our debit account so even if the balance is stolen from the account, we won’t have to deal with bounced checks etc. The one risk to this strategy is that you really need to keep an eye on the account balance in the debit account. This hasn’t been a problem since we created these accounts but we finally got caught with our pants down this weekend when my wife used the debit card for a large shopping trip. The account balance had gotten down to $270 or so and my wife had one transaction for $298. OVERDRAWN. Luckily my credit union doesn’t charge any sort of fee to transfer money from our savings account to cover the discrepancy. There were a couple reasons that this happened. First of all, I hadn’t checked the account balance in a few days and didn’t notice that we were down to $270 in the debit account. Normally that wouldn’t even be a problem because we don’t use the debit account for major purchases. The strategy for any larger purchases is to use our Costco American Express or our Visa that we pay off at the end of the month. By doing this, we reduce the need to monitor our accounts as much and we also get cash back each year from Costco. Unfortunately my wife wasn’t paying attention and used the debit card instead of the credit card. The good news is that it was a lesson learned and didn’t cost us any fees. Yet another reason that I’m much happier with my credit union than a commercial bank.

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It’s Drafty in Our Debit Account

For the last couple months I’ve been dealing with indecision on whether I should buy a small chest freezer for the garage. The only freezer that we have is the small space that our main fridge in the kitchen has devoted to freezing our food. We’ve been able to get by with this amount of freezer space for the last 6 years that we’ve lived in our house but have had to avoid buying all the freezer goods we would have liked since there was no place to put the stuff. Since I’m such a big fan of Costco, I checked there a couple months ago to see what kind of freezers they have. They have one chest freezer that is $229. I was actually pleased with the price for a 7.0 cubic foot freezer but I just haven’t been able to pull the trigger on the purchase. Here are just a few of things that have gone through my mind each time I consider buying it: -Is this really a necessity? -Will the value I get out of it be worth the purchase price? -Will the added energy costs be worth the benefit of having extra freezer space? -Do I really want to devote garage space to yet another “thing”? -Will food sit there only to be consumed by the “freezer burn” Gods? It’s really kind of silly to put this much thought in to such a simple purchase. I mean, do I need a freezer or not? Seems pretty cut and dried. I tend to put much more thought in to purchases like this. It’s probably up for negotiation whether this is smart, or I’m just a bit odd. Unfortunately for me, this is how I live my life. So, here we are. Going on 3 months trying to decide whether I really need the freezer or not. Somehow we are getting by and living our life without it. The big question is: Will our lives be complete and angels appear from the clouds if we buy this freezer? I doubt it. I suppose I’ll ultimately buy the damn freezer but who knows. I would like to have the extra space for meat, and other things that we just don’t buy in very large quantities because there is nowhere to put them. One of these days I’ll have $229 burning a hole in my pocket and I’ll do it. Until then, I guess we’ll make do.

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Buy the Freezer or Don’t Buy the Freezer? That is the Question

At least the rubbish was cheaper back then So Manchester Museum has appointed a hermit in residence : “The artist Ansuman Biswas is to live in the museum’s Victorian Gothic tower for 40 days and nights – with only a computer modem for company. … On each day of his stay, from the end of June until early August, he will be concentrating on one object, and conducting an online discussion with the public about its significance - and its fate. Some of the objects he selects, some apparently trivial, some highly valued by the museum, may never make their way back to the collections. “I will be developing a dialogue with the public, drawing attention to certain objects and ask why we care about them - and if we care about them,” he said. “As Joni Mitchell said, you don’t know what you’ve got till it’s gone.” Fine. After all, Manchester has spawned hermits before. There were the unforgettable Herman’s Hermits , who also developed a dialogue on museums and stuff (see vid). And remember, they were pre -Joni Mitchell! Of course, there is one teensy difference between the Hermits of Herman and Mr Biswas: the former were not tax-funded. When last reported ( seven ! years ago) Manchester Museum was getting £2m pa of taxpayers’ money. Sounds like yet another contribution to George’s List.

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Hermit In Residence

Concerned about the Major Hot on the heels of yesterday’s outburst , the Major was round again this am. And just like yesterday, he was carrying a newspaper. But today he was very different. No more frothing and wild rolling eyes: today, he was smiling in that stained clarety way of his. But I also recognised a steely glint in his eye - the self-same glint I’d seen when he expedited our neighbourhood heron for crimes against goldfish. Here was a man set for action this day. “Now is the time for all good men to come to the aid of the party,” he announced. “Now. Today. No time to lose.” Marching passed me, he opened the Telegraph on the kitchen table. ” Have you seen this ?” He stabbed at an article written by David Cameron. “David wants me to stand as a Conservative MP.” ” David ?” I’ve heard the Major refer to young Cameron by many names, but never before David. I craned over to read. “Are you sure?” “Oh yes - quite sure. He says… ahh… yes, here… ‘it’s not enough to just change the processes in Parliament, and when it comes to the people who actually become members of that Parliament this is also an opportunity to widen the net, increase the talent pool and attract people who have never previously thought of serving. How do we do that? We need to get the public more involved in decisions that political parties have, until now, had a monopoly on… That is why I’m going to reopen the candidates list and invite new people to come forward.” The Major was positively beaming. ” New people … if that’s not a direct summons to me, I don’t know what is.” “Well, now, look Major… you may be right of course, but just think for a moment. Think. The very first thing they’re going to ask is how old are you?” “How old? I’m 62… 62 years young, and loaded with experience of life. Real Life … including all those years I spent fighting for Queen and Country against the Dervishes.” “So that’s three years off being an OAP. Sex?” “Well, perhaps not right now, sailor - B’Boommm!” “So not only are you the wrong sex, but you treat gender balance issues as a subject for Bernard Manning style jokes. Ethnicity?” “British! British and still proud of it.” “White British… not a plus, Major. Not a plus.” “Look, never mind all that. You seem to be forgetting something - I’ve been a member of the Conservative Association for my entire life ! I even enter the raffle. You can’t buy that kind of loyalty. Of course they’ll put me on the list - they’ll welcome me with open arms.” But by now I’d scanned Cam’s article. “I think you should re-read this, Major. Lifelong Tories are the very last people Cameron wants to apply. What he actually says is ‘They don’t necessarily need to have been involved in the Conservative Party in the past – more important than that is a belief in public service, and a desire to clean up our political system.’ I’m sure you don’t need me to translate.” The Major clenched his jaw, the tell-tale vein on the side of forehead giving an involuntary twitch. “The trouble with you,” he growled, “the trouble with you is that you’re too damned cynical. But even if you’re right, do you really think that will stop us? Some day - and that day is not far off - I believe this nation will rise again. I believe we brothers and sisters will take arms against a sea of corruption. And I believe… uhh… something else to complete the rule of three.” It may be a work in progress, but frankly, we’re concerned. **** Interested? “If you are interested in becoming a Conservative candidate and believe you would make a good Member of Parliament, please write to Gareth Fox at Conservative Campaign Headquarters (30 Millbank, London, SW1P 4DP) setting out why you would like to be a candidate, and enclose a copy of your CV. Please set out any work you have done in your local community, and achievements in your work or your personal life which you think would make you an effective MP.”

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Now Is The Time

We hate Prince George ” Call the dogs off? What a joke!” The Major smacked down his tightly-rolled copy of the Times on Tyler’s kitchen table. But for the fact that he already got there some time ago, it sounded like he was being driven to drink. “It’s precisely because of people like the Chief Druid that we’ve got into this situation in the first place! Listen, the reason we have such contempt for our MPs is not because we’re paying for their duck fetishes and porno films - we expect that. No - it’s because they have such contempt for us! They don’t give a stuff what we want! Never have!” Take crime. That appalling case of those poor kiddies in Hackney. One child tortured to death, and the rape of a two-year old - a two year old ! Unbelievable! Yet, when it comes to punishing the scum that did it, all they get is a few years in some cushty PFI holiday camp . Out here, most of us want to string ‘em up. In fact, we never wanted to abolish the drop in the first place. It was our MPs that did that - against our wishes ! And look at the murder rate now - three times what it was back in the 50s! Take what happened to the Listeners’ Law - that dreadful twok Pound pushing his way onto the wireless, faithfully promising that he’d table in Parliament whatever law the listeners vote for. But as soon as they vote for the Tony Martin shoot-burglars law - well, bugger me - he vetoes it, literally calling the listeners a bunch of bastards. How dare he treat us with such contempt!?!! Who does he think he is!! No, if anyone has brought democracy into contempt, it’s not the Telegraph, or the Barclays, or that woman on Question Time - it’s our MPs, and the rest of the ruling elite, including the Druid. We need to change things all right! We need to make our MPs accountable to us , not their party leaders. And if that means electing Esther whatshername… hmm… well, maybe not her… and certainly not that sanctimonious white suit man. But somebody like our Club Secretary - very good man - he wouldn’t forget us once up there. Did you mention a drink? ” **** The yawning void (do they yawn?) between us and our ruling elite has been blown wide open. So you’d kinda think they’d have gleaned we aren’t hailing them, but hating them . But as we discovered with the unappealing Andrew MacKay , it doesn’t work like that. Even in current circs, they have huge difficulties even understanding us (can he really have thought his meeting with constituents had gone well?). We are all crying out for an immediate election to secure some proper representation. But the elite haven’t quite picked up the message. His Grace tells us to stop now, because further humiliation risks undermining the very foundations of democracy. Labour man Matthew Taylor tells us it would be dangerous to have an election because we’ve already got the most motivated possible set of MPs to sort out the mess. Labour ministers (various) tell us we can’t have an election because it will distract Gordo’s attention from the quite superb job he’s doing managing of our economy. We clearly want, and need, an election soonest to eliminate the worst of the sleazebags - without that, nobody has any moral authority to change anything . But we also need be a lot clearer about why we actually need MPs. At present, they are a malfunctioning electoral college whose purpose is to select a Prime Minister. But in Tyler’s New World Order (TNWO), we would be electing the PM/President directly , for fixed terms - just like the Yanks and the French. So what then for our MPs? We’d surely want them to be more than ministers in waiting, focused mainly on plotting their way up the greasy pole. And we’d surely want them to be more than social workers, sorting out housing benefit claims - particularly since in TNWO we’ll have decentralised responsibility for welfare and many other public services back down to the local level. Elected talking heads for Newsnight? Nah - we’ve already got more than enough of them. So what then? Why do we need MPs? Holding government to account - yes, that’s it. We need them on select committees grilling ministers on the detail of policy. Yes, for sure. And scrutinising key legislation. Certainly. And Tyler would really like to see them reassert their traditional role in controlling government spending - and taxes . When did we last have a serious Parliamentary debate on the government’s plans to spend our money? When did Parliament last say No - you can’t have that much - you’ll have to make do with less? But our whipped lobby-fodder party hacks are never going to do any of that. No, to get anywhere along that road, we will need MPs who are much more independent, and much more independently minded. Independent at Westminster . So how do we manage that ? First, primary elections to loosen the hold of parties and strengthen the hold of local constituents. Second, many fewer MPs - say 450 - but better paid relative to ministers (obviously the Allowance/hidden salary system goes completely). Third, no doubling up as minister and MP - if you want to serve as a government minster, you have to resign as an MP. To get more independent MPs we need to split the executive from the legislature - just like in the US. And fourth… I’m sure there’s a fourth, but I’ve just run out of time on this post. TBC… PS There’s a lot of hysterical talk about how all this MP-slagging will end with the ignorant masses electing Adolf Hitler. So the responsible classes must close down further discussion asap. But even we ignorant masses can understand the distinction between our self-serving sleazy MPs and democracy itself. It’s only the former we hold in contempt: the latter is what we need to rescue from their clutches.

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Contempt For Democracy