A commission, formed 18 months ago and including four Nobel-prize winning economists (including American Joseph Stiglitz) has suggested that some of the following factors be incorporated into GDP measures:

• Health care measurements that consider outcomes for patients on top of financial inputs.
• Social safety nets.
• Unemployment insurance.
• Environmental degradation.
• Social connections.
• Insecurity.
• Education.

The idea is that the overall economic well-being of individuals and countries should be about more than just market activity. The ordinary people that make up the backbone of an economy have a variety of priorities, and the financial crisis showed us that perhaps making a great deal of money, without regard to anything else, should not really be the priority Sarkozy argues.

It’s an interesting idea. Especially since the way we assess the economy right now has little to do with a correlation between solid personal finances and what is going on with economic health. Indeed, the fact that our leaders have been encouraging us to spend (and even borrow more money) in the name of helping the economy provides some evidence that there is something amiss in terms of the way the economy works at the expense of individuals.

What do you think? Do you think some of the more abstract ideas related to personal priorities and finances should be considered in terms of assessing economic health?

Image source: Wikimedia Commons

Post from: EveryJoe

France Aims to Change GDP Calculations

1. Obama forced the Democrats to make concessions to the Republicans, even though they didn’t actually have to.
2. Almost no Republican (none in the House) voted for the bill even after the concessions.

This means that GOP partisans will either be remembered as stubborn obstructionist fools or visionary principled heroes — depending on whether the American public thinks that this economic stimulus bill did the trick. You can start making your own assessment for your personal finances today. Here are some of the things that are most likely to affect you personally:

• Starting in June, most people will start to see around $13 a week in their paychecks as part of the new tax credit. This might help you buy a few more things. But, in terms of meaningful spending or debt reduction, it really won’t be all that helpful. I, however, would save or invest it. That $13 a week, in the right place, will add up big time and yield substantial returns down the road.
• Child tax credit ($1,000) will now be offered to more families that don’t make enough to pay income taxes, and the EIC will be expanded to included more low-income families with three children or more. If you are struggling — especially because job loss may have changed your situation — this might be helpful to you.
• Those of us subject to the Alternative Minimum Tax (don’t get me started on this silliness) in the middle-class and in the upper-income class will not have to worry about it for now. But I’m sure that it’ll be back.
• $8,000 tax credit for first-time homebuyers who buy between January 1, 2009 and December 1, 2009.
• If you bought a new car this year, sales tax is written off. (Too bad I bought a used car.)
• If you have a child in college, you could see tax credits of up to $2,500 for 2009 and 2010 to help pay education-related expenses.
• For those who make green changes to their homes — energy efficient air conditioners, furnaces and windows — there is a 30% tax credit up to $1,500.
• Unemployed folks get help with COBRA premiums for nine months, as well as not being taxed on the first $2,400 received in unemployment benefits.

And, of course, there are a number of measures in the economic stimulus bill designed to help the poorest Americans, bring aid to higher education, benefit scientific research, improve infrastructure (”shovel ready” projects that could provide jobs), encourage more alternative energy development (which could make energy efficiency more affordable for more people in the long run), and education spending for elementary and secondary schools. More funding for police departments and work in the environmental sector will also be given. All of the above has the potential to help with job creation, as well as lay a foundation for a more innovative economy down the road.

Now, of course, it is time to see whether this all works well enough to make up for the tremendous amounts of debt our government is racking up (most of it going to China as debt holder) in order to pay for all of this economic stimulus spending.

Post from: EveryJoe

Economic Stimulus Plan: How Will It Help Your Personal Finances?

Not that anything is really going to make a big difference. At this point, what’s another $800 billion or $900 billion? Or even $1 trillion? We’ve already spent more than $7 trillion on economic stimulus — most of it going to “rescue” banks and other large institutions.

So, what’s in this stimulus bill?

Simply put, a great deal of spending that is likely to turn out to be ineffective. Here are some of the highlights of the economic stimulus bill — and what I think of them:

• Taxes: Homebuyer Credit. There will be tax benefits. First of all, that $7,500 first time homebuyer credit that was supposed to be repaid, no longer has to be repaid. That’s nice. They should retroact it to 2007 (so I get the credit for my home) and expand it to include any homebuyer and anyone who refinances.
• Taxes: Cuts. The other big tax thing — included as a sop to the Republicans who didn’t vote for the bill — was a tax cut. I think the tax cuts are a horrible idea. First of all, these tax cuts are not big enough to make any real difference. Is $500 or $1,000 going to prevent anyone’s foreclosure? No. And, because this tax cut is spread out over two years, and in the paycheck, it amounts to around $20 or $40 per month. Is that going to change your household budget dramatically? These tax cuts do nothing to advance the stated goals of preventing foreclosure and increasing consumer spending. Secondly, taxes will have to be raised again — just as we the people get used to this nice tax cut. Seriously, on a political level, down the road this is suicide.
• Infrastructure Projects. I like these. I like the idea of a smart grid (our infrastructure is woefully out of date), improving mass transit options, developing renewable energy (since this will be more cost efficient than fossil fuels in the long run) and bringing our technology up to date through expanding broadband services. These things will provide new jobs and allow more people access to the global economy. Unfortunately, these measures are only a small portion of the economic stimulus bill.
• Schools. I think education is important, and the money spent on secondary and higher education should (if properly directed) be money well spent.
• Bank rescue. It’s not really in the economic stimulus bill overtly, but you know more money is going to be thrown at banks through TARP and other channels. Timothy Geithner has promised to make banks rescue a priority, and I’m sure the continues costs of economic stimulus will be seen in emergency loans and what-not. After all, we didn’t spend more than $7 trillion so far through massive stimulus packages. Most of the economic stimulus will be spent a little here, and a little there, effective masking the true expenditures from the American public.

Honestly, and I’ve been saying it for months now, if our government is going to spend our money (and it will) and if we’re going to pay it back (with interest), they should just give the money directly to us. If economic stimulus had originally been $500 billion for infrastructure and other projects plus a nice fat payout for each household (not person — household) in America, many of the stated goals of our leaders would have been met. And it would have cost a helluva lot less. Foreclosures prevented. Credit card defaults prevented. Consumer spending through the roof. A possible foundation for a less extreme economy built on saving (although that might be a little too much to ask for). An individual economic stimulus would have put money back into banks and benefited the American people directly. It’s our money. Give to us and let us spend it as we please. Even Jon Stewart sees the merit in this:

But it is not to be. Everyone talks about the merits of tax cuts v. government spending on big projects, but the bottom line is that for the economy we have, and for the goals our leaders have stated, neither is very effective option.

Here is some more information on the economic stimulus bill:

• The Wall Street Journal breaks down who gets what from the economic stimulus bill.
• Frugal Dad laments the exorbitant cost of the economic stimulus bill.
• Free From Broke insists that government handouts like this discourage innovation.
• Personal Dividends explains why, in his opinion, the economic stimulus package is a disaster.

Really, about all you can do at this point for your personal finances is put together a budget, live in a frugal manner, and choose careful investments to beat inflation (because printing this much money is going to cause craaaaaazy inflation).

What do you think of the economic stimulus bill?

Post from: EveryJoe

House Passes Economic Stimulus Bill: I Am Not Amused

This, of course, has application in personal finances as well. Some of us have need of a gatekeeper for our personal finances. In business, a gatekeeper is defined as a decision-making unit that limits purchasing by controlling access to funds. The concept can work in personal finances. One example of a sort-of gatekeeper arrangement between life partners might be an agreement to consult together before making purchases that cost more than $100 (or $50 or $500 or whatever you think is reasonable for your situation). Or, you can use a financial planner or some other agent to help control access to your money in order to limit your spending. In some cases, a gatekeeper acts in the more official, court-appointed role of conservator.

No matter how it is set up, though, the function is the same. It is to encourage you to think about how you are spending your money, and determine whether it is something you need — or are willing — to pay for. A gatekeeper forces you to really consider your purchases. In same cases, if you feel helpless to curb your spending — or even if you just need a little help to prevent splurging, a gatekeeper can be of tremendous benefit. My husband and I have an agreement not to spend more than $100 without consulting each other. It has worked well in our personal finances.

What are your thoughts? Do you have some sort of gatekeeper system for your personal finances?

Image source: Arpingstone on WikiMedia Commons

Post from: EveryJoe

Do You Need a Gatekeeper for Your Personal Finances?

At any rate, this is just more proof, I hope, that Americans are starting to look at their spending and saving habits and make some changes for the better. If anything good comes of the current financial crisis and recession, it will be that some Americans will do some introspection and change the way they think about money.

Do you think that this recession is causing people to re-evaluate their personal finances?

Post from: EveryJoe

State Lotteries Dropping in Popularity

1. Employment
2. Debt

Is your job safe?

Today’s announcement that Citi is planning to cut more than 50,000 jobs in addition to the already-cut 22,000 jobs is not exactly instilling confidence in the economy — especially since unemployment is approaching recent highs. (Citi, though, plans to try and save executive bonuses, unlike Goldman Sachs, which has announced that execs will be foregoing bonuses this year.) To this end, it is no surprise that many people are becoming concerned about their jobs.

If you are worried about job loss, My Dollar Plan has some excellent suggestions for preparing for the possibility:

• Review your benefits and consider your health insurance options.
• Check your cash flow and start now to figure out where you can cut costs and how you can increase income from alternative sources.
• Be prepared to take action when it comes to a severance package, getting help, figuring out financing and making sure your credit is in order. Make any credit repair you may need.
• Prepare for the job market by updating your resume and dusting off networking contacts.

It’s never fun to contemplate losing your job, but it may become a reality, and preparing your finances for the blow is a good idea.

Debt and this economy

The other concern that many people have is related to debt. Our consumer culture has been on a debt-fueled spending spree for the last 20 years, and it’s catching up with a lot of us. It’s no surprise that people are looking at their crushing amounts of debt and starting to worry about what happens in an economy where they could lose their jobs.

As with preparing for possible job loss, trying to reduce debt is important. You need to start a debt reduction plan now, doing your best to get ready for what may be coming. This means that you need to cut back on unnecessary items, and do what you can to live within your means. And you need to apply leftover income to your debts. Debt has a way of magnifying other economic issues, and if you can get your debt to a minimum, it will leave more money free to take care of other problems.

And, of course, building an emergency fund will help you prepare for any personal finance storms that may come your way.

What are you doing to prepare your finances for this economy?

Post from: EveryJoe

Preparing Your Finances for This Economy

The bottom line, though, is that you need to be responsible for your own personal finances. There may be some tools to help you on the way, but, ultimately, no matter who is in office, you are largely in charge of your success in terms of personal finances.

My thoughts on some of the economic policies espoused by Barack Obama

My biggest disagreement with Obama: Despite my general support for Barack Obama, I don’t agree with him on every aspect of his plans. One of the things that I disagree with is the “windfall tax” on oil profits. While I think that Big Oil should lose its special tax breaks and as a profitable company should not be receiving subsidies, I think a windfall tax is pushing it. Instead, the subsidies currently enjoyed by Big Oil should be moved to fund the development of alternative energy technology that can help us end our need for oil.

Obama wants to offer rebate checks to people hit be high energy costs from the “windfall tax.” (It’s sort of what they’ve been doing in Alaska for years and years.) Anyway, I was against the first tax rebate check, and I’m not for this rebate check either.

One of the things I like about Obama’s economic proposals: One of the things I’m okay with, in terms of Obama’s proposals is the idea of raising the capital gains and dividend tax rates. Yeah, that means I’ll be paying a little more. But it doesn’t bother me. Neither do allegations that it will stymie investment. Just as there is no evidence that tax cuts for investment gains “trickle down” to help the less wealthy, there is no evidence that higher taxes on investments stymie investment. Bottom line: The benefits of investing outweigh taxes you pay. You still have more money, and you still made more than you put in.

What about you? What are some of the things that you like and dislike about Barack Obama’s economic proposals? And, please, let’s keep this a civil discussion.

image credit: U.S. government, public domain

Post from: EveryJoe

The Economy and a Barack Obama Presidency

But this election is one of the most important we’ve had (and the most important in my lifetime), since it really could affect us on a personal level. Indeed, worries about how policies of John McCain or Barack Obama could affect the economy and our personal finances is why the economy is the #1 issue for most people in this election. A great many people are voting with their wallets. If you plan to vote with your wallet, you need to decide whose policies are likely to benefit you most

My most important issue in this election is health care. Of course, health care is a very big wallet-type issue. We have serious problems that need to be fixed with health care. But education, the economy and energy are all important to me as well.

What’s the most important issue for you in this election?

Post from: EveryJoe

Election Day: What’s Important to You?

Tax proposals

For the most part, both of the plans hinge on taxes:

• John McCain wants to reduce the tax rate on early withdrawals from IRAs and 401(k)s while temporarily waiving the 10% early withdrawal penalty. (Obama wants to waive the penalty, but has not expressed a plan for lowering the income tax on such withdrawals.)
• Barack Obama wants to give companies a $3,000 tax credit for each person hired. His reasoning is that it will encourage employment at a time when the jobless rate is on the rise.
• John McCain wants to slash the long-term capital gains tax for 2009 and 2010. That way, he insists, more people will want to invest and save. Plus, in theory, more people and businesses will sell their shares in order to take advantage of the tax treatment, and that will result in a chunk of capital that can be used for other things.
• A tax write-off acceleration for those forced to sell in the current market is also being encouraged by McCain.

The rest of Barack Obama’s propsals

While John McCain’s new details pretty much stop on new tax breaks, Obama outlined a few more points:

• The Federal Reserve should be able to lend to state and local governments in order to increase liquidity on a local level.
• Unemployment benefits should be extended by 13 weeks. (Benefits would be exempted from income tax.)
• In addition to removing the early withdrawal penalty on up to $10,000 from retirement accounts, Obama proposes that seniors, on a temporary basis, not be forced into taking the minimum disbursement at age 70.5 to give accounts time to recover from the ravages of the stock market.
• A 90-day moratorium on foreclosures from institutions that take advantage of government bank rescue programs.

While I think that many of the measures proposed by both candidates would help ease things for regular people, I am a little wary of the idea of waiving early withdrawal penaties from retirement accounts. After all, now is not a good time to draw down what capital remains in the account. I am also wary of extending unemployment benefits, as well as skeptical about how much slashing the long-term capital gains tax would actually benefit ordinary folk.

What do you think of the proposals offered by the presidential candidates?

Post from: EveryJoe

Barack Obama and John McCain Share Economic Proposals

Let me know what you think — whether it’s for your passive income or your retirement account, what, if anything, are you doing about your investment portfolio?

Post from: EveryJoe

Personal Finances Poll: What Are You Doing With Your Investment Portfolio?