How many articles have I seen in the past month about how to recession proof your 401k? I can think of a couple on MSN, and a bunch on random blogs. Apologies to any of my bloggy friends if you have written on it. Actually I can understand the feelings of panic people are having over 401k, especially those getting ready to retire. If you are getting ready to retire, you can pretty much disregard this article. If not, read on for recession proofing your life, something much more important than worrying just about your 401k….

So I am opening with a disclaimer: I STILL DONT THINK WE SHOULD PANIC OVER RECESSION. Come on people, wheres the widespread unemployment, we are in a frigging correction, not a recession. Though things could get nasty if the fed keeps cutting rates. Inflation is much scarier than a correction. But I digress. But assuming you are scared of the recession, lets look at the effects and how to protect yourself from them:

First what is a recession?

­A recession is a prolonged period of time when a nation’s economy is slowing down, or contracting. Such a slow-down is characterized by a number of different trends, including:

-People buying less stuff
-Decrease in factory production
-Growing unemployment
-Slump in personal income and salary growth
-Stock Market goes down/doesnt grow

Mind you all of this has to happen for 6 months straight to be considered a recession. Now lets see what you should do to your life to handle ICOR (In Case Of Recession)… I just made up that acronym, but I like it so tell your friends and when they don’t know what you are talking about, tell them “What, you don’t know what to do ICOR? In Case of Recession?” And then tell them to visit my site.

Before we go into specifics here is the golden rule: It is not your duty, your responsibility or any other word that implies obligation to SPEND to help the economy recover. Let me repeat that. It is NOT your duty to spend money or acquire debt to help the economy.

1) Make sure you have an emergency fund.
You should have an emergency fund anyway. Start with one month’s worth of expenses and work up to two months worth. Then three months. If you have a family, up it to five to six months if possible. If you’re young and single, or a young couple you can probably find ways to work bizzare/crappy jobs with crappy hours to make ends meet in a worst case scenario. If you have kids, obviously you need to be extra careful because you want to make sure they have stability, shelter, you present as much as possible and have good food. If you have dogs, they will probably eat anything so no problems there.

2) Work harder, work faster, work smarter
This is by far the most important thing to recession proof your life. If you master this one, the rest of them wont matter. If there is a downturn in the job market, employers for the most part are looking to trim the fat, though there are exceptions. Ask yourself, if I were a food to fuel my company, would I be kobe beef or a chunk of spam? So how do you improve? Get involved in more things that are core to your company. Outlying projects can be cut, so too can people working on them. Get yourself into a position where you are generating revenue for your company. Work IN the office. Network with people. Update your resume. This should probably be its own article.

3) Take advantage of the lower interest rates
Refinance, then instead of paying the lower amount due every month, keep paying the same amount and shrink that debt down or use it to grow your emergency fund. The less you owe in principal per month the less your payments will be.

4) Be Frugal
Do I really have to say it again?

5) Look for great bargains
If you are having to do something like buy a house, chances are you can get away with offering much much less than you otherwise could. If you have to buy something, be strategic about it.

6) If you are investing do NOT try to cash out
Trying to time the market is dumb. There are is 50% chance of being wrong each time. I don’t care how much research you did. Im not saying you shouldn’t be strategic but playing stock trader during sketchy times is a bad idea.

7) Keep building your 401k/IRA, DONT panic
Unless you are close to retirement, a downturn in the market just means you can buy cheaper. If you are really worried, mix in some (more)bonds. When the market’s at the bottom, buy buy buy.

Yeah, I really did probably save a guys life last night.

Last night I worked kind of late when at the last minute I decided I would go hide my girlfriend’s early Valentines day present in her desk at work (we work at the same company) so that I wouldnt have to get up TOO early to sneak in and do it before people came in to work. Well, I went ahead and did and drove back to my house. By this time its pretty late so I am tired and want to go to bed. I pulled up into my driveway but was suddenly struck by the thought that the gas station by my house always has good deals on the extra large redbull, which I am addicted to. I normally just go to the gas station by work but I figured hey, Im up and two blocks away, I may as well just go do it now since its late and I don’t want to make a stop in the morning and I can save some money. So I drive over to the gas station and the place is dead, no one around. Well, I walk in and walk over and grab a redbull and a monster and head for the counter. I put my drinks down on the counter and I notice immediately there is something wrong with the attendant, he is bent over the register. I asked him if he was ok and he goes “I…dont….”

And then he starts having muscle spasms and says “Im diabetic, call 911.” I call 911, sit him down, and the ambulance is there within literally 30 seconds. They come in and give him a shot of something. In the meantime I put back the energy drinks and head for the exit and the guy tells me on the way out “thank you so much brother.”

Wow.

*Check in later for my story on how I saved a guys life last night*

As my girlfriend rightfully pointed out, it has been a while since I have posted about getting rid of debt. Well, fear not, I have a whole laundry list of tips to erase your debt in no time.

Lets start with what is something you can do in fifteen minutes that can save you a decent sum of money month after month. If you are reading this, there is a decent chance you have credit card debt. There is equally as good a chance that at least some of that credit card debt is high interest. If you are paying 17,18,19, … 22….30% interest on your credit cards, thats highway robbery! Lets do something about it…

Call your credit card company any request an interest rate reduction.

When you first talk to someone in customer service you are talking to someone low on the totum poll. They probably dont have the authority to reduce your interest rate. I did some digging and my credit union has a clause that says “you have the right to request a supervising officer.” Ah, yes, you most definitely WOULD like to speak to a supervisor. When you have the supervisor on the phone, request the rate reduction. The vast majority of the time they will give you a reduction. If they are reluctant, threaten to balance transfer to a lower rate card. Unless you have terrible credit, this is a very credible threat and will do the trick.

How much will this save me?
I have heard of reductions anywhere from 5-13%. Thats huge savings if you have a couple thousand dollars on your credit card. Lets say your credit card has a balance of $5000.00 at 22%. If you get that reduced to say 12%, thats gonna save you $500 in a year. Thats $41/month. Heres the kicker, keep paying the amount you were budgeted to before you got your rate drop. That extra will go toward the principal and the next month you will be paying even LESS interest and MORE principal. Watch that debt shrink like lawyer in church.

Where do I find this magical number that I need to call to make these wonderful things happen?
Well either you need to:
1) paypal me and I will send a carrier pigeon with the number strapped to its leg
or
2) flip over your card and call the number on the back

Now you see the light, so stand up for your right. Get on that phone!

Ive heard some rumblings about stock market instability and the fact that the new forever stamps are another thing to invest in since postage rates climb fairly often. However they are NOT a good investment. To the right is my new and improved design for the forever stamp. Lets go over why:

1) Buying a ton of stamps sucks. Do you really want to go into the post office and buy a truckload of stamps? Added bonus they WONT EVEN SELL YOU that many. Thats right, they are limited to a “reasonable” quantity. Though it might be funny to walk into the store and ask for 10,000 stamps, I’m pretty sure they wont consider that a reasonable quantity.

2) You can’t even sell stamps for face value. Check ebay. Just because something costs 42 cents doesn’t mean that you can buy it and turn around and sell it for 42 cents.

3) Why aren’t you putting that money into your debt payoffs/retirement fund/emergency fund/index fund/fund to go to cabo?

4) The postage rates are increased yearly based on inflation** and this just in: pacing inflation is not a good investment.

**Our government works in strange, mysterious and non efficient ways, so who really knows.

5) There are better ways to spend your time and messing around with stamps. Yeah I know that is pretty general, but lets think this through. Ok so you buy thousands of forever stamps. You hold on to them for a few years. Now its time to sell. Where are you going to sell thousands of stamps? Ebay? To a store maybe? Logistically its just not feasible. I will probably have a nightmare tonight about running around from store to trying to sell them my crappy boxes full of stamps.

What are forever stamps good for?
Convenience. Buying one cent stamps is annoying when they hike rates. So if you hang onto stamps for a long time, buy yourself some forever stamps to reduce the hassle. Otherwise, leave em alone!

There is something that gets left out a lot when the topic of personal finance comes up. It is one of the most simple things to grasp, yet also one of the hardest to do. It is something that I personally am terrible about if I don’t watch myself. Ok enough suspense already, wheres the beef?

The secret is simple:

Do not buy things you do not currently have enough money to buy.

Ok, you’re thinking, thats pretty obvious. But is it really? Lets dig a little deeper here. If you are like me (note: not referring to good looking and intelligent) then how many times have you said to yourself “well, I have extra on my next paycheck so I will just fit it in there.” Well, there is a good chance that something else will come up next pay period, so then both the original charge AND the new charge get put off. This is what I like to call the reverse snowball. Snowballing is a common metaphor for how to get rid of debt….well this is the best way to build debt.

Here is a a good example. In the consulting environment I get paid a bonus based on how many billable hours I worked for a customer in a given month. I do not figure this into my budget and it varies wildly based on what customer, what Im doing etc etc and its always paid on the second paycheck of the month. For the first part of the month, if I know Im getting a good sized bonus for the month I will overspend outside my budget because, hey, extra money is coming. The problem is that I never know exactly how much it will be and it makes it very easy to get carried away and go wild with the spending. Yes, even a financial titan such as myself will be defeated occasionally by spending temptation. Its my Achilles heal if you will. Ok enough with the greek mythology. Lets strategize:

1) Stick to the budget except in case of absolute complete and total necessities. Medical expenses, car breaks down, furnace goes out and it’s so cold your beta fish is swimming under a layer of ice (true story)….these things are ok. NFL Sunday ticket is calling your name, not ok (also true story).

2) Budget according to only what you KNOW you will make.

3) Make an emergency fund. Yes I know its easy to use credit as an emergency fund, but you should be putting money aside anyway.

4) Be honest with yourself. Most people I know are masters at telling themselves they can easily pay something off later. Don’t do it.

5) Take care of yourself and your things so that you stay healthy, and they stay working. The best way to cut out medical and other expenses is preventative action.

Bonus: Pay yourself first, this will work wonders in keeping you to #1.

Since the federal reserve has been cutting rates like interest is goin out of style there has been a renewed interest in home equity loans and home equity lines of credit. So what exactly are these? What is the different? Should I care?

What is a HEL (home equity loan)?
This is a type of loan where the borrower uses the equity in their home as collateral. These loans a lot of times are used to finance home projects, pay off high interest credit card debt, or pay medical bills. A home equity loan requires good credit history and a good amount of equity in the home. In this loan, the borrower receives a lump sum at the time of closing and nothing more can be borrowed. The max amount of money that can be borrowed is determined by variables including credit history, income and the value of teh home. The amount that can be borrowed is usually up to the entire appraised value of the home minus the first mortgage. Closed end loans have fixed rates and can be amortized for periods of usually up to 15 years.

What is a HELOC (Home Equity Line of Credit)?
A Home Equity Line of Credit (often called HELOC, pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower’s equity in his/her house. This is also called an open-ended home equity loan.

What is the difference between a HELOC and a come equity loan?
The different is that in a HELOC the entire sum of money isn’t given to you up front. Instead you are given a line of credit, very similar to having a credit card. At closing you get a specific credit limit that you can borrow up to. During the period of time you are allowed to borrow you can borrow and pay back what you owe plus interest. Depending on how much you use the home equity line of credit you will have a monthly payment, generally only the interest on whatever is owed. Another difference is that the interest rate on a HELOC is based on the prime rate as set by the federal reserve. This means that the interest rate will change over time. Generally HELOC rates are lower than home equity loans because they are variable, however if there is significant economic turmoil you could get stuck with a very high interest rate.

For each, what are some of the advantages and disadvantages?

Home Equity Loan Advantages:
-All the money up front
-The interest is tax deductible
-Low closing costs

Home Equity Loan Disadvantages
-Fairly high interest rates
-No grace period, payments start right away
-No flexibility

HELOC Advantages:
-The interest is tax deductible
-HELOCs are viewed as not as bad in the eyes of creditors as a traditional home equity loan
-can be interest only
-no prepay

HELOC Disadvantages:
-Variable interest rates mean that rates can rise over time.
-Failure to keep to terms can and probably will result in foreclosure.
-No caps on interest rate
-Minimum draw amounts

As far as times to get home equity loans go, this is a good time. The federal prime interest rate is the lowest it has been in years. If you have sizable high interest debt, a HEL or HELOC might be a good idea…just remember putting up your home for collateral is dangerous!

At the career fair I attended today yesterday. I really wanted to take a camera with and photograph the worst dressed interview candidates but I couldnt quite figure out how to 1) do it without getting caught and 2) ethically justify it to myself. Ok mostly #1. Anyway I couldn’t do that so there went idea number 1 for funny random post of the day. The good news is there are enough stories to make an entire post! (And let this be a lesson to act professional)

Conversation with one computer science major:

me: “Hey hows it going? So what kind of employment are you looking for”
kid: “well I want a summer internship doing no more than 5 hours a week.”
me: “Why only 5 hours? I spend 5 hours a week washing my car in the summer”
kid: “I hate working”
…

Then there was the kid walking around in the always classy flannel pajama pants, flip flops and a tshirt with messy hair wandering around asking for interviews. hmmm.

Another great conversation. A girl comes up to me very professionally dressed with a nametag that reads “mathematics”. Ok a math major that wants to talk to a software/consulting firm interesting, but Im game for listening to her pitch. “Hi, so what kind of employment are you looking for”
“well Im not really sure but I saw your website and I had a dream that I fit in perfectly with your company I can’t quite explain it, I felt a strong core attraction to your company. I feel something telling me to work here.” “Well we have development openings, some marketing openings, etc etc do you have any experience with anything there?” “No” “Do any of those things interest you?” “No” “How do you see yourself fitting in at our company” “I dreamt you would know” “Huh. Well, let me pass you off to our recruiter” Wherein I took great joy in seeing him go through the same thing. There is something cathartic about torturing friends/co-workers.

Here are a couple bonus career/finance related quotes:

baseball great Yogi Berra, on the Broadway show Biloxi Blues:
“It reminds me of being in the Army, even though I was in the Navy.”

Overheard:
“I like investing. Mostly money.”

“If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
JP Getty.

“I’ve been rich and I’ve been poor: Rich is better.”
Sophie Tucker

“Part of the $10 million I spent on gambling, part on booze and part on women. The rest I spent foolishly.”
George Raft.

And Ill leave you with:

“Beyond its entertainment value, Baywatch has enriched and, in many cases, helped save lives. I’m looking forward to the opportunity to continue with a project which has has such a significance for so many.”
- David Hasselhoff, Actor

Baywatch saved my life, how bout yours?

If I had a nickel for every time I have heard the words “recession” and “economic trouble” and “disaster” in the past month I would driving my money truck down to the bank with the biggest change counter in town. Im not sure how you count a truck load of nickels but Im sure it cant be easy.

Everyone knows this is the real end of the world.

So anyway….
The media is of course going crazy over it, which immediately should raise red flags because they are TERRIBLE at predicting the economy. My favorite of all time is people saying that google stock was super overpriced at $80 a share. Oops. I saw an article in mens health I think it was where they picked some stocks based on an expert, throwing darts, and some other random means. The dart method had by far the best results. In any case there are several key points here:

1) Yes there is a housing bubble but surprise…some of it is ALREADY behind us.

2) One of the key points of a recession is a lack of jobs. Consumer spending may be down, but jobs are not. In fact, I am going to my alma mater’s career fair tomorrow (by the time this is posted it will be the day of) because my company is in desperate need of developers.

3) Regardless of what happens, dip in stocks means one thing. Cheaper stock prices! No matter what happens there will be no massive massive sell off of stocks. There will be no massive crash. A downturn in stocks is a chance to get ahead on retirement saving. Think of it as a sale on retirement!

For every dollar less a stock is right now that you can buy it for for your retirement fund, you are making much more money in the long run. For people wanting to get out right now it is problematic….but for most people that are reading this blog this is like the day after thanksgiving sale…for stocks, except you don’t have to wait outside in freezing temperatures in front of circuit city drinking spiked hot chocolate waiting for 7 am to get a tv in below freezing colorado weather. Oh no bitterness here by the way.

So everyone calm down, don’t pull your money out of your investments. Don’t panic that your 401k went down. Dont try to time the market. I promise it will all be ok. If its not, I promise I will share my box with you.

I’m always on the lookout for things that can save energy costs because if it doesn’t affect the quality of life, then its just wasting money. Todays top: turning down the thermostat. Now, don’t get me wrong, I am not saying all the time. In fact I hate sitting around the house being cold…who doesn’t? But really, how about when you are sleeping? Or how about when you are at work during the day? In our case the dogs are still home, and they are definitely princesses, but they do have fur. Speaking of dogs, does anyone else have one that loves poop? Our puppy Sabra’s proudest moment was when she came in from outside, trotted up to me wagging her tail like crazy and triumphantly dropped a nice dried up frozen turd at my feet. Anyway back to finance….

According to the Rocky Mountain Institute, for every 1° you lower your thermostat, you save 2 percent in energy costs. So lets say you lower your thermostat for 8 hours while sleeping and 8 hours while at work. Thats 16 hours a day, exactly 2/3 of the day. 2/3 of 2 percent is 1 and 1/3 percent. Lets say you keep your house at 70 (a fairly common temperature). Here in Colorado heating a 2k square foot house with gas can cost up to $2000.00/yr. Lets say you were to lower your thermostat to 65 at night and during the workday:

Annual heating and cooling costs(before): $2000
Percent savings from adjusting thermostat: 6.67%
Annual savings: $133

Lets day you decide to turn it down to 60 while sleeping and away:

Annual heating and cooling costs(before): $2000
Percent savings from adjusting thermostat:13.33%
Annual savings: $266

Makes sense eh? If you go to the extreme you can save probably up to about 35% assuming a baseline of 70. Thats up to $700 in a year. Mind you I wouldn’t want to turn my own thermostat down that much. All of this becomes much MUCH easier if you have a programmable thermostat. My house doesn’t have one, and I will have to look at my girlfriends house to see if hers is (I think it is; she has a new house and I probably just made work for myself writing this article heh heh). They aren’t much to buy and will pay for themselves in less than a year. Now go!

What has she taught us about money? Its not that money can turn a slightly spoiled hollywood teen into a psychopath, though you could probably make that argument. No, instead it is she has taught us:

“Im a slave for you”

I have a friend that recently has crossed the line from frugality into cheap…in his obsession to save money he has stopped doing anything worthwhile. Everyone has a friend that sometimes fits into the category of Mr or Ms Cheap. You know, instead of the Teddy Roosevelt of frugality, they cross the line into Ross from friends, taking salt out of the hotel salt shaker and unscrewing light bulbs. Ok so my particular friend hasn’t reached that point yet but many people have. They have become slaves to their money.

Just for fun, lets go over Mr Cheap ala Ramit’s definitions.

Mr Cheap:

Mr Cheap lets his friends buy all of the rounds at the bar
Mr Cheap refuses to lend you dollar when you are one dollar short for lunch
Mr Cheap buys things simply because they are cheap
Mr Cheap affects everyone around him
Mr Cheap dismisses ideas because they cost money
Mr Cheap is upset when his friends decide to do something that costs money

Worst of all Mr Cheap drinks PBR. Terrible.

So What is the point? Your friends suck?

No. The point is that you never want to get to the point where you are no longer controlling your money, but it is controlling you.The whole point of personal finance is to manage your money so that you can life a good life. When your money is controlling you, it is one of the most stressful situations possible. Even if you are in debt badly you should be able to allocate at least a small amount of money for fun and entertainment. Pay yourself first. The dog should always wag the tail, never the other way around.