Overspending is “Jingle Bell Wrong”: Don’t Buy Your Way Into a New Year’s Mess

It’s amazing how it happens every year: All of a sudden, it’s the middle of December and Christmas is just a couple of short weeks away.

Because even though Christmas is always on December 25 (each and every year, guys), it seems that there is always financial stress at crunch time when you realize you are going to buy gifts for your family, the in-laws, your friends, your spouse and your children. (Notice I said “going to” and not “have to.”)

Have we not realized this was coming ALL YEAR LONG?

Why, then, do we continue to spend ourselves into a hole that we have to dig our way back out of at the beginning of the New Year? Do the happy holiday blinders go on and we just say, “Charge it!”?

Try just saying, “No.” Because, like my Papaw Kermit always said: “’No’ is a complete sentence.”

You don’t have to buy love with Christmas presents. But, if you enjoy giving and it makes your heart happy, go for it. Just start planning earlier than December 12. 

I’ve listened to a few financial planning “gurus” over the years. Just recently we had a visit from local financial smarty, "Pete the Planner" (as part of the Chamber’s internal wellness programming, our staff will be able to participate in a financial wellness program with Peter Dunn throughout 2013).

They’ve all pretty much said something similar: Start saving up your cash earlier in the year to pay for Christmas. Don’t touch the money unless you are using it for your Christmas shopping purposes (whether that’s in May or on Black Friday). And DON’T spend money you don’t have.

It’s time for Americans to start taking back control of the economy, which will start with each family getting in control of their finances. And no one can do it for you (not even the government). It’s not easy – sticking to a budget takes work, but financial strain and daily turmoil causes more work and stress than living within your means.

As it is only a few weeks away from Christmas and it’s a little late to start stockpiling your money for Christmas 2012, my advice is this if you are fretting and can’t afford gifts. There’s no shame in telling your friends and family that you are working to right your financial ship and that spending time together – or offering to clean their home or cook dinner for them or just listening when they need a shoulder – is a better gift than anything bought in a store. If they are truly your friends and family, they will be understanding and help you on your path to financial peace. 

And next year, you can start saving money early … unless you decide that offering your time and services is a much better gift anyway.

IFPI: New Legislature/Governor Will Face Temptation to Spend

An interesting report from the Indiana Fiscal Policy Institute, via Inside INdiana Business:

The Indiana Fiscal Policy Institute (IFPI) today released its report "Indiana’s Fiscal Condition – A Different Set of Policy Choices" that provides analysis regarding the State’s financial picture and also anticipates the challenges facing a new governor and the General Assembly in 2013.

"The new governor and legislators still will certainly have a tough time balancing the budget, but this time it will be in the form of resisting temptation to spend instead of identifying ways to cut expenses," said John Ketzenberger, president of the IFPI. "There will likely be pent-up demand among many constituents for new or additional spending and it is harder for policymakers to say no to them when there are surplus funds."

The report previews the unique set of circumstances facing the state as it enters a transition phase after Nov. 6 when, for the first time in eight years, the state will have a new governor. It’s likely, too, that nearly 40 percent of the members of the General Assembly will be entering their first or second terms, a remarkable period of turnover for the legislative body. Just days after taking office the new governor and the remade Legislature will begin the work of assembling the state’s next two-year budget. Add the fact there will be a new chair of the House Ways and Means Committee, and this will be a most interesting session from a fiscal perspective.

Among the questions likely to be considered in the 2013 General Assembly session are:

  • How will any new spending affect the state’s surpluses? Will these expenditures be one-time expenses, such as capital projects, that reduce the overall surplus, or will they be ongoing expenses, such as education, that will affect the structural balance?
  • Will surplus funds be used to further reduce taxes?
  • Should the state undertake plans to reform how it funds the Teachers Retirement Fund?

These questions and others also are affected by the sluggish economic recovery and concerns that another recession would create renewed havoc on tax revenue. Indiana’s increased reliance on sales and income taxes to pay for education, especially, makes it vulnerable to economic downturns that would make additional spending moot. The new policymakers will have to carefully consider these economic factors as they consider the state’s fiscal future.

The full report can be found on the Indiana Fiscal Policy Institute Web site – www.indianafiscal.org

You’re Likely to Spend Money ‘Where Everybody Knows Your Name’

Who doesn’t get a little giddy (though discretely to keep your cool, of course) when greeted by name upon entering a restaurant or business? It makes you feel like a bit of a celebrity, right? Okay, maybe it’s just me.

But it seems that “Cheers,” or at least the theme song to the popular 80s show, got it right – you really are more likely to go to a place where you’re well known, or at least where somebody knows your name.

It turns out that research backs that up: 23% of consumers surveyed choose to shop at a locally-owned, independent small business where employees are friendly and greet customers by name, according to American Express OPEN Small Business Saturday Consumer Pulse. And 22% of those surveyed choose to shop at a small business because the people that work there know them and make recommendations of products and services they might like.

That makes sense. In this world of online shopping and social media, it’s nice to have that face-to-face connection. I’d also rather support someone with my hard-earned money that takes the time to learn my face and name. The friendly factor is also incredibly important: What’s that old adage about catching more flies with honey than vinegar?

The research also found that 73% of consumers choose to shop local to support businesses in their community because they don’t want those businesses to go away.

Some other interesting survey results include:

  • A majority of consumers (87%) share their favorable opinions of businesses with others; 85% use word of mouth, 24% use social media and 13% use review sites. Only 69% share unfavorable opinions.
  • Men actually spend more than women at the one small business they shop at the most ($110 versus $95).
  • Resources to find locally-owned independent stores or restaurants vary by region: Consumers in the south and west are more likely to use deal sites such as Groupon and Living Social; consumers in the northeast are more likely to use web sites of traditional media outlets; north central states use social media sites like Facebook and Twitter.

So what do you think? Are you more likely to support your local businesses and restaurants in general or because you feel a bit important when you walk in and are greeted by name?

Just Listen to Jagger When It Comes to Finances

Remember the Game of Life board game? My favorite part was pretending to be the banker, which meant I counted and distributed the “play” money. That exercise helped illustrate a basic – but crucial – “life” lesson: When you run out of money, there’s no more to spend.

As an adult, you learn that’s only partially true – especially with credit cards, which pave a tempting path to overspending.

I’m not saying it’s easy, but here’s what I do as I longingly gaze at advertisements for Hawaiian vacations or elegant – but expensive – wardrobe styles: Begin silently singing what’s become my spending anthem – the Rolling Stones’ “You Can’t Always Get What You Want.”

I read an interesting Accumulating Money article describing a few reasons why people overspend. It notes that 43% of families shell out more than they earn each year. Here’s an excerpt: 

Keeping up with the Joneses – Psychology plays a big role in our spending habits. We want to feel as successful or more successful than those around us. We spend a lot of money to keep up that image. The reality is, the neighbors probably can’t afford that new boat either.

Plastic doesn’t feel like real money – It’s common to spend more when using credit cards than cash. The experience of handing over a card that you get back is just not the same as handing over some cold hard cash and seeing it disappear.

Immediate gratification – It’s all around us. We’re bombarded with the immediate gratification mentality. “Instant pain relief,” “fast food,” “on demand video” and the big financial one, “buy now, pay later.” We’re too used to getting what we want now even if we don’t know how we’ll pay later.

Can’t say no – Some people feel like a failure when they can’t meet the wants of others. Whether it’s new toys for the kids, new outfit for the spouse or a night out with the friends, some people just can’t say no, even when they can’t afford to say yes.

So It’s Not a New Problem We’re Talking About

The Kiplinger Letter has been offering business and political information and analysis for what seems like forever. I couldn’t help but notice that it delivered this familiar blast from the past, which originally appeared in 1957.

"People ask why government won’t cut taxes and spending. OK, here’s why: The whole system is geared to spending more … on practically every front. Every government administrator, big or little, wants more for his functions … and is backed by like-minded lobbies in Washington, lobbying for more. Every member of Congress tries to get more for his district, his voters. Even the average citizen, perhaps even you, has some special interest, and wants government to spend more for that, and economize on other things. Almost no one dares stick his neck out for cuts … on any specified front.

"The total forces for spending exceed the total of forces for cutting. And, mind you, this applies to the general public as well as to government."

And that was from 54 years ago!

Spending in America: The Unfunny Story of Where Some of it is Going

In the recent debt deal, there was plenty of debate from pundits and voters about the need — or lack of need — for more taxation. But one thing almost everyone seemed to agree on — politicians included — was that the U.S. simply must start cutting its spending. The Heritage Foundation has an interesting post showing some places we could likely start:

Late-night comedian Conan O’Brien’s blog has a new post parodying Washington’s excessive spending. “Team Coco has found out why our government is so broke,” the blog explains, “They’ve been spending all our hard earned tax dollars on some pretty ridiculous programs.” The post contains a list of humorous fake programs and encourages readers submit their own.

But sadly, there’s no need to turn to a crack team of comedy writers to gin up examples of ridiculous government spending. Instead, one need only look to the shenanigans on Capitol Hill to find a list of absurd expenditures of taxpayer dollars. As Heritage has reported, in addition to long-term, substantive reforms, $343 billion of wasteful government spending could be cut immediately. And while Conan’s list is populated by a number of outlandish (but fake) programs, there are plenty of REAL government programs that are just as ridiculous. Conan, try these on for size:

  • Washington will spend $2.6 million training Chinese prostitutes to drink more responsibly on the job.
  • Because of overstaffing, the U.S. Postal Service selects 1,125 employees per day to sit in empty rooms. They are not allowed to work, read, play cards, watch television, or do anything. This costs $50 million annually.
  • Stimulus dollars have been spent on mascot costumes, electric golf carts, and a university study examining how much alcohol college freshmen women require before agreeing to casual sex.
  • Washington will spend $615,175 on an archive honoring the Grateful Dead.
  • The Securities and Exchange Commission spent $3.9 million rearranging desks and offices at its Washington, D.C., headquarters.
  • Congress recently gave Alaska Airlines $500,000 to paint a Chinook salmon on a Boeing 737.
  • Washington spends $25 billion annually maintaining unused or vacant federal properties.
  • The Federal Communications Commission spent $350,000 to sponsor NASCAR driver David Gilliland.
  • Washington has spent $3 billion re-sanding beaches—even as this new sand washes back into the ocean.
  • Taxpayers are funding paintings of high-ranking government officials at a cost of up to $50,000 apiece.
  • The Conservation Reserve program pays farmers $2 billion annually not to farm their land.

And the list goes on and on. When it comes to government spending, the truth is often stranger than fiction.

Tallying the Historic Regulatory Burden

Taxes have a higher profile (especially on Tax Day today), but regulations may carry a bigger share of the blame when the topic is government getting in the way of business growth and development. Consider these numbers, just part of a yearly comprehensive report from the Competitive Enterprise Institite:

  • The Federal Register stands at an all-time record-high 81,405 pages.
  • In 2010, federal agencies issued 3,573 final rules.
  • While agencies issued 3,573 final rules, Congress passed and the president signed into law a comparatively “few” 217 bills. Considerable lawmaking power is delegated to unelected bureaucrats at agencies, an abuse addressed recently in proposals such as the REINS Act.
  • Alarmingly, proposed rules in the Federal Register have surged from 2,044 in 2009 to 2,439 in 2010, a jump of 19.3 percent.
  • Of the 4,225 rules now in the regulatory pipeline, 224 are “economically significant” meaning they wield at least $100 million in economic impact—this is an increase of 22 percent over 2009’s 184 rules.
  • Given 2010’s government spending (outlays) of $3.456 trillion, the regulatory “hidden tax” of $1.75 trillion stands at an unprecedented 50.7 percent of the level of federal spending itself.
  • Regulatory costs exceed all 2008 corporate pretax profits of $1.463 trillion.
  • Regulatory costs dwarf corporate income taxes of $157 billion.
  • Regulatory costs tower over the estimated 2010 individual income taxes of $936 billion by 87 percent—nearly double the level.
  • Regulatory costs of $1.75 trillion absorb 11.9 percent of the U.S. gross domestic product (GDP), estimated at $14.649 trillion in 2010.
  • Combining regulatory costs with federal FY 2010 outlays of $3.456 trillion reveals a federal government whose share of the entire economy now reaches 35.5 percent.

Wayne Crews, author of Ten Thousand Commandments:  An Annual Snapshot of the Federal Regulatory State, says, “Trillion-dollar deficits and regulatory costs approaching $2 trillion annually are both unsettling new developments for America.  Every year, the federal government blows past previous deficit, debt, and regulatory burdens with no end in sight. No wonder Americans are fed up with Washington.”

Check out the full report.

“Anyone Aboard?”

If you’re like me, you curse America’s lack of — or at least not so convenient — cross-country passenger train access whenever you head to New York City, or some such locale. Even before TSA gropes became the law of the land, my disdain for large commercial airports could hardly be quantified. Although, I must say Indy’s new airport is about as delightful as an airport can be; in fact, it made LaGuardia feel like I’d landed in a toilet. (And Indiana business travelers are also blessed to have wonderful facilities like the Indianapolis Executive Airport, operated by Montgomery Aviation.)

But the fact is rail development requires serious infrastructure dollars, and as Governing reports, don’t expect that money to be invested in rail anytime soon, as American passenger train commuting may be stuck in the station for some time:

The Obama administration is more sympathetic to rail transit than its predecessors. It proposed a historic expansion of the rail passenger system, including building a national high-speed network of bullet trains with an initial $8 billion down payment in stimulus money (with more promised) to a few states for some modest projects to get things going.

The problem is that the newly elected Republican governors of states where much of the money was supposed to go — like Ohio and Wisconsin, and maybe Florida — don’t want it, at least not for high-speed rail. They’ll gladly take it for auto infrastructure like roads, bridges and highways. But U.S. Transportation Secretary Ray LaHood, a former Republican congressman from Peoria, Ill., won’t agree to that: It’s accept rail or hit the trail, and the money will go to states that want it.

Recently the greater New York area was stunned by New Jersey Gov. Chris Christie’s decision to pull his state out of a long-planned project — described as the largest public transit program in the country — to build a second rail tunnel beneath the Hudson River to ease the commute by 45 minutes for Jersey residents who work in New York City. With substantial overruns, it was estimated to cost as much as $13 billion. Christie’s state was on the hook for $2.7 billion, plus the added costs for its share of the project, which already is under construction. Much is at stake, including 6,000 construction jobs.

Making significant improvements in rail service in this country seems like a no-brainer. Ridership is increasing. The highways and airways are overburdened. It’s far more energy efficient and cleaner, and compared to cars, it’s safer. If done right, it can be one of the most effective economic development tools available. But it’s also very expensive and requires a sustained commitment over many decades. And right now, governments are deep in debt.

Critics of Obama’s high-speed rail plan make several points. The project will cost far too much in initial outlays and subsidies to justify the benefits, siphoning off the funding of worthier programs, including commuter mass transit. The United States has become a suburbanized society, sprawling over a large land mass, with only a few places having sufficient population density to warrant intercity rail service. To be successful in any area except the Northeast Corridor, high-speed trains would have to make too many stops, and therefore would be too slow to compete.

Given the political changes in the new Congress and in many states, it’s hard to imagine that we’ll see many bullet trains whizzing through our future. But that doesn’t necessarily mean that all is lost for rail advocates. The incoming chairman of the U.S. House Transportation and Infrastructure Committee, Florida Republican John Mica, is outspoken in his opposition to the administration’s plan, which he claims is likely to lead to many “slow-speed trains to nowhere.” But he does support what he calls “a better directed high-speed rail program.”
 

Digging Out of a Big Debt Hole

Just where do your tax dollars go in Washington? According to Congressional Budget Office figures for fiscal year 2010:

  • Health: 24%
  • Defense and Social Security: 20% each
  • Safety net programs: 14%
  • Interest on debt: 6%
  • Everything else: 16%

The troubling figure is the smallest percentage listed above. Within 10 years, interest payments will rise to 9% (barring a reveral of course) with $1 trillion being doled out and none of it going to debt principal. Based on current tax rates, nearly half of all income tax revenue would be needed just to pay the interest on the national debt.

That’s an Unhappy New Year thought. Washington lawmakers and bureaucrats are you listening: Act now to give all a fighting chance in the future.

Parties Badger Each Other in Wisconsin Over High Speed Rail

Discussion about the possibilities of high-speed rail has been plentiful over the years. The federal government is putting dollars behind the talk, with Wisconsin the big winner in a network that could extend throughout the Midwest. But there is controversy in the Badger State.

A brick-and-glass state office building on the banks of Lake Monona, just a few blocks from the Wisconsin Capitol and the rest of downtown Madison, shows no outward sign that it has become the focal point of one of the most heated — and unexpected — debates to divide this state’s Democrats and Republicans in a crucial election year.

The controversy is over what the building could become: one of the first new station stops on a high-speed rail network paid for primarily with federal dollars. Wisconsin won big in a national competition to get the high-speed rail stimulus money, and the issue historically has attracted bipartisan support here. Proponents say the new rail service will spur development and link Midwestern cities more tightly together.

But many Wisconsin Republicans this year are denouncing the new trains, using the project as a symbol to show how Democratic leaders in both state and federal government are spending money that neither can afford. “More than anything,” says Scott Walker, the Milwaukee County executive and Republican candidate for governor, “it symbolizes what people think of here when they think of runaway government spending.”

Both Walker and Mark Neumann, a former congressman who faces Walker in Tuesday’s (Sept. 14) Republican primary, want the state to stop work on the project. Walker launched his own website called NoTrain.com, calling for using the money to fill other transportation needs. Neumann doesn’t want it used for transportation at all; he wants the money for tax breaks, although it’s not clear how viable either option is.

Rail proponents are not backing down. President Obama visited Milwaukee to preview his plans to improve the nation’s transportation infrastructure, specifically mentioning high-speed rail. His transportation secretary, Ray LaHood, said in a recent visit that “nobody can stop this train.” And Milwaukee Mayor Tom Barrett, who is running to keep the governor’s mansion in Democratic hands, is firmly behind extending high-speed rail to Madison.