Personal Finance 
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Comments of the week, baby boomer angst edition

Baby boomer angst is understandable given many are worse off than millennials

We had a great week for comments, with lots of people weighing in on a post I wrote pushing back against boomers’ frequent public critiques of the millennial generation.

Some readers thought I was being too hard on the boomers, who have also suffered as a result of the financial crisis.
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 Your Take 
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Your Take: Is Your Recession Over?

The National Bureau of Economic Research issued a report earlier this week in which they said the economic recession, that started in December 2007, ended in June 2009, 18 months later. It was the longest recession since World War 2 (1973-1975 and 1981-1982, both 16 months) and that any new economic downturn would be a new recession. The report is a little dry, heck the summary is like a walk in the Sahara, and makes for good headlines, but ultimately a recession is defined by people, not numbers (numbers lie!).

With so many houses underwater, nearly 10% unemployment, and all the other “signs” of a recession, I want to know what you think. Do you think we’re out of the recession?

We may be out of the technical definition of a recession but it’ll be quite some time before we return to the happy days of three or four years ago. With it being football season and all, I think a most appropriate analogy is when a kicker outkicks his coverage. Our economy, fueled by banking and financial chicanery (which we were all complicit in, you can’t blame the drug dealer for getting addicted), grew far too fast to be healthy, our home prices grew far too fast for our incomes, and now we have to pay the price with a little weakness for some time for things to recover. It’s like overeating at a lunch buffet, sometimes you just skip dinner.

What are your thoughts?


 Your Take 
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Your Take: Will Your Recession Changes Stick?

Almost Empty WagamamasWhile most of us don’t believe we’re out of the recession, no matter what the statistics say, we can all agree that we made a few sacrifices over the last year and a half. Some have made a lot of sacrifices. One of the things my wife and I cut back on was dining out. We would go out to restaurants several times a week, not counting weekend festivities with our friends. For a dual income, no kid household, it’s not uncommon because our other expenses are generally low. However, with the uncertainty of the recession and my wife starting a PhD program, we thought that cutting back on one of our largest expenses was a smart idea and we believe the changes will stick even after the economy truly recovers.

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 Your Take 
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Your Take: Are We Out Of The Recession?

CNN Money GDP 2009Q3 ChartYesterday, the Department of Commerce reported that the annualized GDP (gross domestic product) grew to 3.5% in third quarter. This is significant because, by definition, a recession is two straight quarters of shrinking GDP. A 3.5% increase in GDP would mean, at least technically, the recession was over. Four straight quarters of negative GDP growth, the worst of which was the first quarter of 2009 (-6.4%), has finally come to an end.

Hooray! Right?

Unfortunately, no one living in the real world cares much for technicalities. Millions of jobs have been lost, with hundreds of thousands more each month, and so I don’t think many people feel like the recession is over even if the bean counters say so. One positive sign is that the growth beat expectations by 0.3%, which isn’t a bad thing.

Two things worry me:

  • How much of the recovery was the result of various government programs meant to stimulate consumption? We had all the bailouts, cash for clunkers, first time home buyer credit, and several other programs that cost billions. People are still being laid off at the rate of hundreds of thousands a month, unemployment for September 2009 was 9.5% (not seasonally adjusted), and people without jobs tend to spend less (duh). Is this sustainable?
  • Check out the 2nd quarter of 2008. In the 1st quarter of 2008, we saw a negative GDP growth figure. Then we “pulled out” of a potential recession in the 2nd quarter only to fall back into the trenches for a full year.

So, while we’re technically out of the recession, does it feel like we’re out of the recession? What do you think?

(Source: CNN Money)


 NEWS 
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Fed Says Recession “Likely” Over, Experts Don’t Believe It

Grays Papaya Recession SpecialOn Wednesday, the Federal Reserve will conclude its two day FOMC meeting and announce what they plan to do with the federal interest rate. Most experts expect the rate to stay at the 0% to 0.25% range the Fed set several months ago. With unemployment near or above double digits in some areas, it would be extremely difficult for the Fed to justify a rate increase at this point.

Last week, Jim asked if you thought the recession was over. In the post, he highlighted Ben Bernanke’s comments about how we were “very likely” seeing the end of the Recession but it doesn’t appear that experts believe him!

In general, the Federal Reserve lowers the target rate when it wants to boost the economy. Lower rates mean businesses can borrow money cheaper. It also means banks offer lower rates on deposit accounts, like CDs and savings accounts. The lower they go, the less incentive we have to save – so we boost the economy be spending more. The 0% – 0.25% target range is about as low as it can go.

We need to wait until Wednesday to see what the Fed announces but experts believe rates won’t increase until next year. If you were hoping for a frothy return to economic prosperity… you might have to wait until next year to pop the bubbly.

Fed not acting like there’s a recovery [CNN Money]


 Your Take 
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Your Take: Is The Recession Over?

Recession BusterEarlier this week, Ben Bernanke, Chairman of the Federal Reserve, said the recession was “very likely over” but that the unemployment rate would likely still go up. There’s a lot of talk about a “jobless” recovery, that is a recovery in which new jobs aren’t created, with the unemployment rate not falling back to the normal 5% for at least another four years. Bernanke specifically said that the recession was likely over from a technical perspective, which is to say that we’ll probably still feel like a recession even if we don’t have two consecutive quarters of negative GDP growth.

So I wanted to know from you – do you think the recession is over? It’s one thing to look at “statistics” and declare victory, it’s another to look people in the eye and tell them that the recession is over.

Personally, I think that you can throw technical out the window because regular people don’t really care. Until people stop being afraid they’ll lose their jobs because of the economy, the recession isn’t going to be over. There have been a lot of positive things about this recession – Americans are repaying debt and saving more, frugality has made a resurgence, and there’s been a greater emphasis on emergency funds.

So… is the recession over?

(Photo: arvindgrover)


 Reviews 
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Where to Put Your Money Now by Peter Passell

Where to Put Your Money Now by Peter PassellNot sure where to invest your hard earned money? Not even sure if you should invest it? Where to Put Your Money Now by Peter Passell is the latest in a line of books focused on that very issue. It’s a mere 130-something pages written by a Senior Fellow of the Milken Institute, a well-respected independent economic think tank, and a fairly quick read.

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 Your Take 
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Your Take: What Are You Worried About Now?

Recession Prices SignI think it’s safe to say that we’re knee deep into a Recession. In February, I had the great fortune of being on American Public Media’s Marketplace Money with Tess Vigeland, Lynnae of BeingFrugal.net and Steve at BripBlap.com. Back then, we didn’t know if we were going to be in a recession but everyone pretty much believed we were well on our way. Here’s what I said:

JIM: It’s been crazy. Way back in September and October and November, when the economy was slowing down, but people hadn’t really cemented the idea that we were in a recession. Everyone was focused on the stock market and how it was, you know, one day it would be down 300 points, then up. Then down. My readers were saying, what should I do with my 401(k)? But in the months that have been since, everyone’s now worried about what should I do because I’m afraid I might lose my job? You know, it’s a shift away from “Oh, my 401(k)s down,” to “I might lose my job and not even have a 401(k) to contribute to.” And I think that’s led to a lot of nervousness.

It’s been three months and with the stock market recovering from the doldrums, I’m curious to know what everyone is worried about now or what they’ve been focusing on.

For me, I’ve been focusing on keeping my financial house in order. I call it personal finance defense and the best offense is a good defense. :)

We’ve returned to a more frugal lifestyle, eating out less than we did before and deriving entertainment from cooking our meals (two birds with one stone!). We’ve focused on making sure our financial documents are well integrated and organized (hence the deluge of videos about the charts we make, like the cashflowchart and the financial network map). We have continued to regularly review our credit reports to catch any errors and to make sure our credit score is as high and as accurate as it can be.

What have you been focusing on or what has been worrying you, if anything?

(Photo: anders-vindegg)


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