A Christmas Poem - University of Idaho Extension (Ver página)

ITCT contact info:
Editor: Luke Erickson—Rexburg
erickson@uidaho.edu
Lyle Hansen—Jerome
lhansen@uidaho.edu
Marnie Spencer—Bingham
marniers@uidaho.edu
Marilyn Bischoff—Boise
mbischof@uidaho.edu
Jim Schaffer—Idaho Falls
schaffer@uidaho.edu
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Spending
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Emergencies
-Become
Debt Free
-Save For
Retirement
-Teach Kids About
Money
-Own Your Home
-Leave a
Legacy
A Christmas Poem
Luke Erickson
Let me share a tale about Harry and Ed McDougal.
Harry liked spending, but Ed was more frugal.
This Christmas Harry bought Ed a shiny new bugle,
But Ed spent more time searching, starting with Google.
Google gave Ed a few starting ideas,
“Perhaps I could give Harry a gift card to Maria’s,
Authentic cuisine, complete with tortillas,
With waiters who always say ‘Muchas Graci-as.’”
“Or maybe I’ll get Harry an i with a Pod,
Or maybe I’ll get him a new shiny hot-rod,
Or an Alaskan cruise where he can go fishing for cod.”
But then Ed realized that his thoughts were quite odd.
“I’m Ed McDougal, known for my thrift,
I don’t need to give Harry an extravagant gift,
He just needs to know I care,” he sniffed.
“But Christmas is coming, I need to be swift.”
Christmas morning arrived and Ed felt a little uneasy.
Ed worried that Harry would find his gift cheesy.
When Harry began to unwrap, Ed became queasy,
He tried a distraction, “Let’s go play some Parcheesi!”
But that morning Parcheesi was not to be played,
Harry opened his gift, at first a little dismayed.
“It’s nothing too fancy, it’s actually home-made,
I put together home movies from the 80’s decade.”
“I used a friend’s computer to make the DVD,
It’s from when we were kids, here, pop it in and see.”
Acid washed jeans, feathered hair, the old Atari,
Transformers, He-man and even ET.
Changing the
financial lives of
Idahoans, two
cents at a time!
December, 2008
“Man the 80’s hit us hard! This is true hilarity.
This is the best gift I’ve received,” Harry said with sincerity.
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Christmas morning the brothers spent in solidarity,
But the brothers each had a much different prosperity.
You see, Harry spent way too much on Ed’s horn.
He spent the next year in debt and forlorn,
“I haven’t felt so poor since the day I was born!
I have way too much debt from Christmas,” he did mourn.
“I need some kind of bailout just like Fannie Mae,
I’ve got an idea! I’ll cash out my 401(k)!
It was once worth 5 grand but worth only 9 dollars today,”
Harry asked Ed’s advice but Ed said, “No way, Jose!”
“I know that since Christmas you’ve been real low on money,
But cashing out now is a big mistake, sonny!
When you’re old you’ll be rich, it won’t even be funny!”
“Thanks Ed,” Harry sniffed, ‘cause his nose became runny.
“But I don’t know what to do to get rid of this debt,”
He wished he had not borrowed for the shiny cornet.
“Christmas debt is not good, Harry, don’t you forget,
There’s no way out of loans, except through hard work and sweat.”
Ed then showed Harry the interest on what he bought,
How it added up to much much more than he thought,
And Harry finally learned to do what he ought,
“From now on I won’t ever spend more than I got!”
Knock Debt Down for the Count!
Lyle Hansen
Creditor Name Balance Payment %Rate Payoff Time
Credit Card#1 $5,000 $150.00 19.99% 4 years 2 mos
Feb 2012
Credit Card #2 $3,500 $105.00 17.99% 5 years 6 mos
Department
Card
June 2013
$750 $22.50 24.99% 4 years 10 mos
Oct 2012
Car Loan $7,500 $300.00 7.99% 3 years 8 mos
Aug 2011
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Let’s face it, most of us have debt in some form or another
and it often can be very overwhelming and hard
to manage. Like losing weight you need to have a plan
to effectively knock out your debt. To effectively
knock out debt you need to first, make a commitment
to stop spending or charging any debt. Second, create
an effective plan to knock your debt out. If you are
ready to follow step one there is a great free resource
available to help you with the second step
www.powerpay.org. Power Pay is a computer debt
management program created by Utah State University
Extension. It is available in English and Espanol and
is very easy to use. I recently went to
www.powerpay.org and set up an account to try the
program out. To run the program you have to enter
information about each of your debts. For example I
entered the following debts and listed minimum payments
for all debts.
As you can see from looking at the payoff time, making
only minimum payments can take a long time to
get out of heavy debt.
All you need to run the program is information about
each debt. The program will compute how long it will
take you to get completely out of debt. If you only
make the minimum payments it can take almost a lifetime
to get out of heavy debt. The idea behind Power
Pay is that once you have paid off one debt you roll
that payment onto another debt thus increasing the
payment made on the second debt. This pattern continues
until all the money you are paying in a month is
going to pay off the last debt. Power Pay will calculate
which debt will be in your best interest to pay off first,
With Power Payments Without Power Payments
Creditor # of payments Total Paid Int Paid # of payments Total Paid Int Paid
Credit Card #1 35 $6,762.9 1,762.94 50 $7,357.03 $2,357.03
Credit Card #2 38 $4,808.26 $1,308.26 47 $4,887.20 $1,387.23
Department Store Card 12 $853.53 $103.53 58 $1,293.40 $543.40
Car Loan 41 $861.52 $1,151.52 44 $8,664.50 $1,164.54
Payoff Time: Payoff Time:
3 yrs 5 mos Apr 2012
Total Paid: Total Paid:
$21,076.25 $22,202..20
Total Interest: Total Interest:
$4,326.25 $5,452.20
Power Pay Benefits
Time Reduction:
1 year 5 months
Amount Saved:
$,125.95
4 yrs 10 mos Sep 2013
and provide you with an amortization chart. The amortization
chart will give you month-by-month instruction on
when and how much to pay which creditor. In the following
example I used the above debts and entered them into
the Power Pay system and calculated to pay off debt by the
highest interest first.
A Better Perspective
Luke Erickson
Tell me if this sounds familiar.
You’re trying to get home after
work, and you’re cruising down
main street. There’s a stack of
at least a dozen cars in the righthand
lane and only one in the
left. The car on the left might
simply be planning to drive
straight through on the next
green light, but he just might be
waiting to turn left onto Center
Street, and has failed properly to indicate his intentions by
using the left blinker like any normal non-idiotic person
would do. I mean, blinkers were invented for a reason
right? Are they really so hard to use? Is it too much to ask
for a little flick of the wrist? Blinkers work wonders!
Um, so where was I? Oh, so do you take the chance or
wait behind the dozen car stack? You’re feeling courageous,
and so you pull into the left lane, properly signaling
first of course, and just as you ease in behind the car and
the light turns green the driver pulls up a little and then
slams on his brakes, and then to add insult to injury he sud-

denly flips on his left blinker, as though it is just a reminder
of something you should have known already.
You entirely miss the green light, because the leftturner
has to wait for the dozen-car stack in the opposing
lane, and by the time you get home your mood has
completely soured, and you look at the clock and realize
its only 5:11, and not 5:10 when you usually pull
in.
My point? In a big picture sense it makes no difference
whether you get home at 5:10 or 5:11, unless of
course it’s the middle of the winter and that was the
one remaining minute of daylight you had left. But in
spite of this fact I actually do catch myself complaining
about Rexburg traffic now and again, and this from
a guy who’s lived in Cleveland, and worse yet, the
dreaded Utah Valley. But putting things into perspective
I realize that we don’t really have it that bad in
rural Rexburg.
Recent complaints about plummeting retirement accounts,
and depreciating housing values, lost bonuses,
or the like, and my tendency is to join along in the chorus
of complainers about my perceived reduced quality
of life. Never mind that most of my sour mood can be
attributed to the act of complaining and not the actual
problems I’m complaining about!
But if I wanted to truly put things in perspective I
could easily flashback to a much different time in my
life about eight years ago where I sat on a bamboo
floor on a dark humid night. In a one-room hut lit only
by a small oil lamp, I visited with a couple who, along
with their seven small children were only able to eat
one meal of rice that day with a few vegetables to
share between them. You might say this family I met
in the Philippines while on a religious mission had
some things to complain about—but in that very setting
I described, instead of uttering a word of complaint
I actually found that family singing, laughing,
telling stories and looking to the future with hope, in
spite of their overwhelming poverty.
These are tumultuous times we are facing as a country,
that will likely affect us all in one way or another. Job
stability, retirement savings, home values and all legitimate
concerns, but before you start chanting “Woe
is me!” and point fingers, as we might have a tendency
to do, realize that the vast majority of the world’s
population would love to have the luxury of worrying
about these types of problems. This isn’t to belittle
anyone’s current future financial troubles, but only to
help us put things in proper perspective. You might
realize that, in a manner of speaking, you’re complaining
about getting home at 5:11 instead of 5:10 when
there are those who won’t make it home at all.
Email “subscribe” to erickson@uidaho.edu
Managing Money in Tough
Economic Times
Marilyn Bischoff
More Americans feel stress and anxiety about their financial
future as rising consumer debt, falling housing prices,
rising costs of living, declining retail sales, and declining
assets in retirement accounts bring up worries about the
nation’s economic health.
Money is often on the minds of most Americans. In fact,
according to the American Psychological Association’s
2007 Stress in America survey, money and work are two of
the top sources of stress for almost 75 percent of Americans.
Add to the mix headlines declaring an economic recession,
and many begin to fear how they can handle any
further financial crunch.
Learning positive money management techniques can help
individuals and their families adapt to tough economic
times. Extension specialists in several states developed a
new eXtension website to help consumers with financial
issues. More then 30 topics are addressed on the website
titled, Managing Money in Tough Economic Times. Your
clients can access the information at http://
www.extension.org/pagesFinancial_Security:_Managing_
Money_in_Tough_Times.
Save Money on Food
Shopping
Marnie Spencer
In a recent article, I discussed the costs of groceries and
gave some brief suggestions on ways to save money. This
article expands on ways to save
money while shopping while still
eating healthfully.
Plan
The most important step in saving
money is to plan ahead. This means
making a menu, writing a grocery list
based on that menu, and sticking to
the list while shopping. Basing your
menu around the food that is on sale
that week can be a money-saver.
Alternately, if you have a standard
menu that you cycle through, buy
items for the meals when they are on sale and store them in
the freezer or pantry. The grocery list should include food

for all meals and ingredients for one or two super
quick meals for days when the original plan doesn’t
work out. My research shows that a person can cook a
quick meal and have it on the table in a shorter time
than driving to a fast-food restaurant. Not only is it
quicker, it is much less expensive and healthier.
Choose Healthy Food
A 2002 study published in the Journal of the American
Dietetic Association found that eating healthier food
can save money. The families in the study saved
money by reducing portion sizes and cutting down on
“extras”—foods that add calories but little nutritional
value. So, when shopping, consider the nutritional
value of food for the price.
10 More Money-Saving Tips
1. Buy produce in season. Each season has wonderful
fruits and vegetables that are reasonably priced.
2. Use sales and coupons. In addition to shopping
sales which was mentioned above, using coupons
wisely can be a money-saver.
3. Brown bag it. Make your lunch rather than buying
lunch. Use leftovers for meals at work, school, or
wherever you a re going. If you don’t have access
to a refrigerator, use freezer packs.
4. Use frozen, canned, or dried products. They are
often less expensive than fresh ingredients, yet
equally nutritious.
5. Save on protein foods. Non-meat protein sources
such as beans, eggs, and legumes are an inexpensive
source of protein. When you do buy meat,
choose smaller portions of lean meat, poultry, and
seafood.
6. Waste not, want not. Before you buy perishable
foods, decide whether you will be able to use them
while they are still fresh. Leftovers can be used
for soups, stews, salads and casseroles to create a
new version of the food.
7. Go generic. Store brands are usually less expensive
than national brands. Sometimes they are the
same product with a different label. And all food
manufacturers follow standards for safe, quality
food.
8. Buy prepackaged only if you need to. They almost
always are more expensive.
9. Buy and cook in bulk. Buying
in bulk can be a great way to save
money, if the food gets used. Some
stores have bulk bins that let you
choose how much you buy. Cooking
larger quantities of food and
freezing them in family-size or in-
dividual-size portions can also save money and yield
tasty meals that only need to be heated.
10. Plant a garden. Although gardening season is winding
down, start planning a garden for next year. If space
is an issue, consider container gardens for tomatoes,
herbs, and other produce. The extension office has
resources on freezing, drying and canning your harvest,
so you can enjoy summer’s bounty all year long.
Reference: Web MD
When Should I Feel Comfortable
Investing Again?
Jim Schaffer
We get a lot of questions about when we should feel comfortable
buying into or back into the stock market. Some
of us never got out of the market and have suffered serious
asset declines in recent months. However, once the market
goes “low enough”, it becomes a buying opportunity.
Financial experts define a bear market as one in which the
“market” has lost in excess of 20% of its value. Since
1950 the S&P 500 has experienced nine bear markets and
one near bear in 1990 (-19.9%) as shown in the first chart.
The question most investors have is, “How do we know
when it’s hit bottom?”
A resource that I like to study is the website dshort.com,
called Financial Life Cycle Planning. Doug Short often
has very interesting charts and graphs with excellent analyses
of their implications. The following two charts came
from his website and show the bear markets since 1950
and the four worst bear markets in the well recorded history
of the U.S. stock market, respectively. If you go to
dshort.com and look at these charts on that website, you
will discover a great deal more detail and Mr. Short’s
analyses. I’d recommend you “bookmark” his website for
future reference.
Data provided by Prudential reveal that of the nine bear
markets since 1950 (excluding the current one and including
the 1990 “near bear”), the average loss from the prebear
peak was 32%. The average recovery in the year following
the bear market low was 36%. But that recovery
potential depended on targeting the exact “bottom” of the
bear market. Most of us don’t know how to hit the bear
market “bottom” and are simply left to guess that the market
has hit bottom.
Short’s detailed charts reveal that the length of the
“bottom” ranged from six weeks to almost 8 months for
the bear markets since 1950. His analysis on the current

ear market claim that we have been searching for the
“bottom” for almost eight weeks already.
The second chart shows relative lengths and severity of
the four worst U.S. bear markets. The graph shows
that those “bad” bear markets span differing periods of
time. With the exception of the worst bear market in
our history (1929 to 1932 total loss of 89.2%), the
other three worst losses approximated 50%. The current
bear market began October 9, 2007 and has appeared
to “bottom” on November 20, 2008 with a
51.9% loss. If the market goes no lower than on that
date, the current “bad” bear will have lasted slightly
over one year. The recent bear market associated with
the crash in technology stocks lasted over two years
before rebounding.
Note that the worst bear begun in 1929 approached a
50% loss within two months of its beginning. There
was an apparent recovery that spanned many months.
Then a gradual decline set in that spanned almost two
more years. Analyses by economics historians in recent
years have placed the blame for the length of the Great
Depression on government policies that exacerbated the
problem of the recession, extended a recession into a depression,
and extended the losses in the stock market.
While we may never know that for sure, many legal and
regulatory changes occurred after the Great Depression to
protect savers and investors from the dramatic and extended
losses that occurred at that time. Whether they will
work to protect us this time will only be known for sure
after the fact.
Another important point needs to be acknowledged. Those
of us who have invested in, or only in, recent years have
now experienced two of the worst bear markets in U.S.
stock market history. That makes most people a little nervous
about investing at all at a time like this let along taking
money from cash or bonds to buy more stocks right now.
So what lesson should you take away from this? Savvy
long term investors are calling this a “buying opportunity.”

As an investor who has been investing during four
bears and the one “near” bear, I know that I should be
rebalancing my portfolio and taking assets from a relatively
secure bond fund to move them to a potentially
risky stock fund. However, I have not done that yet
because I am not certain that we have finally hit the
stock market “bottom” for this serious bear market.
One technique that I have used is to “dollar cost average”
into the stock market with my monthly contribution
to my retirement account. Prior to the recent market
losses, my monthly contribution was allocated 60%
to the purchase of stock funds and 40% to bond funds.
Just recently, I switched my allocation so that 100% of
my upcoming monthly retirement contribution goes to
purchase stock funds. That will move my asset allocation
more slowly into stocks and should allow me to
purchase some of my stock funds at the market
“bottom.” It also protects me from making a major
purchasing mistake by making it all at one time. How-
ever, if we have already passed the bear market “bottom,” I
will be precluded from making big gains by rebalancing at
the “right” time.
Prudential makes the point about recessions and bear markets
that the stock market’s low point and recovery have
occurred while the recession was still taking place. According
to them, “… historically the most pessimistic period
has made for good long term buying opportunities.”
Take this as food for thought as you contemplate important
purchasing or rebalancing decisions in a risky market like
this.