The Amateur Financier

I had to take my car in to be reinspected and have the emissions checked on Sunday. Unfortunately, my brake pads needed work and my muffler had a hole in it; as a result, I ended up having to go to another garage and spending just shy of one thousand dollars before I was able to get my stickers renewed today.

$1000 and a two day wait without being able to drive my car.

Luckily, I do have the money set aside in my emergency fund; I had hoped to avoid pulling so much money out so soon, especially as I am still unemployed and will likely need it in the future. Still, while this situation is adding to the stress of being unemployed, it’s nothing compared to what I’d be suffering without an emergency fund. I’ve been able to forestall having to make more difficult choices, such as selling my stock holdings for a loss or floating the expense on my credit card, which will help me to get to sleep at night.

This has been a wake call for me. I had been assuming that I could ride out my unemployment without making any significant changes, that somehow all the horror stories and risks didn’t apply to me. However, this car issue came out of nowhere, blindsiding me. If I didn’t have funds already put aside, I’d be in serious trouble. As it stands, I’ve been forced to pull out money from my emergency fun, getting ready to pay the bills that will be due in the next few weeks.

From here on out, I’m going take on a few additional tactics to help make it through my unemployment:

1) Cut down spending – I’ve been resisting this, but I need to spend less. I’m not a prolific spender, but I do a fair amount of shopping and impulse buying (perhaps too much), and if I am going to be unemployed for an extended period of time, I need to be able to stretch my emergency fund. I can’t keep assuming that something will come along before I exhaust my money; I need to cut down my expenses NOW.

2) Increase my job hunting – I keep searching, applying to jobs, calling to follow up, trying to see if anyone I’ve encountered in my past could help me to get a new position. But there’s so much more I can do; if I treat job hunting like a job itself and spend five or six hours a day, I can canvass more ground. I’ve considered hiring a head hunter in the past; I might have look more into this avenue, and see how I’d go about hiring someone.

3) Stop my automatic investments – This one is painful; I like investing, even now, when my mutual funds and ETFs seem to be down more often than up. But, while I still believe in the importance of investing, right now, the $300 I’m putting into stocks is probably better if held in my emergency fund. I’ll have to put more in later, once I have a job, but for the moment, my priority has to be taking care of my expenses.

4) Look into more ‘side hacks’ – I’ve found a part time job, running study sessions in organic chemistry, and have been approached by a few students to have additional, private sessions. It’s not a huge amount of money (about $150 a week, all told), but it helps, and does allow me to network with some people in my field. I’m looking for more possibilities to get money from other sources, including this blog. I won’t get enough to replace a regular salary, but every little bit helps, especially in an economic environment like this.

If I implement these plans, I should be in much better shape next time I need to tap my emergency fund for unexpected expenses.

How about you? What changes would you make if you were unemployed?

Over on MSN Money, Michael Brush has posted about the five biggest lies from Wall Street. I’m very impressed by his willingness to go through all the work of cutting it down to five (I counted 43,257,892 lies in just the last three weeks), but as I was reading through his list, I started to wonder just how…dishonest they actually were. Could it be possible that Wall Street was actually telling…the truth? Let’s see what Mr. Brush has to say.

Big Lie 1: The market will take care of everything. This one is pretty obviously false; unfettered capitalism isn’t a cure all. Balancing out the good that the markets can do in creating wealth with rules to ensure that people don’t get trampled in the rush is an essential part of government, one which has been sadly lacking as of late.

Big Lie 2: The ‘experts’ will help you. This one I take issue with; not all experts are the same. Yes, there are plenty of false ‘advisers’ and others who seek to profit off of your naivette, but there is still plenty of good advice out there. Ruling out someone, just because they are an ‘expert’ makes it hard to find any information at all. (To say nothing of the irony of being told about the untrustworthy nature of experts BY an expert…)

Big Lie 3: Buy and Hold. This is the first one with which I flatly disagree. Mr. Brush talks about changing your investment holding as the risk profile for the investment changes, in other words, timing the market. I admit, perhaps there were signs that the economy was starting to have trouble earlier than most people now admit (at least, the ‘expert’ Mr. Brush quotes says as much), but knowing when to get out, and more to the point, when to get back in, is all but impossible. And attempting to do so will result in much worse results than simply riding out the market gyrations.

Big Lie 4: Overpaid CEOs are worth the money. I’ll second this; at best, quantifying the worth of a CEO is difficult (how much of a gain or loss in a particular stretch of time is directly traceable to the head person is nigh impossible to judge); at worse, there’s an aura of inevitability to executive pay, a form of cronyism from top stockholders to keep them in power. Hopefully, one result of this recession will be a readjustment of executive compensation to be more in line with what regular workers are receiving.

Big Lie 5: Buy a flat-screen TV, save the economy. I mostly agree that this is a myth, but it does have an element of truth. If you spend money, you’re putting someone, somewhere to work. It used to be that if you were saving in a bank, they’d do the same thing, but given how over-extended many of the national banks are, right now they seem to be gathering up larger amounts of money to add to their ledgers without putting it back into the economy. This isn’t a reason to go out on a spending spree, but money added back to the economy does have an effect, beyond just making you poorer.

Overall, I’d say Michael Brush is about half right; a little less harshness for experts, a little more tolerance for buy and hold, and he’d be right on track.

Just about everywhere you turn, you see articles and commentary about the government actions to stem the fall out from the subprime mortgage crisis. I’ve resisted writing about this until now, mainly because so many people with at least a passing interest in money, government, or politics have covered every conceivable angle on this crisis. But, reading this post on the Money Blog Network forums, I was just so fired up, I wrote this in response. Be warned, I do start ranting:

My Fellow Americans,

Our financial system is a mess, our elected officials are more worried about getting re-elected than doing the right thing for our financial system, and nobody is taking responsibility for their actions. I am angry (mad as hell, to be more accurate) about the subprime mortgage crisis and the fall out into the rest of our banking system (and beyond).

I am NOT angry at individual homeowners, for the most part; while they certainly should have exercised more caution when running their finances, I have a hard time getting upset with people who took out mortgages their bankers allowed, in many cases encouraged, them to take. While the homeowners aren’t innocent victims in this situation, I can think of so many more deserving targets for scorn:

-School systems that provide inadequate financial and money management teaching, leaving so many potential homeowners undereducated about the risks of mortgages and reliant on the (sometimes unscrupulous) advice of bankers.

-The aforementioned bankers, for giving people loans they couldn’t afford by any reasonable measure, under the assumption that home prices would keep shooting up, and telling the mortgagees they could easily do a cash out refinance in a few years.

-The huge market for mortgages that allowed the banks to move the subprime mortgages off their books, enabling them to make MORE questionable loans with virtually no (perceived) risk to the banks themselves.

-Investment banks that bought up and packaged dozens, if not hundreds, of subprime mortgages, pretending that if they sliced and diced enough questionable loans, they’d end up with high quality products with virtually no risk.

-Ratings agencies, which played along with the charade and gave high ratings to the mortgage backed bonds, regardless of which mortgages were backing them, leading to the spread of mortgage-backed securities throughout the national and international financial system.

-A federal government that, through a mixture of deregulation, perverse incentives and implicit (and now explicit) promises of government protection, allowed a massive bubble to form in the housing market, and did nothing to limit the fallout until it was too late.

-At least a quarter century of government policy makers who, when given the choice between cutting spending or raising taxes to bring the federal budget in line, have opted for (c) adding to the deficit and pushing the politically tough but fiscally possible decisions off onto our children. We face massive entitlement deficits and looming shortfalls and yet, neither Democrats nor Republicans are willing to tell the American people that there have to be cuts in federal spending, higher taxes, or both, and SOON, or our children are going to spend most of their lives simply repaying the debt that accumulates.

Next time you feel like hurling blame at homeowners who took out loans much larger than they could handle and now need to be saved from foreclosure, remember all the ‘helpers’ they had in getting to that point, and direct your scorn accordingly.

One of the most entertaining blogs I’ve encountered is from Stephanie, of Poorer Than You. She’s an interesting writer, with a unique perspective as a young woman finishing school and facing plenty of educational debt. She seems like a strong, fascinating person, and it’s nice to have her perspective out there in the blogosphere.

Some of the most interesting posts she’s done in the last month are listed below; be sure to check them out:

Is It Ok to Bridge the Gap with Credit Cards – This is an interesting post, considering the possibility of relying on credit card use to make up the difference between what she’ll be able to earn and what she can afford when she gets out of school. She’s looking into using her credit cards to help make up the difference between her earnings and her spending. It’s a difficult decision that shouldn’t be made lightly, but between the blog entry and her comments, it seems like Stephanie has thoroughly thought about her situation, and has determined that using her credit cards will be the best solution. If everyone put as much foresight into their credit use, we wouldn’t have nearly as many problems with excessive debt in this country.

Review: The Boglehead’s Guide to Investing – Stephanie takes a look at a book I’ve been looking to read for a while now, detailing the investing strategy and philosophy of the Bogleheads. (The people who follow the investment strategies popularized by John Bogle, founder of Vanguard.) She has high praise for the book, a very detailed and thorough treatment of a variety of financial topics, and strongly encourages everyone over their mid-twenties to read it (which, sadly, is a group that now includes me).

Checking the Status of my Health Insurance – One of the biggest worries for most people, especially those just getting out of college (or as in my case, losing their jobs) is ensuring continuing health coverage. Luckily, it sounds like Stephanie’s got coverage for the next few years, so that’s one load off her mind.

College Money Tip #8: Know What You Owe – Stephanie has been doing a series of tips for college students regarding their money lately. This tip in particular is right on target for college students and recent grads: knowing what you owe (particularly in this context, for student loans) and whom you owe money to is vitally important, if you hope to have a handle on your expenses.