Here is a couple who are a living example of the economic times we are in.
The power of having limited or no debt at all:
'From a $100K-Plus Income to Less Than $35K and Happier Than Ever'-From Financially Fit
Before I was let go two years ago, my husband and I enjoyed a combined income of over $100,000 plus very good benefits. We lived well then and surprisingly, are still managing fairly well. Today, both of us are self-employed with an income of less than $35K. Two years ago, we recognized that my job was not secure and made plans to shore ourselves economically. Fortunately, we had no mortgage or car loans. Before my layoff, we consolidated our credit card debt and opted for a small home equity loan.
Self-Employment and Debt
Because we own several businesses, we like to each have a vehicle, plus a back-up so we don't get stuck and miss opportunities to make money. A few weeks ago, our second work van died and all we had left was a truck. With our consolidated debt, we had a $300 mortgage per month. We had been postponing buying new vehicles for as long as possible to keep our debt minimized.
Emergency Fund and Leveraging Cash in Negotiations
Fortunately, we had saved for a rainy day and tapped into our emergency fund. My husband called me around 3:00 p.m., and asked me what I thought about him buying two vehicles for the price of one.
Our budget was $10,000, and he had found both a mini-van and a pick-up truck that we could negotiate to our budget.
Minimize Costs
An hour later, we chose to finance one of the vehicles to keep some cash for a future rainy day. After giving him my credit information, the sales representative ran us through a credit reporting agency.
Upon seeing the results, he jumped up and slapped my husband a high-five. Our credit was stellar.
Fortunately, bill-paying diligence gave us a lower interest rate. We spent five thousand in cash, reserved five and obtained two new cars for a $100.00 a month payment. Our insurance company modified our auto plan to remove the old vehicles and add the new.
There was no financial adjustment; our rate did not change.
Financially, it would be cheaper to pay cash for both vehicles; however, we would have lost our cash-flow advantage in case of another emergency. There is no prepayment penalty, and we plan to pay the loan off early, but even if we cannot, our long-term debt expenses are still under $500 a month or $6,000 a year. Our super saver mentality includes managing for risks, leveraging cash flow and negotiating better prices with bundling.
Always Ask
If we had accepted the original prices, there's no doubt we'd only have one car now. By simply asking for a better rate, we got it. Many people in our community are small business owners, and we have found that not only does it never hurt to ask, it nearly always yields a positive result.
Trade-Offs
We're big fans of the barter system. Living in a small community, many of our neighbors are in situations similar to ours. We help each other out by trading—when we needed wood for the winter, my husband painted a room for a neighbor who had some.
Buy in Bulk
Especially with non-perishable items, we save a lot of money by buying in bulk. From painting supplies to household items, it means additional organization in the garage, but it's worth it!
Re-Frame Your View
Losing my job was not the heartbreak I thought it would be. Not working in an office environment has lowered my income but also lowered my outlay. I no longer have enormous bills from dry cleaning. I no longer go out to eat because I don't have time to cook. I now employ not one, but two crockpots and have cut our grocery spending by cooking that way.
Being a freelance writer and speaker now, I spend more time at home with my family. We may have lost a lot of income, but we have gained a lot of family togetherness. And that, to us, is priceless.
2) In the Markets today:
The S&P 500 rose more than 1 percent in late trading on Wednesday.
Wall Street gains 1 percent as IMF gives Europe hope-From Reuters
Stocks jumped to their highest since July on Wednesday as the International Monetary Fund sought to help countries hit by the European debt crisis, while forecast-beating earnings from Goldman Sachs dispelled some worries over bank profits.
The stronger-than-expected earnings from Goldman Sachs Group Inc (NYSE:GS - News) followed disappointing results from Citigroup (NYSE:C - News) on Tuesday and JPMorgan Chase & Co (NYSE:JPM - News) last week.
Goldman shares shot up 6.8 percent to $104.31, while the S&P financial sector (:.GSPF) rose 1.7 percent, leading the S&P 500 higher.
The banking sector has outperformed the broader market so far this year, but the financials sector was the S&P 500's weakest-performing one last year.
While the Goldman results supported financial shares, the IMF's willingness to bolster its crisis-fighting resources gave the sector a big push. Financials had suffered throughout 2011 on worries that Europe's debt crisis would hit banks globally.
"Any time liquidity is added to the financial system, it gives financials a little bit of breathing room, and it will result in higher prices for the banks," said Kevin Caron, market strategist at Stifel, Nicolaus & Co, in Florham Park, New Jersey.
Home builders' shares surged after data showed U.S. homebuilder sentiment unexpectedly jumped in January to its highest level in 4-1/2 years. The PHLX housing index (Nasdaq:^HGX - News) climbed 3.1 percent, while the Dow Jones home construction index (DJI:^DJUSHB - News) rose 4.4 percent.
The Dow Jones industrial average (DJI:^DJI - News) rose 96.88 points, or 0.78 percent, to close at 12,578.95. The Standard & Poor's 500 Index (SNP:^GSPC - News) added 14.37 points, or 1.11 percent, to 1,308.04. The Nasdaq Composite Index (Nasdaq:^IXIC - News) climbed 41.63 points, or 1.53 percent, to close at 2,769.71.
XILINX AND ALTERA UP LATE
After the bell, shares of chipmakers Xilinx (NasdaqGS:XLNX - News) and Altera (NasdaqGS:ALTR - News) rose following their earnings reports. Xilinx was up 7 percent from its close of $35.30 and Altera was up 5.1 percent from its close of $40.72.
An index of semiconductor shares (Nasdaq:^SOX - News) climbed 5 percent during the regular session. Intel (NasdaqGS:INTC - News) is expected to report results on Thursday.
Despite the optimism over the IMF, investors watched cautiously as Greece and its creditors resumed negotiations on terms of a planned debt swap, hoping to overcome an impasse in talks and stave off a painful default.
The benchmark S&P 500 closed above 1,300, a key resistance point that analysts said signal more room to rally if the index stays there.
Within the tech sector, Yahoo Inc (NasdaqGS:YHOO - News) jumped 3.2 percent to $15.92 a day after co-founder Jerry Yang said he was severing all formal ties with the company he started in 1995.
Shareholders had blasted Yang for impeding investment deals that could have transformed the Internet media group.
In other bank results, Bank of New York Mellon Corp (NYSE:BK - News) slid 4.6 percent to $20.30 after the world's No. 1 custody bank said fourth-quarter earnings fell.
Another big custody bank, State Street Corp (NYSE:STT - News) slid 6.6 percent to $39.95 after saying it accelerated an expense- control program, a sign it still sees continued weakness in global capital markets.
Financial results will remain in the spotlight, with reports from Bank of America Corp (NYSE:BAC - News) and Morgan Stanley (NYSE:MS - News) later this week. Bank of America's stock gained 4.9 percent to $6.80 and Morgan Stanley's shares were up 6.8 percent at $17.35.
"As we've seen, investment banking revenues have been very weak, and we think that's going to be a trend that continues and (there's) also a lot more exposure to Europe in those banks," said Dan Neuger, portfolio manager, head of U.S. and Europe active equities for PineBridge Investments in New York, which has about $70 billion in assets.
In terms of investing, "we don't like the large money-center banks. That's one area we've been away from," he said. "Where we think there is more value is in the regional, more domestically focused smaller banks."
Volume totaled about 7.3 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.68 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of 4 to 1 while on the Nasdaq, More than three stocks rose for every one that fell.
3) Top financial story of the day:
U.S. factory output surges in December.
Wholesale Prices Decline-From The Wall Street Journal
U.S. wholesale prices fell in December, as food and energy costs declined significantly, but the underlying rate was up as light truck prices rose.
Separately, U.S. industrial production rebounded in December as manufacturing output climbed, an indication that a key sector of the economy regained some momentum at the end of the year.
The producer price index, which measures how much manufacturers and wholesalers pay for goods and materials, fell a seasonally adjusted 0.1% for finished goods in December from November, the
Labor Department said Wednesday.
The slowdown in overall costs may give the Federal Reserve more flexibility to deploy a new round of economic stimulus measures. However, the rise in so-called core wholesale prices will raise some eyebrows at the central bank. Removing volatile energy and food prices, producer prices increased by 0.3%, the largest rise since July 2011. Besides trucks, the cost of drugs, tires and cars also rose.
Economists surveyed by Dow Jones Newswires had forecast overall wholesale prices would be unchanged on a month-to-month basis, while core producer prices were expected to rise by 0.1%.
Wholesale prices were up 0.3% in November from the prior month, after falling by that same amount in October.
Most Fed officials expect that energy and commodity prices will continue to dissipate as the global economy grows slowly in 2012, leading annual inflation to remain at or below 2.0% in 2012 through 2014, within the central bank's comfort zone.
Compared to a year ago, wholesale prices were 4.8% higher in December, Wednesday's report showed. While still high, that's down from the 7.1% annual increase recorded in July. Year-over-year, prices were up 3.0% when removing energy and food costs.
Food prices decreased by 0.8% in December from November, the first decline since May 2011. The drop was due to falling vegetable prices, down 11.1% on a month-to-month basis.
Energy prices also moved down 0.8%, led by declining gasoline prices. Energy prices edged up 0.1% in November.
Prices for intermediate goods--which are semifinished goods like lumber or flour that require further processing--fell by 0.5% last month, after edging up by 0.2% in November. Meanwhile, prices of raw materials, known as crude goods, fell by 1.1% in December.
Richmond Fed President Jeffrey Lacker, who normally worries about inflation, last week said recent trends point to inflation moderating. He's forecasting inflation to remain near 2% on an annual basis in 2012.
"A rate noticeably below 2% is possible, particularly if global growth should soften enough to further ease pressures on commodity prices," he said. This year, Mr. Lacker becomes a voting member on the Federal Open Market Committee, the central bank's body that sets interest rates.
Moderate inflation means the Fed will be under little pressure to raise rates anytime soon. The central bank has said rates will remain near zero at least until the middle of 2013. After its meeting later this month, Fed officials will release their forecast for future interest rates for the first time.
Industrial Output Increases
Overall production increased by 0.4%, the Federal Reserve said Wednesday in its monthly report. The rise followed a 0.3% dip in November--the first fall in seven months.The Fed data said industries used 78.1% of their capacity last month, compared with 77.8% in November.
Economists surveyed by Dow Jones Newswires had forecast a 0.5% increase in output during December and a capacity utilization rate of 78.1%.
Manufacturing production surged by 0.9% on strong gains for wood products, primary metals and machinery.
Mining production rose 0.3%, while utilities output dropped 2.7% as unseasonably warm weather reduced the demand for heating.
Other recent industrial data has also been broadly positive.
The Institute for Supply Management's manufacturing purchasing managers' index rose to 53.9 last month from 52.7 in November. A reading above 50 indicates expanding activity.
The Labor Department earlier this month reported that manufacturing payrolls rose by 23,000 in December.
And New York manufacturing activity accelerated in January, according to the New York Fed's Empire State Manufacturing Survey released Tuesday. The Empire State's business conditions index rose to 13.48 this month from a revised 8.19 in December.
Still, other indicators have pointed to potential stumbling blocks for the recovery. Commerce Department figures released last week showed that U.S. retail sales almost stalled in December as Americans appeared to tighten their budgets. And the U.S. trade deficit widened in November on slumping exports to the euro area and rising oil prices.
Economists are looking to end-of-year data to help determine the pace of the recovery heading into the new year.
The Fed report Wednesday showed that year over year, industrial production increased by 2.9% from December 2010. For the fourth quarter, industrial production rose at an annual rate of 3.1%, its 10th consecutive quarterly gain, the Fed said.
Output by the service sector, which makes up most of the U.S. economy, isn't reflected in the industrial production data.
4) Quote of the Day from Dave Ramsey.com:
Make every decision as if you owned the whole company. — Charles C. Noble
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