Live Frugally or Die Broke

The Credit Hangover

A great role model of mine once said, “Credit is like alcohol and no one wants a hangover.” The government especially wants to keep the populace drunk, in order to maintain political positions. We need a hangover right now in this country and we are being prevented from having one. Never before have we had debt to income ratios so high. America needs to ween itself off it’s current system of credit. I’ve never heard a single politician ever advocate frugality and I don’t expect it to happen in my lifetime.

What We Need To Succeed

This country needs to lead by example. Metaphorically speaking the band aid needs to be ripped off. We need our government to slash spending and cut taxes, eliminate unneeded programs, and find free market solutions. Government sector jobs need to systematically destroy themselves. A drastic change in our civil services programs needs to be implemented. Public sector unions need to be broken up and more realistic retirement plans should be sought. There is no reason that a public school teacher should receive $1 million in a pension, when they pay in $70,000 in funding. These people need to get IRAs and 401k plans like the majority of the private sector.

What I Would Do

We desperately need to bring back volunteering. What happened to neighborhood watch programs, volunteer firefighters, and old fashioned barn raising projects? Local governments are unnecessarily burdening their citizens with property and sales taxes. They are paying obscene amounts of money, to positions that are unnecessary or unwarranted.

I would enact a mandatory 2 year civil service draft, for individuals over and under 40 years of age. You would have the option of serving in the military, health care field, forestry service, law enforcement, border patrol, etc. You would be paid a fair wage and would receive training in the particular field you choose. This kills two birds with one stone. In the event of a national emergency, the entire country has already been trained in specialized fields. You would eliminate the tight grips of unions and “big wigs” who work the same job year over year collecting hefty raises.

The Dangers of The Public Sector

The public sector has a choke hold on the nation and we are being suffocated. Every year they take over more and more of the private sector. Eventually we will watch the free market system, established by our founders, become extinct. The amount of control the government would have, if we continue down this path, will make our future very dim. Public sector unions are even more dangerous, with their unbelievable demands of higher wages and luxurious retirement packages. We currently have more and more unemployed Americans lining up at jobs like McDonalds and Walmart. There is a serious disconnect here and it needs to be addressed.

Rates Going Up

I flipped on CNBC, as I was making some coffee this afternoon. I would really have a hard time justifying my $80 a month cable/internet bill, if it wasn’t for this channel. I noticed the Federal Reserve was raising the discount rate for the first time in years and I about spit out my coffee. It seems that inflationary pressures could be in our future at some point. What’s this mean? Well it looks like the train is leaving soon, for those that still need to consolidate loans. If rates continue climbing, which I believe they will, we will see interest rates spike. The loans you have not yet consolidated, will have their interest rates increase. You will notice your monthly bills will get more expensive.

Time To Read The Manual

I’m assuming most people don’t have the greatest understanding of loan consolidation. As I explained in Consolidate Your Loans Part I techniques vary, but usually you can do it yourself. Other times you need to consult your bank or lending institution. If you want to save a few easy bucks on your bills, it’s best to talk to them about consolidation options. Now that interest rates are starting to climb again, we may see them go up at an alarming rate. This is great news for some of us and very bad news for others. The stock market doesn’t tend to like interest rate increases. So normally you don’t want to put your money there when you know rates are climbing. However for savers like me, these are great times. For the frugal out there, interest rate increases are exciting.

Banks Need Deposits

When interest rates go up like they did today, banks will find borrowing money is more expensive. They will want to borrow more from customers to absorb the increases. Typically we will see interest rates on deposits increase. This means that the money you have in the bank will grow faster. Banks will tend to get competitive with each other to collect these deposits. This is great for consumers, because we can shop around. I highly recommend an online savings account at HSBC. They seem to have the highest interest rates in the United States and you can set up your account exclusively online.

Timing Is Everything

Although I wasn’t really surprised by this interest rate move, I did find the timing interesting. Historically when interest rates go up it can cause some shaking of our economy. With unemployment so high right now and housing still in cardiac arrest, this should be interesting. You can view more on this specific interest rate hike at the New York Times article here. I have also included a chart to the right to give you a sense of the timing. You can see that interest rates haven’t increase in over 3 years.