Preparing for Recession
The Dollar Stretcher Blog
by Gary Foreman

Lately it seems everyone is talking about a possible recession (or even a depression). When the Federal Reserve drops rates by 3/4% between meetings it's probably time for all of us to take notice. No one knows for sure whether we'll end up with a recession or not. But, as we all do know, it's always better to be prepared for financial challenges. Just in case.

The first thing is to know what your current position is. Are you spending more than you're making? Do you even know? Where does your money go each month? The only way to really find out is to track your spending for a month and compare it to your income. Don't forget to include items that happen just a few times a year (property taxes, auto insurance, etc). If you are working you should be making more than you're spending each month. That extra money can be used for paying down debt or building an emergency fund.

Next, pay down debt. It's easier to survive a job loss if you don't have a lot of bills each month. Now is the time to reduce credit card balances. Even it it means taking a second job or cutting off cable television. You'll be tempted not to do anything. Just remember that if you do lose your job it will be too late.

Look for big savings items. With lower rates now might be the time to refinance your home or car. Compare insurance rates. Make sure that you really can afford the house or car you're paying for. Typically if your house is over 40% of income or your car is over 20% you need to do radical surgery. That means moving to a cheaper home or car.

Take a serious look at your food/grocery/eating out expenses. Most people spend 15 to 20% of their money on food. But, it's real easy to spend more. And, it can happen a little at a time. That luscious $4 dessert won't bankrupt you by itself. But, it will take you one step further from your goal.

Look at your employment situation. If you're honest with yourself, it's not that difficult to recognize job troubles ahead. Is your employer in trouble? Is the whole industry suffering? Could your job be done by someone else for much lower pay? Either within the U.S. or without? Does technology threaten your job? If you can answer 'yes' to any of those questions, you'd be wise to consider what your life would be like without your present job.

Ask yourself if you'd be likely to find the same type of work at a different employer. It could be that your field is changing. That happened to me. If you're facing a similar situation begin learning a new trade now. Don't wait until you lose your job. Waiting will only make the transition longer.

No, I can't say whether you'll be affected by a recession or if there will even be a recession this year. But I can tell you that you'll be better able to handle one if you begin preparing now.
________

Gary Foreman is the editor of The Dollar Stretcher.com website < www.stretcher.com> and newsletters. Not only does the site host thousands of articles on various ways to save money, but you'll also find a vibrant forum where people share their dollar stretching ideas. Visit today!

Auction Fever
The Dollar Stretcher Blog
by Gary Foreman

Recently I spent some time watching the Barrett-Jackson collector car auction. Anyone involved with collector cars has heard of Barrett-Jackson. Each January they hold a huge auction. This year I believe they sold something like 2,000 cars!

I love old cars and quite often you'll find me at a local show in my '65 Chevy. Often you'll hear guys (and gals) talking about the eye-popping bids at Barrett. Yes, there are some exotic, very rare vehicles. But some of the prices are really unbelievable.

As a car guy and a frugal living guy, I tried to figure out what was going on. An auction is a complex psychological dance, but even simple people can gain some insight from studying it.

The first thing is that it's viewed as a competition between the bidders. I just checked and on the homepage of ebay.com, you'll find "Don't just shop. Win!" Wow! Somehow I don't get the feeling of winning when I"m buying a tool at Sears! Missed the whole "winning" experience! Maybe next time.

On TV the announcers talked about it being like an old western shootout between two bidders. (somehow I have trouble picturing Matt Dillon pulling a credit card out of his holster in the opening scene of Gunsmoke) Don't get me wrong. There is a lot of ego involved. And, if someone outbids me, the assumption is that he has more money than I do. That could be a big deal when you know that people all over the country are going to see someone with a bigger bidder's paddle than I have.

Another part of the push to ever higher bids is the audience. When the bidding gets near a round number ($100,000 or $250,000 or $1,000,000) the auctioneer would ask the audience to encourage the bidders. I really don't know why they complied. Should it really matter to me whether someone pays $95k or $100k for a car? If he pays more it favors the seller (who I don't know). If he pays less it favors the buyer (who I also don't know). Why would spectators cheer for higher bids?

The urgency of the situation also effects bidders. You have to make a decision right now. Not tomorrow. Not later. Right now. And, (you're told over and over) you don't want to miss this one. Once it's gone you may never get another chance at it. So step up now before it's too late.

One other thing seemed noteworthy. For the really high-end stuff, there are buyers for museums and very private collections. These buyers are typically very calm and collected. The auctioneers don't seem to try to goad them into higher bids. My guess is that they know that won't work on them. They've done their research before the bidding began and they pretty much know exactly how high they are willing to go. (and they won't change their mind in the middle of the bidding)

So what's this have to do with you? You're not thinking of buying a collector car. Ahh, but you do shop on eBay.com. And, you've got a bid in on that cute little purse that closes in 15h 56m. Don't want to miss that. The seller says that it's unique. Plus there are other people who are bidding on it. Some might even see your name on the 'high bidder' space. Kinda sounds familiar doesn't it. The same tactics work no matter what's being sold at auction.

So, just as you'd be careful not to accidentally buy a $50,000 car at Barrett-Jackson, it's probably a good idea not to make a mistake and buy a $50 purse on eBay.com.
________

Gary Foreman is the editor of The Dollar Stretcher.com website < www.stretcher.com> and newsletters. Not only does the site host thousands of articles on various ways to save money, but you'll also find a vibrant forum where people share their dollar stretching ideas. Visit today!