inflation vs. deflation

There’s been a lot of debate in the press lately about inflation vs. deflation.  The inflationary side says that the Fed is printing money so fast that we will inevitably incur inflation.  (ie: the value of the dollar goes down so it takes more of those dollars to buy things)

The deflationary argument says that people are out of work and home values are falling so folks aren’t spending.  When people don’t spend prices naturally come down to where demand is created.  When prices fall that is deflation.

I will leave it to the much smarter economists to battle it out on what will eventually take hold, but for purposes of this financial infotainment blog let’s take a look at real world examples:

The wife has been wanting to wrap up our 9 month basement project by purchasing a home theater system.  You know the deal:  large flat screen plasma tv and surround sound audio system.  I knew that we would eventually do this, but since the thought of spending this kind of money causes an anxiety attack, I have been stalling.  Stalling for the better part of 5 months.  The main reason is that each Sunday I would check out all of the ads in the local paper from electronics stores.  Guess what?  The price of TV’s have steadily declined.  I knew  that there was no way the prices were going to rise so by putting off the purchase I could get a better price.  This my friends is the problem with deflation – nobody can make consumers spend if they feel that they can get a better price by waiting.  If everyone adopted this philosophy the economy would be in real trouble.  Consumer spending would halt.  That is deflation.  The Fed hates this because there isn’t anything you can do to force folks to spend, unless they think prices will eventually rise (inflate your way out) or if jobs return and growth resumes (then you feel better about spending).

So that is the real world example.  On the flipside, I have been looking at the grocery bill lately and it definitely has not gone down.  In fact it appears to be creeping up. 

I guess we are faced with inflation in some items and deflation in others.  Where it ends up will be interesting.

marriage and finances

The wife’s busy with the kids this summer and doesn’t have much time to chime in to these discussions.  Hopefully we will get back to it in a few months when they return to school.

Updates on previous blogs:

We are still busy at work with our basement project.  We have had our share of financial conversations as we approach some of the higher ticket items in finishing this project: furniture, electronics (tv / surround sound), and various items needed to make the room liveable.   The one problem with any home improvement project is that it tends to expand.  Finishing the basement has now turned into possibly repainting the entire main floor, which then turned into buying some new furniture for our living room and moving the older stuff into the basement, etc.  It can expand the budget considerably.  I am the type that I get an idea and a budget in mind and it is very hard for me to divert from that.  The thought of more expenditures causes panic attacks.  Hope on the other hand would prefer just to get it all done even if it is a little higher than what was budgeted.  That is what makes a marriage is finding a happy medium and ways to compromise.  (I call it compromise, but she normally gets her way in the end).

something to rant about

I have gotten a few comments that I haven’t been on my usual rantings about the wife’s spending.  Honestly, I can’t complain about anything lately.  She has been doing a great job of seeking out bargains.  Just this week she told me about the special “icee” deals at the Sonic restaurants.  Her and the kids all got a treat for a total of like $3.  Then when we went out for dinner it was buy one get one free at the local Asian place.  Grand total was $11 for both of us.  I can’t complain about that.

I guess I could rant about seeing another “build a bear” stuffed animal in the house.  I think my daughter now has 42 of those things.  Even if she did have a coupon for them, I mean seriously how many stuffed animals does a kid need.  Okay and there was the quick Disney trip we surprised the kids with back in May.  This has nothing to do with the wife, but jeeze it seems like you need to take out a mortgage to get into Disney for a couple of days.

Since the wife isn’t providing any material for me to write about, I will have to revert to back to personal finance stuff.  Check back soon!

is frugality here to stay?

I don’t know about you but I have seen a lot more writings about ways to economize and cut costs lately.  Is this just a passing fad or is it here to stay?  It seems as consumers throughout the 90’s and early 2000’s we had become a binge buying nation.  Was it in fact that the standard of living had improved so much that a big house, new cars and inflated lifestyles were the norm?  Or was it a momentary lapse of sanity that caused things to get a bit out of whack?  Loans were cheap and easy to get.  You could buy a house with little money down and then turn around and take out a home equity loan to fill it up full of big screen tv’s and such, and it seemed as if everyone was doing it. 

 I have falling victim to some of these consumer flaws as well, but luckily I have such a buyers remorse on big ticket purchases that it doesn’t occur to often.  Couple that with reinventing my business 8 years ago and again 4 years ago and you learn to live somewhat frugally until things improve.

It will be interesting to see if we as a society are truly seeing a shift in consumer attitudes or if it is a temporary phenomenon.  With tighter lending standards for the foreseeable future and tighter job markets what we are seeing may in fact be a longer term cultural shift.  I guess it lasts until the next bull market and then the wild spending will commence again!

Healthcare…….

Being self-employed I watch my healthcare costs very closely.  We have a high deductible plan for the family (no maternity coverage if you have read the earlier posts) to save money on the monthly premiums.  What that means is that outside of normal office visits for the kids, I have to eat the cost of everything until I reach the per person deductible of $3000.  This also means that because the wife likes to take the kids to a “pediatric dentist” instead of the few that are offered in our plan that we pay full cost.  Don’t even get me started on what those fillings cost!

Needless to say, I don’t frequent the doctors office unless I am feeling like death.  I also encourage this for the family although they are a bit quicker to go for their ailments.

This all leads to today’s post regarding a recent trip to the emergency room.  Since we are still debating healthcare in this country I figured a real-life example would be appropriate.  Before I get any nasty emails this is not a political discussion and is not a slap against doctors or hospitals.  I work with a number of physicians and completely agree that they should be compensated well because of their skills and knowledge.  I also understand that hospitals can charge their fees because they provide the equipment, facilities and services.  I accept this and like every other capitalist I believe that you can charge whatever the market will support.

So, a couple of weeks back my son had been suffering from a multi-day stomach virus that would not seem to go away.  I had been a bit concerned because my experience with viruses is that they last about 24 hours and then you get better.  After having this thing for 4 days he woke me up at 12:30am on a Sunday night complaining of severe stomach cramps.  He was in pain and my inital thought was that this may not be a virus but something more serious like appendicitis.  So I put him in the truck and rushed over to the local hospital emergency room.  We were immediately put in a room and promptly attended to by an ER Nurse and then checked out by an ER Doc.  (both great folks)  The doc did some general tests such as blood work and physical movement which ruled out the appendicitis, but thought that a CT Scan would be warranted to make sure (and I agreed).  Finally at 4:30 am we left the hospital and went home. 

The following bill arrived in my mailbox a week later:

• med-sur supplies      $71
• Lab                                  $275
• Urology                         $88
• CT Scan                           $5048
• ER room                         $1706
• drugs                                $466

so the grand total for 4 hours at the hospital was $7654 (i paid a $150 deductible upon entering).  Once again I am not against paying folks what they are worth, but even if I wasn’t a miser this seemed a bit steep.  I agree that the doc, nurse and facility are worth their charge.  My gut tells me the CT scan and drug charge is off base, but since I don’t have any other access to a CT scanner I guess it doesn’t matter what I think!

So the thing with insurance is that they have negotiated rates, so even though I have a high deductible my insurance company followed up with an itemized list that reduced the charges based on “contractural adjustments” and the total bill came out to be $1109.

After this ordeal I am left to ponder the following things:

• if I did not have coverage and was a cash paying customer, would I have gotten the reduced rates or been stuck with the inflated rates?
• if the state / fed government let hospitals expand and buy equipment as they wanted, would it not bring the prices down due to competition?  (did you know that the hospital has to get approval from the state to have a CT machine (or to add any equipment/service)?  did you know that the hospital has to get approval to add even one additional bed?  (so much for free market competition)
• exactly what would be a fair cost for the treatment we recieved?  I am guessing somewhere between the inflated rate of $7654 and the insurance rate of $1109.

even miser’s can have flaws

The wife is starting to make fun of my newfound hobby.  So I figured I would air it out here on the blog.  It’s not really a hobby but more of an addiction of sorts.  It’s……Craigslist.com …..

I will admit I have become a craigslist addict.  It all started when I decided to get rid of a few household items that were piling up in the garage: old set of golf cart tires, small bookcase and then we sold our treadmill.  After I sold a few items on Craigslist I started searching for stuff that I could use in my basement finishing project.  So I bought a set of custom shelves from a cabinet maker.  I got them for well below what the custom order would have cost and so that began my evening addiction of searching Craigslist.com.

My next project has been the possible move of my office.  In planning this I started searching for used office furniture.  Well this led to a trip to Nashville to pick up a great deal on a couple of really nice office desks.  It then led me across town to purchase some filing cabinets (once again a great deal).

My latest craigslist purchase was 4 five gallon containers of stone/concrete sealer.  I was in need of some sealer for brick patio that is looking a bit worn down along with a slate tile that I recently put down in the basement.  If you have ever purchased sealer you know this stuff can run as high as $50 for a gallon, so when I found 20 gallons for $200 I knew I hit paydirt.  Don’t ask me what I will use 20 gallons of sealer on.  Hopefully, the stuff stays good for quite awhile!

Craigslist is definitely a great tool for those looking for a deal.  It’s only drawback is that it can also be addicting as well.

new planning newsletter out

For those that like to read the more serious stuff regarding personal finance:  The Advisory Firm Financial Planning newsletter

The April e-newsletter is out.  All about IRA’s part 2.

shopping with your spouse

By now anyone reading the blog knows that I like a deal.  I consider it somewhat of a challenge to find what I am looking for at a deep discount.  Hope and I have used this as a sort of game between the spouses.  We each see who can score the best savings.  Sometimes it is using coupons or sometimes simply snapping up a bargain on closeout.

The difference between us of course is she is a shopper.  She will go and browse the stores like many females until she finds something interesting.  I on the other hand am more of the hunter type.  I have to know specifically what I am looking for and then I start the search.  This is why Hope absolutely hates shopping with me.  Case in point is a recent evening out we had some time to kill and were at a local mall.  I mentioned needing a few dress shirts, so we hopped over to Macy’s.  After finding what I needed (on the discount rack of course) we were heading out.  She then mentioned that I needed new jeans……..

Guys I don’t know if you have been to a mall lately, but it isn’t just Levi 501’s anymore.  There must have been 50 brands and 500 different choices.  She had decided that I needed something a little more hip.  I looked around for a few minutes and then felt that shopping anxiety kick in.  Have you ever had that?  I mean just to many choices, it was complete overload for me. 

I don’t know why it can’t be simpler in the guys section of clothing stores.  If they would limit the selection so that you don’t get analysis paralysis, they would increase their sells.  I don’t think it was just me.  I truly believe I saw at least 5 other guys run screaming out of the store gasping for air.  Needless to say I did not buy any new jeans.  That will have to be another day when I am specifically looking for jeans….

Relationships & Money

The purpose of this blog from the outset was to add a bit of humor to the world of personal finance.  I figured what better way to do that than offer up a real world view of what it is like to be married to a financial planner.  I have no problem poking fun at myself and the posts are sort of a tongue and cheek way of showing that no one is perfect.  The ultimate objective is to hopefully share that all couples approach money differently but that compromises can be made.

Statistically, money issues rank among the highest reasons for friction in a marriage.  As a financial planner I see it every day and in this recession it is getting worse. 

The take away from this blog should always be that spouses will not agree on every financial issue, but we hope that by having a laugh at our expense will enable you to figure out a way to compromise on money issues in your relationship.

now back to the rants!….she wants to take the kids to Disney over spring break, the one time of year I hate to travel.  The crowds, the inflated hotel rates, etc.   Did I mention the crowds?  I really hate crowds……..