Mining our non-financial resources

You can get lots of advice today about how to invest your money and how to cut your living expenses during this turbulent economy. You can also get many, often conflicting, opinions about what lies ahead financially. What has been less easy to come by are discussions of the resources we can draw on that have nothing to do with money.

In this economic crisis, who will we be for each other? What values and virtues are we drawing on in this storm? What are the qualities of human nature that determine our economic markets? These, and more, are questions that Krista Tippett, host of the "Speaking of Faith" radio program, asked many thoughtful people from the fields of economics, theology, literature, philosophy, banking, and urban activism. A sample of what they have to say:

• One of the things that should make us closer is our vulnerability...Riding the crest of the wave was exciting and exhilarating but there may be some advantages to being landed on the beach. Vigen Guroian, Armenian Orthodox theologian/educator


• The economy is based not on scientific principals, but on beliefs of what is a good life...money is simply stored energy...What's happening today is an opportunity to live more consciously according to your values, not the values of the culture. Rachel Naomi Remen, physician


• What is the dignified thing to do? They can take away our money, they can take away our jobs, but at the end of the day we have our conscience. What people have the opportunity to focus on right now is being there for the people in their lives. Greg Epstein, humanist chaplain

The complete discussion aired recently on Krista Tippett's weekly radio program, "Speaking of Faith," on National Public Radio. You can listen to it, as well as unedited interviews on this topic with more than a dozen thoughtful people, at the Speaking of Faith web site.

Keeping down with the Joneses

In the Conspicuous Consumption Department, peer pressure has been turned upside down. As the number of people losing their houses and their jobs rises, those who are still able to spend lavishly are losing their desire to do so. It's unseemly, decadent, even immoral, according to the could-be spenders interviewed for the New York Times article.

It shows that, for some, today's downturn may be the cure for compulsive shopping. “It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well-being of my family," said Maxine Frankel, 59, a high school teacher from Illinois. "I’m just not seeking happiness from material things anymore.”

One of the experts, Juliet B. Schor, an economist at Boston College and the author of “The Overspent American: Upscaling, Downshifting and the New Consumer” (Basic Books, 1998), says the downturn has eliminated the need to compete, as we focus on those who are worse off. And, no doubt, as we focus on the fact that we are just one layoff away from being worse off, too.

What price fun?

Advance word on this year's Toy Fair, which starts Sunday in New York for some 20,000 buyers and sellers in the $22 billion industry, is that price matters. In an interview with MarketWatch, Hasbro CEO Brian Goldner said the company would be "dialing back" on some of its pricier toys in light of the recession and emphasized that most of its products retail for $20 or less. This doesn't include its Transformers line, based on kids' movies, which has roughly $500 million in annual sales.

Will one of the prominent players in today's dialing-back economy, Bernard Madoff, be on display at Toy Fair? Two months after Madoff was arrested and allegedly admitted to a decades-long Ponzi scheme that has liabilities of roughly $50 billion, HeroBuilders.com is selling the Bernie Madoff action figure, complete with a fistful of cash, for $149.95. Yes, of course there's a Rod Blogojevich figure, too. Same price.

If all this makes you want to snap your wallet shut, may I suggest Good Times Made Simple: The Lost Art of Fun and Tips for Parenting in a Consumer Culture, free booklets from the New American Dream organization. They may be the antidote for kids of all ages who are attracted to action figures of all kinds.

Welfare on the Street and in the street

Amount of taxpayer bailout money used to pay Wall Street bonuses in 2008: $18.4 billion
Federal allocation for Temporary Assistance to Needy Families (welfare) in 2008: $16. billion
Number of states that cut their welfare rolls last year: 18

How those numbers are playing out, at street level:
From the Star-Ledger in Essex County, N.J. "All over New Jersey, the welfare lines are getting longer and longer. Victims of the recession are lining up to apply for food stamps and seek help paying for utilities, rent and subsidized health care in numbers that veteran social service workers have never seen before. While the lines may run the longest in urban Essex County, rural Salem County and suburban Middlesex see the same thing: lines getting longer, lines made up more and more of people that have never stood there before. The state Department of Human Services, which oversees the distribution of welfare, Medicaid and food stamps benefits, saw a dramatic spike in the demand for these programs in the fall. Food-stamp applications doubled from 2,234 people in October 2007 to 4,547 people in October 2008, according to the most recent state data available.
Inundated Essex County welfare director Bruce Nigro said county agencies have yet to feel the full impact of the lost jobs. 'They've just extended unemployment for another 13 weeks, but when unemployment runs out, I expect to get hit, probably late spring or early summer,' he said."

From the South Bend Tribune in Indiana: "A common story falls from the lips of many seeking help at the Sister Maura Brannick Center. Lost jobs, late bills and little mouths to feed have forced them to put aside their own medical treatment. But now, running out of medication or worse — such as enduring a painful infection — has finally caused them to turn to the center. Most are suffering from chronic illnesses, says Director Carla Bice, such as diabetes, high blood pressure, heart problems or serious dental ailments. 'A lot of people have lost their insurance,' she says. 'The problem is a lot of them are getting sicker. We see so many train wrecks.' ...The number of food stamps recipients has increased by thousands in the last year, with a total of 31,563 St. Joseph County residents receiving stamps in 2008, compared with 28,089 in 2007, according to the Indiana Family and Social Security Administration.The numbers do not include residents who apply for food stamps but are denied qualification, according to FSSA spokeswoman Lauren Auld. She says that number is not recorded."

Nationally, the number of people receiving cash assistance in 2008 remained at or near the lowest in more than 40 years, according to a recent survey by The New York Times. "Of the 12 states where joblessness grew most rapidly, eight reduced or kept constant the number of people receiving Temporary Assistance for Needy Families, the main cash welfare program for families with children. Nationally, for the 12 months ending October 2008, the rolls inched up a fraction of 1 percent."

Bargain is in the eye of the beholder

"Invest in yourself and forget about your portfolio. You shouldn’t ever be losing sleep over your investments. Learn something new. There’s more to life than fretting about a financial nightmare that never seems to end. " So says John Wasik on Bloomberg.com in a column that consitutes a good response to those people (often salespeople) who say: If you loved stocks at Dow 14,000, shouldn't you really love them at the bargain price of Dow 8,000?

Economic corruption? Call on the blogosphere

We may be too close to it to have good perspective, but 2008 was a triumphant turming point for democracy and humanity, thanks to the blogosphere. So says Craig Newmark, founder of craigslist, the Internet's classfied ad section.

Imagining that he is writing from the year 2058, in the new book "The Way We Will Be 50 Years from Today," Craig credits bloggers with restoring the American Constitution in 2008.

"People forget that a tipping point occurred that year; citizen journalists exposed so much corruption that the mainstream press followed through. That was the real beginning of continuous coverage of governance via Congresspedia. Until 2008, the victors, the guys with guns, wrote what we'd consider history. That year, the history of record became Wikipedia. What I think happened is that the mass of humanity, who are almost all moderates, got tired of the fanatics, got connected via the 'net, and started to run things."

If humanity can use the 'net to save the Constitution, can it save the economy--or build a better one? Maybe it will be an economy that values voter participation and civic engagement and clean air and water, an economy where status doesn't have much to do with stuff you buy?

Inertia is the enemy in today's job market

If you count discouraged workers—those who have given up looking for a job—about one in seven American adults are unemployed, not the one in 13 contained in the official unemployment rate of 7.6 percent, released today.

It’s easy to be discouraged in an economy that is losing upwards of half a million jobs a month. At the same time, hiring never drops to zero. What if you don’t have the luxury of waiting for a more welcoming job market? What if the only way you are going to keep body and soul together is to get to work?

That's what I asked Ed McEneny, a longtime professional employment counselor for a large, nationwide firm that shows the laid off, the underemployed, and the never-employed how to increase their chances of getting where they want to go. Here's his take on what it takes:

• Yes, getting a job is tougher today, but people are getting offers. One thing hasn’t changed, no matter what’s happening in the economy: The harder you work, the luckier you get.

• Don’t let your spouse or your mom or your former colleague tell you there are no jobs out there. "Let the market tell you whether it has a place for you," Ed says. You won’t know the answer until you’ve spent some quality time in the job-search.

• Several Web sites and books will give you the basics of job-hunt behavior—a top-notch resume vs. any old resume; using the Internet to do focused, rather than scattershot, job research; preparing for tough interview questions—as well as provide moral support and tips from others in your situation. To start, you could check out the venerable “What Color is Your Parachute?” as well as The Riley Guide and CareerJournal.

• Tell everyone you know that you’re looking for a job, and be specific about the fields you’re targeting and the skills you’re offering. You’re not asking people for a job, you’re telling them what you’re up to in case they have advice or they know someone who knows someone whose business may need a person with your skills. Such networking is the most effective form of job-hunting--better than on-line listings, career fairs, headhunters, etc. Passive job-hunting (emailing a resume to an online ad) is rarely enough. How many times have you heard: “I sent out a hundred resumes and I didn’t get even one interview!”

• Don’t limit your networking to people in your line of work. Tell everyone—your neighbor, your cousin, your book club—what you’re looking for. Remember, six degrees of separation.

• Don’t limit your networking to conversations, either. Volunteer, which will widen your contacts, keep you active in the world, and perhaps let you show off your skills or further develop a dormant set of skills. Join Toastmasters. Yes, even in the era of email and YouTube, maybe especially in the era of email and YouTube, sharpening your face-to-face communication style and your critical-thinking skills is important. They will help you get the interview, make a good impression in the interview, make you more effective in your next workplace, and widen your network.

You’ve done it all, for as long as you can, and you haven’t gotten the kind of job you're looking for? Go to the sidelines, Ed says, and get a job (or two) that pays the bills while you wait for your field to open up again or while you retool for a field with better prospects.

Whether you’re employed or not, don’t stop networking. In an era when the average adult will change jobs more than 10 times, job-hunting is not just for the unemployed. If you keep yourself out there in the relevant professional organizations, if you make it a point to stay educated and current in your field, if you maintain your connections, it will be that much easier to land on your feet, no matter what happens.

His years of advising the unemployed have sharpened Ed's definition of job security: "Your skills, plus your ability to get your next job."

This market is a wake-up call for all of us, unemployed or not.

Retirement no longer in sight?

If you're a baby boomer, your retirement plans have changed. So says the current BusinessWeek cover story. Author Chris Farrell says the hit that your 401k and other investments have likely taken in the last year means you'll be working longer. He demonstrates the impact of an incredibly shrinking nest egg with figures provided by economist Robert Shackleton of the Congressional Budget Office: Assume a married couple is in their early 60s earning $100,000 pretax a year. They need nearly $66,000 a year after taxes to replace 80% of their preretirement income, the standard guideline for retirement income.

If both retire at age 62, they'll receive more than $25,000 in total Social Security benefits and require a portfolio of at least $891,000 to generate the income they need, assuming normal life expectancy. But if the couple waits until age 66 to retire, their Social Security benefits go up, they have more years to feed their portfolio, and fewer years to rely on its earnings, so they need only $552,000 socked away. If they retire at age 70, they need only $263,000.

Anecdotally, I know a couple in their early 60s who were looking forward to retirement in the spring of 2008, nearly a year ago. The economy had gotten so shaky, though, that they decided to hang on a bit longer. That was before the Wall Street meltdown last fall claimed a piece of their savings. They're both still working and have adopted a wait-and-see attitude.

The silver linings? For most people, working keeps the mind sharp and provides a built-in social network. Read the full BusinessWeek story.

Beware the credit counselor

As if we haven't endured enough financial double-talk lately, the airwaves and our email are filled these days with offers to slash our credit card debt. Sounds tempting, but beware. A lot of credit counselors are up to no good.

Don't take my word for it--take the word of Elizabeth Warren, Harvard professor, author, and champion of the middle-class. In "All Your Worth: The Ultimate Lifetime Money Plan, she writes that "...credit counseling has become an industry thick with slick operators who do little more than take your money and leave you deeper in a hole." Some masquerade as nonprofit operations when they're not and many of them are run by big banks and credit card companies, she points out.

Other brands of snake oil identified by Warren: Credit repair offers, FICO repair kits, identity-theft protection and credit-card loss protection. This book was published in 2005, before the credit bubble burst. Its cautionary advice seems even more relevant today.

Adventures in frugality

Retail sales fell twice as much as economists thought they would in December, down 2.7 percent from November, the numbers-crunchers reported yesterday. Compared to December 2007, we consumers spent 9.8 percent less last month.

My guess is that this spending dropoff surprised economists more than the rest of us. With home foreclosures and the unemployment rate climbing, and investment portfolios falling, many of us have revised our shopping lists. We also are revising our shopping methods.

I offer my household as one example. My partner, Harry, and I wanted a carpet runner for our stairs. A few hours in the carpet store pointed to a price tag of $2,000 or so. We figured it was something to think about for a while. As we were thinking, the economy took a tumble down its own set of stairs, inspiring us to be creative with our carpet purchase.

Craigslist came through. We found a brand new carpet runner, purchased years ago but never installed. The owner, who lived five miles away, was moving out, the carpet was still rolled up in the attic, and she just needed to get rid of it. The size, colors, and pattern worked very well for us and the price was less than 10 percent of what we had considered spending last summer. What about installation? We found that on Craigslist, too.

What about you? Any creative shopping (or non-shopping) stories you can share?

Paradox or not, the party's over

Was it only a year ago that we were tsk-tsking over the fact that Americans’ savings rate had fallen below zero? We were spending more than we made, thanks to home equity loans, credit cards, and our vague notion that everything would work out—it always had.

Now, professional econo-watchers are tsk-tsking over the fact that Americans have snapped their wallets shut. In many cases, the home equity and the credit cards and the feelings of well-being are gone—along with the job. Consumer confidence is at an all-time low, down to 38 (100=1985, the year the measurement began).

Oh no, the commentators say, now that people have started saving. In an economy that is two-thirds consumer spending, how can we hope to recover if the consumer won’t consume? They have a name for this: The paradox of thrift. A healthy economy depends on a substantial savings rate; our unhealthy economy can’t recover if people don’t spend.

A critical example is the American auto industry, which suffered an 18 percent drop in sales for 2008 and will see a further 20 percent drop in 2009 sales, if forecasters are correct. If the Big Three American automakers went under, nearly 3 million jobs in the automaking industry and related services would be lost, according to the Center for Autmotive Research. Few people want to see the American automakers go under, but too many of us have been blown off the road, economically speaking. We’re supposed to keep consuming because the economy needs jobs? That party is over.

The country lost more than 500,000 jobs in December alone, a 200 percent increase from the previous December. Housing prices nationwide have dropped 23 percent since the summer of 2006 and are still falling. Credit card issuers are expected to lop $2 trillion off credit lines nationwide over the next 18 months, which translates to a 45 percent contraction in credit lines.
So, between the people who are unemployed , the people who no longer have home equity to tap, the people whose credit cards have shrunk, who’s left to spend?

Those who were savers, those with relatively large, secure incomes? Many of those people have seen their retirement nest eggs shrink, along with the Dow Jones Industrial Average. Many of them look at what has happened in the last year—on Wall Street and on their street—and they’re deciding to just say no to the big vacation, the beach house, the early retirement. Even if their personal balance sheet hasn’t suffered much, after the meltdowns, the bailouts, the Paulson schemes, the Ponzi schemes, who knows what lies ahead?

Most of us don’t have much control over what the policymakers or the macro economy will do next. But we do have control over the micro economy in our household. In this environment we get pretty clear, pretty fast, about what’s a necessity and what’s a luxury. That equation is different for everybody, but it’s a good bet that lavish restaurants, the leased Mercedes, the in-home theater, maybe even the weekly pedicure, are falling off the must-have list. Paradox of Thrift, meet the Need to Survive.

What do you think? Do you feel the need to spend to help save jobs? If not, what has fallen off your must-have list?