The USA economy is still in very fragile ground. The continued problems created by policies focused on aiding too big too fail institutions and continued huge federal budge deficits are dangerous. And the continued problems in Europe and mounting problems in China are not helping. Still, rental prices continue to rise across the USA.
The graph above shows housing rents (as shown by the Zillow rent index) have increased 5.4% in the last year (through July) across the USA. In Boston the increase was 4.5%; Grand Junction, Colorado -4.9%; San Francisco up 8.8%; Washington DC up 7.3%; Raleigh, NC up 1.8% (though the last one couldn’t be added to the graph for some reason). I just picked some cities I found interesting – with some diversity.
Housing prices are up 1.2% in the same period, according to the Zillow price index.
When looking at data on rental prices and home prices you will notice different sources give different readings. Judging these changes across the nation is very difficult and requires making judgements. Even at the local level the measures are imprecise so the figures you see will vary. Taking a look at several different measures, from reputable sources, is often wise.
Related: USA Apartment Market in 2011 – Top USA Markets for Buying Rental Property – Apartment Vacancies Fall to Lowest in 3 Years in the USA (April 2011) – Apartment Rents Rise, Slightly, for First Time in 5 Quarters (April 2010)
Big Income Losses for Those Near Retirement takes a look at some interesting data, including data on median income drops due to the too-big-too-fail credit crisis recession.
The post also includes data showing the only groups with income increases as those 65-74 years old and, 75 and over which is surprising. 25-34 took the 2nd largest drop decreasing 8.9%.
Another interesting tidbit is the percent of people over 65 with jobs. In 1960 20% of those over 65 had jobs. Which pretty much decreased steadily to 10% in 1986 and then has increased steadily to 17% in 2011.
Related: USA Individual Earnings Levels: Top 1% $343,000, 5% $154,000, 10% $112,000, 25% $66,000 –
Looking at Data on the Value of Different College Degrees – 60% of Workers in the USA Have Less Than $25,000 in Retirement Savings – Credit Card Regulation Has Reduced Abuse By Banks
I’m really too lazy for any ongoing budgeting. This is the model I have used: write down your big expense (rent, car payment, required student loan payment…). Get the total take home pay each month subtract your big expenses. If that is negative you better do something else (make more money, get rid of big expenses).
Big monthly expenses:
- Rent: $900
- Car payment + insurance: $300
- Cash (miscellaneous spending food, gas, cloths, books…): $450
- Utilities+ (heat, electricity, phone, internet…): $250
Take home pay: $2,800.
That leaves $900/month ($2,800 – $1,900). Decide how to allocate that – toward your IRA, saving to buy a house or take a vacation, eating out (above what was allocated above for cash), pay off debt (if you have it…), build up an emergency fund, save to buy a new MacBook Pro with Retina display…
If I decided to allocate $300 to my IRA (or increase my 401k) I would just set that up automatically each month. Then say I decided to put $400 toward other savings I would have that go to my savings account each month. And I decided I could use the $200 to pamper myself I just leave that in my checking account and what is in checking is what I have to spend.
I just don’t spend more than that. Just like when I was in college I had little spending money. I could spend that. I couldn’t spend any more, I didn’t have it. If I were to go over (I never did), but if I were to have (say my credit card bill exceeded my checking account balance), I would have had to reduce my cash the next month. I reality I would have something like $2,000 extra in the checking account so no bills would be a problem (and just view $2,000 as 0).
In 6 months see where things stand. Is it really working? Did you mess up and forget some expenses… If you need to adjust, do so. Re-examine every 6 months (or every year, if you are doing pretty well).
Take a portion of each raise (50% maybe) and devote it to personal finance goals (paying off debt, retirement savings, building up emergency fund, saving for big purcahse, investing, give more to charity…); don’t just use it to increase spending. Use no more than half (or whatever level you set) of the raise to increase your current spending.
Us treasury yield hit a incredibly low level years ago and they have continued to fall further. Granted this is mainly due to the bailout of the economy necessitated by the politicians favors to the too-big-too-fail financial institutions that have given those politicians so much cash over the years. Other factors are at play but the extent of the excessive punishment of savers is mainly due to political bailouts of bankers and bailouts of the economy caused by the bankers actions.
This extremely low rate environment is crippling to many retirees. The small percentage that actually did what they were told to have been blindsided by years of artificially low rates (and it is likely to continue for years). This has pushed some that would have been comfortable in retirement into an uncomfortable one an has pushed some from a challenging balancing act to essentially having to eliminate every possible expense (and even that may not be enough).
I can’t believe long term bonds are a sensible investment now. Of course I haven’t thought they were for 10 years, but they are even worse now. Bonds of “strong” governments (USA, Germany, Japan) are paying less than inflation (sometimes even less than 0 nominally – I think this has just been for short term issues so far).
I cannot see putting more than token amounts into long term bonds at these rates. Corporate bonds are not much better. The economic damaged caused by out of control too-big-too-fail institution is huge and continuing. And the politicians that have been paid lots of cash by those too-big-too-fail institutions continue to treat the too-big-too-fail players are favored friends. The yields are corporate bonds are not good for companies that are strong.
The alternatives are not great. But real assets, strong dividend stocks, strong company stocks, and short term bonds seem like better options to me in many cases. And hope we elect people that will put the economic interest of the country ahead of a few well paid friends at too-big-too-fail institution. They also need to eliminate the captured “regulators” that have facilitated the continued wrecking of the global economy. I don’t hold out much hope for this though. We keep re-electing those given lots of cash by the too-big-too-fail crowd and they continue giving them favors. We are getting what we deserve given this poor performance on our part but it is pretty annoying having to watch us vote ourselves into economic calamity.
Sadly, Congress refused to allow the person that should have headed to the Consumer Financial Protection Bureau (CFPB) to do so: Elizabeth Warren. If we are lucky she will be joining congress as the new senator from Massachusetts to reduce the amount of big donnor favoritism that prevails there now. That attitude will still prevail, she will just be one voice standing against the many bought and paid for politicians we keep sending back to Washington (there are a couple now, but they are vastly outnumbered).
Even with congressional attempts to stop the CFPB from being able to enforce laws against their big donnors, the CFPB has announced their first public enforcement action: an order requiring Capital One Bank to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This is a good, small step that is helping creating a rule of law instead of a rule of those capturing regulators and giving lots of cash to politicians. But it is a very small step. The system is still mainly about captured regulators and giving lots of cash to politicians.
This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for add-on products such as payment protection and credit monitoring when they activated their credit cards.
“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”
Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:
- Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
- Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
- Misinformed about cost of the products: Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
- Enrolled without their consent: Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.
One of the less obvious costs of a poor credit rating these days is large companies see you as someone to take advantage of. They often target those with poor credit for extremely lousy deals that they wouldn’t try to sell to those with good credit. The presumption, I would imagine, is someone able to maintain a good credit rating is much less likely fall for our lousy deals.
Related: Protect Yourself from Credit Card Fraud (facilitated by financial institutions) – Anti-Market Policies from Our Talking Head and Political Class – Banks Hope they Paid Politicians Enough to Protect Billions in Excessive Fees
Studies show that a 20 year old has a 30% chance of becoming disabled before reaching retirement age. In the USA, the Social Security Administration provides disability benefits for total disabilities. You still want to get your own long term disability insurance (this can cover for partial disabilities), but here is some information on the SSA disability coverage.
To qualify for Social Security disability benefits, you must first have worked in jobs covered by Social Security. Then you must have a medical condition that meets Social Security’s definition of disability. In general, they pay monthly cash benefits to people who are unable to work for a year or more because of a disability.
Benefits usually continue until you are able to work again on a regular basis. There are also a number of special rules, called “work incentives,” that provide continued benefits and health care coverage to help you make the transition back to work.
If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same.
Generally, you need 40 credits, 20 of which were earned in the last 10 years ending with the year you become disabled. You earn essentially 4 credit each year you work. There are reduced requirements if you are young and haven’t had a chance to earn 10 years worth of credit. So essentially you have to have worked 10 years (and 5 years in the last 10 years) paying social security tax.
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
“Disability” under Social Security is based on your inability to work. The Social Security Administration consider you disabled under Social Security rules if:
- You cannot do work that you did before;
- We decide that you cannot adjust to other work because of your medical condition(s); and
- Your disability has lasted or is expected to last for at least one year or to result in death.
This is a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings and investments.
The benefit amount is calculated based on your average annual earnings and is subject to a maximum of $2,346/month (in 2011). The average benefit payment, last month, was $1,111. Minor, dependent, children are also eligible for a small monthly payment.
In June 2012, 8.7 million people received disability benefits. Theoretically the number of recipients shouldn’t increase just because there is a recession, but they generally do increase in recessions.
There is no means testing on receiving the disability payment from the SSA. It is based on your income and disability. There are other Social Security programs (SSI, Medicare) where you must show you have very few assets before you are eligible for benefits.
Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival. This carnival is different than many blog carnivals: I select posts on those topics from what I read (instead of posting those that submit to the carnival as many carnivals do). If you would like to host the carnival add a comment below.
- The U.S. Content of “Made in China” by Galina Hale and Bart Hobijn (SF Federal Reserve) – “Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the “Made in China” label.”
- 7 equations to build a secure retirement by Robert Powell – the equations are not complex but might scare those that don’t like math. Even without really understanding the equations the text is useful.
- Stock Market Capitalization by Country from 1990 to 2010 by John Hunter – The USA was 32.5% of the total stock market capitalization of the global stock markets in 1990. The USA grew to 46.9% as the tech, finance and housing bubbles were all underway (also Japan was stagnating and the Chinese stock market hadn’t started booming to a significant extent) in 2000. By 2010 the USA was back down to 31.4%.
- 5 stages of retirement crisis–and what to do about yours by Jim Jubak – “Certainly you weren’t planning for three-month Treasury bills to be paying you 0.08% or 10-year Treasuries 1.61%. And you’re worried by projections that say the real return on stocks going forward is going to be more like 5% (if we’re lucky) than the 7.5% real return that has been the assumption of choice recently. (That assumption replaces the 10% assumption that was the common wisdom in the years before the 2000 bear market.)
The extremely low interest rate environment created by the too big to fail financial institution bailouts has severely harmed savers. Most severely harmed those in retirement that didn’t count on irresponsibly regulators and bankers creating a situation where to avoid a depression they had to punish savers to favor large banks (and others).
For some savings that might normally go into bonds (if the bond market were not so manipulated by the central banks to punish savers) dividend stocks are a good option. The stocks have risks but frankly with extremely strong companies with huge amounts of positive cash flow the future looks brighter than it does for those debt ridden governments.
Apple (AAPL) announced they will start paying a $2.65 quarterly dividend which works out to $10.60 annually. At the current stock price, this is a yield of nearly 1.9%. That is hardly going to make you rich but it is extremely attractive when you can get a much higher yield than savings account, treasury bills… and have the potential gains in stock price. Yes you do also have risk of a declining stock price, but as I have said I think Apple’s stock is an extremely good investment now.
Other good options include: Intel (INTL) which offers a 3.3% yield and Abbott (ABT) which offers a 3.4% yield. I own those 3 and also ONEOK Partners (OKS) which sports a 4.8% yield (but is a bit tricker situation that is suitable for a lower investment I think).
Even a stock like Toyota (TM), which I like as an investment, while it offers only a 1.8% yield that is much higher than you get for savings or treasury bills. So even stocks that are not about yield in the normal market conditions offer an attractive yield today.
I am a bit nervous about health care dividend investments but Pfizer (PFE) is worth considering at 4.1% (as are JNJ and MRK). I really like ABT (they have raised dividends for over 40 straight years, I think), sadly they are splitting into 2 companies. Even so I am planning on staying invested but it is avery big change and would make me worried about having too much committed to ABT.
Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival. This carnival is different than other carnivals: I select posts, and articles, from what I read (instead of posting those that submit to the carnival as many carnivals do). If you would like to host the carnival add a comment below.
- How Much Should You Contribute To Your 401k? by David Weliver – “If your employer matches 401k funds, contribute enough to get the full match. Do this first. Even if you’re in debt. Even if you don’t put in a penny more. Next, if you can contribute to a Roth IRA, work on contributing the full $5,000 a year to that account before you contribute elsewhere.”
- USA’s creaking infrastructure holds back economy by Paul Davidson – “The U.S. is spending about half of the $2.2 trillion that it should over a five-year period to repair and expand overburdened infrastructure, says Andrew Herrmann, president of the American Society of Civil Engineers.
Inland waterways, for example, carry coal to power plants, iron ore to steel mills and grain to export terminals. But inadequate investment led to nearly 80,000 hours of lock outages in fiscal 2010, four times more than in fiscal 2000. Most of the nation’s 200 or so locks are past their 50-year design life.”
- Earth to Dimon: Banks Don’t Have a Right to Profit by Yves Smith – “banks that exist only by virtue of state-granted charters — and more recently, huge transfers from the public — have persuaded public officials and regulators that they have a God-granted right not just to high levels of profit but also high levels of employee and executive compensation.”
- Road Map for Saving Health Care with Fareed Zakaria – “our [USA] out-of-control health care costs continue to climb. No other nation spends more than 12 percent of its economy on health care. America spends 17 percent. What’s more, we don’t really benefit from the huge price tag. Our healthy life expectancy, the standard measurement, ranks only 29th in the world, behind Slovenia… All of them, including free market havens like Taiwan, have found that they need to use an insurance or government sponsored model. And all of them provide universal health care at much, much lower costs than we do.”
Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival. The carnival is published twice each month with links to new, related, interesting content online.
- Long Term Care Insurance – Financially Wise but Current Options are Less Than Ideal by John Hunter – “The questions about long term care insurance are not about the sensibility of the coverage abstractly, it is very wise. But the complexities, today, in the real world make the question of buying more a guess about what coverage you will actually receive if you need it.”
- Figuring Out The Real Price Of College by Jacob Goldstein – “For the current school year, the average sticker price for tuition and fees at a private, nonprofit college is $28,500, according to a report from the College Board.
The average price students actually pay is less than half that — $12,970. That’s almost identical to the $12,650 that students paid, on average, in the 2001-2002 school year. (These are inflation-adjusted dollars.) Of course, this is just the average. What students actually pay varies wildly.”
- The Philippines Astounds the Skeptics by Bruce Einhorn – “Much of the credit for the good feeling should go to Aquino and his efforts to tackle corruption and improve the country’s infrastructure… As wages rise in China, the Philippines has a chance to attract investment from companies looking for low-wage alternatives, but the country’s notorious culture of bribery remains a major obstacle to growth”
- Periodic Table Of Dividend Champions by David Van Knapp – the post looks at the 105 stocks raising dividends 25 straight years and looking at current yield and dividend growth rate highlights 34 for further study by an investor “Similarly, some investors may be interested in stocks that have a low current yield coupled with a high rate of dividend growth.”