Everybody Loves Your Money

I’ve really been somewhat riveted by the current economic crisis.  Each day seems to bring new twists and the numbers are getting worse by the month.  Today they announced a 2.7% decrease in December retail sales.  Isn’t December the month where everyone is supposed to go gangbusters and spend tons of money they don’t have?  Apparently not last December.

I’ve read more than a few articles where economists talk about a mid to late year turnaround.  Other articles even cite the real possibility that this recession will be a “V” recovery, where it goes down quickly but then bounces back just as quickly.  I can’t find a single reason why I think that will be the case.

• Layoffs are being announced daily by companies all around the country
• Late 2008 saw job losses increasing, not decreasing and early 2009 doesn’t seem to be trending any better
• Companies are still retrenching and are certainly not planning growth and hiring in 2009
• Hundreds of companies around the country are closing up shop now or are planning to this year
• Credit is still tight for a large percentage of the population due to more conservative lending rules.  I don’t see why those rules will change much this year as they are simply going back to fiscally responsible standards
• As job losses mount, there is real concern that foreclosures may continue to increase as the next wave of people, who have traditionally paid their bills on time and have good credit, can’t afford the payments
• For every one job that is available, there are 3.8 people trying to get hired for it.  That most likely won’t change this year due to all of the other economic factors
• Fear is driving every sector of the economy, from Wall street to the street in front of your house.  That doesn’t appear ready to go anywhere any time soon.

So, where do we go from here?  I’d argue that we have a long period of flat or negative economic growth ahead of us and we should each take the steps to position ourselves for a long ride.  While we have been spending a lot of money over the last week, we are still doing our best to continue to save and build our cash cushion further.  I think cash is going to be KING for awhile and the more of it you have, the better you’ll be able to ride out this downturn.  Most people seem to be afraid of using the term 2009 Depression but this is probably the closest thing to the first depression that most of us have or will ever see.  There are just too many parallels to the first depression and too many incomprehensible things have happened already.  Who would have thought that some of the titans of Wall street would fail?  Who would have expected Washington Mutual and other high profile banks would fail?  Who would have predicted that some of the staples of the retail world would fail?  And damnit, who could have predicted the fall of my favorite cookies in the world?

Amidst all the noises of garbage landing in the pile and large machines working away I heard the sound of my long time friend being crushed in to a thousand pieces.  I suppose it had to happen sooner or later.  The couch that has been my comfort every evening for 10 years finally had it’s last behind on it yesterday.  At first I thought that old thing would ride it’s way in to the garbage truck, parked under the garbage transfer station, in one piece.  She held on for a long time slowly sliding in front of the massive Caterpillar machine that flattens the garbage down before pushing it in to the truck.  Just as the couch was about to go over the edge in to the truck, the machine lifted up it’s front blade and then slammed the blade down crushing the couch.  Okay, so I knew that was going to happen when I threw it over the chains in to the pit but I was really hoping to see it get run over by the large tracks instead of being crushed by the blade.

That’s my long winded way of saying, on top of all the other money we spent this weekend, we also bought a new couch.  It has really been a long time coming.  Frankly, it was embarrassing to invite people in to our house because our couch was falling apart.  We had already flipped the cushions over a number of times and both sides of each cushion had worn through the fabric down to the stuffing.  The armrests were worn and stuffing was coming out of those too.  I feel good that we got the absolute maximum time out of that couch, but I’ll still miss it.  I have many pictures of my wife and I, as well as other family members, holding my daughter while sitting there.  Don’t get me wrong, I’m not at all sentimental about the couch, it’s just that it was the most comfortable couch I’ve ever owned.

If you been reading this blog for any amount of time you’ll know that I’m not the type of person to just walk out and buy a couch (and love seat) without doing a bit of homework.  My wife, daughter and I went to a number of furniture stores before realizing that the leather couch and love seat at Costco were a really good deal.  We’ve been wanting leather furniture because it’s helpful for all of my allergies and they are pretty comfortable.  We also like the reclining capability of both.

I did a little number crunching on the old couch and figured out that the couch cost me $5.83 per month during the 10 years we had it.  I’d say that’s a reasonable cost for a comfortable couch.  That’s less than 20 cents per day.  I usually take a minute to calculate the average cost of any major purchases that I part with just to see what kind of value the item delivered to me over it’s life.  By doing this I can tell if my purchase was just cheap, or was actually a good value over it’s lifetime.  Mostly this is just for my entertainment but it can help me see whether my trend is to spend too little on things that won’t last.  I’ve been bitten a few times when I purchased higher priced items that didn’t last very long and I’ve really cleaned up on items that were low cost but ended up lasting me a long time.  Our current iron is a great example of this:

When my wife and I were married, we bought a new iron that we thought could last us a lifetime.  The iron cost us $90 and only lasted about one year.  That’s an average cost of $7.50 a month.  Yikes.  That iron cost me more than my couch on a monthly basis.  We bought our current iron when that failed and have had it for 9 years.  After getting such a dismal life span out of the expensive iron, we decided to buy a much less expensive model.  We purchased a Sunbeam iron for about $30.  After 9 years the iron is still going strong, which comes out to less than 28 cents per month.  The less expensive Sunbeam turned out to be a much better value for us in the long term.  Wouldn’t it be nice if you knew the exact value something would deliver when you purchased it?

Anyway, the old couch is now sitting in a massive stench of garbage at the local landfill.  I wish there was someplace that you could take them to recycle them.  I considered giving it away on Craigslist but it was in such bad shape that I couldn’t imagine anyone wanting it and was kind of afraid of who might show up to take it.  In the end we decided it was probably best to just take it to the garbage dump.