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  • Food and Energy Costs

    Energy and food prices have obviously been increasing dramatically. The economist has a nice chart showing where people spend most on food and fuel. In the USA, Canada, Western Europe and Australia people spend less than 25%. In Brazil, India, China, Mexico, South Africa, Turkey… they spend 25-40%. In Argentina, Saudi Arabia, Russia, Pakistan… they spend 40-50%. And in Mongolia, Nigeria, Iran, Kenya, Madagascar… they spend over 50%.

    The data is from the IMF. As with any economic data there are issues to consider about comparing across countries. Still this is a stark illustration that the impacts those in the wealthy countries feel from rising energy and food prices are felt to a greater degree in poor countries (that already have economic difficulties).

    Related: Food Price Inflation is Quite High – Helping Capitalism Make the World Better

  • Solar Heats Up Desert Real Estate Market

    The desert boom

    A solar land rush is rolling across the desert Southwest. Goldman Sachs, utilities PG&E and FPL, Silicon Valley startups, Israeli and German solar firms, Chevron, speculators – all are scrambling to lock up hundreds of thousands of acres of long-worthless land now coveted as sites for solar power plants.

    The race has barely begun – finished plants are years away – but it’s blazing fastest in the Mojave, where the federal government controls immense stretches of some of the world’s best solar real estate right next to the nation’s biggest electricity markets. Just 20 months ago only five applications for solar sites had been filed with the BLM in the California Mojave. Today 104 claims have been received for nearly a million acres of land, representing a theoretical 60 gigawatts of electricity. (The entire state of California currently consumes 33 gigawatts annually.)

    Related: Solar Thermal in Desert, to Beat Coal by 2020 – Solar Tower Power Generation – Global Wind Power Installed Capacity – real estate investing articles

  • Save Some of Each Raise

    Failing to save is a huge problem in the USA. Spending money you don’t have (taking on personal debt) and not even having emergency savings and retirement savings lead to failed financial futures. Even though those in the USA today are among the richest people ever to live many still seem to have trouble saving. Here is a simple tip to improve that result for yourself.

    Anytime you get a raise split the raise between savings, paying off debt (if you have any non-mortgage debt), and increasing the amount you have to spend. I think too many people think financial success is much more complicated than it is. Doing simple things like this (and some of the other things, mentioned in this blog) will help most people do much better than they have been doing.

    There are lots of ways to spend money. And many people find ways to spend all or more than all (credit card debt, personal loans…) they have which are sure ways to a failed financial future. So anytime you get a raise (a promotion, new job…) take a portion of that extra money and put it toward your financial future. The proportion can very but I would aim for at least 50% if you have any non-mortgage debt, don’t have a 6 month emergency fund, or are behind in saving for retirement, a house…

    Exactly how you calculate if you are behind, I will address in a future post (or you can look around for more information). By taking this fairly simple action you will be setting yourself up for a successful financial future instead of finding yourself falling behind, as so many do. And then when things go badly, as they most likely will sometime during your life, you will have built up a financial position to draw on. Instead of, as so many do now, find that you were living beyond your means when things were going well – which it doesn’t take a genius to see will lead to serious problems when things take a turn for the worse.

    So lets say you take a new job and get a raise of $4,000 a year. Instead of spending $4,000 more just put $2,000 away (pay off debt, add to your retirement savings, add to savings for a house, add to your emergency fund…). Then you get a promotion of another $3,000, increase your spending by $1,500 and save the rest. It is such a simple idea and just doing this you can find yourself in the top few percent of those making smart financial decisions. And if you get to the point that you are ahead in all your financial areas then you can take more of each raise you get (but most of the time you will have learned how valuable the extra saving are and figured out the extra toys really are not worth it). But if you want to, once you have created a successful financial life, you can choose to buy more toys.

    Related: Retirement Savings Survey Results – Earn more, spend more, want more

  • How to Protect Your Financial Health

    There are external risks to your financial health. Many people ruin their financial health even before any external risk can, but lets say you are being responsible then what risks should you seek to protect yourself from?

    Risk Strategy Also
    medical costs health insurance emergency fund, healthy lifestyle to reduce the likelihood of needing medical care
    property losses (house damaged, car stolen, property damage…) homeowners insurance, rental insurance
    job loss emergency fund, unemployment insurance (provided by the government and paid for by the company in most cases – in the USA) updating skills, maintain a career network, education, learning new skills
    disability (which both damages your earning potential and often has medical care costs) disability insurance, health insurance social security disability insurance – in the USA
    investment losses sound investment portfolio and strategy (diversification, appropriate investments, adjusting investment strategy over time) extra savings
    having to pay damages caused to others homeowners insurance often includes personal liability coverage (and car insurance often includes some coverage for damage you cause while driving). check and likely choose to pay for extra liability insurance – costs to add coverage is normally cheap.
    unexpected expenses emergency fund extra savings
    loss of income of someone you rely on (spouse) life insurance extra savings

    Another protection is to be financially literate. You can risk your financial health by being fooled in spending money you should save, borrowing too much for your house, failing to buy the right insurance, using too much leverage, investing too much in high risk investments…

    Related: credit card tips – personal finance tips – personal loan information

  • Oil Consumption by Country

    The largest oil consuming countries (and EU), in millions of barrels per day:

    Country consumption % of oil used % of population % of World GDP
    USA 20.8 25.9 4.5 21.0
    European Union 14.6 18.1 7.4 21.9
    China 6.9 8.6 19.9 10.7
    Japan 5.4 6.7 1.9 6.5
    Russia 2.9 3.6 2.1 3.2
    Germany 2.6 3.3 1.2 4.3
    India 2.4 3.0 17.0 4.6
    Canada 2.3 2.9 0.5 1.9
    Korea 2.1 2.7 0.7 1.8
    Brazil 2.1 2.6 2.9 2.8
    Mexico 2.1 2.6 1.6 2.1

    All data is from CIA World Factbook 2008 (downloaded Jun 2008). GDP calculated using purchasing power parity.

    Related: Top 10 Manufacturing Countries 2006 – Country H-index Rank for Science Publications – Best Research University Rankings (2007)

  • Failing Infrastructure in the USA

    The cracks are showing

    For the past few years it has been hard to ignore America’s crumbling infrastructure
    …
    Even worse is the influence of the pork-barrel. Only around 20 states use cost-benefit analyses to evaluate transport projects; of these, just six do so regularly. Alaska’s “bridge to nowhere” is an infamous result of this sort of planning. But it is not exceptional. Two months after the bridge collapsed in Minneapolis, the Senate approved a transport and housing bill that included money for a stadium in Montana and a museum in Las Vegas.
    …
    Such plans stand in stark contrast to the federal government’s strategy today. America invests a mere 2.4% of GDP in infrastructure, compared with 5% in Europe and 9% in China, and the distribution of that money is misguided.

    I think they underestimate our ability to ignore. For example we have over $500,000 in federal government debt per household and continue to raise taxes on future generations without any guilt. I think our capacity to ignore is pretty large and certainly large enough to ignore the decision to spend money on things other than infrastructure repair.

    I think those that don’t somehow manage to remain ignorant all know that China has taken the lead in investing in infrastructure and that the USA has chosen to elect politicians that are gutting infrastructure investments (and still spending far beyond the resources they have available). I can’t imagine many who understand economics have any trouble seeing which country is investing in the future and which country is selling out its future. It is not the choice I wish was being made in the USA but it is obviously the choice we are making.

    Related: USA Infrastructure Needs Improvement – Politicians Again Raising Taxes On Your Children – Manufacturing Takes off in India – True Level of USA Federal Debt

  • Where to Keep Your Emergency Funds?

    Poorer Than You posed the question: Where to Stash Your Rainy Day Fund?

    One of the most popular places for emergency funds right now, online savings accounts offer the sweet spot of liquidity and interest rate. The funds can be transferred to your checking account within 1-3 days. Recommended account: ING Direct’s Orange Savings.

    Pros: Interest rate usually meets or beats inflation, transfers to checking account, separation from checking decreases temptation to spend, no minimum balance requirement

    Cons: Slow transfers may hinder urgent emergencies, limited by federal law to 6 transfers out of the account per month
    …
    Personally, I’m using a credit card/online savings account combination right now. After I graduate from college and grow my emergency fund, I’ll move most of the fund to a money market savings account, and perhaps keep a couple hundred dollars in cash as well.

    Here are my thoughts:

    A money market fund is where I used to hold emergency funds, but things have changed. Money market funds are paying less than inflation (especially true inflation – which exceeds reported inflation). Right now high yield savings is where I have my emergency funds. You need to not only pick a good choice but pay attention to see if the marketplace shifts and certain options are not as appealing as before.

    I would use a credit card for immediate spending needs and then paying the balance in full with funds from high yield savings. But right now high yield savings accounts pay more than money market funds, so just stay with high yield savings. If money market funds pay more in the future then I would put the emergency funds there.

    Related: Personal Finance Basics: Health Insurance – personal finance tips

  • Buying Stuff to Feel Powerful

    New research confirms feeling powerless leads to expensive purchases. So in addition to learning about personal finance logically it can be important to build your self esteem in order to improve your financial position. For many people understanding human psychology helps them take more control of their own life. And can help when helping others.

    Feeling powerless can trigger strong desires to purchase products that convey high status, according to new research in the Journal of Consumer Research.

    In a study that may explain why so many Americans who are deeply in debt still spend beyond their means, authors Derek D. Rucker and Adam D. Galinsky (both Kellogg School of Management at Northwestern University) found that research subjects who were asked to recall times when someone else had power over them were willing to pay higher prices for status-symbol items.

    “This increased willingness to pay for status-related objects stems from the belief that obtaining such objects will indeed restore a lost sense of power,” write the authors.

    Instead of allowing yourself to submit to this impulse you will put yourself in a better position if you refrain from trying to buy a sense of power. Take a real look at your position and make changes that move your personal finances in the right direction.

    Related: Buy Less Stuff – Too Much Personal Debt – Financial Illiteracy Credit Trap – Curious Cat Investing Library: Personal Loans

  • Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania

    photo of Cesar Augusto Santamaría Escoto

    I have made some additional loans through Kiva, $250 for 5 loans in: Nicaragua, Ghana, Viet Nam, Togo and Tanzania. I have now made 37 loans for a total of $1,775. 5 loans of $250 have been paid back (and I relent the proceeds). Kiva says 5.64% are delinquent. While they show my delinquency rate they don’t show me which loans are delinquent. Frankly I think that figure may be in error (maybe it is counting one that was delinquent but is not now – see next paragraph). In any event all loans appear to have been paid off in full on time or are being paid in full now on time.

    In any event no loans are in default. One loan in Kenya for bike repair shop (that for whatever reason I especially liked) and did connect me more to the troubles in Kenya recently. Kiva mentioned many banks were having trouble keeping in touch with clients as many people fled violence. For two months there was no activity then there was a payment for 3 full months. I was happy when a new payment came in, not for the money being repaid (which shows again that my aim with this money is not a return for me but to provide opportunities to entrepreneurs), but for confirmation he was doing well.

    Photo of Cesar Augusto Santamaría Escoto in his welding workshop, Chinandega, Nicaragua.

    If you have a Kiva page, let me know and I will add a link to it on the Curious Cat Kivans page.

    Related: Provide a Helping Hand – Microfinancing Entrepreneurs – Entrepreneurship posts on the Curious Cat Science and Engineering blog

  • Japan to Add Personal Solar Subsidies

    Japan to Cut the Cost of Solar 50% Creating Greater Self-sufficiency (site broke the link so I removed it, sigh, sites can’t even manage to avoid breaking 10 year old web usability guidelines, when will they learn?)

    The country however is the 2nd largest global market for solar energy, and is home to some of the largest solar component manufacturers, including Sanyo, Kyocera, and Sharp. The Japanese government will introduce tax credits and subsidies to encourage household use of solar energy starting next year.
    …
    The incentive will decrease the cost of a solar photovoltaic system by an estimated 50% within 3 to 5 years. This initiative will make solar energy especially appealing because the cost of electricity in Japan is already over $.20 a kWh. This is roughly double the rate of electricity found in many areas of the US.

    Germany is the largest solar market (due to government policy encouraging solar development).

    Related: Large-Scale, Cheap Solar Electricity – Solar Energy: Economics, Government and Technology – Wind Power Potential to Produce 20% of Electricity Supply by 2030 – solar energy posts on the Curious Cat Science and Engineering blog