Money Talk Daily

Archive for February, 2010

Charities in the US

In the US there are over 1.2 million charities and other nonprofits hoping to reach their financial goals this year. Unfortunately, due to the recession many are predicted to fall short. More than 93% of nonprofits are experiencing notable declines in charitable donations. The Bridgespan Group, a nonprofit consultancy organization, says that not only is private funding drying up, so are many others.

The Salvation Army suffers

Everyone has seen them on street corners and in front of businesses. The Jolly Santa rings the Salvation Army bell, hoping to get a donation. Even the Salvation Army is facing a shortfall. Typically, Thanksgiving through to Christmas is the peak time of the year for the charity. Major George Hood, Chief Communications Officer for the Salvation Army, said, “Fundraising is very difficult in this economy, yet we know that there are people suffering in all 50 states.”

Since the recession, spending has declined drastically. A shortage of people traveling the streets to buy, means a shortage of people passing by the red-kettle ringers. Hood continued, “That impulsive giving can be jeopardized if there is no foot traffic in malls. We are in a difficult economic spot. We have to be prepared for it. All we can do it get out there and do what we do and know that the American public has never let us down.”

Service organizations suffer

Another sector braced for a lack of funding is service organizations. Karen Pushaw, director of a soup kitchen in Philadelphia, said, “More people are seeking services at the same time as fewer people are able to contribute.” Service organizations are expected less funding, along with increased demand for help from those without. One facility in New York City called Nazareth Housing, a 58-bed homeless shelter, has been operating at full capacity since June of this year.

The organization does not expect to meet its budget, but has a “no one turned away” policy that presses them to stay open until there is no room available. Executive Director Michael Callaghan said, “There are a variety of fiscal stresses on nonprofits. Smaller non-profits are failing, or they’re crippled and unable to continue their efforts. We are going to see more people go out of business, which will add to unemployment and leave gaps in services.”

When will charities and service organizations mend?

Industry experts are studying the past, to see what to expect. In the Great Depression it took three to four years for charitable giving to return to normal. The analysts and experts aren’t ALL doom and gloom – since the per capita income has risen since the 40s, the recovery could be a lot quicker. The recession crippled businesses and organizations, but hope of a recovery is stronger now than it was previously. It’s likely that service organizations and charities will get closer to normal once the economy turns around.

Cash only money management

A recent CNN Money article highlighted people from all over the USA who have switched to cash only transactions to better manage finances. William Hazelgrove of St. Charles, Ill., is tired of mortgage loans, auto loans, unsecured loans and debt. He’s not alone in his sentiment toward credit and debt, but unlike other consumers, he is doing something about it. Hazelgrove had previously dealt with credit like a lot of people had. When he received bills, he’d pay them with his credit card. It wasn’t until his credit company hiked the interest rate due to the recession that he realized the problem. “I realized if I ever wanted to live within my means, I would have to switch to using cash only.”
Hazelgrove took charge of his finances, and steadily paid off debt and increased savings. He took on a second job and channeled the money directly to both. His complete solution included:

• Keeping a debit card balance above $100
• Liquid savings of $5,000 for emergencies
• Using Quicken to keep track of every expense

One of the main commitments he had to subscribe to was not spending when cash was low. He stated, “It was hard, especially towards the end of the month, but I had to forego credit card spending. If I couldn’t afford it, then it had to wait.” He admitted it was hard, but he was able to pursue and achieve his goals. Living without using a lot of credit isn’t exactly a bad idea.

Statistics on credit

When it comes to credit, almost everyone has it. A recent study by Hoffman & Brinker revealed that Americans totaled up to $ 917 billion in credit debt by September 2009. Just about 70 percent of that credit is currently past due.

It’s no secret that consumers over-used their credit, and the harsh reality is that lenders have changed their rules in terms of lending and limits. Without an action plan, many Americans will find themselves at a difficult juncture in their finances. Mortgage loans, car loans and unsecured loans are no longer given out to just any applicant. Prior to the recession lending laws were lax. It was easy to get funding and almost every credit-scored applicant could find some lender to extend money. Granted, the money most likely would come with a hefty interest rate, but for most consumers that was a price they were willing to pay.

Today’s world of cash management

The lending crash had the biggest effect on people going cash-only. Due to the number of defaulting borrowers, credit card companies had to take drastic action to mitigate their losses. They raised interest rates to unmanageable levels and cut limits. Another person, Daphne Harringe of Cincinnati, OH, said, “We always used credit to manage our monthly bills. Always. Then suddenly our interest rate shot up to 27 percent after one delinquency. It was difficult to manage, but we realized that we had to switch to cash if we were going to save our future.”

More and more consumers are heading towards a cash-based money management system. Particularly because of the way credit lenders took the recession, borrowers saw how unreliable credit can be at times. More consumers are moving away from funding methods like credit cards, mortgage loans, and unsecured loans. They are opting for cash as they forge ahead and create their financial futures.

This is our second in a series of articles to help budding eBay entrepreneurs get started.

After you have registered with eBay and opened a store, the second step of learning how to sell things on eBay is to find products that will attract customers. So let’s look at the type of products that you can sell and where to find them.

Selling products online is relatively easy but if you want to know how to sell things on eBay to generate a sizeable income; you will have to put in a fair amount of market research. In any industry, the more unique your product the better will be your chances of finding a buyer.

Unique Products that sell fast

With a little bit of imagination you can find several places where you could purchase unique products dirt cheap and then sell them on eBay for a hefty profit. For instance, start by rummaging through the yard sales in your area. Not only will you find many items at throw away prices here but also because you will not be able to get more than two pieces of a particular item you will be able to offer your customers something exclusive.

You simply need to have a keen eye for products that customers will want to buy; you could hop over to your local dollar store and come back with a bounty.

Don’t forget the boutiques and second hand stores in your area, often these establishments sell items that are rare and vintage. It may take you some time to forage through all the items in such a store but you will be glad that you did it if you find the right set of items that can be sold on eBay.

Get in touch with the manufacturers of new and interesting products in the market; this can usually be accomplished with a few mouse clicks. If you apply to be a distributor for a manufacturer who is trying to gain an edge in the market, you may even get a discount.

Go through your newspaper in search of local auctions from estates and repossessed houses. You can usually get information on the type of items being sold and the auction time from the local phone book.

If your creative juices are flowing, try making your own unique products; these are a big hit during the holidays. For instance, you could make a T-shirt with a fourth of July motif or a door wreath around Christmas.

The good thing about selling on eBay is that you get access to all the tools that you will need to find out about products that are hot sellers and you will be able to trade in a similar niche.

For cheap products look for overstock clearance sales and establishments that are going out of business and would like to sell their entire inventory.

More help with setting up your eBay business in our next article!

This is our first in a series of articles to help budding eBay entrepreneurs get started.

With the economy still in doldrums, thousands of people are turning to the internet to generate a second income. eBay presents a wonderful opportunity to make a decent income online. So if you want to know more about how to sell things on eBay, here is some information on how to open an eBay account and set up your store.

Setting up your eBay account

If you are wondering about how to sell things on eBay you will have to start by visiting the eBay homepage. Here you should see two buttons, one that reads “register” and the other that reads “sign in”. Click on the register button to reach the eBay registration page.

You will have to provide the appropriate information such as your name, email, and address as requested on the “Welcome to Registration” page.

The next step is to create a log-in ID for yourself along with a password. Your log-in ID will also be your username so if you intend to use your eBay account for business purposes, pick a name that is descriptive of what you do and sell.

You will have to provide the chosen password twice. Write down your username and password in safe place so that you can access it when required.

A secret question will also be required. If you ever lose your log in information you can get in touch with eBay customer service and they will verify the answer to the secret question before sending you the log-in details.

Finally, check the box that confirms your agreement to eBay policies and you are done.

Setting up an eBay store

Once you have completed the registration, log-in to your account and click on the “myebay” tab on the top right hand corner of your screen. From here you will simply need to go through the prompts. There are several options to choose from when setting up an eBay store — a $15 account is appropriate for a beginner. Free one month access to the selling manager feature is included in the fee, and you will be charged an additional $5 for it from the second month on. Even if you make an incorrect selection you can always change it later, so no need to fret.

Next, choose the layout, the categories and the store motto. And that’s all there is to setting up an eBay account and store.

Stay tuned for part two of our eBay series!

The new face of joblessness

Today, the unemployed sector cuts through a very broad cross-section of the country. Since late 2007, some 8 million jobs have vanished, and the end is not yet in sight. The ranks of the unemployed have now swelled to nearly 16 million people.

In the past, recessions have mostly hit blue collar and low level retail jobs, and white collar layoffs accounted for about 30 percent of job losses. By contrast, the current recession has seen 50% of the lost jobs be from managerial, professional, and skilled white collar positions. Workers in the upper echelons that are scrambling for cash now, the current recession has changed the world overnight.

Who has been hardest hit?

Past recessions hit minorities the hardest, and this hasn’t changed. According to current Labor Department statistics, the nationwide unemployment rate in November was 10%, but joblessness among African-Americans, for example, was 15.5%. Interestingly enough, the unemployment rate for men is 11.9%, compared to 8.1% for women, the widest unemployment gender gap in more than half a century. Older workers are being laid off at a faster rate than younger workers.

Are unemployed people finding new jobs?

The unemployed are staying that way for unusually long stretches of time. Almost 25% of jobless people have been unemployed for over 6 months, the highest long term unemployment level since the Great Depression. That 25% long term unemployment figure doesn’t include “discouraged workers” – people who have given up, and those who have settled for part time work. In hard-hit regions of the country, long stretches of joblessness coincide with elevated suicide rates, mounting depression, and family conflicts.

But aren’t layoffs cyclical in a recession?

In most recessions, job losses are from temporary contractions from industries and bussines producing more goods and services than can be absorbed. Losses, therefore are cyclical in nature. Typically, businesses lay off employees until demand picks back up, and then start hiring again. The current economic downturn, however, is more foundational; that is, some industrial segments appear to have undergone permanent shrinkage – home construction, vehicle manufacturing, and newsprint publishing, for example.

New-home construction busts amid the housing crisis across the country have shifted many construction-worker families from affluence to poverty, or at best, survival mode. It’s difficult to believe that home construction industry will ever see boom years again. For that matter, there’s no reason to suspect that vehicle manufacturing will ever return to a glorious era of unthinking tunnel vision, or that two-inch-thick newspapers will ever again grace the breakfast table of every American home.

How do long term unemployment sufferers get by?

They sell off cars, get rid of extra phones, cancel health club memberships, and bid vacations farewell. They scrounge for any income they can find. Most workers who qualify for unemployment pay receive about 60% of their former wages, but unless Congress extends their benefits, they expire after 26 weeks. But even unemployment benefit extensions eventually expire, at which point people may become eligible for welfare benefits and food stamps. A family of four might get $ 900 monthly, which can’t cover even basic costs like food, housing, and health care. From there, without family or friends to help, it’s a short jump to soup kitchens and private charities. Those experiencing long term unemployment face prospects that are grim.

Will new jobs be created?

It’s an unanswered question. Some politicians are anxious to spend more to salvage shrinking industries, but that’s more of a stop-gap than anything. And there is talk of replacing shrinking industries like vehicle manufacturing with “green” industries that will create a new economic boom, but turning such talk into reality would require billions in private or government investments as well as more years than today’s unemployed population can even hope to live. Not all displaced workers can learn new skills quickly. And even for those who can, chances are good that they won’t be returning to any semblance of their former pay. This is especially true for older workers or those who have extensive experience in specialized fields.

Will current job losses become permanent?

It is a sad thing to admit that many people who have lost jobs in the past year or two may never return to their former occupations or ever again reach their former income levels, but there seems to be no immediate way to avoid such a conclusion. Barring the unforeseeable, like a whole new economy arising, we are likely to have an unprecedented recessionary shift to permanent job losses.

Buffet’s claims

Warren Buffet seems to believe that, despite what other experts are saying, consumers won’t find debt relief any time in the near future.

“Everything I see about the economy is that we have had no bounce,” according to Buffet. “There were a lot of excesses to be wrung out and that process is still underway and it looks to me that it will be underway for quite a while. In the annual report I said that that economy would be in shambles this year and probably well beyond, and I think that is true.”

Buffet claims the biggest contributor to the lagging economy will be unemployment. Buffet believes that this unemployment spike will continue to “depress consumer demand for everything from energy to cars and homes.” Unfortunately, a lot of the economic turmoil is hinged on consumers’ spending again. The signs are that this is unlikely.

The economic turnaround

Ben Bernanke, chairman of the Federal Reserve, has cited nascent signs of economic recovery abounding throughout the market. He has been a strong proponent of consumer anticipation of better times on the horizon. However, Buffet’s argument is based on some telling facts about the market. The decline in home building dashed many hopes that the economy and credit industry turned around enough to once again push people to start buying big ticket items.

Buffet claims that debt relief for the masses is a long way off because of the seemingly unstoppable unemployment rate. “It looks like we’re going to need more medicine, not less,” he stated recently, implying that the country will need a second stimulus if it is ever to recover.

Cautions for the future

Despite some changes and government intercession, Buffet claims that more is needed. He also believes that the stimulus and programs the government has already introduced will impact the economy in adverse ways. “We have done things that raise the probability of high rates of inflation at some point,” he adds. He said that some of the government’s actions were necessary, but could drive down the value of the dollar to record lows.

People’s futures

So people are left to wait it out and see what results the stimulus really will bring. Many people have seen the fall of large corporations and bankruptcy filings by huge companies. They take this as signs to be cautious about their own finances, and make do as opposed to going out and buying again. However, everyone agrees that consumer buying is key to true economic resurgence. Without confidence in the market, spending on large purchases seems imprudent, and buying a house is not exactly like buying a candy bar. Consumers are opting to go without rather than stretch budgets in murky waters.

Despite Buffet’s words

Despite what Warren Buffet is professing to the public, people are going to have to make their own judgments on what their future holds. They’ll have to be vigilant with finances to get debt relief, and still have room to save for retirement, college, and emergencies. All in all, only time will determine how well the economy will recover, and what it will be like when it does.