Boston Gal's Open Wallet

Actually, where I live in Delaware County, a rural area overlapping the Catskills that lies about three hours from New York City, the mood is anything but light. We are dependent on our cars here. Most of the county’s 42,000-odd residents are scattered among a few dozen tiny towns and villages, with at least 10 or 15 miles between them.

Until recently, most people thought nothing of zipping 45 minutes down the road to take advantage of better shopping opportunities in the bigger towns. Now those basic routines are stretching people’s budgets. For us to go to the nearest mall costs $16 round trip.

“You don’t just get in the car anymore,” said Laura O’Connor, who works in a kitchen goods store in Margaretville, but lives about 20 miles from there in Andes. “If I have errands to run, I try to make a giant loop and do everything in one day,” she said. “Most of us are carpooling, too.”

But with prices rising so rapidly, the usual ways of economizing aren’t enough to keep gas costs down. In the Catskills, you can’t just switch to mass transit.

Another reason (excuse?) given for not saving is that interest rates are low. "Maybe if interest rates went back to 5 percent I would start saving," a reader wrote. "But now it doesn't pay to save."

Ah, but it does. When you start saving, you don't have that much principal to earn interest on. It's only after you have accumulated a fair amount of savings that a higher rate makes a significant difference.

If you save $200 a month at 5 percent interest, you'll have $2,456 after one year. If you earn 2 percent, you'll have $2,422, just $34 less. I would argue it pays to start saving now so that, if rates go back up, you'll have more money to earn the higher interest.

And if rates don't go up, you'll have more savings to possibly put into investments that tend to do well when rates stay low, such as low-cost, broadly diversified stock mutual funds.

Labels: Free Sample

If they're right, Americans need to face a sobering fact: They're not likely to have as much money for retirement as they'd projected. Which means that many of us will have to save more, expect less and work longer than we'd planned.

Investors who rely on historical returns for the past 50 years will "probably overestimate what we're likely to see in the future," says Chris Jones, chief investment officer for Financial Engines, a retirement-plan consultant.

"As much as we'd like to say history is a good guide to what the future holds, it's simply not true."

Consider a 45-year-old with $100,000 in savings and income of $50,000 this year.

If that worker contributed 8% of income to his 401(k) plan for 20 years, received an annual raise of 4% and earned an average return of 10%, he'd retire at 65 with $878,862.

By contrast, if his average investment return were only 8%, he'd end up with much less — about $652,000. And if he earned an average return of only 6%, he'd retire with just $486,310.

Long-distance couples half-rooted in the Boston-area - many of whom are in their 20s and 30s, separated by graduate school, internships, and first jobs - say gas prices and airfare (not to mention a wave of canceled flights) are leaving them broke, emotionally exhausted, and seeing less of each other. No more last-minute jaunts to New York to surprise their partner after work. No more quick flights to Philadelphia to see their significant other's smile. Travel is too expensive these days for spontaneity and frequent visits.

Davies, a nonprofit worker who makes a little over $50,000 a year, said that the price to keep the spark alive, with two visits a month, has soared in the past six months. It had been under $300 for two trips, but in November AirTran canceled its Boston-to-Philadelphia service. Now, to avoid $300-plus roundtrip flights on other airlines, Davies takes the train to Providence, a bus to T.F. Green Airport, and flies Southwest Airlines for about $160 each visit.

"It puts you into a period of total limbo," he said of the rising costs. "Basically you put your life on pause. Any vacations you were planning or anything you were planning on buying . . . any disposable income goes to maintaining your relationship."

At present, the couple has $44,000 in retirement savings. Both contribute double-digit percentages to their 401(k) accounts and both receive 3% matching funds from their employers. Additionally, they put $200 a month in a Roth IRA account.

They have about $16,500 in a traditional bank savings account that earns 0.3%. In case of emergency, they keep about $4,000 in Ameriprise Cash Reserve Certificates.

The Wisneskis recently set up a 529 savings account for Ashyln’s college costs but they do not plan on funding her education entirely. While they have saved a modest amount for her college tuition, they also feel it is important that Ashyln contribute to her own education costs.

“We want to have as much money as possible to retire comfortably and as soon as possible. We want to maintain our lifestyles through retirement and not be restricted by money and bills,” Nate says.

Labels: Money Stories

Upper Midwestern states are in danger of losing a precious economic commodity: young people. Many are leaving for other parts of the country after finishing school. Without young, educated workers, there's little incentive for businesses to locate in economically hard-hit states.

Jennifer Paschal, 36, of Woodstock, Ga., has tried to ease the effect of the foreclosure of her home on her children, Bailey, 12, and Trent, 9. But she says they've been deeply pained. After 13 years of marriage, Paschal is going through a divorce. The divorce and medical bills led the family to lose its home to foreclosure in April. Paschal couldn't afford the $1,300 monthly mortgage payment on her $45,000 annual salary as a day care center director.

The home is a six-bedroom house on an acre of land, with a trampoline in the backyard, blooming pink azaleas and rose bushes, and a muddy creek where Trent and Bailey would catch frogs and play with their two dogs, a retriever and a Labrador.

Before they left, Paschal took the children to their rooms and told them to fill a box with whatever they wanted to take with them. They moved in July to a two-bedroom, $900-a-month apartment. The "for sale" sign on the house they lost to foreclosure went up this month. When she saw a picture of it, Paschal says, she cried.

The children are suffering, too. Trent worries about money. Recently, at the grocery store, he told his mother not to buy milk because it cost $4. He begs his mother to get a house again, saying that he's old enough now to cut the grass.

"It's hard," Paschal says. "I think they see things very differently now. My son asked me how much money I have, and I told him not to worry about it. We had to give away our Lab and our bird dog (because it seemed unfair to keep them in such a small apartment). That killed my son. That tore him apart, big time."

In the new apartment, Paschal doesn't sleep well. After she goes to bed, she hears Trent scurry out of his bed to make sure all the doors are locked. Then Trent comes to her room and quietly tells his mother she can sleep now because everything is safe.

Last winter the average New England family, with an average size home, paying the average state-wide price, spent $430 a month to heat with oil. Compare that to $266 a month for electric heat, and $206 a month to heat with natural gas.

Renita Jablonski: Tomorrow, you can leave your lunch at home. Dunkin' Donuts and McDonald's will both be staging big giveaways. At Dunkin' Donuts, it's free iced coffee. McDonald's will hand out free Southern Style Chicken Sandwiches and Chicken Biscuits. Stacey Vanek-Smith explains why we're awash in freebies.

Stacey Vanek-Smith: Dunkin' Donuts plans to hand out millions of free iced coffees. Might be the perfect thing to wash down the chicken sandwiches McDonald's is giving away. With food costs on the rise and companies cutting back, why all the free stuff? It pays, says Advertising Age's Emily Bryson York.

Emily Bryson York: Because people are low on money, they're not eating out as much and looking to get value where it's available. So, I think these free offers do get them into the stores.

Earlier this year, McDonald's gave away 3 million McSkillet Breakfast Burritos. Same store sales jumped 8 percent. No surprise then that supermarkets are stepping up free samples. Bryson says freebies encourage consumers to try new things, and they also build brand loyalty.

Labels: Cool Gardening

Born in Mexico, Ms. Perez arrived here from Los Angeles a decade ago to put her five children — then mostly teenagers — beyond the reach of gangs, she said. She started the taxi service in 2001, making use of no-money-down financing to buy her first car, a used Buick Regal.

As Dalton filled with Latinos, her business expanded, earning her a $40,000 profit in 2004 and again the following year, she said.

She and her husband, Ricardo Torres, bought a four-bedroom house with a swimming pool, a huge living room, a washer-dryer and a kitchen with granite countertops. They paid $240,000, with no money down, she said.

The promotional mortgage payment of $1,700 a month was manageable, she said. But the taxi business dipped the following year. And by early 2007, their mortgage payment had jumped to $2,500, she said.

Last summer, with the taxi service losing money, Ms. Perez stopped making house payments. In January, she and her husband gave up their home to foreclosure, she said, joining a growing crowd. From January to March of this year, Dalton registered 111 foreclosure filings, nearly four times the number of the previous year, according to data from RealtyTrac.

Ms. Perez and her husband are now camping in the taxi company office. They do their laundry at a Laundromat, and cook with a hot plate, opening the door to release the smoke.

“I don’t know what’s going to happen in the future,” she said. “The only thing that’s left is to wait and see.”

Labels: Middle Class Crunch

Scott, 31, and Razije, 30, save about 22% of Scott's take-home pay of $54,000 a year. They have no credit card debt — just a 30-year mortgage on which they owe $136,000.

They have built up more than $145,000 in mutual funds, stocks and bank accounts. Once he retires, Scott will also benefit from a military pension, guaranteeing him monthly income for life.

What's dragging down their finances is the modest return they're getting on investments: They've pocketed a meager $2,000 profit in seven years on more than $100,000 invested in the stock market.

"I've heard that anything you can put in the market is better than nothing," Scott says. "But in the last seven years, I've seen a small return on my money. I wonder sometimes if the financial market has changed so much that old rules might not apply."

Labels: Money Stories

Labels: Funny Money, Gold, Recession Obsession

In today's housing market, a successful buyer must be able to respond to market opportunities, have stellar credit, keen market intelligence, and a hefty down payment. To judge your fitness to buy, answer the following six questions:

1. Is your debt-to-income ratio less than 30 percent?

2. Is your credit score higher than 680?

3. Is the local market price/rent ratio in balance?

4. Has the neighborhood generated a positive return on investment?

5. Are home inventories in the neighborhood low?

6. Is it cheaper to buy than rent?

"I just got some great news. They are going to allow me to consolidate my student loans and get my credit score back up to 720. In three years my credit should be cleared up enough that I could qualify to buy a house"