Do you hear that whizzing and whirring sound? It’s coming from my brain. The cogs and gears are spinning like mad, trying to find a little common sense in a recent legislative proposal from two odd political bedfellows, Democrat Barbara Mikulski of Delaware and Republican Kit Bond of Missouri.

The not-so-dynamic Senatorial duo are backing a “pro-auto” plan so incredibly bass-ackwards that it seems to completely fly in the face of all things logical.

I heard about it while driving my used automobile the other day. A local station was interviewing Bond, who was expressing his belief in the need to protect the U.S. auto industry. After all of the usual and overused cliches (think: “Main Street, USA”, for instance) Bond talked about how we should provide new car buyers with a tax rebate to reduce the real cost of purchasing vehicles made in Detroit. This would increase sales, thus helping the car manufacturers and reducing the risk of whatever madness might ensue if the Big 3 might actually be held accountable for their own mismanagement.

This is perhaps the silliest plan in the recent history of silly plans.

This little chunk of legislative insanity has somehow shifted the cosmic balance to the point where I, for the very first time ever, am actually agreeing with Michelle Malkin about something. You may not understand how bizarre that it unless you know me, but rest assured it’s downright freaky.

When you can get me and Malkin to concur that your plan is bad, it is most definitely Very Bad.

The portion of Malkin’s assessment with which I agree reads like this:

“Spending beyond our means is what got this country into trouble in this first place. This kind of temporary political gimmickry is going to exacerbate the problem. Encouraging people to take out $50,000 car loans before the end of the year when they should be saving their money instead?”

Bingo. We’re living through the aftermath of overspending and living too high on credit right now and Mikulski/Bond are pushing a plan that’s actually designed to persuade people like you and me to make horrible investment decisions.

New cars are probably the most notorious of all bad personal finance decisions. Your new car depreciates in value the second you turn the ignition key and its value continues to slide with every subsequent mile you drive. Cars even make Mint’s list of the “Eight Things You Should Not Buy New”.

Moneyweb sums up exactly why no one should buy a new car:

“Tony Twine, director and senior economist at Econometrix, describes the life cycle of a car: ‘During the first year, the value of the car decreases at a steep rate. For the next four years, the car depreciates at a more gentle, slower pace, with a further step down in value in the sixth year. Beyond this, the value of the rate of depreciation flattens out.’

Borrowing money to purchase a depreciating asset is the worst ‘investment’ you can make. Sages say: ‘Buy things that appreciate and pay for the use of the things that depreciate.’”

Yet Mikulski and Bond have somehow forged a bi-partisan love connection over the idea of encouraging their constituents to go out and make stupid purchases that will cause them eventual financial heartbreak in order to keep the Big 3 limping along. Making it even uglier is the fact that this “bad investment incentive” is targeted to working- and middle-class people (the proposed legislation doesn’t extend the rebate to those making in excess of $250,000 per year, the only people who might have enough cushion to justify new car buys).

Don’t get me wrong. I’m not happy that Detroit is in trouble and I certainly hope there’s some way for the automobile industry to stabilize in order to prevent the nasty repercussions that could come from any sort of collapse. However, I don’t like the idea of encouraging unnecessary and financially foolish purchases on the part of the same taxpayers who’ll probably end up footing the tax bill for an additional bailout package.

The whirring in my noggin continues.

Clearly, one of these things is true.  Tell me which one it is, please?

1.  The folks running the Big 3 automakers are completely tone deaf with respect to public relations.

2.  The folks running the Big 3 already know that Washington won’t bail them out no matter what happens.

3.  The folks running the Big 3 know that Washington will bail them out no matter what happens.

Based on what we’ve seen from Richard Wagoner, Alan Mulally and Robert Nardelli at Congressional hearings, there’s little doubt that one of those three options is the truth.  There’s no other logical explanation for their failure to generate one iota of compassion on the part of anyone for their fates.

Come Fly With Me…

You’ve probably seen the clips by now.  Detroit’s auto head honchos were quizzed about their travel arrangements for their DC visit.  In one of those cruel, shallow and absolutely hilarious acts of political show-offery, Rep. Brad Sherman took the CEOs to task:

“I’m going to ask the three executives here to raise their hand if they flew here commercial,” he said. All still at the witness table. “Second,” he continued, “I’m going ask you to raise your hand if you’re planning to sell your jet . . . and fly back commercial.” More stillness. “Let the record show no hands went up,” Sherman grandstanded.

Ouch.

Look, there are probably really good reasons why these guys don’t fly coach, right?  Okay, maybe not.  There are reasons, though.  Some are related to travel schedules and job demands.  Some are security related.  I’m not saying the Gang of Three needed to offer a spirited defense of travel by private Gulfstream, but their stone-faced silence certainly didn’t humanize them or help their cause.

Puttin’ on the Ritz…

The review of CEO travel itineraries was preceded by a memorable comment from Rep. Gary Ackerman who managed to superimpose a mental image of a fancy-pants dandy over the faces of Richard Wagoner, Alan Mulally and Robert Nardelli.  M. Ethan Ross recounts Ackerman’s dig and expresses the sentiments of those who undoubtedly nodded in agreement upon hearing it:

“This would be the same, as if someone appeared in a soup kitchen, wearing a tuxedo with a top hat.” This is a great quote, and so true, because it is another example of corporate greed while the name tag wearing employees have to suffer more.

The only way it could’ve been more effective is if he had mentioned a cane and a monocle.  The reaction from the CEOs?  It was a lot like an Iron Eyes Cody stare without the single tear.

We’re not Lee Iacocca…

Those with memories that predate cell phones and satellite dishes smaller than the side of an average house remember when a little company named Chrysler stared into the abyss in the 80s.  Chrysler went to Washington in search of a loan.  The incredibly popular boss at Chrysler, Lee Iacocca, cemented his image as a trustworthy fella and a good credit risk for Uncle Sam by agreeing to take a $1 salary as part of the deal.  He was all about saving jobs, not feathering his own nest.

Apparently, some of the legislators remember those days, too.  That led to a great little discussion with Wagoner, Mulally and Nardelli regarding their willingness to take a buck instead of the tens of millions they’re currently getting to sit at the helm of sinking ships.

The exchange was an awesome example of how to make yourself look like a responsibility-denying, self-interested, handout-demanding fraud.  Mr. Mullaly, for instance, told Rep. Roskam that he’s convinced that his salary is just fine where it is:

Roskam:  OK.  Are you willing to go down to the dollar?
MULALLY:  I think it’s — I understand your point about the symbol and, clearly, the intent of what you are asking.  But I think, not just for me, but we were trying to field a skilled and motivated team, also.  And it’s just so important that, as we do this plan, that we have the team that we need.
So I understand the intent, but I think where we are is OK.
Roskam:  OK.  And just so I’m clear.  I’m in the asking about the team.  I’m just asking about you.
MULALLY:  I understand.
Roskam:  And the answer is no?
MULALLY:  I think I’m OK where I am.

If these guys have business skills on par with their public relations skills, it’s no wonder they’re on their way to a mighty crash.

So, what’s really going on here.  Are these guys tone deaf or do they simply know that these hearings are a dog and pony show that won’t really influence any legislative action?

Investing is sexy.  It represents a chance to put your money on the fast track to growth. It’s the way people make fortunes.  We like to think about investing, looking for high-yield strategies, exploring “systems” and pursuing every possible “edge” we can.

Saving is boring. It involves little more than hiding some extra cash into an FDIC-insured mattress.  It’s handy for rainy days and unanticipated expenses, but it won’t make you rich.  We don’t spend a great deal of time thinking about savings.

We might want to change our thinking a little bit.

According to a Putnam Investments study quoted by Walter Updegrave from Money/CNN, “[S]aving is just as important [as investment] for building wealth, if not more so. We can’t be sure of the size of the investment gains we’ll earn, and we don’t have nearly as much control over them as we used to think. But we have much more control over how much we save.”

Saving has a great deal of power and it’s something we shouldn’t overlook.  Increasing savings decreases the need for aggressive investment, which reduces the risk of substantial setbacks.  If you don’t have a nest egg, you need to invest more aggressively in order to meet your long-term financial goals.  Those aggressive investments, naturally, bring with them a higher risk than more conservative alternatives.

Additionally, a nice pile of saved cash is a fantastic cushion against hard falls in the market.  Who is suffering more right now, in light of the market meltdown, the person who was completely “in the market” or the person who balanced that kind of investment against substantial savings?  The answer is obvious.

Those might seem like “common sense” observations, but they actually contradict the most popular outlook on the savings vs. investment argument.  Many experts believe in a “three year rule”.  They argue that it makes sense to save your money if you think you will need it to meet an expense within three years.  Otherwise, they argue, the money should be invested.  The Investment FAQ sums up that perspective in “Subject: Financial Planning – Saving versus Investing”.

The same logic underlying the “three year rule” is flushed out by Financial Web.  They argue that shorter-term anticipated expenditures justify savings but that wealth creation is primarily a matter of investing.

Updegrave seems to be taking notice of something that others often overlook.  Savings isn’t merely a means of reaching shorter-term goals, it actually has an impact on long-range financial well-being, too.

If you’ve been avoiding saving because it seems to have such limited potential compared to investment strategies, you might want to consider the interplay between the two a little more closely.  Smart savings can serve as a launching pad for a lower-risk investment approach that may actually provide better long-term returns than if you sunk your cash completely in the market.

American Century Investments and others, however, will be quick to remind us that we need to evaluate our savings options carefully.  By their very nature, savings returns tend to be low and it’s possible to actually lose money while saving due to a combination of inflation and taxes.

The bottom line: Saving has a role in your personal financial plan.  Savings provide liquid cash for meeting unanticipated expenses.  Saving is the best way to meet substantial shorter-term needs.  Socking your cash away can also hedge against poor investment performance while simultaneously providing a solid foundation that will allow you to pursue a less risky overall investment strategy while still meeting your long-term goals.

Investment is still undoubtedly the sexier option, but it doesn’t make sense to ignore the potential real value of savings.

Most of us would think of feminist pioneer Gloria Steinem and womanizing ’30s movie idol Errol Flynn as polar opposites.  While one dedicated her life to pursuit of women’s rights and the defeat of sexism, the other spent every spare moment drinking, carousing and pursuing women like trophies.

I think it’s safe to say that there’s a paucity of common ground between Steinem and Flynn.  There is one place, however, where their thoughts seem to have converged–money.

When you see people from opposite sides of the spectrum agree on something, it’s probably worth noting.  Odds are that the shared position is hard to argue against.  With that in mind, let’s look at a few personal finance-related comments from these two opposites.

Gloria Steinem said, “We can tell our values by looking at our checkbook stubs.”

Errol Flynn said, “My problem lies in reconciling my gross habits with my net income.”

Both agreed our habits and principles have a substantial impact on how we save and manage our resources.  That’s a sentiment we’ve touched upon before.  I’ve mentioned the fact that the psychological component of money management can be just as important as proper number-crunching.  I guess that lines me up with Flynn and Steinem, doesn’t it?

Others, of course, would concur.  Steven Sashen, for instance, has written an interesting perspective on how our beliefs influence the way we relate to dollars and cents.  Sashen maintains that our beliefs lead “to all sorts of financial stress and difficulty” and that one of the keys to resolving our personal finance issues is to address that underlying psychology and our belief systems.

While some advocate for a reconsideration of perspectives based in religion, others believe that an introspective evaluation of our personal beliefs and the histories that have shaped them can point us in the right direction.  Regardless of the proposed methods, it seems like everyone who’s considered the role of habit and personal psychology has reached the same conclusion as Steinem and Flynn. Ann Field provides a great perspective in an article that appeared in the industry magazine, Rep:

Most reps view themselves as some combination of stockpicker, number cruncher, relationship builder and financial advisor. But it’s increasingly helpful to throw a dash of psychological expertise into the mix.

This is not to say a rep’s job should be talking to clients about their relationships with their mothers. But for many people — financial advisory clients included — money is about a lot more than just dollars and cents or the vagaries of the market. It’s a symbol of love, self-esteem, power — you name it. The symbolism runs deep and is shaped by all sorts of complex childhood forces that exert a powerful hold over clients’ psyches.

As a result, many clients have highly irrational approaches to money. They can’t save. They procrastinate. They overspend. They fear even the most conservative investments, or want to risk it all every day.

So, does this mean that we should all start thumbing through the Yellow Pages in search of a good psychiatrist who moonlights as a financial analyst?  Probably not.

What it does mean is that we need to approach financial decisions with a clear recognition of our biases and tendencies–and their underlying motivations.  Awareness gives us the opportunity to hold in check those aspects of our personality that “naturally” work against smart money management.

It also means that we need to understand that, for some of us, getting a grip on our personal finances will require an ongoing battle against mindsets that have been in place for a long time.  When we really comprehend that, it gives us a much better idea of what we need to do to structure a system that will really work for us.

As Steinem/Flynn might say, “We need to look at our checkbook stubs to see which of our gross habits we’re valuing to the detriment of our net income”.

One of the most interesting aspects of the souring stock market has been the behavior of investors during the last half-hour of every trading day. Days that initially appear relatively stable have been going absolutely wacky as the last grains of sand find their way through the hourglass. Yo-you sessions continue to bounce and bump as the clock expires.

You can’t count on a lot with respect to the markets right now, but there is one relatively sure bet: The last half hour is going to wild.

Headline: Stocks Fold in Last Half-Hour of Trading

Headline: US Stocks Rebound, Dow Jones Flies in Last Half-Hour

Here’s the first few lines from a recent post at Weekly Technical Commentary:

A reversal, then another reversal, and one final reversal in the last half-hour. If you can’t handle this rollercoaster and adapt to the changing environment, then you shouldn’t be trading

Different days, different outcomes, same story. The end of the day is the day.

Some people are arguing that the last half-hour presents a unique buying opportunity. Warren Bevan and others in the world of day-trading see these rapid shifts as a chance to make big money with fast moves arguing, “[i]t’s a day trader’s dream here and quite easy to predict. When an extreme reading is hit, expect it to reverse hard and fast. If your trade is not profitable, just wait a half hour and it very well may be.” I’m not advocating these approaches, by the way. I bring them up to evidence that the tendency toward late swings is so pronounced that people are now actually hinging investment strategies on it.

I can’t imagine that anyone who’s been paying attention has failed to notice the way things are moving at the close of every day. What’s interesting is that we all see it but that no one really talks too much about why it’s happening. You can toss out a label like “volatile market” as a descriptor, but that really doesn’t explain the causes underlying the end-of-the-day movement.

So, what’s driving these big, fast, strong moves at the buzzer? I’m sure there are many different contributing factors, but I read an article today that caught my attention. Harold S. Bradley, who is the CIO at Kauffman Industries and who blogs regularly for the Kansas City Star, provides some nifty insight. His post, “I Want My Money Back… Now!” argues that hedge funds are one of the reasons we’re witnessing these last-minute flips and flops.

Here’s his position, in a nutshell: It’s obvious that those wild rides are happening for reasons that aren’t directly tied to any real underlying values. One reason involves hedge funds needing to meet margin calls by the end of the year.

Before the onset of the recent “crisis” in the market, hedge funds were able to take out loans for as much as 10x their pledged collateral. They were wielding serious leverage. Now, credit is tight and no one is particularly excited about handing these same folks big stacks of cash. Meanwhile, margin calls are coming due.

So, what do these funds do to meet their obligations? They sell. Bradley summarizes:

So they sell the most liquid assets they own to meet margin calls. Hedge funds typically own a lot of Russell 2000 stocks.

The Russell 2000 index traded down 5% in the last 30 minutes. Today is also the deadline for institutions to tell hedge funds that they, too, want their money back on December 30. Almost all hedge funds require at least 45 days advance notice of intentions to redeem money. It’s not just the lenders who want their money back. That would explain a lot about the last half hour’s stampede for the exits.

I think that’s a solid part of an explanation for last-minute nosedives. It doesn’t do quite as much to explain why some days feature monumental late rallies, though. Herd mentality is often cited as the cause of these big moves, but something must be starting the stampede. If you have any theories as to why the last 30 minutes of the day is becoming the day, please leave them in the comments. I would love to see some other perspectives.

In the meantime, I’m watching in shock, just like Barry Ritholtz from The Big Picture says:

Here’s where merely thinking about numbers helps: You have to have previously thought, “Gee, if I ever see a 10 percent move down, intraday, I’m going to be buying the hell out of that.” But if you haven’t gone through that thought process beforehand, when the opportunity confronts you, it’s like looking at a car wreck. Part of you says, “Gee, I ought to go over and help those people” but the spectator part of you is just thinking, “Man, look at that thing burn.”

Man, look at that thing burn.

Hi Everyone,

Welcome again to our weekly carnival round up where you’ll find the best Personal Finance posts in the blogosphere.  Enjoy!

- Carnival of Personal Finance #177 was hosted by The Sun’s Financial Diary and you can find our post entitled McDonalds Monopoly and A Cash Windfall listed there.

- Festival of Frugality #150 (The Election Day Edition) was hosted by Bargain Briana and you can find our post entitled My Favorite 3 Cheap Places To Eat In Baton Rouge listed there.

- Carnival of Money Stories #83 (The Election Day Edition) was hosted by SimplyForties and you can find our post entitled IRS Tax Liens: What Legal Issues Should Be Considered When Buying Your First Home? listed there.

- Money Hacks Carnival #37 (The Wonders of the World Edition) was hosted by Living Almost Large and you can find our post entitled Olive Garden Deals: Dining at Olive Garden Is Downright Sinful listed there.

You might not believe that the next Great Depression is right around the corner, but you’d have to be crazy not to admit that a recession might be looming.  Even if a downturn ends up being more mild than some folks project, it makes sense to prepare for the change of circumstances.

Last time, we covered three recession preparation strategies–avoidance of new fixed expenses, paying down debt, and reconsidering personal priorities.  Today, we’re going to cover three other things you can do to prepare yourself for a recession.

Income Diversification/Alteration. A contracting economy inevitably results in lower wages and increased job loss numbers.  You may not be able to save your employer’s company singlehandedly, but you are capable of diversifying your household income to prevent massive shocks to the system if something goes haywire with your employment situation.  That might mean an extra part-time job, for instance.

This is also a good time to take a very serious look at your job security and likely future with your current employer.  You don’t necessarily want to walk out on a job when the economy is tight, but you do need to assess your company’s vulnerability and to prepare for possible hard times.  Like The Dollar Stretcher notes:

“If you’re honest with yourself, it’s not that difficult to recognize job troubles ahead. Is your employer in trouble? Is the whole industry suffering? Could your job be done by someone else for much lower pay? Either within the U.S. or without? Does technology threaten your job? If you can answer ‘yes’ to any of those questions, you’d be wise to consider what your life would be like without your present job.”

Build the Emergency Fund. You need to have a sufficient reserve of readily available cash at your disposal.  It’s that simple.  Every financial adviser worth his or her weight in beans and rice will tell you that an emergency fund is essential to good household financial management.  That’s even more true with a potential recession on the horizon.  The importance of having a pool of cash from which you can draw in the case of unexpected negative situations cannot be overstated.

Lower “Fixed” Expenses. The word “fixed” is in parentheses for a reason.  We often consider certain expenses to be fixed even when we actually have a modicum of control over them.  Look at your regular monthly expenses and consider whether you might have some way of reducing them.  Utilities are a perfect example.  You might have a certain sum penciled into your budget to cover those utility payments, but you actually have a lot of influence on what your bill will actually show at the end of any given month.

A Reuter’s personal finance article noted:

“Most people could significantly improve their household budgets if they limited the amount they paid to the cable, water, electric, gas and telecom companies. Wear sweaters and turn down the thermostat. Use your cell phone all the time and give up your landline. Say goodbye to HMO. Squeeze those monthly expenses now; you can always add more later.”

Return to the Basic Formula for Guidance. If you want to save money or if you want to spend more money in one particular area of your life, you have two choices.  You can either increase your income or decrease your spending.  That’s the basic formula–make more or spend less.  Recession preparation is a matter of decreasing expenses while increasing savings/investment.

There’s only so much you can realistically expect to do in a recessive environment with respect to income generation.  Diversifying your income sources can give you some insulation against shock, but you can’t expect it to skyrocket your earnings.  You also can’t count on promotions and pay raises from your employer during a recession.  That means the focus needs to be on spending less.

Some of the tips we’ve covered address savings strategies, but they only scratch the surface.  If you really want to maximize your recession preparation, this is the time when you trim spending to a bare minimum.

We’ve now covered seven different things you can do to protect yourself from a recession and they’re only the tip of the iceberg.  Anything you can do to improve your general financial state is a potential anti-recession hedge.  And that’s what’s great about getting ready for the worst.  If the worst doesn’t happen, you’re still in much better shape than you were before you started preparing.

As the holiday season nears, my mood has turned artistic.  I had a great idea for a family project.  I decided that it would be a nice idea to tap into our imaginative side by making a Thanksgiving door wreath.  So last night at dinner, I pitched the idea.  And to my dismay, I only got one taker… my daughter.  Apparently, my fourteen year old soon is “too cool” to make a wreath with his mother.  And the DH claims that his creative juices are tapped so as much as he’d love to help out (his feeble attempt to soften to rejection)… he is passing on this one…

I think they were really trying to say that wreath making is a little to frilly for the guys… but it is ok.  My feelings are not hurt.  I won’t push the issue.  I’ll let them be free to more manly things like scratch, belch and watch the Hornets vs. the Rockets… while I collaborate with a six year old to make the best door wreath on this side of town.

So this morning my daughter and I sat down to make our wreath.  But we hit a little stumbling block… I know nothing about making a wreath and the closest she’s come to making one was a paper cut out in school.

Needless to say, we’ve got a bit of a learning curve to overcome.  And we need to overcome it really fast.  Thanksgiving is only two weeks away and we have a lot to do. One – we need to get a quick lesson in wreath making 101. Two – we have to plan a design for our wreath. Three – we have to get the materials. Four – we have to put it all together.

Though we have a lot to do… I do not feel pressured.  We move fast. A quick 4 minute tutorial on wreath making… Goal one accomplished!  Thanks to Better Homes and Gardens, we’ve got our design idea… Goal two accomplished!

Now on to goal three… gathering the supplies.  Rated by Vickie as one of the best arts and crafts stores around, A.C. Moore is a wreath maker’s dream.  I also like A. C. Moore.  I happened upon one a few years ago when I was on vacation in Florida.  The store is huge and has everything I need to complete my artsy projects.  But… there are none in my area.  However, I can order all of my supplies from A.C. Moore online.  And right now… they have some great deals:

- Free shipping on orders $35 or more, now through December 30^th

- Sign up for A.C. Moore emails and be entered into a weekly drawing for  one of four $250 gift cards, sweepstakes expires on December 15^th

- Be the first to find out about A.C. Moore specials on this forum

- Look here to find weekly coupons and specials at your local A.C. Moore location

- Sign up for the A.C. Moore rewards card and earn points that can be redeemed for gift certificates

- Click here for printable A.C. Moore coupons

- Enter the Naturally Baby contest to win a $300 A.C. Moore gift certificate, contest ends December 1^st

- Sign your kids up for the Birthday Club and they will get a $5 gift certificate on their birthday

I’m not necessarily convinced that we’re on the precipice of a massive and prolonged economic downturn.  I don’t think I’m going to be wearing a barrel for clothing and selling apples for nickels to guys in the soup line in a few months.  We might be walking around in the first part of a recession, but I’m betting against Great Depression v. 2.0.

At the same time, it would take a brand of optimism bordering on insanity to pretend like everything is AOK.  There are good reasons not to stay up all night worrying about the economy, but there are just as many reasons to spend a little time thinking about the possible repercussions of a recession on your life.

So, it seems like a good time to go over a few things you can do to insulate yourself from the impacts of an economic recession.  It never hurts to be prepared and if we’re lucky enough to avoid a full-bore recession, you’ll still be money ahead after following these recommendations.  We’re going to start going over core recession preparation with three basics today.  We’ll follow up with a few others tomorrow.

Fixed Expense Avoidance. Spending money on one-off propositions is one thing, locking yourself into recurring fixed expenses is another.  You can manage those isolated expenditures with discipline and perspective or out of sheer necessity if things get ugly.  As the good folks at Wisebread have said, however, “high fixed expenses will wreck your finances very quickly if the income stream dries up. This means reduce debt and avoid new obligations (fitness center memberships, burglar alarm contracts, etc.).”

Debt Reduction. You don’t just want to avoid new obligations.  You also want to reduce your current obligations in case you begin to lose income as a result of a recession.  Make every effort possible to pay down debts.  The Dollar Stretcher argues that “It’s easier to survive a job loss if you don’t have a lot of bills each month.”  I’d go a step further and remind you that it’s easier to deal with any situation when you’re tied to fewer bills.

Reconsider Priorities. If there’s an upside to a possible recession, it might be its power to force us to rethink our lifestyles and priorities.  Let’s be honest, most of us are fully grounded in the consumer culture mindset.  We want things and we want a lot of them.  That perspective is relatively painless when the economy is cruising and the cash is pouring into our pockets, but it’s nothing short of untenable when things take a nosedive.  Our spending habits are rooted in our psychology and changing our perspectives on what we value can radically alter our financial futures.

Additionally, reconsidering our motivations can actually improve the overall quality of our lives.  It might be painless to live with a consumption-based concept of happiness at some times, but it’s never really that fulfilling.  A recent Suite101 article on recession preparation summed this point up nicely:

“What really matters to you and your family? And is your current income really necessary in order for you all to enjoy life? The looming recession is a great opportunity to really think about your priorities in life. Perhaps you would prefer to spend more time together as a family? Or spending more time enjoying the natural world could be as fun as movies and restaurant meals?”

These three ideas–avoiding new fixed expenses, buying down debt and refocusing priorities–are all great parts of a recession preparation plan.  They aren’t the only things you can do, however.  Tomorrow, we’ll cover a few more options for anyone who wants to be ready for a prolonged economic downturn.

When I was a kid, I used to walk to the public library once a week. I’d pick out a few new books and return or renew the checkout of the ones I grabbed the week before. Occasionally, I’d blow off a few weeks and would end up owing that small town library a little change in fines.

I hated paying the fines. It wasn’t a matter of money. Digging up a few nickels wasn’t that tough. I hated paying the fines because that meant I had to see a particular librarian. She was shaped like Shrek, wore her hair in a massive beehive, and breathed like a horror movie serial killer. There were issues with slobber, too.

Well, now I’m all grown up and don’t live anywhere near that particular library. The creepy librarian of my past has been replaced by a collection of teenaged volunteers who look like they’re on break from an Up With People tour. There’s nothing scary about our current public library. It’s well-lit, reasonably organized and absolutely fantastic for kids. I like our public library.

I also like its impact on our finances. My wife is a voracious reader and the public library undoubtedly saves us several hundred dollars in book expenditures every year (though Borders still gets a massive chunk of change from us) between her and our book-loving little girl. You can grab a movie at the library, too. And it’s all free.

That’s a personal finance hint, by the way. The public library offers things you would otherwise buy for absolutely nothing. Make use of it.

If you would’ve asked me two weeks ago, I would’ve had to really struggle to come up with something negative to say about our library. That all changed when we received the letter.

It was a mystery letter from a mystery company with one of those completely unrevealing names that don’t give you any clue as to what’s actually inside. It was a collection notice.

What account had we overlooked? What seemingly invisible bill had we failed to pay for so long that it went to collections?

Library fines. We owe the library a whopping $37. And they sent it to collections.

They see at least one of us every week. They continue to let us check things out and they usually don’t even bother to ask about paying a fine. They are so darn pleasant and accommodating that we don’t think they’ve ever mentioned this particular fine. It’s over a year old. The $37 is spread over three weeks that missed their return date while we were on a vacation.

And they sent it to collections without even making a “hey, give me $37, okay?” phone call.

So, now we have a collection agency bugging us for $37. We have a nasty gray-if-not-black mark potentially sneaking its way onto our credit reports. Whatever happened to paying the creepy librarian a few nickels and moving on with your life, huh?

Well, after griping and complaining about libraries using collection agencies for small fines (sure, they have a right to do it, but I don’t think it’s the greatest PR move or the most efficient way of bringing in the money), I did a little research.

I’ve discovered that my public library isn’t the only joint who’s willing to stick the dogs of war on anyone who’s late returning The Dogs of War. This is a growing trend in the library biz, apparently.

The moral to this tale comes in two parts.

First, you can use libraries to your personal financial advantage and you should do so when possible. However, you need to realize that the repercussions of sloppy book-borrowing can come back to bite you in the FICO later if you aren’t careful. Don’t ring up fines or you can undo some of the gains you make by using a lending library in the first place. If you’re really bad about keeping track of your books, take a look at reminder systems like “Elf” or something similar.

Second, if you have a creepy mouth-breathing librarian who smells vaguely like mothballs and vinegar who demands fourteen cents from you when you keep a book for an extra week, stop whining and count yourself lucky.