One economic theme that has started to creep into the news lately has to do with deflation, which is a general lowering of prices. Certainly nobody’s complaining about the decrease in gas prices, myself include, so it seems like a good thing overall, right?

Unfortunately, deflation, while not as bad as inflation coupled with a shrinking economy (aka “stagflation”), is not a sign of happy times in the short term. Here’s an explanation that sums up the problems with deflation perfectly from Canada.com:

“Deflation, like runaway inflation, can be self-perpetuating insofar as consumers defer expenditures in expectation of further discounting and this delay itself reinforces the discounting trend by putting downward pressure on domestic demand,” the Merrill Lynch economist said.

“Likewise, firms that are faced with deflation to their top lines are typically forced to cut costs to protect their profit margins and in so doing, trigger a second-round negative income effect on their workers and suppliers, which also ends up exacerbating the trend towards lower pricing.”

So, people spend less because they think things will be more “on sale” later. This is why we constantly see stories about consumer spending in the news, why President Bush told us all to go shopping after 9/11, and why the retail outlook for this upcoming holiday season has businesses and economists very worried. Without money in constant circulation, businesses have to cut back on their production. When businesses have to cut back, people get laid off. Further, new offices and factories don’t get built, which impacts companies in the construction industry, sales tax and other tax revenue decreases, which impacts social services and infrastructure maintenance (and jobs in those areas), and the whole mess just keeps spiraling down the toilet.

Unfortunately, this is a painful period that we have to go through in order to recover. Just as wildfires can be brutally destructive but ultimately healthy for a forest’s ecosystem, we can’t just keep spending and spending just to maintain an economic “boom.” Indeed, that’s what we’ve done for the last several years and we’re seeing the results crash down around us. In the meantime, you may at least see some reduction in your short term interest rate obligations (home equity lines, for example), so take advantage while you can and get some of those debts paid off.

It seems that even the rich are being impacted by this blasted recession. Kudos to the people at Prince and Associates for thinking of this particular survey to conduct, because it amused me quite a bit. From the WSJ Wealth Report blog:

According to a new survey by Prince & Assoc., more than 80% of multimillionaires who had extra-marital lovers planned to cut back on their gifts and allowances. Still, only 12% of the multimillionaire cheaters said they plan to give up on their lovers altogether for financial reasons.

12%! Just think of all of those poor lovers who will be out on the streetcorners now with no money, no job, and no more sugar daddies and mommies to take care of them. I can’t help but think of Megan Hauserman, who will be particularly upset if she isn’t able to fulfill her dream of being a kept woman (if you don’t know who she is, consider yourself blessedly unaffected by garbage reality TV).

Yesterday I wrote a post about the cost of some domestic coach airfares topping $1,000 but stated that for my family, a round trip flight from Denver to Houston over the week of Christmas was much less, about $450 per person.

Just for fun, I thought I’d go see how many extra charges I could find that would bump up my flight cost if I didn’t plan ahead wisely, so …

I repriced today for just one person and found an itinerary at reasonable times during the day for $375.99. That’s the starting point we’ll use. That’s just the airfare itself, though, so let’s look at some other costs … some of these are specific to certain airlines so you probably wouldn’t have them all apply on one trip, but it’s a nice lesson in looking at the fine print and being prepared. I’m going to use the maximum price for every option except parking - I’m a bit of a brat like that.

First of all, for my illustration, I’m using Expedia’s website. In the terms you agree to, there’s the following:

• Please note that the most restrictive set of rules applies to your entire itinerary.
• Denver, CO (DEN-All Airports) to Houston, TX (HOU-All Airports)
  Tickets are nonrefundable. A fee of $150.00 per ticket will be charged for itinerary changes after the tickets are issued, provided that the booking rules were followed.
• Denver, CO (DEN-All Airports) to Houston, TX (HOU-All Airports)
  A fee of $150.00 per ticket will be charged for itinerary changes after the tickets are issued, provided that the booking rules were followed.
• In addition to any penalties imposed by the airline, a processing fee of up to $30.00 per ticket will be charged by Expedia for any changes you make to the flights in this itinerary.
• Tickets are nontransferable and name changes are not allowed.
• This price includes a nonrefundable $7.00 booking fee.
• Please read important information regarding airline liability limitations.
• Prices do not include baggage fees or other fees charged directly by the airline.
• Read an overview of all the rules and restrictions applicable to this fare.
• Read the complete penalty rules for changes and cancellations applicable to this fare.

So, assuming that I don’t change my itinerary, I won’t have to worry about the $150 fee. I will have the $7 booking fee, but that’s rolled into the taxes and fees of $23.51 that Expedia tacks onto their fare, raising the final amount to them $399.50.

If I had gone directly to United to book the entire flight, I would have had to pay a $25 fee to talk to a live person if I couldn’t get my itinerary booked correctly online (I won’t count that in my final tally for this illustration but wanted to include it because it’s ridiculous).

The itinerary I chose has me on a United flight going to Houston and Continental coming back. I left the link for the baggage and other fees intact in the list above so you could go check out their handy dandy table, but to summarize, let’s assume I will have two bags to check both ways and I didn’t remember to bring anything to eat or drink on the plane. On the way out on United, I will be charged $15 for my first bag, $25 for the second bag of gifts to give, and up to $9 for a beverage and snack. Returning on Continental, I’d have $15 for my first bag, $25 for the second bag full of gifties coming home, and no fees for snacks and beverages (but no guarantee that there will be anything to eat either, I suppose - it’s really not a very long flight). If my bags are oversized or too heavy, I would have a fee of up to $175 going down to Houston and $150 coming back. United does offer a 20% discount if you pay for your first bag fee online, but that’s not an option through Expedia so it doesn’t count.

Now, I’m a tall girl, so airline seats are usually pretty cramped for me. On a Continental flight this summer I was really pleased with the leg room but usually I’m pretty sure in the knees by the end of a flight, especially if the person in front of me needs that two inches of recline for a nap (go here for a hilarious Ellen Degeneres skit where she talks about this - it’s about two and a half minutes in). United offers “preferred seating” with more leg room, probably exit rows and bulkheads, for up to $109 per seat. Continental doesn’t have extra fees for preferred seating.

If I wanted to bring my cat, I’d need to add $175 for the United leg and $125 for the return on Continental. I must really like my cat.

Oops - I almost forgot about parking. I chose a 9 day visit because I really like my parents. The cheap lots for Denver International Airport, located somewhere in the general vicinity of Wichita, are $5 per day, so that’s $45 altogether.

If I had chosen to fly on Jet Blue, I would also be charged $7 if I wanted a pillow and a blanket - I won’t count that for this example, just another point to be made.

OK! So, me and my cat Rocky are heading to Houston for a little over a week and bringing my gifts made of superheavy lead with us, I desperately need extra legroom because I had knee surgery this summer and am not quite healed up yet, and I have to buy food on the plane because I forgot to bring any. Adding up all of the above fees, I have successfully taken my $399.50 airfare to a whopping $1,267.50 - for one person! In coach! If I for some reason have to change my itinerary on both legs, I can add over $350 to that cost.

Of course, you aren’t going to do that, but knowing about all of the fees that you COULD incur is helpful.

Tips:

• If you’re going for a longish period of time, see if a friend can take you to the airport and pick you up.
• Ship whatever you can to avoid baggage fees. Even if you’re shipping something very heavy both ways, it’s probably not going to cost you as much as taking it on the airplane.
• Leave the pets at home and ask a neighbor to check in on them or find other accommodations. Boarding isn’t cheap, but I’ve heard airplane rides aren’t particularly pleasant for animals anyway. At least go read this and consider whether it’s wise to bring your animal(s).
• From an old post:

I wouldn’t mind at all bringing my own beverages except that the TSA still considers that to be a terrorist act so I can’t unless I put them in three ounce containers and then in a quart size ziploc, which apparently renders all dangerous liquids completely harmless. If you travel quite a bit, having only two options is no good - either buying ridiculously overpriced water in the terminal or buying ridiculously overpriced water on the plane. Bring an empty water bottle and fill it up in a fountain instead. There are water bottles with filters, if that’s important to you. Look for them in health food stores, sporting goods stores, or online.

• Of course, bring snacks. You’ll like what you bring better than whatever they’re going to have on the plane anyway.
• Dress in layers or at least bring a light jacket in case you get chilly.
• If you need extra leg room, pay attention to which airline you choose. As I mentioned, my experience with Continental was excellent as far as leg room.
• Don’t wait until the last minute to book - you’ll need at least three weeks advance purchase to get lower prices, but those are for nonrefundable tickets so …
• Make sure you have pretty solid itinerary plans BEFORE you book to minimize the chance of having to alter your tickets.

I’m not an frequent traveler so I’m sure I’m missing some tips - feel free to add a comment if you have a good idea!

A friend told me about a show he watched last night called Half Ton Dad. It is a documentary about a man named Kenneth Brumley and the lengths he went to in order to lose weight and regain his life. I haven’t seen the show (no cable) but apparently after undergoing surgery to remove over 200 pounds of fatty tumors and then gastric bypass surgery, he is now down to a  little over 500 pounds and can stand on his own for a few minutes at a time. That’s fantastic and I wish him the best.

So how did he get so large? By eating too much, of course. His case is obviously extreme, but just to give you an idea, he ate 30,000 calories per day. According to the McDonalds nutrition chart, and with a quick note that I’m not picking on McDonalds but am just using them as a familiar reference, a Big Mac, large fries and large regular Coke is about 1,350 calories and 54 grams of fat. He was eating the equivalent of a little over twenty-two of those meals per day, on average.

Seriously, sit back and ponder that for a moment. 22 Big Macs, 22 large fries, and 22 32-ounce sodas per day. It’s mind boggling.

What’s even more mind boggling is how much money it must cost to feed someone 30,000 calories per day, and why the people around him continued to kill him by bring him this much food. Not to sound cold here, but he couldn’t walk so his food intake was dictated by what others would bring to him. It’s not like he could get up and get his own burger if his family chose to only bring him salad …

… but I digress.

Back to the topic at hand, there is a KFC commercial currently in rotation that mocks anyone who would get a puny little burger and fries combo because their new box combo, branded by Guitar Hero, is bigger and manlier.

From the a friendly blogger in Michigan (I’ll include his video at the bottom of this post - thank goodness he went and bought it because I never will!), here’s what you get in your Guitar Hero fully loaded box meal, which will run you about $8:

• 1 Snacker (mini sandwich)
• 1 piece chicken (leg or thigh, Original Recipe or Extra Crispy)
• 2 Crispy Strips
• 2 sides
• 1 biscuit
• 32-ounce drink in flimsy “collector” cup

Alrighty.

According to his site, this meal has about 1,200 calories, which actually makes it a more slenderizing choice than a Big Mac, large fries and a Coke. There are, however, quite a variety of choices to be made with this meal. The only fairly consistent calorie numbers come with the Snacker sandwich, Crispy Strips and biscuit. If I put together a meal with a Snacker, 1 Extra Crispy thigh, 2 Crispy Strips, Baked Beans, Coleslaw, 1 biscuit and a 32 ounce regular Pepsi, I can easily plump that calorie count up to about 1,800 calories and 73 grams of fat.

Since this meal is aimed at young males, I found a calculator that would calculate the average calorie needs of a 6′0″ tall, 200 pound, lightly active 20 year old male. The calculator popped out that to maintain that weight, my fictional young man would need about 2,800 calories per day, including 95 grams of fat. One of these meals would provide about 65% of caloric needs for the day, and 77% of his fat. In other words, he’s theoretically OK if he eats this meal every day, depending on how the rest of his daily calorie and fat content plays out.

Of course, weight and nutrition is not all about calories and fat content. Besides the cabbage in the slaw I chose for him and a piece of token lettuce on the Snacker sandwich, there’s no vegetables in this meal, and no fruit at all. I can’t imagine he would be getting a decent amount of vitamins and minerals either, and just looking at the foods in that list makes me tired - eating all of it at one sitting would probably require a nap afterwards, don’t you think?

So, while I wouldn’t personally choose to pay $8 for this meal, it’s certainly not a killer as an occasional expenditure. If you want to splurge and KFC is your thing, I guess this is a great way to get a wide variety of treats in one box - just don’t make it a daily habit.

KFC Guitar Hero Fully Loaded Box Meal unboxed from Tim Agne on Vimeo

I was a little shocked when I read recently that domestic coach airfares around the holidays are topping $1000 in relatively large numbers. From USA Today:

According to Sabre Airline Solutions’ study of hundreds of thousands of tickets bought through September for Thanksgiving-period travel, 3.8% of round-trip tickets that consumers bought cost $1,000 or more — nearly double last year’s percentage. Another 5.2% of tickets purchased cost at least $900 round trip — also nearly double last year’s share, the study shows.

Granted, 3.8% and 5.2% of total ticket sales is not a huge number, but when you see that it’s double what it was last year, it’s a pretty impressive change - especially considering the economy right now. That’s some motivated travelers, for sure.

Let me just get this little shout-out in here - Mom and Dad, I love you, but there’s no way I’d spend $5,000 to fly us down to Texas to see you … but we’re looking forward to you coming up here next month!

Of course, everyone’s situation is different and we wouldn’t actually pay $1,000 for a round trip ticket from Denver to Houston - if our families weren’t connected by two decent sized hub airports, we’d likely be bumping that number, but according to Expedia, we could do a round trip ticket arriving in Houston on December 20th and leaving on December 28th for about $450 per person. That’s before costs like baggage check (which we wouldn’t do - we ship our clothes when visiting family because it’s less expensive and makes airport navigation simpler), snackage and parking. Once we added up the incidental expenses, we’d probably be looking at about $2,500 for airfare this year.

One alternative would be to rent a minivan, which we’ve done in the past, but over the holidays it probably wouldn’t save us much money - $1,400 or so for the same time period, plus one hotel overnight each way, gasoline, plus higher costs when it came to meals on the road. Sure, we pack stuff to bring with us but that only gets you so far into a 16 hour drive.

We could just drive our car, but it has 108,000 miles on it and I’m not sure I would want to put that many miles on it … so that’s really not an option.

What are your plans? If your family is far flung, are you going to suck it up and spend the money on flights in order to have some valuable (some might say “priceless”) time with your loved ones? Will you rent a car or drive your own? Maybe plan on meeting somewhere in the middle? How about investing instead in a webcam so you can get together “virtually?”

Partly to make up for bad mortgages, banks are increasing account and transaction fees. From USA Today:

Bounced-check fees, ATM fees, monthly service fees and balance requirements for interest checking accounts all hit highs in 2008, before adjusting for inflation, according to a survey released Monday by Bankrate.com., which tracks and compares bank products.

[...] consumers now pay an average of $3.43 to use another bank’s ATM, up 13% from a year ago (or 7% after adjusting for inflation).

It’s not just the size of the fees that hurt consumers. In the past year, large banks have also “substantially changed the design of how they charge those fees to get more revenue,” says Michael Moebs, founder of Moebs Services, a bank consulting firm.

More banks, for instance, are imposing lower fees for the first bounced check, but significantly higher fees each additional time consumers overdraw.

Frankly, most fees are a matter of customers just not planning ahead or paying attention - especially the ATM fees. If you’re withdrawing funds from an ATM that is not your bank’s, shame on you. Seriously, where’s the logic in paying almost a 10% penalty on a $40 withdrawal of your OWN money? Recently another blogger, Mr. Tough Money Love, found out that NFL games are somehow outside the normal space-time-money continuum (people will spend money on bad nachos at a football game as part of the “experience” - myself included!), but his son saw some interesting behavior at the ATM machines that I think fits here:

I learned about a new wasteful money expenditure last night from one of my sons.  He had gone to the concession stand in the first half (for hot chocolate) and noticed that the line at the in-stadium ATM was at least 25 people deep.  His girl friend had used the machine for free because she was a customer of that bank.  (No, she did not buy beer.)  Everyone else paid a $5 ATM service fee!  So here we have fans during the first half of the game lining up to withdraw more cash and paying $5 to access their own money. No doubt that a lot of those expensive cash withdrawals were used to purchase more $7 beers.  It gave me a sick feeling to even think about it.  Paying $5 to access your own money in this situation is similar to taking a payday loan.  The interest cost is astronomical.

Silly, isn’t it? Of course, after a few $7 beers, sound financial judgment goes out the window.

Back on topic, your goal should be to never pay a bank fee. If you tend to coast close to the edge of zero, apply for overdraft protection. If you go negative, you still have to pay but it’s only the interest on the amount you owe and only for the amount of time that you owe it - and it doesn’t matter if you went negative because of one big check or ten little ones. Contrast that with a $20 fee times ten bounced checks.

If you have a monthly service fee, ask your bank what it would take to get it waived. If they say that there’s nothing that can be done, shop around. If there is a minimum balance for an interest bearing account, figure out whether the interest is worth the fee - it may be more beneficial to change your account type to one that doesn’t pay interest but has lower fees or none at all.

If your bank offers a credit card with a cash back reward program and you believe you have the discipline to not go nuts, consider using the credit card to pay for many of your monthly expenses and set up automatic transfers from your regular checking account to your credit card account. For example, if you know you spend $500 per week on groceries, gas and entertainment for your family, use that card to get cash back and transfer enough money every paycheck to cover your costs. Remember, this one’s ONLY if you are disciplined enough not to use your credit card to overspend - the idea is to get a little cash back while NOT paying interest and NOT having your checking account hover near zero and risk overdrawing.

In these times of falling home prices and upside down mortgages, it’s truly tragic to see some of the cutbacks people are having to make. For example, this guy in California who relates what he’s had to do to survive in an interview with the New York Times (emphasis mine, which took a few seconds to select with my mouse because I was laughing too hard):

Kenny Rogers, a data security specialist, moved into Mountain House last year, buying a foreclosed property on Prosperity Street for $380,000. But the decline in values has been so fierce that he too is underwater.

He has cut his DVD buying from 50 a month to perhaps one, and is waiting until the Christmas sales to buy a high-definition television. He does not indulge much anymore in his hobbies of scuba diving and flying. “Best to wait for a better price, or do without,” Mr. Rogers, 52, said.

OK, carry on with your day … I have nothing to add to that …

I have to admit, this kinda pisses me off. From Associated Press:

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower’s financial situation, up to a maximum of 40 percent.

[...]

Under the groups’ proposal to U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks, a pilot project would allow big credit card companies to sharply reduce the amounts owed by consumers in over their heads who don’t qualify for the repayment plans now available.

Nearly all the biggest credit card banks have agreed to such a pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time.

The test program could reach as many as 50,000 borrowers, said Scott Talbott, senior vice president at the Roundtable. Borrowers would have to be in a counseling program for their credit card debt. The amount of debt to be forgiven would be determined case by case, depending on the borrower’s financial condition; those receiving close to the maximum forgiveness level would be nearing a personal bankruptcy filing.

And there would be a tax benefit. Borrowers would be able to defer payment of income taxes they owe on the forgiven part of the debt until after the remainder was paid off. The lenders could wait until then to book their loss on the forgiven debt.

OK, you know what? Our family could have bought a huge flat screen TV, we could have cars that don’t have 100,000 and 200,000 miles on them, and we haven’t been on a vacation that didn’t involve family in … well, ever. My husband and I have gone on a couple of weekend trips in the last SIX YEARS but that’s it.

While I think I’ve been pretty consistent in saying that I empathize with people who dealt with sleazy mortgage brokers, believe credit card companies have been way too lenient with the offering of credit in the first place, and know sometimes people get caught up in illnesses or accidents that just tank them financially, but dammit - this looks like a blanket pardon to me, and that means there are people who have been completely irresponsible and are getting a nice little “get out of bankruptcy free” card.

I hope this “plan” isn’t administered as willy nilly as this article makes it sound, that’s all I’m saying.

As you may know by now, I’m a big fan of The Grocery Game. Even though the program does cost a few dollars a month, I like the format and particularly like that the lists are laid out in the same order as the store - a big time saver that is worth a few bucks in exchange for not having to trek back and forth across the store.

Although I generally wouldn’t suggest buying stuff that you won’t use even if it’s a Great Deal, I do want to take this opportunity to remind you that there are people in need all year round and using some of these fantastic savings opportunities is a way to donate frugally and therefore stretch your generosity.

If you attend a church that has a soup kitchen, you might be able to work out a regular communication with whoever runs it to see if particular sale items from the produce section or other areas might be of use every week. Homeless shelters might also find particular use from fresh produce. You can also bring non-perishables to food banks, and I’ve noticed that holiday cooking needs are already starting to show up on special. For example, this week I saw that Carnation Evaporated Milk was on sale with a coupon for $.50 per can, down from $1.79 - that’s someone’s pumpkin pie. A few weeks ago I remember seeing those crunchy onions on crazy sale, and I’d bet next week or the week after there will be a few great deals on canned pumpkin.

So, if you’re using the Grocery Game or some other coupon site to help you save money - and I highly recommend it, 50% off your grocery bill is really not hard to do - keep an eye out for those non-perishable goods, toiletries for shelters, and even fresh food for soup kitchens and shelters if you know what they need.

Regardless of who you were pulling for in the most recent election, you’re probably not pleased with the amount of money you pay in taxes. Income taxes, property taxes, sales taxes, franchise taxes - and for what? Sure, taxes help build infrastructure, provide safety nets and arm the military, but they also pay for many things that we may personally not agree with, like two trillion dollar bailouts to companies who seem unwilling to stop their spendin’ ways.

Most of us will enjoy a tax break if Obama is able to follow through on his plans to cut taxes for everyone who makes under $250,000 but why wait? Why put control of your tax dollars in the hands of any politician when you have a very simple tax cut strategy at your fingertips that can save you thousands of dollars every year?

Curious?

It’s really so simple, it’s delicious.

The best way to cut your taxes is to spend less money.

Yup, it’s that easy. Think about it.

If you drop your cable, not only do you drop the fee for the service, you drop all of the other little fees and taxes they sneak into your bill - even dropping to a less expensive plan can help. Similarly, you could decide whether or not you need a land line if you primarily use your cell phone (we still choose to have one in our home mostly because I want the 911 service, but it’s probably something we should revisit) and drop taxes on that bill as well. Turn down the heater, don’t leave lights on, lower the temperature on your water heater to 120 so that you can drop your your electricity and gas bill and cut utility taxes. Carpool and/or plan your driving trips to conserve gas, a highly taxed product. Try to stop smoking.

Think about sales taxes! In my town, the sales tax is a whopping 8.3%. That means if I went out and bought a big flat screen TV for $2,000, I would pay $166 in sales taxes. If I don’t buy the TV, I don’t pay the taxes.

Plan ahead for your pre-tax deductions. If you use daycare or have medical expenses, have those taken from your paycheck right off the bat so you don’t have to deal with going through all of your receipts at tax time to take the deductions. It’s still a hassle to file claims, but at least you keep up with it throughout the year if you do it that way - and if you have to pay out of pocket and get reimbursed, you could try taking those payments and putting them directly into savings instead of spending them on goods or services that are taxed!

Pay particular attention to your retirement contributions, which we all know is a way to reduce your taxable income (except in the case of Roch contributions), right? Grow to know and love the IRS website, which has plenty of information on how much you can contribute, including whether or not you can contribute as a “catch up” if you are one of our valued older citizens.

And speaking of deductions, maximize them. If you need to punch through a tax bracket, consider taking a break from offering items on Freecycle and channel those used items to charities instead. If you’ve never used income tax software, consider trying out Turbo Tax - it asks all kinds of questions that may prompt you to remember a forgotten expenditure or just let you know about a deduction you didn’t even know existed.

Barter - although barter is technically taxable, the kind of barter I’m talking about is really just about being in your community. A person who owns a nail salon can be taxed for offering manicures in return for a mural painting in the salon, but if you have a friend who is very good at doing nails and you’re good at hair trims, why not trade those services? Babysitting co-ops are common so that stay at home parents can run errands without kids, and you know how when your zucchini plants go crazy and you give some to neighbors, who in turn bring you a few tomatoes from their garden? That’s barter.

The bottom line is that you do not have some patriotic duty to pay some arbitrary bit into the tax pool, and nor are you powerless against either the evil socialist Democrats or the fiscally conservative in-name-only Republicans of the last eight years. Allow your frugal self to be your tax protesting self at the same time.

This entry is included in this week’s Carnival of Personal Finance - be sure to check out more great posts here!