I had a friend come pick me up to get coffee this morning.

Living near a university, there are coffee shops nearly everywhere—but we knew we’d either be going to Caribou Coffee or Starbucks.

Caribou Coffee was about 10 miles north, Starbucks was about a mile south.

Why were we even considering Caribou? Because my friend David had a gift card.

Which made me ask the question…

How far out of your way do you go to use a gift card?

Ten miles?

We didn’t. My friend even took the time to say, “I know that using the gift card is the financially smart decision…”

We ended up at Starbucks.

We couldn’t make ourselves drive ten miles just to save a few dollars. The time and the gasoline made the idea of a Starbucks a mile away much more appealing.

Gift cards may be free money; but they’re not nearly as valuable and are almost always completely illiquid.

I used to get Best Buy gift certificates for my birthday every year. I hated that. It meant I had to drive 5 exits down the interstate, deal with traffic in the busiest part of town (the area is a nightmare), fight the lines in Best Buy, and buy something I never would have bought or wanted had I not had a Best Buy Gift Card.

Why was I stuck buying things I didn’t want in stores I didn’t shop at?

People Think They Can Spend Your Money Better Than You Can

Just look around. It started with the Government, now its your friends. Are they trying to upset or control you?

Probably not—if they are, get a new friend. They probably just feel strange giving you cash instead of a present. For some reason, if they give you a card they feel like they’ve personalized the gift.

It probably seemed that way for the other thousands of people who bought that identical gift card as well.

Money is plenty personal for me!

There are however, those occasional people that truly did buy you a gift card because they wanted to make sure you spent it in that store. These people drive me insane.

Gift Cards are the Gifts of Tyrants.

Sadly—I’m not talking to those people. There’s no talking sense into those people. But to all of you who are simply trying to personalize your gift:

Money is a great gift for most people. It always comes in the right size, color and everything else! Perfectly customizable and easily exchanged.

Don’t Overthink Gifts! Give Cash!

Why are gift cards worse than money? Loads of reasons! Here are a few:

1. Gift cards limit you to just one store.
2. It’s never the right amount.
   Whether the item you choose to get is less than or more than your gift card, you’ve been screwed.
   Either you end up with money that your gift giver paid on your card that you never use
   Or you have to spend extra money in the store that you wouldn’t have spent to make up the difference.
3. Gift Certificates have Expiration Dates
   I promise your money won’t have an expiration date. Well, actually, at the rate the Government’s going now… nevermind. A post for another day.
4. Gift Certificates force someone to go to a Store
   Giving someone money allows them to hang on to it, invest it, save it or anything else. A gift certificate is like saying, “Here. I didn’t want to get anything so you get up and do it.”
5. Gift Certificates have no Earning Potential
   I can invest a $20 bill and make an average of $2.48 a year according to the last 80 years of market history. My $20 gift certificate will be worth exactly the same a year from now though.

Please—for the sake of your friends and for me. If we all start giving cash instead, we may start the pattern and end the horrid reign of gift cards. Let’s make cash an acceptable gift again.

If you have a story about gifts in the form of cash or giftcards, let us know! Drop a comment below, or reach us on Twitter.

His website has him quoted as saying:

“We can achieve universal access to quality, affordable health care without bankrupting our children with trillions more in debt or imposing draconian tax hikes on all Americans.”

I haven’t spent much time looking into his plan: the Patient’s Choice Act; so I am by no means claiming that he has a good plan here. I have no idea.

What caught me off guard was something else that he said during his interview.

“We are simply not in a position as a nation to be increasing our spending any more.”

This reminded me of what debt counselors tell people. Its a lesson everyone needs to learn at one point or another. Don’t purchase things until you’re in a position to purchase them.

For some reason, it all made sense to me.

Although we have many, many fiscally wise people in charge of our nation; Group think has reduced America to a teenage money mindset.

The nature of our government reduces the vast majority of politicians and leaders to being utterly powerless with these sort of issues.

If they’re not in power- who is?

Well; although we tried to put some of the more educated people in the hot seat to deal with fiscal issues– Americans want something and they want it now. When that happens- politicians either deliver or they leave office.

With this approach nearing 250 years in the making, America’s debt is well over $11 Trillion dollars.
In fact: Since September 2007 it has increased an average of $3.88 Billion per day!

As America decides that they don’t care about their current debt- they want healthcare and what’s another trillion on top of eleven trillion; she reminds me of a girl I met in a marketing class.

“I lost my job, but its no big deal. I just took out another student loan and I figure I’ll live off of that for a year. That way I don’t have to worry about money.”

Noooooooooooooo!!!!

That’s the road we’re walking down, Nation.

Do you want to live in a hormonal teenage country?

Or do you want to live in a country that has control over it’s own destiny?

The choice is being left up to each and every one of us. We need to make clear that debt is not acceptable.
Our country needs to get this deficit under control; or else we’ll each be paying for our nation’s childish decisions in the frighteningly near future.

If you want to Fix this problem:

Contact your Senator and Representative! Let them know what you think.
As I said before: their job is to appease you in congress. They are there to represent your ideas!

Don’t know your congressmen?
Use Visi.com’s tool “Contacting the Congress” to find your congressmen and their email addresses.

Have you ever wondered why the government is so terrible at fixing our economy? Well, its not all their fault. Today we’ll start a series about why they can’t quite make it work and the Lags associated with Fed Intervention.

Show me This Business Cycle thing

Below is what is known in MacroEconomics as “The Business Cycle”:
This is just a fancy way of saying “Showing that the economy goes up and down on a graph“.

The blue line is the business cycle as is, with its ups and downs- and the black dotted line is the long term trend of the business cycle.
As you will see, a free market economy (like the USA) always goes upward with time in the long term trend.

These ups and downs are awfully dramatic.

So what is the Gov’t Trying to Do?

The government’s goal is to achieve a line closer to the green one below, with less up and down swing. The less dramatic our economy as it continues its upward trend, the more content are the people. And as we all know- Government strives for the happiness of its people at all times….

Now – as the government tries to solves these issues with actions like tax increases and decreases, interest rate adjustments and spending, certain Time Lags come into play which disrupt their actions.

What do we mean by Time Lags?

If you’re a gamer, you’re familiar with the term Lag. There are three types of lag that affect the Fed’s response to economic woes or booms.

The Recognition Lag

The recognition lag takes place because when a Recession starts or ends, we simply can’t know it!
Huh?

It takes somwhere between 3 and 6 months for our Government Census bureaus to recognize that the economy has taken a turn for the better or worse.

So if the economy actually takes the turn downward at T1 (above), the government will continue high taxation, high interest rates and low spending as if the economy were in a boom until T2 months later.

This means that the government is actually fueling the recession for several months before it sees that it should be responding to a falling economy.

Well we Finally Realized it…

But notice… T2 is awfully close to the natural end of the recession.

Now that the Feds will start responding to a recession, it may well be nearing an end.
This means the Fed’s are unnaturally fueling a Boom now- which will have to come crashing back downward toward the trend, causing a more violent crash in the future.

But-
Even if we could somehow eliminate this Response Lag- the USA leaves us with two more.

So we’ve finally made it through the Response Lag.
The Feds have realized that we’re in a recession.

Putting a plan into action shouldn’t be hard! … Right?

Why Democracy Screws Up Economic Aid

As with everything else:
Our Government must argue over the means by which we come to an end.

The Bipartisanship of our government causes an Implementation Lag-
This is the time it takes for the government to draw up a plan and execute.

Let’s say that it now takes from T2 to T3 for the Government Officials to finally agree to a plan and implement it.

I’m being very generous illustrating it as less than the Response lag.
Implementation Lags are almost always MUCH longer than response lags.
Politicians don’t tend to get along well when it comes to money.

So as you can see- By the time that the government is responding to the crisis- we are naturally out of the Crisis and on our way up.

Atleast this must be where the lagging ends.

Wrong.

The government and our checkbooks have managed to make it through the Response Lag and Implementation Lags now.

The Recognition Lag is caused by the time it takes for Government’s actions to actually affect the economy.

Money takes time to Spread

As money is spent by the government and taxes are lowered- two things start to happen.

While highways are being built, schools are being built, people are being employed to perform meaningless tasks- money is being pulled out of the Government’s coffers (actually Lenders’, but that’s another post) and put in the peoples’.

Brokers in New York and across the country are also regaining their confidence in the economy.

These sort of events take time.

As you can see in the picture- By the time we reach T4, we have already come fully out of the dip- and the government stimulation has pushed us into an unnatural boom.

This boom MUST come back down to even out with the long term trend (because growth beyond the maximum can’t be sustained by the economy in the long run) causing an even worse recession.

This is Why the Government Can’t Help!

As the government tries to help, good intentioned they may be, they simply are unable to respond quickly enough and in the end do more damage than good.

1. Wordle.net

According to their website, “Wordle is a toy for generating “word clouds” from text that you provide.”
With wordle, you can either type a bunch of words in a field that the website will work with or type in a website URL and the site will automatically take the main words from that page.

For UseTheDollar.com- Wordle yielded this:

or

Wordle.net makes this sort of project so mind-numbingly simple, its incredible.

Print it out, Throw one of these into a cheap or self made frame, and voila! Gift ready!

2. Bake Cookies

I’ll tell you what- I don’t think you could make me a whole lot happier than to hand me a batch of fresh snickerdoodles. I’m a sucker for those things.

Throw some shredded paper in the bottom, bake a few different types of cookies, and put them in a basket and you’ve got a killer gift for any friend or family member!

3. Coupon Book

Make your own coupon book. These can be filled with things like “one free backrub”, “5 rooms vacuumed”, etc.

If you really want to make a killer one, mix it with your own home made coupons and coupons for different stores, restaurants and anything else that the receiver might be interested in.

What a Beautiful Paper

Above is a picture of the copy of the Journal that arrived on my doorstep this morning. 
Though it appears to be just as cluttered and jampacked as the average paper, the Journal’s writers actually take into consideration your time constraints and make it a bit easier to digest.

The Efficiency of the Front Page

Cliche as it is, the Journal does a great job with the front page.  Ordinarily, the Front page houses the most meaningful and useful articles.  If you’re sure to atleast glance through the headlines on the front page, you’ll be sure to hit up the majority of news from the previous day.

What’s News-

This is my favorite part of the Journal.  The Wall Street Journal gives small summaries of almost every important article in the paper in the “What’s News-” section on the front page. 

This is an Incredible tool for the average busy skimmer!  The Journal removes the need to go searching for articles.  It gives a boldened headline and one to two sentence summary of each article on the front left of the page.  It will almost always be above the fold, so it is increidbly easy to find.

If you glance over the “What’s News-” section every day,  you should be broadly updated on the previous day’s news.

Using the Different Sections

First off, I’ll say that these are my opinions about the usefulness of each section- some have disagreed with me, and I’m sure more will in the future.

 The Wall Street Journal is divided into Four Sections in the Monday through Friday Issues: The Front Section, MARKETPLACE, MONEY & INVESTING, and THE JOURNAL REPORT.

The first section covers the main headlines of the day.  If you are going to read only one section, read the first section.  That’s why its the first section.

MARKETPLACE

I call this section Main Street, because overall- that’s what this one covers.  It covers articles about the actual fundamentals and infrastructures of a company.  Main Street covers the actual companies.

MONEY & INVESTING

This one is Wall Street.  It covers where to invest, what to buy, etc.  It’s more about the shares, earnings, and Wall Street related topics.

The Journal Report

My Honest Opinion: unnecessary.  This one covers things like Google’s new G-Phone, or new products, etc- which if important enough will be covered much more briefly in the Marketplace section, and in all seriousness- you’ll hear about on the radio, fox news, CNN, or anywhere else that you turn.

So How can this Help me?

This is all nice and good, but how can I use this?

The Wall Street Journal is probably the most reputable paper in the world for Finance.  They hire only the most credible, educated, and up to date writers and editors in the world.

If you keep up to date on the topics and headlines that these influential writers find important, you should be caught up on all of the important financial news for the previous day.

The P/E Ratio is an Important Tool that Every Investor Should Look Into Before Making Decisions.

If you’ve ever wandered onto Yahoo! Finance, read the Wall Street Journal or watched CNBC then you have definitely heard things like “Walmart’s price to earnings ratio is…”, “Home Depot’s multiple…”, or “Caterpillar is trading at 10 times earnings.”

It may surprise you to know that each of these phrases is actually describing the same thing. Each statement is keeping up with a company’s Multiple, or the amount of times that an annual earnings per share can be divided into the market share price.

You are calculating how much more, in times, you are paying for a share than the company’s earnings for that share.

Example of a P/E Ratio

Why is this important? I will use an imaginary example to illustrate.

Let’s say that Caldwell Inc.’s shares are trading at $10.00 per share, and Leggett Co.’s shares are trading at $45.00.

Which one is more expensive?

At first glance you would say that Leggett Co. Is the more expensive share, but this is inaccurate and the multiple can show us why.

You see, the earnings per share at Caldwell Inc. was $2.00 per share last year. So that means Caldwell Inc. has a 5:1 P/E ratio ($10 divided by $2). It is trading at 5 times earnings.

Leggett Co. had earnings per share of $10.00 last year ($45 divided by $10). So Leggett Co. is trading at 4.5 times earnings.

What Does it Mean?

So let’s put this into perspective: would you prefer to pay 5 times what a car is worth or 4.5 times what a car is worth? Of course, 4.5 times is cheaper!

So even though numerically Leggett Co. appears to be more expensive than Caldwell Inc. when you utilize the Price to Earnings Ratio you see that it is actually quite the opposite!

And this is Important because…

When you are looking to purchase shares of any company, you should ALWAYS be comparing them to the industry and sector you find them in, as well as all of its major competitors. The P/E Ratio is a great starter’s tool for comparing companies’ prices.

Photo Credit: justonlysteve

Income Allocation is the splitting up of your income. It’s the discipline of dividing your cash into multiple areas for unique spending, saving, and investment.

That doesn’t sound very fun now does it. It is an INCREDIBLY important principle though… One that each and every person who strives to manage their own finances should utilize.

What Should I Be Doing?

Before you throw all of your income into a single spending account, consider the consequences of immediate spending… It

Discipline is necessary to any kind of expertise, and allocating your income is no exception. I’ll use my own as my example for this particular lesson, laying out how I allocate my income using percentages for every dollar of that comes into my possession.

Whenever I receive any kind of income — and like I said, DISCIPLINE, so this means ANY kind of income, from my monthly paycheck to a birthday check — I immediately deposit it into a free checking account I have with Wachovia labeled “Spending Account”. From there it is immediately disbursed among several other accounts, each labeled as follows:

• 30% remains in my Spending Account
• 30% is transferred into my Bills Account
• 30% is transferred into my Investment Account
• 10% is withdrawn in Cash and placed into envelopes for my Tithe

Spending Account Example

It’s very simple — My spending Account goes many more places though.

For example, For every purchase that I make with my spending Debit Card, I have one dollar removed from the Spending account and automatically transferred into a Wachovia Way2Save high yield Savings account.

I also use this for longer term accumulation for large spending that doesn’t qualify as an “investment”. What is an example of this? Well, I hope that in the next five years I’ll be blessed enough to ask someone to marry me. So, to prepare for this sort of a purchase, I dedicate 10% of my spending account to an envelope on my desk with a circle drawn on it and no label, so that no one walking in will think I’m jumping the gun… but now you all know. Shoot.

Bills Account

My Bills account gets used for things like gasoline, groceries, etc.

This account is ONLY used for paying off bills. No tapping into this account to cover personal expenses. It’s all a part of that disciplinary lifestyle I keep referring back to.

Investment Account

My investment account is widespread, but ONLY used for purposes that will yield some sort of return. This could range anywhere from purchasing a domain for a website (not a fun website but one I think could yield a return) to a business flight.

Overview of MY Income Allocation

If there’s anything I would encourage you to do before doing ANYTHING else — Set up an income allocation procedure for yourself. This discipline is important because without it, none of these important fields of your personal finance will see a dime of your income. Each of the things that I account for within my list are important and necessary to devote a portion of my income to. If I didn’t make a point to move money into those accounts each and every time I received an income check, I would probably spend it before I could ever place it where it needed to be.

I believe that most Americans are more similar to myself in their irresponsible spending habits than those who can keep all their money together and still manage to plan for retirement and investments.

So to counter my irresponsible tendencies, I force myself to divide the checks immediately. It’s a surefire way to get things done automatically, saving me time, and saving me money.