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Musings...
I have been thinking a lot lately about the way society is running headlong over the cliff of peak oil like lemmings.
I had even considered putting together a series of posts outlining my "presidential planks" or stands on the issues the same way the presidential candidates do on their website, but realized that post such as that do not really convey what I am trying to say.
Instead, I will outline what I see happening in the next few years, and offer up my opinion of what should be done to minimize the effects of resource depletion on our society.
First, a bit of an overview as to what I mean on resource depletion.
Resource Depletion. aka Peak Everything.
(Read Heinberg's book for a more in depth explanation)
In a nutshell, resources are finite, some more so than others. Oil is finite. Coal, finite. Copper, Gold, Silver, Platinum, all finite. Get this into your head, there is not any more being made by natural means at any pace that will help us. Once we have used it, it is gone.
Oil companies have been scouring the world for the past 100 years, trying to find more sources of oil. All of the easy to get to oil has been found. What is left is hard to get to, which makes it expensive, or in a form that is costly to refine into usable product.
If you truly want to get a background on this from web sources, I point you to: http://www.energybulletin.net/primer.php
We are not running out of oil, we are simply running out of the capacity to produce more than is in demand worldwide. Plus, our ability to maintain production at current levels will very soon begin to decline as well, as we deplete the oil fields we are tapping now.
Any new oil fields will take at least a decade to get producing, and once they do start we will be lucky if they replace the capacity we lose due to field depletion. For those that think drilling in ANWAR is the answer, consider that estimates place the amount of oil in the Arctic National Wildlife Refuge anywhere from 5.7 billion (95% chance) to 10.4 billion (50% chance) to 16 billion (5% chance) barrels, with the recoverable percentage of oil only being 37% of whatever is found.
So if it is 10.4 billion barrels found, then we could only recover 3.85 billion barrels over the LIFE of the field. And this assumes that the oil is actually found at commercial production flow rates, of which the rosiest prediction is for 780,000 barrels a day in 2027, should exploration begin today. http://www.energybulletin.net/45331.html
We(as a nation) consume an estimated 25 million barrels every day.
Do the math.
So where does this leave us?
The age of oil is collapsing around us.
"So what?" You may ask.
Well, consider this. The rising cost of oil affects everything in today's global economy. All of those cheap goods we buy at Wal-mart are shipped to us from China. The ships run on fuel oil. The trains and trucks that transport it from the coasts all run on diesel, a distillation of oil. Plastic (with a few, new expensive exceptions) are made from oil. Think of how many things you use every day that are made from plastic. Gasoline is the most visible product of oil. As the oil gets more expensive, the cost of goods increase, meaning your hard earned wages buy less and less.
This is called inflation.
To compound this, the Federal Reserve has attempted to bail out the financial markets that are in distress from the rampant financial machinations, where debt from the housing bubble was sliced and diced and jullianed, then sold off in pieces to the unsuspecting public as risk free, gaining the financial houses unimaginable fortunes from smoke and mirrors.
To deal with the fallout from where the smoke cleared, and it was discovered that there actually was risk in loaning money to those who can not afford to pay it back under the agreed to terms, the Fed cut interest rates.
Each time the rate is cut, it makes our federal debt bonds worth less, as they are tied to this rate to determine how much is repaid when the bond matures. This debt bond is what determines the value of a dollar. When U.S. bonds lose value, it means that the U.S. dollar is worth less compared to the value of other nation's currencies, and thus goods produced in other countries are more expensive to buy in dollars.
Again, this is inflation.
Why is inflation so important? Well, to put it simply,as inflation rises, the buying power of your paycheck decreases. Unless your boss gives you an annual or semi-annual raise that keeps up with inflation (real inflation, not the governments feel-good inflation rate, which removes the rise in gas and food costs from the equation), your actual earnings are effectively reduced every year.
Sadly, the vast majority of Americans are oblivious to this, as they simply augment their earnings using credit cards, and digging themselves ever deeper into debt with every swipe. They have been taught through advertising from credit card companies (which take the place of proper money management skills their parents didn't pass on because they don't know how to manage money) that this is normal, and it is their right to be able to live beyond their means.
So how do we deal with this mess?
Unfortunately, there is no easy solution.
We as a nation are dependent upon (not so)cheap oil.
Historically, oil has been extremely cheap, allowing us decades of unfettered growth, letting us spread our cities and towns (and our waistlines) out into empty space. We were willing to deal with the long commutes because gas was cheap, so living in the boonies an hour away from work was cheaper than paying the premium to live close to work.
Plus, the advertising people did their best to convince the populace that what they really needed was a bigger house, on a bigger yard, filled with more stuff, out in the country where things were cheap and you didn't have to worry about other people sticking their nose in your business. (for a more complete critique, I highly recommend Howard Kuntsler's book, The Geography of Nowhere ) This started in 1945, and has not let up since, resulting in Americans feeling entitled to this fairy-tale.
Originally, the way that people commuted to work from the suburbs and back was via mass transit; streetcars, interurbans, and passenger rail. However, the automobile industry did everything it could to promote individual cars for every family while simultaneously ruining the competition from mass transit.
(See the Great American Streetcar Scandal, where a front company created by GM, Firestone tire, Standard Oil, and Phillips Petroleum bought up streetcar lines across the US, tore up the rails and converted them to bus lines, were sued under anti-trust laws, and received a slap on the wrist for their successful efforts).
This, combined with the massive marketing campaign from Detroit about the freedom of driving, combined with the marketing campaign of what makes "The American Dream" (a quarter acre lot with green grass lawn, a picket fence, and a car in the driveway) served to drop transit companies into a vicious feedback cycle. The companies cut service to save money, then ended up with few riders, so they had to cut services again, and so on, until they either went out of business or the cities and towns they served stepped in and bought them to keep from loosing service all together.
The marketing succeeded, and now Americans feel that they are entitled to owning a car once they hit the magic age of 16, and can obtain their driver's license.
In fact, the success has been so complete that in many parts of the US, lack of a automobile results in being delegated to a second class citizen, unable to gain access to the necessities of life.
In the 50's, while all of this was going on, the federal government stepped in and decided to subsidize the creation of the National Interstate System.
When Eisenhower was a General leading his troops across Europe during World War II, he studied the things that made the Nazi Blitzkrieg so effective. He found that it was the German's ability to move their troops quickly across the battlefield using mechanized troops and wheeled supply lines that provided the advantage. At the beginning of the war Allied forces were still in a World War I mentality on troop mobilization. Their military planners considered troop movement to take place at the rate of a foot soldier's measured march. Yes, the railroads could funnel vast quantities of troops and materiel to the front, but they ran on fixed rails which were easily targeted by enemy forces, so in the thinking of the war planners, the battle lines moved at the pace of a foot soldier.
The Germans's realized that by creating small, quick tanks with high mobility, and by moving the foot soldiers in trucks and armored vehicles, the rate of advance would be greatly accelerated. These vehicles were not tied to rails, and therefore could easily react to battlefield conditions, dodge obstacles, and be mobile almost anywhere. Thus modern Mechanized warfare was born.
The Germans also realized that a fast moving front meant greater strains upon the supply lines. Railroads could move greater quantities of supplies than trucks, but considering that the rails were high priority military targets during an attack, it was considered better to keep at least a portion of the supply lines on wheeled vehicles.
In order to facilitate this, the Germans had created the Autobahn system, limited access, high speed roads, which served to speed up the truck supply lines to speeds almost equivalent to rail. Eisenhower saw this and was impressed.
When he was elected President after the war, he was in the perfect position to influence transportation policy. Eisenhower felt that the flexibility of an autobahn-esque highway system was superior to the existing railroad transportation system which had kept the troops on two fronts supplied throughout the war.
Therefore he used government subsidies funded through taxation of the railroad's privately owned rail system to create the vast web of interstates that we have today. He never foresaw the congestion that was to choke the system around cities, rendering the system's usefulness moot.
The creation of this network of high speed roads combined with the previously mentioned marketing of the automobile industry served to make travel by train unfashionable. The individual freedoms that owning a car provided, meshed well with the attitudes of Americans and quickly insinuated itself into every facet of popular culture, exemplified in influential works of literary art such as Jack Kerouac's On The Road which was written in 1951 and published in 1957.
As a result, the railroads which help built this nation into greatness were abandoned by the population they served. Passenger volumes dropped precipitously, and rail companies cut back on services as the newer forms of transportation, automobiles and airplanes rose in popularity. In 1971, passenger rail traffic was in such dire straits that the government stepped in and nationalized interstate rail travel through the formation of Amtrak.
The current passenger rail network is a mere shadow of what it was 60 years ago, just after the World Wars ended. Many towns and communities that were connected then turned their backs on the railroad, and stopped using not only the passenger system but also the freight system.
Over time, as the railroads were no longer able to turn a profit on their vast networks of rails, they trimmed service and abandoned routes. The communities that were served did not really notice that much, as the businesses merely moved their freight operations to commercial trucking. Some communities even tore up the rails and turned the rights of way into walking and bike paths, while the roads continued to get more and more congested.
The railroads consolidated on making the most profitable routes more profitable, concentrating on high volume cross country freight, and high volume, single item bulk service, such as coal.
Trucking moved into the voids left when the railroads left, and the volume of traffic on the roads increased. People continue to follow the flight into the suburbs and exburbs, following the "American Dream".
In short, the situation in many parts of the Midwest and South stand as such:
The average Joe (or Jane) is buying (the banks still owe it until the mortgage is paid off) a house at the outskirts of a city, where land is still cheap. They drive 30 minutes to an hour each way to get to work, and find it harder to pay their bills because their paychecks just don't stretch as far as it used to. The long commute amplifies the increase in the cost of gasoline, as they have no alternative to driving everywhere they go.
Sure they care about the environment and complain about the cost of gas, but what can they really do? There are no jobs close to where they live, It costs too much to buy property close to work, and the neighborhoods they live in aren't on any sort of mass-transit system, because no-one wants to pay more taxes to support the extension of a city's transit system.
It is ingrained into our psyche that we must increase our consumption, that if something breaks it is easier to buy a new one than to fix it, and that we can have anything we want when we want it, (and thanks to easy credit, we can have it even if we can't afford it.)
Our governmental policies demand the growth of the economy every year. Lack of growth is considered bad, and it is considered a patriotic duty to spend our money to buy stuff, even if it means borrowing money to do so.
So what do we do?
First we must realize that we no longer can live beyond our means.
We each individually need to take off the rose colored glasses and assess where we are financially. We need to look at our income on a monthly basis, and evaluate our bills against them. If we can not pay our bills with our income, we need to figure out what can change to do so.
Look at what you are paying. Do you really need to have cable? For instance, locally, cable TV costs a minimum of $13 for 16 channels (limited basic), $53 for 68 channels (full basic), $69 for 130 digital channels (digital preferred), and $100 for 199 digital channels (digital premier). This is per month, plus fees.
Do you really need to have every last doodad, bell and whistle on your cell phone? My wife and I have the cheapest, basic service we can find, and it still runs us $60 a month. We can justify it based upon our not having a home, land line phone (which is about $50 a month, locally, not counting long distance fees). I shudder to think what it would cost if we had one of the smart phones, with internet access, and text messaging.
A good way to figure out where your money is going is to keep track of every penny spent over the course of a month. Use MS Excel, or if you do not have access to Excel, Open Office Calc is free ( http://download.openoffice.org/other.html#en-US ), or you can use Google Docs online Spreadsheet app. ( http://docs.google.com/ ) Or you can go the old fashioned route and use a pencil and a pad of paper.
The point is, document where you spend your money.
Once you know where you money is going, you need to determine if some of the recurring items are worth it.
Do you really need to spend $1.25 on a 20 oz coke twice a day? Do you really need to spend $4.50 on a cappuccino or a latte or a mocha from your local Starbucks?
Is there a way to get the same benefit for less?
Look at all aspects of your budget.
The point is, figure out how to live on less money than you earn. If you are doing that already, then instead of spending your money on frivolous stuff, spend it where it will help you. On bills.
Make a budget that lets you live on less than you earn, and still has funds in there for a bit of fun. Otherwise, just like when dieting, you will deny yourself pleasure until you are tempted just a tad too much, and then you will splurge, and have to start over from scratch.
The excess monies you free up, will be what you will use to get out of debt.
If you think about it, debt equals slavery. If you have debt, then you are contractually obligated to pay it and the agreed upon interest back. If you decide to not pay it, then the person who owns the debt has legal recourse to take you to court to force you to pay it. Typical court rulings result in garnishment of wages, whereby a portion of your earnings every paycheck are diverted from your bank account to your debtor's.
In essence, you are stuck working to pay off your debts.
Think about it. If you have $1000 in credit card debt, you most likely are having to pay a minimum of around $30 a month depending on your interest rate. This is enough that your debt is (very) slowly being paid off, but it will take a decade or two to do so.
The median credit card balance carried by US citizens is $2,200. But, ten percent carry balances in excess of $8,000. When you add in car loans and the like, the average American spends %14 of their income on debt.
What do these numbers mean? If you made $10.00 an hour, this means that $1.40 of your pay rate goes towards debt, effectively lowering the amount you earn to $8.60 an hour. In order to achieve an effective pay rate of $10.00 an hour with the average debt load, you need to earn $11.63 an hour.
If you paid off your debt, you would give yourself a $1.40 an hour raise.
High amounts of debt is one of the main reasons that people stick with a job they do not enjoy. They do it just to pay the bills, and are in effect, slaves to their debt.
Those who are debt free can afford to quit, to find a different job, to enjoy life.
In short, they are free.
If we are living within our means and we are debt free, then we are already immeasurably in a better position to deal with high energy prices.
The high transportation costs are going to make it more imperative that you live closer to work.
Another way to give yourself more leeway financially is to be closer to your workplace. This can be accomplished by changing jobs or by moving.
Consider the following scenario.
You drive a car that gets 20 mpg on average. You live 20 miles from work. This means that in the course of a typical 5 day work week, you drive 200 miles to and from work, and use 10 gallons of gas. When gas was $1.50 a gallon, this meant that you paid $15 to get to and from work every week. This works out to $0.38 from your $10 an hour paycheck.
As of today, gas is $4.11 a gallon (nationwide average per Gasbuddy.com).
Your 8 gallons of gas now cost you $41.10 a week, or $1.03 from your $10 an hour paycheck.
If you move closer, or take a job closer to home you reduce that expense.
In fact, at current gas price levels, if you take a job that is 5 miles from work instead of 20, you can take a cut in pay rate of $0.75 an hour and still effectively make more than you did before due to savings in gas.
Other ways to cut costs are the old standbys of car pooling, bicycling, or using public transit.
I will continue musing on these things, but this one has gotten a bit unwieldy, and I think I should just go ahead and post it before it losses it's direction entirely.
Stay tuned for my thoughts on how we, as a nation, should address the problems ahead.
I had even considered putting together a series of posts outlining my "presidential planks" or stands on the issues the same way the presidential candidates do on their website, but realized that post such as that do not really convey what I am trying to say.
Instead, I will outline what I see happening in the next few years, and offer up my opinion of what should be done to minimize the effects of resource depletion on our society.
First, a bit of an overview as to what I mean on resource depletion.
Resource Depletion. aka Peak Everything.
(Read Heinberg's book for a more in depth explanation)In a nutshell, resources are finite, some more so than others. Oil is finite. Coal, finite. Copper, Gold, Silver, Platinum, all finite. Get this into your head, there is not any more being made by natural means at any pace that will help us. Once we have used it, it is gone.
Oil companies have been scouring the world for the past 100 years, trying to find more sources of oil. All of the easy to get to oil has been found. What is left is hard to get to, which makes it expensive, or in a form that is costly to refine into usable product.
If you truly want to get a background on this from web sources, I point you to: http://www.energybulletin.net/primer.php
We are not running out of oil, we are simply running out of the capacity to produce more than is in demand worldwide. Plus, our ability to maintain production at current levels will very soon begin to decline as well, as we deplete the oil fields we are tapping now.
Any new oil fields will take at least a decade to get producing, and once they do start we will be lucky if they replace the capacity we lose due to field depletion. For those that think drilling in ANWAR is the answer, consider that estimates place the amount of oil in the Arctic National Wildlife Refuge anywhere from 5.7 billion (95% chance) to 10.4 billion (50% chance) to 16 billion (5% chance) barrels, with the recoverable percentage of oil only being 37% of whatever is found.
So if it is 10.4 billion barrels found, then we could only recover 3.85 billion barrels over the LIFE of the field. And this assumes that the oil is actually found at commercial production flow rates, of which the rosiest prediction is for 780,000 barrels a day in 2027, should exploration begin today. http://www.energybulletin.net/45331.html
We(as a nation) consume an estimated 25 million barrels every day.
Do the math.
So where does this leave us?
The age of oil is collapsing around us.
"So what?" You may ask.
Well, consider this. The rising cost of oil affects everything in today's global economy. All of those cheap goods we buy at Wal-mart are shipped to us from China. The ships run on fuel oil. The trains and trucks that transport it from the coasts all run on diesel, a distillation of oil. Plastic (with a few, new expensive exceptions) are made from oil. Think of how many things you use every day that are made from plastic. Gasoline is the most visible product of oil. As the oil gets more expensive, the cost of goods increase, meaning your hard earned wages buy less and less.
This is called inflation.
To compound this, the Federal Reserve has attempted to bail out the financial markets that are in distress from the rampant financial machinations, where debt from the housing bubble was sliced and diced and jullianed, then sold off in pieces to the unsuspecting public as risk free, gaining the financial houses unimaginable fortunes from smoke and mirrors.
To deal with the fallout from where the smoke cleared, and it was discovered that there actually was risk in loaning money to those who can not afford to pay it back under the agreed to terms, the Fed cut interest rates.
Each time the rate is cut, it makes our federal debt bonds worth less, as they are tied to this rate to determine how much is repaid when the bond matures. This debt bond is what determines the value of a dollar. When U.S. bonds lose value, it means that the U.S. dollar is worth less compared to the value of other nation's currencies, and thus goods produced in other countries are more expensive to buy in dollars.
Again, this is inflation.
Why is inflation so important? Well, to put it simply,as inflation rises, the buying power of your paycheck decreases. Unless your boss gives you an annual or semi-annual raise that keeps up with inflation (real inflation, not the governments feel-good inflation rate, which removes the rise in gas and food costs from the equation), your actual earnings are effectively reduced every year.
Sadly, the vast majority of Americans are oblivious to this, as they simply augment their earnings using credit cards, and digging themselves ever deeper into debt with every swipe. They have been taught through advertising from credit card companies (which take the place of proper money management skills their parents didn't pass on because they don't know how to manage money) that this is normal, and it is their right to be able to live beyond their means.
So how do we deal with this mess?
Unfortunately, there is no easy solution.
We as a nation are dependent upon (not so)cheap oil.
Historically, oil has been extremely cheap, allowing us decades of unfettered growth, letting us spread our cities and towns (and our waistlines) out into empty space. We were willing to deal with the long commutes because gas was cheap, so living in the boonies an hour away from work was cheaper than paying the premium to live close to work.
Plus, the advertising people did their best to convince the populace that what they really needed was a bigger house, on a bigger yard, filled with more stuff, out in the country where things were cheap and you didn't have to worry about other people sticking their nose in your business. (for a more complete critique, I highly recommend Howard Kuntsler's book, The Geography of Nowhere ) This started in 1945, and has not let up since, resulting in Americans feeling entitled to this fairy-tale.
Originally, the way that people commuted to work from the suburbs and back was via mass transit; streetcars, interurbans, and passenger rail. However, the automobile industry did everything it could to promote individual cars for every family while simultaneously ruining the competition from mass transit.
(See the Great American Streetcar Scandal, where a front company created by GM, Firestone tire, Standard Oil, and Phillips Petroleum bought up streetcar lines across the US, tore up the rails and converted them to bus lines, were sued under anti-trust laws, and received a slap on the wrist for their successful efforts).
This, combined with the massive marketing campaign from Detroit about the freedom of driving, combined with the marketing campaign of what makes "The American Dream" (a quarter acre lot with green grass lawn, a picket fence, and a car in the driveway) served to drop transit companies into a vicious feedback cycle. The companies cut service to save money, then ended up with few riders, so they had to cut services again, and so on, until they either went out of business or the cities and towns they served stepped in and bought them to keep from loosing service all together.
The marketing succeeded, and now Americans feel that they are entitled to owning a car once they hit the magic age of 16, and can obtain their driver's license.
In fact, the success has been so complete that in many parts of the US, lack of a automobile results in being delegated to a second class citizen, unable to gain access to the necessities of life.
In the 50's, while all of this was going on, the federal government stepped in and decided to subsidize the creation of the National Interstate System.
When Eisenhower was a General leading his troops across Europe during World War II, he studied the things that made the Nazi Blitzkrieg so effective. He found that it was the German's ability to move their troops quickly across the battlefield using mechanized troops and wheeled supply lines that provided the advantage. At the beginning of the war Allied forces were still in a World War I mentality on troop mobilization. Their military planners considered troop movement to take place at the rate of a foot soldier's measured march. Yes, the railroads could funnel vast quantities of troops and materiel to the front, but they ran on fixed rails which were easily targeted by enemy forces, so in the thinking of the war planners, the battle lines moved at the pace of a foot soldier.
The Germans's realized that by creating small, quick tanks with high mobility, and by moving the foot soldiers in trucks and armored vehicles, the rate of advance would be greatly accelerated. These vehicles were not tied to rails, and therefore could easily react to battlefield conditions, dodge obstacles, and be mobile almost anywhere. Thus modern Mechanized warfare was born.
The Germans also realized that a fast moving front meant greater strains upon the supply lines. Railroads could move greater quantities of supplies than trucks, but considering that the rails were high priority military targets during an attack, it was considered better to keep at least a portion of the supply lines on wheeled vehicles.
In order to facilitate this, the Germans had created the Autobahn system, limited access, high speed roads, which served to speed up the truck supply lines to speeds almost equivalent to rail. Eisenhower saw this and was impressed.
When he was elected President after the war, he was in the perfect position to influence transportation policy. Eisenhower felt that the flexibility of an autobahn-esque highway system was superior to the existing railroad transportation system which had kept the troops on two fronts supplied throughout the war.
Therefore he used government subsidies funded through taxation of the railroad's privately owned rail system to create the vast web of interstates that we have today. He never foresaw the congestion that was to choke the system around cities, rendering the system's usefulness moot.
The creation of this network of high speed roads combined with the previously mentioned marketing of the automobile industry served to make travel by train unfashionable. The individual freedoms that owning a car provided, meshed well with the attitudes of Americans and quickly insinuated itself into every facet of popular culture, exemplified in influential works of literary art such as Jack Kerouac's On The Road which was written in 1951 and published in 1957.
As a result, the railroads which help built this nation into greatness were abandoned by the population they served. Passenger volumes dropped precipitously, and rail companies cut back on services as the newer forms of transportation, automobiles and airplanes rose in popularity. In 1971, passenger rail traffic was in such dire straits that the government stepped in and nationalized interstate rail travel through the formation of Amtrak.
The current passenger rail network is a mere shadow of what it was 60 years ago, just after the World Wars ended. Many towns and communities that were connected then turned their backs on the railroad, and stopped using not only the passenger system but also the freight system.
Over time, as the railroads were no longer able to turn a profit on their vast networks of rails, they trimmed service and abandoned routes. The communities that were served did not really notice that much, as the businesses merely moved their freight operations to commercial trucking. Some communities even tore up the rails and turned the rights of way into walking and bike paths, while the roads continued to get more and more congested.
The railroads consolidated on making the most profitable routes more profitable, concentrating on high volume cross country freight, and high volume, single item bulk service, such as coal.
Trucking moved into the voids left when the railroads left, and the volume of traffic on the roads increased. People continue to follow the flight into the suburbs and exburbs, following the "American Dream".
In short, the situation in many parts of the Midwest and South stand as such:
The average Joe (or Jane) is buying (the banks still owe it until the mortgage is paid off) a house at the outskirts of a city, where land is still cheap. They drive 30 minutes to an hour each way to get to work, and find it harder to pay their bills because their paychecks just don't stretch as far as it used to. The long commute amplifies the increase in the cost of gasoline, as they have no alternative to driving everywhere they go.
Sure they care about the environment and complain about the cost of gas, but what can they really do? There are no jobs close to where they live, It costs too much to buy property close to work, and the neighborhoods they live in aren't on any sort of mass-transit system, because no-one wants to pay more taxes to support the extension of a city's transit system.
It is ingrained into our psyche that we must increase our consumption, that if something breaks it is easier to buy a new one than to fix it, and that we can have anything we want when we want it, (and thanks to easy credit, we can have it even if we can't afford it.)
Our governmental policies demand the growth of the economy every year. Lack of growth is considered bad, and it is considered a patriotic duty to spend our money to buy stuff, even if it means borrowing money to do so.
So what do we do?
First we must realize that we no longer can live beyond our means.
We each individually need to take off the rose colored glasses and assess where we are financially. We need to look at our income on a monthly basis, and evaluate our bills against them. If we can not pay our bills with our income, we need to figure out what can change to do so.
Look at what you are paying. Do you really need to have cable? For instance, locally, cable TV costs a minimum of $13 for 16 channels (limited basic), $53 for 68 channels (full basic), $69 for 130 digital channels (digital preferred), and $100 for 199 digital channels (digital premier). This is per month, plus fees.
Do you really need to have every last doodad, bell and whistle on your cell phone? My wife and I have the cheapest, basic service we can find, and it still runs us $60 a month. We can justify it based upon our not having a home, land line phone (which is about $50 a month, locally, not counting long distance fees). I shudder to think what it would cost if we had one of the smart phones, with internet access, and text messaging.
A good way to figure out where your money is going is to keep track of every penny spent over the course of a month. Use MS Excel, or if you do not have access to Excel, Open Office Calc is free ( http://download.openoffice.org/other.html#en-US ), or you can use Google Docs online Spreadsheet app. ( http://docs.google.com/ ) Or you can go the old fashioned route and use a pencil and a pad of paper.
The point is, document where you spend your money.
Once you know where you money is going, you need to determine if some of the recurring items are worth it.
Do you really need to spend $1.25 on a 20 oz coke twice a day? Do you really need to spend $4.50 on a cappuccino or a latte or a mocha from your local Starbucks?
Is there a way to get the same benefit for less?
Look at all aspects of your budget.
The point is, figure out how to live on less money than you earn. If you are doing that already, then instead of spending your money on frivolous stuff, spend it where it will help you. On bills.
Make a budget that lets you live on less than you earn, and still has funds in there for a bit of fun. Otherwise, just like when dieting, you will deny yourself pleasure until you are tempted just a tad too much, and then you will splurge, and have to start over from scratch.
The excess monies you free up, will be what you will use to get out of debt.
If you think about it, debt equals slavery. If you have debt, then you are contractually obligated to pay it and the agreed upon interest back. If you decide to not pay it, then the person who owns the debt has legal recourse to take you to court to force you to pay it. Typical court rulings result in garnishment of wages, whereby a portion of your earnings every paycheck are diverted from your bank account to your debtor's.
In essence, you are stuck working to pay off your debts.
Think about it. If you have $1000 in credit card debt, you most likely are having to pay a minimum of around $30 a month depending on your interest rate. This is enough that your debt is (very) slowly being paid off, but it will take a decade or two to do so.
The median credit card balance carried by US citizens is $2,200. But, ten percent carry balances in excess of $8,000. When you add in car loans and the like, the average American spends %14 of their income on debt.
What do these numbers mean? If you made $10.00 an hour, this means that $1.40 of your pay rate goes towards debt, effectively lowering the amount you earn to $8.60 an hour. In order to achieve an effective pay rate of $10.00 an hour with the average debt load, you need to earn $11.63 an hour.
If you paid off your debt, you would give yourself a $1.40 an hour raise.
High amounts of debt is one of the main reasons that people stick with a job they do not enjoy. They do it just to pay the bills, and are in effect, slaves to their debt.
Those who are debt free can afford to quit, to find a different job, to enjoy life.
In short, they are free.
If we are living within our means and we are debt free, then we are already immeasurably in a better position to deal with high energy prices.
The high transportation costs are going to make it more imperative that you live closer to work.
Another way to give yourself more leeway financially is to be closer to your workplace. This can be accomplished by changing jobs or by moving.
Consider the following scenario.
You drive a car that gets 20 mpg on average. You live 20 miles from work. This means that in the course of a typical 5 day work week, you drive 200 miles to and from work, and use 10 gallons of gas. When gas was $1.50 a gallon, this meant that you paid $15 to get to and from work every week. This works out to $0.38 from your $10 an hour paycheck.
As of today, gas is $4.11 a gallon (nationwide average per Gasbuddy.com).
Your 8 gallons of gas now cost you $41.10 a week, or $1.03 from your $10 an hour paycheck.
If you move closer, or take a job closer to home you reduce that expense.
In fact, at current gas price levels, if you take a job that is 5 miles from work instead of 20, you can take a cut in pay rate of $0.75 an hour and still effectively make more than you did before due to savings in gas.
Other ways to cut costs are the old standbys of car pooling, bicycling, or using public transit.
I will continue musing on these things, but this one has gotten a bit unwieldy, and I think I should just go ahead and post it before it losses it's direction entirely.
Stay tuned for my thoughts on how we, as a nation, should address the problems ahead.