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Dad Joke
What do you call a Frenchman wearing flip-flops?
Philippe-flop.
Now Let’s Make Your Money Smile
Cooler isn’t cheaper
When a headline gives people the impression things are getting better, spending will be less in control. If panic and fear are reduced, fun will fill the gap.
Fox Business reported this morning that the Fed’s favorite inflation gauge “cooled more than expected” in August. That’s real. But it’s not the whole story.
Here’s the rest of it, from the government’s own August report. Prices still went up. They rose 0.3% in one month and 3.4% from a year ago. Cooled means rising more slowly. It doesn’t mean coming down.
What households did in the same month is the other half. Income rose 0.2%. Spending rose 0.9%. After taxes and after inflation, what all of us earned together bought exactly as much in August as it did in July. The report puts that change at zero. People spent more anyway.
That gap came from somewhere. Side by side, the report’s two lines show personal saving falling by roughly $122 billion in a single month. What was left was 4.1% of after-tax income. Some of the rest will show up later, on a card.
That’s the part a good headline hides. Fear makes people careful. Relief makes them generous with themselves, usually before their own numbers have changed at all. The quiet habit that holds up is a boring one: last month’s statement gets read before the good news gets believed.
Somebody you love heard this morning that inflation is cooling, and relaxed a little. I’d forward this to them today. Prices are still rising, paychecks didn’t gain any ground in August, and a relaxed month has a way of turning up on the card statement a few weeks later.
If you want the longer version, I wrote about why debt plans fall apart when prices keep rising and what holds up instead.
A way out of default that isn’t paper anymore
Getting out of student loan default has always meant a stack of forms, and that stack is where a lot of people stopped.
Treasury and the Education Department opened a website today for people with defaulted federal student loans. They say more than 5 million borrowers have been in default for more than six years. The Defaulted Loans Support Center lets you apply online for the two common ways out. Rehabilitation, which the site says takes nine monthly payments in a row. Or consolidation, which takes three payments or signing up for an income-driven plan. Treasury says it replaces the paper process.
Nobody needs to pay a company to do this. If a paycheck is already being garnished, I wrote about what to do right now.
Also on the site since yesterday
Debt Collectors Won’t Stop Calling My Elderly Parent. Here’s What to Do Right Now.
The Student Loan Autopay Discount Deadline Just Moved to December 31
If any of this was new to you, somebody you know hasn’t heard it either. It’s free at yourmoneyactually.com, and I don’t sell the list. The places I actually use for my own money, and what I get out of telling you, are on one page where they’ll always be.
Nothing here is advice for your specific situation. It’s what I’d tell a friend over coffee, and I’d tell the same friend that the details of their own life outrank anything I’ve written here.
One more thing. Good news is allowed to feel good. It just doesn’t get to spend your money before your own numbers agree with it. Nobody climbs out of a tight spot in one month, and nobody has to. It’s ordinary months, one after another, that do it. I’ll be back tomorrow.
— Steve