Good news, everyone! Gas prices have dropped to less than $3 a gallon. In Santa Maria, prices have been spotted as low as $2.99. That’s a small ray of sunshine for commuters in an otherwise bleak and dreary economic climate. But, as it turns out, it’s not the only one.
As the old saying goes, there’s always a silver lining, and with reports of mortgage troubles evolving into the Wall Street debacle turning into the economic crisis, it seems like people could use a ray of sunshine right now—no matter how small.
So take another look at those gas prices: A month ago, the average price at the pump was $3.69 a gallon. That was down from an all-time average high in California of $4.98 a gallon in June of this year, according to the Automobile Association of America (AAA). As of press time, the statewide average is a cool $3.12.
The drop in prices can be traced directly back to the economic downturn. According to the New York Mercantile Exchange, the price of a barrel of crude oil has dropped to $62.16. At the height of high gas prices this summer, a barrel of crude was going for $120 a barrel.
It’s a simple case of supply and demand. Expanding countries needed a lot of fuel, and we needed a lot of fuel when prices were high. Our sinking economy has had a ripple effect on every country that chose to invest in the United States. Now those countries, well, maybe they don’t need so much oil. At the same time, American drivers are trying to cut back, and so demand goes down, followed by prices.
According to the Department of Energy, prices are likely to keep falling. Gasoline drives the economy—literally. As gas prices drop, the falling costs could trickle down to the price of goods and services. Now that’s a silver lining.
The Santa Maria Valley Chamber of Commerce and Visitor and Convention Bureau is hoping that lower gas prices will be a draw for tourists this year. Gina Keough, Visitor and Convention Bureau manager, just got back from a conference where she said she learned how to take advantage of this economic downturn.
She explained that Santa Maria is within driving distance of two major population hubs: Los Angeles and San Francisco. There are people in those areas who, in a normal year, would travel overseas, she said. Not this year. This year they’re cutting back, and that leaves an opening for closer destinations, like Santa Maria.
So take another look at those gas prices: A month ago, the average price at the pump was $3.69 a gallon. That was “We’re basically in the middle of the state, and our target markets are one tank of gas away,” Keough said.
Keough explained that the bureau plans to promote golfing destinations, tout wineries, and even court the coveted bird watching population this year. Europe’s tourism loss could be Santa Maria’s gain.
But what’s the gain for Santa Maria residents? Is there any?
It depends, financial analyst Chris Brown says, on whether or not people can stay calm and ride out the downturn. Brown is the owner/operator of Chris Brown Investment Management, and he’s been looking after his clients’ money for more than 20 years.
Right now, he said, “my call volume has never been higher.”
People are scared, Brown said. They’re scared that their investments will lose money, and that their retirements money will go away. The good news, Brown said, is that the vast majority of his clients will ride out this downturn just fine.
“I remind them I’ve seen these market corrections happen before at least a couple of times,” he said.
In total, Brown said that he manages more than $200 million. The money is usually savings or retirement funds, and Brown makes sure that the money stays safe and works for his clients. On average, he manages less than $50,000 for each client, he said.
And there is something to be gained in the current economic climate, Brown explained, but only for those who are in a position to take advantage. Right now is a good time to buy a house, he said—but only if the buyer plans to live in it for at least five years.
Jerry Bunin, government affairs director for the Homebuilders Association of the Central Coast, agreed.
“It is a good time to buy,” he said. “There are some great deals out there—but here’s the dark side of that silver lining: It’s harder to get a loan.”
Few people are taking advantage of the low prices, Bunin said, despite an inventory of houses available.
“We’re not seeing a lot of people running forward to buy,” he noted.
New houses, Bunin said, will run out eventually, because builders aren’t starting new projects. In his opinion, new units aren’t going to get any cheaper. Bunin said that the prices are already at rock bottom.
Financial analyst Brown was a bit more optimistic about the possibility of getting a loan, and said that a client of his, a young firefighter, was recently able to buy his first home at a very reasonable price.
And there’s another silver lining to be found, Brown said. Stocks are on sale. Now is a good time to buy stocks, he explained, because they’re basically the same stocks that were valuable just a month ago, but now are cheaper.
Cheap doesn’t necessarily mean risky, either. The key, Brown said, is to diversify. Buy mutual funds, which are groups of diversified stocks, and make sure that all industries are represented.
“Spread your risk around,” Brown said, “so when an AIG happens, it’s not your whole account.”
This advice especially applies to young people in their 20s and 30s, Brown said. At that age, there’s more time to play around with stocks and get money into a 401(k).
Of course, this all assumes that a person has money. Right now, a lot of people don’t. April Lewis-Parks, director of education for the national nonprofit Consolidated Credit Counseling Services, said that their call volume is up 30 percent from last year. Not only that, but the average amount of credit debt per person has risen from $8,000 to $15,000.
“People had been using their credit cards for everything,” she said.
Some of the worst cases involve people using a credit card to pay their mortgage, she said, and then losing their house anyway. Still, Lewis-Clark said that there’s a light at the end of the tunnel, even for these people.
“One positive aspect is people are going back to using cash, she said. “I think that’s a positive thing, that people are stepping back and taking a closer look at their finances.”
Lewis-Clark said that teaching people how to use credit is one of the main goals of Consolidated Credit Counseling Services. An example of a good credit purchase is a car loan, she said, or a large appliance. Bad choices include any purchase of less than $50.
“We hope that this whole crisis will teach people what credit is for,” she said.
The call center at Consolidated Credit is getting 1,000 new calls a day, according to Lewis-Clark, so the message could be getting through.
SIDEBAR:
Money, money, money
Federal Reserve Chairman Ben Bernanke may not want to admit it, but the rest of us know what this is: It’s a recession. Since I wasn’t a tax-paying citizen during the last recession in the early 1980s, this is the first economic calamity that I’ve had the pleasure of experiencing. It’s an interesting experience, that’s for sure. Kind of a mix of melancholy, stirred in with some fear, restlessness, and overall malaise.
On the bright side, because this article is all about looking on the bright side, at least we’re not in the middle of a “panic.” That’s right, crack a history book and you’ll see a whole list of economic crises in the United States throughout the years, including the Panic of 1819, followed by the Panic of 1857, 1873, and the list goes on. According to Wikipedia (a credible source of modern history?), this current economic downturn is called the “Economic Crisis of 2008.” So it’s a crisis, but at least we haven’t panicked.
Still, for those of us one paycheck from panicking, it might help to take action, take charge, and start making more money by saving it. Say the old cheapskate mantra with me: “A penny saved is a penny earned.”
With that in mind, we in the newsroom have come up with a few ideas for saving, and even making money. Some involve websites, others involve paperwork, and all require some effort on your part, but hey, money is money, right?
Found money
I recently received a letter from the state government informing me that the cable company owed me $60. Sounds like a dream come true? It was pretty awesome. Turns out, a law was passed in 2007 requiring that the State Controller’s Office try and reunite consumers with lost rebates, refunds, and other forgotten money floating around California.
This is money that belongs to taxpayers, but that they’ve forgotten about. This is how it works: Go to sco.ca.gov and click on the link that says “Search for unclaimed property.” Type in your name and see what pops up. Try using just your last name, your maiden name, and looking in cities where you used to live. This is actually kind of fun. I typed in my last name and found some relatives that had some money coming to them. It wasn’t a lot of money, but every little bit helps.
Follow the instructions on the website to claim your money, and it’s yours. Call the State Controller’s office with any questions at 1-800-992-4647.
Made money
Consignment
I can sense the angry letters from nonprofits pouring in as I write this, but what about instead of giving your kid’s old clothes to charity, you try and sell them and get a little cash back? Consignment stores like Kids n Things in the Stowell Center Plaza in Santa Maria will buy kids’ clothing.
Be warned, however: Consignment stores aren’t interested in your torn, worn, and otherwise stained stuff, but if you have nice things that the kids have outgrown, give it a try. You may get some money back. If not, then off to Goodwill it goes, but at least you tried.
There are consignment stores for grown-ups too. Get online and look around, but only if your clothes are worth the gas money to get there.
Recycling
The CRV, or California Refund Value, of cans and bottles recently increased to 5 cents for each beverage container less than 24 ounces and 10 cents for each container 24 ounces or greater. I’m not suggesting Dumpster diving in search of these treasures, but how about recycling the cans and bottles that you’ve already bought?
There are recycling centers located throughout the area. Visit conservation.ca.gov and hit the recycling tab to look up the closest one to your house. If you don’t feel up to collecting the cans and waiting in line yourself, how about making the kids do it? They collect the cans, and they get to keep the money. Less work for you, and a money management lesson for them—that’s what’s called a win-win.
Saved money
The library
The books here are free. Free. Enough said. If you’re a reader, forget all about bookstores and head to the library. They have almost every book you could ever need, and if they don’t have it, they can probably get it for you. If it’s checked out, they’ll put your name on a waiting list and get the book to you, eventually.
Sure, it might be slower than just buying the new bestseller, but sometimes patience equals savings. Which brings us to:
Netflix
Don’t go to the movies. Join Netflix. The online movie rental company sends DVDs to your door in prepaid envelopes. Plans start at $4.99 a month, but most people I know have ended up in the $15 range.
Netflix, of course, only saves you money if you stay home and rent movies instead of dropping $10 a head to go see them in the theater. It’s a sacrifice, sure, but well worth it. I use my Netflix subscription to watch TV shows without ads, and all in a row. Hey, now that I’m thinking about it, drop your cable service too. While everyone else is watching Grey’s Anatomy season-whatever’s-on-right-now, you’ll be watching the most recent season commercial free, and saving money at the same time.
Maghound
Magazine junkies can save money by canceling their subscriptions and signing up for Maghound. It’s like Netflix for magazines. For $4.95 a month, you get three magazine subscriptions sent to your house.
Here’s an example: My dad subscribes to Time and Sports Illustrated for about $100 each a year. If he cancels and switches to Maghound, it would cost about $60, plus an extra charge because both magazines are weeklies, adding up to about $75 a year for both magazines, plus one extra.
Barter on Craigslist, get things free on Freecycle
You can’t get more old school than bartering. It’s a simple trade, and Craigslist can make it happen. Just check out the bartering section and there may be an opportunity for you to trade skills (like house painting) for something else (like car parts). The opportunities are endless.
Over on Freecycle, people are literally giving things away for free. Every day there are posts for clothes, furniture, random items, fruit from backyard trees, and more. Go to freecycle.org to sign up for the local group and then get e-mail updates. Respond quickly, because the good stuff goes fast.
Contact Sports Editor Sarah E. Thien at sthien@santamariasun.com.
This article appears in Oct 30 – Nov 5, 2008.