Authored by: Stephanie May, NBR Summer 2009 Intern

The first step when starting a workout plan is realizing you need to exercise and actually getting yourself to the gym or the park or wherever you are going to work out. Similarly, when starting a rehab program, the first step to recovery is admitting you have a problem. So here we go. My name is Stephanie and I am a chronically careless spender.

I feel I need to take this step because I don't want you, my readers, to think my biggest money problem is my tendency to buy a few too many Frappuccinos. You should hear my whole story. It's a little scary, so get ready...

When I was little, my grandmother generously put aside some money for my college tuition. She invested it, and for years it has been growing. When it came time to apply for colleges, I was told I could go anywhere I wanted. Money wasn't a problem. Luckily, I decided to go in-state (Go Buffs!!), so my tuition was half of what it would have been had I chosen an out-of-state school.

As I watched GM CEO Fritz Henderson's press conference this morning I was struck by a couple of his comments. (Henderson met with the media in Detroit as the company emerges from bankruptcy.)

First, Henderson said "business as usual is over" at GM. I hope so. Prior to its chapter 11 reorganization, GM was a hulking giant unable, and possibly unwilling, to change its ways. After the terrorist attacks in 2001 GM couldn't sell big sport utilities without big rebates or 0% financing. Yet, the company still clung to the segment thinking consumer sentiment would change. It didn't and things got worse last year when fuel prices soared above $4.00 a gallon. The company's commitment to making smaller cars and new technology hopefully is a move in the right direction.

Here's a statistic that may shock you: The average US household owes 128% of disposable income. What may be more surprising is that's actually an improvement from the peak of 133% at the end of last year. To give you perspective, as recently as the mid-80's, the load was about half that amount. It's no wonder economists think it will be at least 6 years before consumers have a good handle on their debt.

Now, the good news. There has been significant progress on savings. The savings rate--which was actually negative for part of last year--is now up to almost 7%. That's not far from what economists say is the long-term average of about 9%.

Health care reform doesn't come cheap. To cover the uninsured and get the underinsured truly covered will cost between 1.3 and 1.6 trillion (with a T) dollars over the next decade.

And it doesn't come easy. Senator Chris Dodd, who is leading the Health Committee in Senator Kennedy's absence, likened reform to a Rubik's cube. All the parts need to come into line to make reform work. Avalere health policy analyst Jon Glaudemans says a good example is the requirement for insurance companies to enroll anyone regardless of pre-existing condition. That can't be done without another requirement that people buy insurance. Without that additional requirement, people might only buy insurance once they were sick, which could create a problem for the whole system.

This is one of those matches headline writers love and fight promoters wish they could schedule for the ring. Google v. Microsoft, Microsoft v. Google, is there room for both?

This reminds me of the battle in the 1990s between upstart Microsoft and market dominating IBM which, many wags love to claim, was won by Microsoft. The lesson pf those days, they claim, is that Google, now offering products which compete with Microsoft on almost every front, is bound to defeat the reigning software champ just because they are younger, bolder, and cooler.

Authored by: Stephanie May, NBR Summer 2009 Intern

Judging from the whimpers coming from my debit card, I am pretty sure my holiday weekend was a fiscal fiasco. I don't know how your Little Black Book looks, but one peek at mine and you would think I paid for all of the fireworks in Washington. Coming off of that 3 day holiday blowout... I was feeling like a financial failure. My stress level was high and my balance was low.

As I was reflecting on my money makeover, I was reminded of a piece of advice nutritionists give first time dieters. They would be quick to warn you that over-dieting is a death sentence. If you deprive yourself of everything you love, you'll be lucky if the diet lasts even a few weeks... and as for that life change? Forget about it. You need to keep indulging in the things you love most (cheesecake?) ... but in moderation (one slice, not four.)

Yesterday, I reported on the impact furloughs are having on wages.

So this caught my eye from Goldman Sachs today:

"We expect average hourly earnings growth to turn negative next year, reaching -½% year-on-year by the fourth quarter. . . . Our forecast includes a judgmental adjustment for workers' likely resistance to nominal wage cuts; without this adjustment, the projection would be -2%."

Ouch. Nothing influences voters (and Power Town) more than their pocketbooks. This will be a major issue in next year's election. Count on it.

My kids never tire of hearing how, when I was their age, I could buy an ice-cream cone (three scoops!) for a quarter.

It's $3.50 now! (OK, that's at the fancy ice cream place.)

The important question here is whether the price change matters? Obviously, if the ice cream is identical, then the cost of ice cream has gone up in name. But if everyone in the country is earning 14 times as much, then the real cost of ice cream to me is the same.

At the end of the day or week or year, what we really care about is not how many dollars we have, but how much those dollars can buy. And we also care a lot how much we have to work to get those dollars with which to buy things.

When we confuse the real cost of something with the cost in name, we are falling prey to what economists call "money illusion." As Irving Fisher explained many years ago: "Money illusion . . . is the failure to perceive that the dollar, or any other unit of money, expands or shrinks in value."

What really should matter to workers is how much they can buy when they get their paycheck.

Authored by: Stephanie May, NBR Summer 2009 Intern

Any nutritionist or diet expert will say mindless eating is the worst thing you can possibly do for your diet. And, I've discovered in the past few weeks that mindless spending is just as bad. When you're not paying attention, you can finish an entire bag of potato chips (I say this from experience)... or you can spend an entire paycheck without even realizing it! Have you ever walked out of a store and realized that you've just spent 30 bucks on stuff you don't need?

As I was walking back to the office from Starbucks yesterday, I was hit like a bus by a very serious truth: I am a chronically careless spender. I looked down at my Venti Caramel Frappuccino -- which had cost me $4.50 (and more calories than I'd like to know about) -- and I wondered... what would happen if I used my Starbucks money elsewhere?

Now to be fair... my caffeine addiction has been generously funded by my amazing friends and family who have given me Starbucks gift cards over the years. But if I continue the 4-day-a-week Starbucks tradition for a month... 6 months... a year after those cards run out, how much money am I actually spending? So I crunched some numbers.

If you had to identify the biggest business development of the year's first half, what would you choose? GM declaring bankruptcy? Bernie Madoff being sentenced to 150 years? The Obama financial regulation proposal? Ken Lewis's demotion (to mere CEO, rather than Chairman and CEO) at Bank of America?

It's a tough decision...but I would vote for none of the above. Rather, I would go with the U-Turn in the Stock Market that began in early March.

Why? Until March 9, stock prices were still in free-fall, continuing the crash of 2008. That reflected a continuing stream of bad news on the economy and serious concerns that the financial system might collapse. But then the Stock Market began to turn round and headed in the other direction--rallying some 40 percent over the next four months. (Even that move only brought prices back to where they started the year, but who's complaining?)