Right now the United States economy is taking a turn for the worse. With the higher cost of energy which includes gasoline, heating oil, etc., the rising cost of food, the falling stock market, increasing layoffs, and the credit crisis, which necessitated a 700 billion dollar bailout by the Federal Government, times are looking tough for many middle class Americans.

Another huge factor that that has been affecting middle class spending power is the real estate market. Housing values are falling, so people are less able to get a second mortgage or a line of credit, since the equity is not there for them to borrow against, and in addition, lenders are tightening their standards. Also, the volume of resale of existing home units has decreased significantly. With this lower volume, the segment of the population that would normally downsize, such as empty nesters, retirees, those in financial distress etc., will not be able to do so as easily, and the hopeful results of a decrease in housing cost and an increase in available resources after living expenses may not be attained.

Also, because of the rising prices of energy and food, a higher percentage of the consumers’ income is being used for those items. When there is not enough spare income to purchase those items, they often end up on the credit card. Thus, resulting in higher balances on their cards, which then results in increased interest charges, and less credit available. Therefore, putting any large additional purchases on their card will be less of an option. Consumers are starting to adapt frugal spending habits, and are sticking more to purchasing the items that they went to the store to buy, without the impulse buying they often made when their finances felt more secure to them (Associated Press).

So when money is tight, the first thing that people will cut back on is the purchasing of high value luxury items. Once luxury items are eliminated and if families are still having trouble making ends meet, non essential spending will be cut back next. Thus, the total of all of these economic factors, and others, such as lower interest rates on savings, etc., it has had, and will have, a significant effect on the retail industry.

When manufacturing items, the more that is manufactured the less it costs to manufacture each item. So companies want to manufacture the highest volume to keep unit cost down, hopefully matching the volume that would be needed for demand. When the retail demand weakens, this creates excess manufacturing capabilities and product, causing increased inventory and business costs, causing the manufacturers to discount their products to the retailers. Retailers will similarly do the same thing, to keep inventory cost down and to keep their products moving they will discount their goods to the consumer. Another reason retailers will discount, in addition to inventory costs, is to provide shelf space for the newest models and products and therefore not to have out of date or stale product lines.

Companies are also seeing the effect of the real estate downturn, in addition to middle class America. Many companies own the land that their stores are built on. Since real estates values are dropping, this effects the land and building values that they own. Companies often get lines of credit on their buildings and their land, and would use the credit to keep their shelves stocked and give them the capital they need to buy the latest items and for the overall running of their business of operation.

If this trend continues, retail stores must and will continues to slash prices, have big sales, and send out coupons to make buying more attractive and draw in consumers. This is especially true during the holiday season, which is the biggest time of year for retail sales, and often makes or breaks the companies’ year. This will create an environment where if a family or person has any extra spending capability, they will be able to purchase items which at one time may have been out of their means, but now will be affordable. This is a limited example of deflation, which often can be catastrophic to an economy but also can be an opportunity to those not entrapped by the economic downturn.

In conclusion, if we have not already begun to see the increasing amount of sale signs in many store front windows, we will begin to soon. Companies are frantically fighting to try to get the consumers in their stores. So for the holiday shopper, with a little room left on their credit card, this could be an exceptional shopping season.

The Associated Press, comp. “Financial crisis leads retailers to slash prices.” MSNBC Business. 02 Oct. 2008. MSNBC. 04 Oct. 2008 .

by Mary Mashura

Author: Nicholas Tan
If you are ready to invest money for a future event, such as retirement or a child’s college education, you have several options. You do not have to invest in risky stocks or ventures. You can easily invest your money in ways that are very safe, which will show a decent return over a long period of time. First consider bonds. There are various types of bonds that you can purchase. Bond’s are similar to Certificates of Deposit. Instead of being issued by banks, however, bonds are issued by the Government. Depending on the type of bonds that you buy, your initial investment may double over a specific period of time.

Mutual funds are also relatively safe. Mutual funds exist when a group of investors put their money together to buy stocks, bonds, or other investments. A fund manager typically decides how the money will be invested. All you need to do is find a reputable, qualified broker who handles mutual funds, and he or she will invest your money, along with other client’s money. Mutual funds are a bit riskier than bonds. Stocks are another vehicle for long term investments. Shares of stocks are essentially shares of ownership in the company you are investing in. When the company does well financially, the value of your stock rises.

However, if a company is doing poorly, your stock value drops. Stocks, of course, are even riskier than Mutual funds. Even though there is a greater amount of risk, you can still purchase stock in sound companies, such as G & E Electric, and sleep at night knowing that your money is relatively safe.

The important thing is to do your research before investing your money for long term gain. When purchasing stocks you should choose stocks that are well established. When you look for a mutual fund to invest in, choose a broker that is well established and has a proven track record. If you aren’t quite ready to take the risks involved with mutual funds or stocks Health Fitness Articles, at the very least invest in bonds that are guaranteed by the Government.

Author Michael Russell
One of the biggest myths in investing funds to your retirement portfolio is that the investor should stick to mainly conservative investments such as bonds and cash reserves. The idea is that as you grow older, you’ll need money more readily, so playing it safe is the idea here. Interestingly, there’s an old method of determining your asset allocation by subtracting your age from 100. The difference is the amount (percentage) that you should devote your assets to for stocks. So a 60 year old person would have 40% in stocks. Sounds like a plan? Not for many.

Today, the retirement investing may not have the same goals for various reasons. One, the age of retirement could vary dramatically. Individuals could retire in their 80s, or others may want to retire in their 60s, depending on their retirement assets.

There are also investors who have saved very little for retirement. Often they find themselves in a catch-up mode. This isn’t the age-old pension plan that older generations relied on for their savings. More retirement plans are now defined benefit plans so the plan participant will have to provide how much they will contribute and how they will allocate their investments.

Sometimes, you’ll find investors not willing to place part of their paychecks for retirement. It behoves individuals facing a close retirement to accelerate their contributions and place assets in more aggressive stocks. Since aggressive assets such as stocks can help you increase your returns, catch-up employees need to weigh investment risks and returns carefully.

Retirement participants also underestimate their longevity and as such, they assess their length of retirement incorrectly. As individuals live longer, retirement income may erode over time. Especially for the person that takes the conservative approach to investing, less money may be available during the later years of retirement. One must evaluate other sources of income and determine if these sources can contribute. Consider Social Security or income from a part time job. Such alternatives may allow the investor to rely less on the retirement accounts and allow the person to adjust the allocation accordingly.

The fact remains that the investor needs to assess time horizon, risk tolerance and retirement goals in today’s environment, like any non-retirement portfolio. With people living longer, it makes sense to evaluate your investment portfolio for the long retirement. A 60 year old person thinking that he or she will retire soon may want to consider living in the 90s, a 30 year stretch for the retiree. How does one account this long duration? One would clearly have to account for the time horizon, which means allocate more to stock funds. Remember, stocks outperform bonds in the long run. A person at the age of 60 will be left out if their asset allocation is 40% in stocks. The long-term range may push the investor to take a more aggressive stance such as a 60% stock and 40% bond ratio.
Planning for retirement is not an easy step. One has to assess goals and other factors that will lead to proper asset allocation. More specifically, investors need to consider aggressive vehicles such as stocks, even at the beginning of retirement. There’s still hope. Retirement asset allocation tools are available that can help you plan for retirement. Ask your investment company if they have online calculators, or, simply, go to one of the two largest mutual fund companies (vanguard.com or fidelity.com). Personal financial advisors are a good way to get professional help as well.