Thursday, March 8, 2012

Reduce Stress To Save More Money

There are countless ways that people try to be more financially prudent, spend less, and save more. They make detailed budgets and stop eating out at restaurants. They consult financial advisors and start putting more earnings towards investments. They seek out a Green Dot best prepaid debit card or simply just use cash in an effort to reduce impulse purchases. The strategies go on and on.

But few people try to reduce their stress levels as a means of achieving greater financial health.

Yes, stress. We all know that stress is an unfortunate side-effect of modern life, and all of us probably want to – and take steps to – reduce our stress levels whenever possible. But stress isn’t just something that impacts your health and well being; rather, it is an emotion that has a proven influence on your wallet and on your bank account.

Research conducted at Coventry University Business School and at Duke University found that happier people tend to save better invest smarter, and generally make prudent financial decisions. They are further more likely to exert self-control when it comes to spending and make choices that take their long-term financial future into account. In short, happy people are personal finance experts when compared with the general population.

And how can we become happier? Happiness is such an intrinsic quality – one that you either have or you don’t, one that you can either realize or cannot. But there are several ways that people can concertedly try to make themselves happier, stress reduction being foremost among them.

So perhaps this is a better question to ask: How can we reduce our stress levels? Most stress is work-related, so finding ways to switch up the daily routine can always be beneficial. One can rearrange their work schedule, try to take on different projects, plan weekend getaways, or make an effort to occasionally work from home. Of course, your ability to reduce your work stress varies considerably based upon the nature of your job.

Perhaps a more sure way to reduce stress is by exercising on a regular basis. Exercise has been shown to be an excellent stress-reducer because it breeds newer, “calmer” brain cells that give us a greater buffer against pressures and anxieties. Whenever stress builds up, then, go for a run. It might make you more relaxed and, ultimately, make you happier in the long run.

It all comes down to a matter of personal effectiveness. What makes you stressed? How can you target and minimize this pressure source? Asking these questions may just be an important first step towards improving your long-term finances.

Thursday, March 1, 2012

How Debt-Ridden Housing Holds Back U.S. Recovery: Mian and Sufi

There is an emerging consensus that housing is weighing down the U.S. economy. The Federal Reserve’s housing white paper in January declared that “ongoing problems in the U.S. market continue to impede the economic recovery.” The 2012 Economic Report of the President argued that “declines in housing wealth can have a far greater effect on the economy than equivalent losses in other financial assets.”
Are these arguments sensible? Why should declines in house prices affect the broader economy? And why should the drop in housing wealth matter more than, say, a drop in stock-market wealth?
The key to understanding these questions is a four-letter word: debt.
In the absence of debt, economic theory tells us that house-price declines should have a negligible impact on aggregate output. To understand this argument, imagine a young recently married couple who own a one-bedroom condominium. They plan to start a family soon, and are looking to buy a bigger, more expensive house in the same neighborhood in the next few years.

Given their plan to upsize, a decline in house prices in the neighborhood makes them unambiguously “richer.” In the parlance of finance, the young couple are “short” housing services, and are better off when the price of such services declines.

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