You are not Jack Nicholson

There’s an excellent dialogue going on over at Million Dollar Journey that includes a few comments from yours truly. The gist of the comments I’ve been following (and there are two different comment ‘streams’ going on, so you have to read through them) is that there’s a disconnect between competence and promotion in many organizations. I take the position that who you know is far more important than what you know, a position held by Gates VP.

I should start off by saying I dislike the position I’m defending. I wish that every promotion in every company was always based on the simple question “who can do this job best?” It’s not. Often the question is “who stood up for me in that political battle over who got the corner office” or “who hangs out after work and has a beer with the boss” or, even worse, “who is male?” This is awful – but I think it’s still true, and it’s going to take many more years to break that pattern.

I have been having an earnest disagreement with a colleague at work over the past couple of days. We had a large meeting, including 40-50 people from several departments, to determine a course of action for a big corporation-wide problem. The meeting was ‘facilitated’ by one of the groups, meaning someone stood up front and assigned responsibilities and due dates for various tasks. In breakout conversations afterwards, I took the position (as did other consultants present) that this exercise was ridiculous. Assignments were given and responsibilities assigned before a goal was defined or basic information was discovered. Most of this was brushed off with earnest declarations that “at least we’re getting something done!” by employees of the corporation.

I wish I could say that pure technical competence is always going to win out. I would be happy to hear that people who read this could say “my workplace is like that!” I can speak mostly just to my experience, and my second-hand knowledge of my family’s, friends’ and colleagues’ experiences. For all of them, their workplace promotions and treatment have been driven by a combination of accident, personal preferences and irrational behavior, with a tiny mix of technical competence thrown in.

As far as competence goes, there may be people out there who are The Only. Jack Nicholson, for example, is more or less the only guy who can put Jack Nicholson in a movie. You can’t outsource to India, or hire 30-year-old Jack Nicholson. You can hire someone similar but not the same. If he doesn’t show up, you don’t have Jack Nicholson. You, however, are not The Only. Whatever you do, I guarantee you that somewhere out there, a person exists who can do your job as well as you can for less money. They may not be interested – maybe they are working for someone else, or prefer to live in a different city, or they just never heard of your job. But you are not irreplaceable.

I use that point to show that competence can’t be the driving factor. Often bosses may not be interested in replacing you because it’s too much of a hassle to fill out the “no cause lay off” paperwork with Human Resources, or it means they’d actually have to break in a new person. But if the opportunity to replace you with someone who could do your work just as well as you presented itself – with no effort on your bosses’ part - and they would take the job for less money, why wouldn’t your boss replace you?

I will tell you the only reason why, and it’s not a good reason. Maybe there’s a boss who likes having the guys around. He likes football and blonde jokes, and he’s surrounded himself with guys who at least act like they do, too. Now maybe there’s a recent MIT graduate or foreign-born professional or woman who could do one of his guy’s jobs, but this boss inwardly cringes a bit at the prospect of having to watch himself. He likes that crutch of talking about the Giants as an excuse for real teambuilding. So he will keep on his guys.

You could have the same scenario play out different ways. Bosses who like single people because they don’t have commitments like kids pulling them away from a single-minded devotion to work. Other bosses may like pretty women, or people who curse, or Christians, or quiet people or Ivy League grads. The preference doesn’t have to be negative, at all, but it’s a preference, and if you don’t meet that requirement you’re going to have to work harder to make up for it.

So while I think the old boys network as a clear, obvious component of the corporation may be fading, I don’t think it’s realistic to assume that corporations always reward the best, smartest workers. I can look around my workplace right now and see plenty of smart people who are working for less-smart people. I have seen plenty of people smarter than me stuck levels below me, and plenty of people stupider than me well above me in the corporate hierarchy. Every time, the reason has been the preferences of the boss or the group-think of the management team leading a department or just a herd mentality. You shouldn’t ever just rely on your brains to succeed, because if you do you’ll be smart John Kerry watching dumb George Bush take the oath of office. Successful, but a step behind.

the space between

In America, many families are scattered far and wide across the continent; some may even be living overseas. Approximately 100 years ago, my mother’s family all lived in one area of one state, and my father’s family lived in an even smaller ethnic community in one state. Traveling was of course more difficult so while the distances might have been shorter the travel time might have been equal. Today I live approximately five hours by car from my parents and my brother and his family. I live a two-hour flight from my mother’s parents, and a three-hour flight from where my father’s parents lived. At various points in my life I have lived up to twelve hours’ flight from my family.

My wife, being an immigrant, has even odder situation. Her family, for the most part, emigrated en masse to the New York area, so they all live within approximately 1-2 hours of each other. Her relatives who didn’t emigrate, however, live almost a day away. My brother’s wife has a similar situation.

So if you start by considering my nuclear family of four people, our links to other family spread out across the globe rapidly. Various reasons are behind where we all live. I ended up in the New York area because of work and remain here for work, and for my wife’s family and for a general love of the City. My brother made a conscious decision to leave New York for a more affordable area for raising a family. My parents moved to be closer to my brother (and closer to me, although still fairly far away). My father’s parents had moved to a warmer climate. My mother’s parents have lived within a ten-mile radius for the last 40 years. My wife’s sister and her family have chosen to stay close to their parents, while my wife and I moved to a suburb of the city to have more space. The list can go on and on.

But what are the financial costs of being so scattered? Forget housing and wages, because I think that adjusts – usually – with the general cost of living in an area. I make more in New York than I would in Chicago, or in Lexington, Kentucky, but my costs are substantially higher, too.

My family goes back and forth to my in-laws on a regular basis. The trip takes a little more than an hour both ways, and with tolls and wear and tear on the car I figure a trip costs $25 or so, twice a month. No big deal. Going to visit my side of the family, however, is expensive. Flights to visit my grandparents are usually no cheaper than $250 per person. Right now Little Buddy flies for free, but soon he’ll have to have a ticket too. Then there’s parking, tolls and all the various to-and-from-the-airport costs, not to mention a hotel on arrival. I estimate a recent four-day trip probably cost over $1600 for the three of us to fly to see my grandparents:

  • $200 for meals
  • $700 for the hotel
  • $30 for tolls
  • $0 for parking since my in-laws drove us to the airport, but it would have been $100
  • $600 for the flight (fortunately we had vouchers for $250 of that, so a net $350)
  • $100 for other miscellaneous costs – food for Little Buddy once there, etc.

$1600 is no small amount of money. That’s almost half of what I put in my Roth IRA this year. Now imagine visiting people in more than two or three locations; the cost becomes prohibitive. Driving to visit my brother and parents is cheaper, although with gas prices and tolls I would guess it probably costs more than $100 each way in total, plus other expenses – a hotel if we don’t want to crowd them, and so on. We tried flying, but that experience was far more expensive, even with cheaper tickets ($125 apiece) and very unpleasant due to the weather.

So if I visit everyone in my family once a year and my wife’s family once a month, you’re looking at several thousands per year just in ‘visiting’ expenses. Since being close to your family and friends is a good indicator of your overall happiness I don’t have “never visit” as a solution. So how do you get around it?

  1. Don’t always visit family for holidays. I know everyone likes to be around family at Christmas or Passover or Arbor Day, but typically airlines charge more, hotels charge more and the travel experience will inevitably be worse due to crowding. Consider visiting near the holidays.
  2. Gather. Try not to visit one set of relatives one month, then one the next. Try to get people to agree to family reunions.
  3. Stay on the lookout for travel bargains. I found a cheap resort option one weekend that was halfway between my parents and me, and it was a nice way to spend a weekend without spending nearly as much money as the resort usually charged. I try to keep an eye out for airline bargains, although in a surprisingly noncompetitive market like New York they are few and far between (Continental dominates the routes I fly to visit family, and doesn’t give much on prices).

It’s certainly something we think about a lot, but with family scattered around it’s harder to move closer to some without moving farther from others. So for now, unfortunately, there will remain a space between us.

book giveaway and carnival of personal finance

First off, the winner of the book giveaway is Saving Diva! Check out her blog, “Saving for a home of my own”. She just won a Rockin’ Girl Blogger award, but I won’t be jealous since I don’t think I’m eligible! 🙂

Thanks to everyone who commented and linked; I’ll have another giveaway soon, so stay tuned!

In other business, my post “Aging Gently” was one of the articles featured on the 109th Carnival of Personal Finance. I’m the lone entry on retirement, which surprised me a little bit…! Hopefully I’ll work up to hosting a carnival one of these days.

I will not pay for my children’s college education, part 2

Continued from Part 1. Many of the personal finance sites I read concentrate on a few key areas: reducing debt, making investments, emergency funds, saving for your children’s college education and saving for retirement. I agree that most of these are important topics, but I don’t believe that you should save for your children’s college education. This may come across as a shocking or neglectful thing for a parent to say, but I have my reasons.

College costs. A report, “Trends in College Pricing 2006” (warning, big PDF), noted that “[p]ublished tuition and fee charges at four-year private colleges average $22,218 in 2006-07. The $1,238 increase over 2005-06 represents an increase of 5.9 percent, or 2 percent after adjusting for inflation. The average total tuition, fee, room, and board charges at private four-year colleges and universities are $30,367.” The report goes on to note that this amount is usually reduced by student aid, but let’s assume you’re trying to pay for them to go to the best college possible (no Cornell for my baby, only Yale/Harvard/Stanford for her!)

If we consider that tuition, fees, etc. increase at the same rate going forward (no sure thing) then a private school tuition for four years will be $42,000 in today’s dollars by the time my son is in college, around the year 2024. If you consider inflation, that will be $80,000 or more. So you’ll need $80,000 in the bank for each child. Keep in mind that the starting point, $22,000 is the average for a four-year college, not for the very best colleges. Yale, for example, now costs $35,000 per year all in. In 2024 a Yale education might cost – get ready - $370,000 for a four-year degree by my very rough calculations. I won’t have that much saved, frankly.

Personally I am not convinced that there is a lot of value in a private school education that is not present in a state university education. There may even be an argument that not everyone needs a four-year degree, to be honest. I am prejudiced. I received a bachelor’s degree and a master’s degree from a state university, and I work alongside Ivy League grads every day. They don’t make any more money or have any more prestige due to their schooling than I do; the distinction between our backgrounds was flattened out back in the first 3 or 4 years of our careers. By year 15 nobody asks where you went to school unless you’re talking about sports.

Those Ivy grads I work with may not be the most successful Ivy alumni, though. If you want a career with the movers and shakers of the world, you need to go to a school where you’ll meet fellow future movers and shakers. For every Ronald Reagan attending Eureka College there are a thousand Bill Clintons/John Kerrys/George Bushes attending Yale, I’m sure. But don’t think that a state school means your ambitions will be cut short, and unless you have ambitions to be the next hedge fund manager or a U.S. Senator I’m not sure a private school is that much better. After you get that first job, no-one will much care if you went to State U. or Fancy Institute except on football weekends. Of course, if you want to major in some specialty that only exists at some private school, or you have some other reason for going (family ties, etc.) there’s nothing wrong with it, but I don’t plan on giving my children an extra $328,000 just for the heck of it.

Invest in early education. One of the main reasons I’ve been uncomfortable with 529s is the fact that you are tying up money for a college education. I know you can get it out, I know it can be used for your own education if your child decides to run off to Nepal, and so on – but what if you need money for education in the early years? We are considering a private pre-school and kindergarten for our son; first, for safety and quality reasons and second, for our own opinions on educational philosophies (we are very interested in Waldorf education, for example). We hope that money spent early on can provide some love of learning that will help earn scholarships later on. I won’t have an answer on whether this was a good idea or not until 18+ years in the future, but it makes sense to me.

Conclusion

I guess in the end this is more of a decision related to your personal values. My parents helped me a lot during college, but I provided the great majority of the money for the total costs of my undergraduate and graduate education came from scholarships and teaching jobs, including 100% of tuition. While my parents could have (and I am sure would have) scraped together the money for me to attend Harvard (yes, I was accepted there), I never felt a burning desire to attend and haven’t ever felt that I shortchanged myself.

My hope is that my son will appreciate the fact that I have enough confidence in him, even now, to know that he’ll be able to put himself through college with scholarships and hard work, and hopefully we will return the favor by making sure first that we are never a burden to him.

I should also point out that I do have a 529 for my son (set up by his grandparents), but it’s mainly a place for relatives to put gifts. I haven’t contributed anything to it myself to date. Please don’t beat me up too much in comments.

I will not pay for my children’s college education, part 1

Many of the personal finance sites I read concentrate on a few key areas: reducing debt, making investments, emergency funds, saving for your children’s college education and saving for retirement. I agree that most of these are important topics, but I don’t believe that you should save for your children’s college education. This may come across as a shocking or neglectful thing for a parent to say, but I have my reasons.

Save for your retirement and debt reduction first. Quite simply, there is a good chance that any 529 or savings plan you start today will not have a better return than debt reduction or your own retirement savings. You may argue that a 529 and a 401(k), for example, have a similar pre-tax benefit, but if your 401(k) has an employer match it’s going to come out ahead of a 529. Now, if you have an employer who will match 529 contributions, then it’s probably a good idea (and hold on to that job like grim death because I bet it offers very good benefits in general). But I doubt your 529 will return 15% if your IRA is returning 3%; most likely they’ll both be in the ballpark of the market in general, assuming you have similar funds in each.

Just remember that if you are a burden on your children when you retire, due to debt or lack of savings, much of the money you saved for their education may be lost. You may unconsciously think of putting money into your child’s education as a retirement plan (“my son the rich doctor will buy me a house in Arizona when I’m old!”) but that’s putting a huge amount of faith in a future unknown. What if your child decides instead to work as a doctor for “Medicin Sans Frontieres” or has eight children of their own (i.e. no money leftover)? Or, more brutally, decides that he or she want a vacation home in California and decide to leave Mother and Father in the one-bedroom in Funkytown? I hope that my son will spend his money on himself and his family rather than needing to help me out. I hope that if I really need help, he’ll be there, but more in the sense of physical or emotional or ‘administrative’ help when I’m too old to manage for myself. And it takes a lot of money to pay for the golden years.

Finally, I think it goes without saying that if you’re paying 18% on credit card debt but skimping on debt repayment to fund a 529, and your 529 returns are 10% per year (even considering the tax advantages) it’s probably better to pay the debt down first, then worry about your children’s education.

Student loans/scholarships. Quite simply, nobody is going to give you a loan or a gift to fund your retirement. On the other hand, student loans are easy to come by and scholarships, while not always easy to come by, are plentiful. I was no great athlete, but I received tennis scholarships. I also received a number of academic scholarships. Some were general, but others were award-related (National Merit Finalist scholarship, for example). If your child studies hard and participates in extracurriculars, they will receive scholarships. They may not receive scholarships to every school they want to attend, but I guarantee there will be a college willing to extend “free money” in the form of a scholarship to attract students with good grades or community leadership activities or athletic ability.

…to be continued…

how a ‘regular person’ can make passive income


Wikipedia has a rather tortured entry on passive income. The entry begins by categorizing all income as either earned (wages), portfolio (income from market instruments such as shares) and passive (income from rental properties, royalties, etc.). I think a clearer definition might be to define all income as either earned or passive. Earned income is income arising from a continuing exchange of labor or time for money. Passive income is income arising from an exchange of money for the same unit of labor or time. That’s a confusing way of saying earned income is when you must continue the activity to keep getting money, and passive income is when you do the activity once and then keep getting money. So if I work for wages, I have to show up 8 hours a day to get paid 8 hours’ worth of wages. That is earned income. If I have passive income, I show up and do some work for 8 hours and then get paid that day, and the next day for the prior days’ work, and so on.

My definitions are fairly vague but the general idea is that earned income requires continuing work and passive doesn’t. If you buy a house, fix it up and rent it out, theoretically it could earn rent for the lifetime of the house, making it passive income. If you buy a house, fix it up and sell it, you are earning money for the time spent buying, fixing and reselling, so it’s earned income.

So why doesn’t everyone just forget earned income? Earned income is much easier to come by, for starters. I sell my time at a very specific rate to clients to perform consulting services, and in doing this I’m only doing the same thing 200 million other Americans do. If they have an 8 month project, they pay me my rate times 8 hours a day times 5 days a week times 4 weeks per month times 8 months. They don’t pay me any more after that. However, if I wrote a blog post, and someone comes to my page via a search engine and I get an ‘impression’ from Google Adsense, then the initial hour spent writing that post could potentially generate income for 8 months if people keep visiting the page. But it is hard to imagine that I could ever get to the point where the one hour spent writing a post might equal one hour spent doling out my consulting wisdom, earned through 15 years of experience and a master’s degree. That would be the goal, though.

I do have a fair amount of passive income which I have purchased with my earned income: stocks and mutual funds. Once I buy a stock, the dividends continue to come even though the earned income used to purchase that investment was capped out. If I worked enough hours to earn $100, then bought one share of a stock that earned me $1 per year in dividends, that passive income would (in theory) truly start after 100 years. Up until then it was just a deferral of my earned income in a sense.

I have given a good deal of thought as to what a ‘normal’ person like me, a wage earner, can do for passive income. I only come up with a few areas that are realistic:

  1. Owning dividend-paying stocks, interest-bearing cash accounts or other market-related investments.
  2. Owning and renting property.
  3. Creating original content (writing, art, music, etc.) and selling it.

The first two present the problem that you need at least some earned income to ‘kick off’ the passive income stream. You have to buy a stock or a house. Sure, there’s leverage, but still, some sort of earned income has to be there to initiate things. The third item is where the possibilities are.

This blog is original content. It may not be good original content, but it’s definitely my own work. Selling an original MP3 would be, too. If I can create good enough content, people will want to read/listen/acquire it, and they will pay for it, either passively through advertising or directly by paying me for it.

The goal, therefore, is probably to work on increasing your creativity, which is free of cost but can generate income. Of course the time spent in generating creative thoughts has to be retroactively paid for once the income comes in, but at some point - like the stock example above - you reach a break even point and move into true passive income territory. Once you have reached that point, the need for earned income decreases and you can stop selling your time for money.

This is nothing new to readers of Kiyosaki or Steve Pavlina or Lazy Man and Money or dozens of other blogs, who have covered the same ground in more depth and precision than I. But I think the challenge for many people is how exactly to recognize passive income generators. Owning and renting property and stocks is far and away the easiest way, but still require an initial payment of earned income (and again, many people would argue you can borrow money to generate that, but no-one will lend you money if you don’t have some sort of earned income ‘background’). Creative content, however, does not require an intitial payment of earned income, but a retroactive payment once it is created. So I continue to try to think of things to create, so I can generate more passive income and quit selling so much of my time (a limited commodity) to other people rather than using it myself.

IQ and wealth

I read an interesting article, “A high IQ is no financial guarantee”, on MSN Money today. There were a couple of key takeaways I got from the article, but you should read it before continuing. The author, Karen Aho, points out that you can’t draw any broad conclusions from the study… but I will! The study focused on baby boomers, since they can, for the most part, be looked at retrospectively in terms of savings and income.

My key takeaways:

  1. Saving money has nothing to do with IQ: “[people] with average and low IQs were just as good at saving money as those with high IQs.”

  2. Earning money does have something to do with IQ: “subjects earned an average of $234 to $616 more per year for each added IQ point, meaning someone with an IQ of 120 (top 10%) made $4,680 to $12,320 more than those crowded in the middle of the bell curve with an IQ of about 100.”

  3. Earning money has nothing to do with saving money: While those with above-average IQs were three times more likely to have a high income as those with below-average IQs, they were only 1.2 times more likely to have a high net worth.

  4. Nobody is really good at saving money: No IQ group had built up "a significant financial cushion." The median baby boomer’s wealth equaled 18.6 months of income, while the highest-scoring group, those with an IQ of 125 or above, had little more than two years of income saved.

  5. Money is not the only measurement of wealth: The colleagues of the study’s author, university professors, told him “We are incredibly ‘wealthy.’ We don’t work many hours, and we get to work on whatever projects we want [despite lower salaries and net worth]."

So to address each point:

Saving money has nothing to do with IQ

People are often confused about what IQ really means. From Wikipedia: An intelligence quotient or IQ is a score derived from one of several different standardized tests attempting to measure intelligence. IQ tests are used as predictors of educational achievement. Note that these tests are used as predictors of educational achievement. They do not, for example, test discipline, or creative ability or personality. Someone who has a low IQ but is highly disciplined, for example, might be a better student of engineering or mathematics than someone with a high IQ who doesn’t focus. Someone who has a great knack for spotting real estate deals though intuition might not have done well in biology class.

Saving money is more about temperament than educational intelligence. Since our education here in the US pays absolutely no attention to financial education, a high IQ might even work against financial education. People with high IQs might continue their education longer, deferring their entrance into the real world where they have to learn about managing their finances. I didn’t get my first real job until I finished my graduate degree at 24. People I know who didn’t go on to college had already been in the workplace for six years, dealing with all that entails.

Earning money does have something to do with IQ

Study after study shows that you can earn more money with a college education, which you are more likely to obtain if you have a higher IQ. Corporations and other large employers will tend to pay more to a college graduate, meaning earning potential is higher if your IQ is higher. I am not sure this is such a great thing. Are you better off working at a fixed salary as a manager for The Corporation with 5% raises over the course of your life, or being this guy who didn’t manage to graduate from college, but had a clever idea about selling software?

Earning money has nothing to do with saving money

I earn a lot of money. I spend a lot of money. Because I live in the most expensive part of America, my above-average salary gets swept away pretty quickly by my way-above-average-costs. I don’t spend unnecessarily, although as with everyone I could cut back in certain areas. But my ability to save is a function of my efforts to cut back on expenses where I can, not due to the fact that I make a huge salary. I maxed out my 401(k) deductions (which is a set amount, not a percentage of earnings) 15 years ago when I was living in a much cheaper city, making about 1/5th of what I make today. So I saved just as much when I was earning much less. That has more to do with my interest in saving than it does with my earning ability, because as a percentage of my overall income my savings rate is drastically lower than it was – my savings rate has declined as my income has increased.

Nobody is really good at saving money

This goes without saying, almost. The US has a terrible personal savings rate. I think the statistics bear out that although certain individuals are better than others, as a whole our nation is not good at saving money, regardless of one’s social status, intelligence, hair color or favorite TV show.

Money is not the only measurement of wealth

I don’t think this point can be repeated enough. There are other measurements. Is someone who works 100 hour weeks his whole life until he drops dead of a heart attack at 60 truly wealthy? Is a painter who loves to paint but can’t afford the newest iPhone really poor? These are philosophical questions, of course. But a person who has a pension guaranteed for life is in many ways wealthier than a person who has all of their savings for retirement in the stock market. The pension, of course, can go bust, but assuming it doesn’t I’d rather have a small guaranteed payment rather than a wildly fluctuating amount. Peace of mind is priceless, isn’t it?

It’s a good article. I don’t think there’s anything surprising there – street smarts have trumped book smarts plenty of times throughout American history – but it’s interesting to see those study results in one place. There’s hope for all of us!

aging gently

As I spent some time in an assisted living facility last week I thought about aging and money. Here are the two most important concepts I came away with:

  1. At the end of your life, money and things are not important. Having friends and family and a rich store of memories will be more important than whether you ever owned a boat. This is the Hallmark Card thought that people bring up when talking about old age and death.
  2. That having been said, the end of your life is a lot nicer if you have some money. I’m not talking about nicer in the sense of having HBO. I’m talking about having a nurse who’s going to change your bedpan when you ring the bell rather than being in an institution where they let you sit in your own crap for three hours because they are understaffed.

I really cringe from time to time thinking about how much money I am hoarding for some far-off "retirement". Unless my savings rate and return rate spike up dramatically in the next 10 years I’ll still work until my mid-60s regardless of what I do now. And of course I could get hit by the mythical bus any day, rendering much of my planning for my sunset years irrelevant (except of course in that these savings would help out my family, but I have life insurance for that and frankly even with savings and insurance Bubelah would have to go back to work). So the ugly little thought creeps into my mind that maybe I should be enjoying this money today. Not buying the latest plasma TV, necessarily, but spending it on a fancy private education for my son, or on illuminating vacations (pyramids, Great Wall, safaris) or on a beach home in Florida. With the amount of money my wife and I save it wouldn’t be an insignificant amount of extra money if we stopped saving tomorrow. That extra money would alter our lifestyle.

However, I think about what I saw last week and realized that if you don’t have lots and lots of money, things can go south quickly. I saw a very nice assisted living complex, filled with relatively happy looking seniors. There was a very pleasant restaurant-style cafeteria, activities and a very pleasant physical complex with bright halls, cheery rooms and clean surroundings. All of this comes at a price; my best understanding was that it runs more than $5000 a month in an area of the country where that is no small amount. To put that in perspective, to generate $5000 per month in net income would require a nest egg of $1,300,000 earning 6% interest (no sure thing unless you want lots of risk). “That’s not so bad”, you think. That means $5000 for basic care. No drug co-payments, no hospital stays, no extra assistant care - all of that is extra. “That’s fine, Medicare will cover that,” you say. I hope you are right, after all of your “fun” 60s and 70s and giving gifts to the grandkids and traveling to Spain and whatnot, just for a place to live. $1,300,000 in the bank when you are 80, for the sake of argument.

All of that might not even be that terrible except:

  1. One or both of us might live far longer due to advances in medicine. Already people are living longer and longer due to artificial hearts, drugs, surgery, you name it. If I live to be 105, or 20 years past what I expect, won’t I run out of money? What happens when I’m 97 and the bank account is tapped out? I hope my son or other potential future children could help, but I may need care past what they could easily provide at home. What then? What if something even more ridiculous happens in the next 20 years (a cure for cancer, for example) and people start living to 120? 130?
  2. One or both of us might have health issues, draining our savings. This might be as simple as needing additional nursing care for non-life-threatening conditions, or as awful as a long lingering illness.

So let’s assume that $2 million (a random large number) would last for 30 years after I reach 65 (remember, 20-25 years for me and 30-35 for Bubelah). How is it even remotely possible to think of saving for 40 years, 50 years of quality living? Is it possible? I sometimes doubt it, particularly considering costs may dip at first when we’re in our 60s and in decent health (assuming we don’t take that super-luxury cruise to Europe), but will probably spike back up again as health problems mount. Could you ever start drawing down on principal to boost your monthly income? Even if you don’t, the principal will rot away with inflation. 40 or 50 years is a long time to hope for $1,300,000+ to carry you. You would have to draw the principle down and hope that the month you drew out the last $18,000 (inflation, remember?) was the month you died.

I don’t know what the answer is. Maybe the answer is spend it while you’re young and hope that this country does something about elder care before you get there yourself…

free cool stuff

I thought in this post I would highlight a few products that have made my web experience a lot more productive and fun.  They are in no particular order, and it’s certainly not an exhaustive list.  I know I have many Google products on the list, but they are quite dominant these days in terms of very useful free software.  If you are looking for ways to save money – and you always should be – these are a few ways you can quickly and easily jettison your expensive applications from companies like Microsoft and Norton.

Open Office:  What can’t you say about Open Office.  I used to fork over hundreds of dollars for various Microsoft apps every couple of years when they upgraded their buggy operating system.  No more.  Open Office has word processing, spreadsheets, presentations, databases and more.  It is very stable and very similar to the Microsoft Office suite.  You may have to relearn a few keystrokes if you’re a keyboard person like me – instead of Ctrl-K to insert a hyperlink it’s Alt-I-H.  But these are easy to overcome, and Open Office works very smoothly.  It seems to crash far less than Microsoft’s products.  They can save anything in Microsoft format or a million other formats, including PDF.  I can’t see why anyone would choose to use the Microsoft product after using Open Office for a day or two.

Google Documents and Spreadsheets:  I have to be honest, these are a bit buggy for me, and the features are still very limited.  I can imagine eventually these will become stronger, and the online aspect is great as long as you can access them. I only use them for very basic files that I might need to access from anywhere.  I keep a copy of my phonebook in here, for example.  I keep a few ‘goals’ documents here, too.  However, an annoying number of my clients block Google docs so I don’t rely on it for my primary word processing and spreadsheet needs.  I probably would if I could, though, just for convenience’s sake.  I suppose the possibility of shifting confidential information around on the Internet worries some companies, although I’m sure a million sensitive documents get copied onto USB drives and sent by email to personal addresses every day.

Gmail:  I recently shut down my Yahoo! Mail account after using the same email address for almost eight years.  Yahoo! Mail has a lot to recommend it – unlimited storage, a neat little Outlook-like interface and a nice RSS reader.  However, the new mail beta crashed too often for my taste, and the new interface seemed like a step in a very unimaginative direction.  They basically said “let’s take Outlook and put it online”.  The web is moving in a different direction – tagging, what I call “light touch” interfaces and simple, pleasant design.  Yahoo is getting away from their original simplicity and creating a feature-heavy, complex interface for mail.  Gmail, on the other hand, allows multiple tags for emails to help keep them organized, and the search function has rendered any need for folders obsolete.  Need to check that email you received four months ago from what’s-his-name about the meeting at the Starbucks on something street on June 26?  Just search on “Starbucks” and there it is.  I have been using gmail for several months now and the tagging and search functions are incredibly useful.  I know it has other features, such as integration with Google Calendar and Google Maps, but I don’t use them as much.

Google Earth:  A massive timewaster and not terribly useful, but this is a sure crowd-pleaser.  I love to sit and ‘fly’ from one remote location to the next; from Miami to Red Square to the Forbidden City to the South Pole to Ulan Baator.  Try zooming in on your home, or your office, or even looking for famous landmarks.  It’s a lot of fun, although the practical application eludes me.

Firefox:  I tried using Internet Explorer for a while when version 7 came out.  It was an improvement, but Firefox has one tremendous advantage over IE:  it is open source and therefore anyone can develop add-ons for it.  It also works better with sites like Brip Blap.  I use a dozen different add-ons, and every one of them has greatly enhanced my web browsing experience.  LeechBlock is a great add-on, as are THIS and THIS.  Firefox is less susceptible to hacker attacks (for now) and if you aren’t using it, you really should give it a try for a while.

Picasa:  Unless you are a professional photographer, this photo editor/organizer is all you need.  It has a very easy-to-use interface, and the basic fixes like cropping and red-eye removal are simple to use.  I find that it’s the only photo editor I need 99% of the time.  Occasionally I might like to do something a little fancier, but not at the price of buying Photoshop.  I have heard of a free photo editing software (open source) called gimp but I’ve never tried it so I can’t speak to it.  It’s quite popular, though.

Miniclip.com:  Who needs a Wii when you have this site?  I am no gamer.  For some reason that whole lifestyle just passed me by.  I played Doom II and Quake when they came out, and I enjoy Strategic Commander on my Palm, but for the most part I’m not that ‘into’ video games.  This site, though, has a few simple Flash games that I find really entertaining to blow off steam for ten minutes.  Try Samurai Sam or On The Run.  Simple and fun and most importantly, free.

Grand Central:  I am a very light user of this service, but so far it has blown me away.  If you aren’t familiar with it, it is a “unified number” for all of your phone numbers – home, work, office, even your hotel or temporary conference room.  If someone rings your GC number, all of your other phones ring – but that’s not the really amazing feature.  I can also set certain phones and certain voicemails to activate if certain people call.  If John from work calls, GC will ring my work and mobile phones from 9 to 5 but send him straight to voicemail after 5.  If Bubelah calls, every single phone I own will ring.  If someone I’m trying to avoid calls, I can have all of his calls sent straight to voicemail.  The possibilities are endless.  I’m sure that in the future I’ll have one number, my GC number, and all of my other phone numbers will be completely irrelevant.  There are rumors that Google is acquiring GC, which is great – one more way to give myself and all of my information over to Google.  Google has acquired Grand Central.  I figure as an early adopter they will spare me and my family when they seize control of Earth (not in an evil way, of course).

eVoice:  I have been using this service for years.  They give you a free number, although if you want a specific area code you’ll have to pay for it.  I use this number every time I apply for something:  an account with a random web service, a credit card, even an account with a job board.  This helps me screen calls and keep non-personal phone traffic from hitting my cell phone minutes or disturbing Little Buddy when the home phone rings.  You receive a small attachment in your email account and you can play it with their proprietary player or with QuickTime.  I wouldn’t recommend using it for anything you need to check quickly, since you have to be able to receive emails to hear your voicemails, but it’s great as a ‘second’ phone number.

Grisoft Anti-virus:  I have been using this free anti-virus software for years.  It is non-obtrusive and has – knock on wood – provided complete and flawless protection for several PCs over the last few years.  I don’t know how they do it, to be honest, but it’s a very good little program that does exactly what it advertises.  In my experience paid anti-virus programs (I’m thinking of Norton’s products) often had trouble performing self-updates and occasionally struggled with new viruses as they appeared.

 

On a final note:  when I first set up Brip Blap, I noticed that I couldn’t get my ads for Google AdSense or Amazon.com or blueeyetree.com to show up.  I tinkered with the code for a day before I suddenly remembered that I had an adblocker running.  I hate pop-up ads and noisy flashing motion ads, but I realized that by blocking static text ads I was only hurting myself.  The way sites like the New York Times remain free is through advertising.  If you want to continue to read sites like those, or enjoy Google apps, you probably should suffer through the ads, or else they will have to start charging someday in the future.  Personally I’m still blocking pop-ups.  I wouldn’t want a pop-up on my TV, obliterating my show until I hit a button on the remote.  Ads between segments of the show, fine.  Text ads to the side and around content on the Internet, fine.  But consider that advertising keeps these sites free when using any of the services above.

So what did I forget?  There are many others, of course - Remember the Milk, WordPress, Poisson Rouge, Wikipedia, etc. etc.  You could go on forever.

 

How to lose 100 pounds, part 1

If you like this article, you can also read my article 101 thoughts on losing 100 pounds.

In 2000, I weighed approximately 315 pounds. By 2006 I weighed 200, although this year I’m back up to 220 (baby fat – nothing like having a baby to ruin a diet/exercise plan)! But I have lost 100 pounds off of my maximum weight and kept it off. I wouldn’t say it was easy to do, but the rules to do it were very, very simple. There were three categories, and I’ll cover the first, diet, in this post. The other categories were exercise and overall discipline.

Diet

I went on the Atkins Low Carb Dietlow-carb diet

I think the problem most people have with Atkins is (a) your food selection becomes fairly limited and (b) they don’t follow his instructions. I lived that book’s instructions like they were gospel. Read the book and follow its instructions first, but I have a few tips in addition.

1. Eat lots of fish and chicken. You can do a lot of different things with fish and chicken in terms of preparation and spices. Turkey, beef and pork are a little trickier to work with. I love turkey so I didn’t mind eating it a lot, but I largely avoided beef and pork.

2. Keep lots of cheese for snacking. I like salty foods, so my biggest snack issue was dropping the Doritos. Cheese works much better as a snack food than meats or veggies.

3. Don’t ever touch bread or pasta. After I had been on low-carb for a while, “low-carb bread” and “low-carb pasta” started coming out. I still avoided them. I think part of the low-carb lifestyle is just that, a lifestyle. Reintroducing breads and pasta just puts you back in the mindset that they are legitimate food choices. They aren’t, ever, when you’re trying to do Atkins.

4. Drink a lot of liquids and if it helps curb cravings diet soda is OK. Atkins says you shouldn’t drink diet sodas – it enflames your sweet tooth and splenda/aspartame have unknown effects on the body’s chemistry. However, I still drank diet Coke when I was on Atkins and it helped with any cravings I had for sweets, so I think it’s a good substitute. I did introduce my 8 X 8 habit: 8 ounce cups of water 8 times per day. I was never a big water drinker prior to going on Atkins, but trust me – if you drink enough water, you will be full at least for a while.

5. Ricola

6. Don’t be embarrassed! I was a fervent evangelical for Atkins. Some people thought it was funny that a man was dieting, but I viewed it as something I could be proud of, particularly after I lost 100 pounds. Dieting shows willpower and determination. Fatness is a by-product of lack of will. I know, I know, some people have biological predispositions to obesity, yada yada. I am sure that’s the case, but 99% of us are just lazy.

7. Learn to cook. To survive I had to learn to cook. You can’t go on Atkins and eat hamburgers and cheese for two years. I became a bit of a gourmand during this time, whipping up all sorts of fancy fish dishes, chicken-and-veggie mixes and a lot of ‘modified’ dishes. You would be surprised how many good recipes can easily be altered by substituting diced cauliflower for rice, or shredded peppers in place of pasta.

Try following these steps in addition to the book. Exercise and mental discipline are also important steps which I will cover in future parts of this series.

how to save money on air conditioning

In 1997, the average home in the Northeast spent approximately $1,700 per year on energy. In the Department of Energy study, this spending was broken down into four categories: Space heating, electric air-conditioning, water heating and appliances operation. I was surprised by the ratios, since my original thought for this post was to talk about keeping air conditioning costs low. According to their study the percentages for these categories broke down like this:

Now my idea for this post was going to cover ways to reduce your air-conditioning costs, but this study started me thinking (always a dangerous undertaking, because once I emerge from days of introspection, reading and agonizing over this data I’ll be ready to make a tentative decision and then the trouble starts). My thoughts on air conditioning reduction are still valid, I think, as a lifestyle choice, and later I’ll give my thoughts on researching things before leaping into action.

Air conditioning

I have found that air conditioning is one of the simpler things to ease out of your life. During the winter in the Northeast air conditioning is a non-issue. The temperature even at its most freakish won’t climb into a range requiring any air conditioning for six to seven months out of the year. Spring and autumn are usually mild and don’t require air conditioning, either. We live about 50 feet from a river, and the breeze coming off the river is usually quite brisk year round, especially during the day. It usually gets very still as the river cools at night, and that’s one of the few times air conditioning might be needed, particularly if the tide is ebbing out.

During the summer, usually about three to four months, air conditioning may be necessary. We have the same breezes but temperatures rise into the mid 80s; seldom higher, but occasionally we’ll get some 90s. Three years ago the summer was so mild it seldom reached the 80s. Last year we had a few terribly hot weeks. In general, though, we don’t have the extremes of temperatures you find further inland or south.

Our house is a townhouse, but we’re lucky in that we have a corner unit and therefore windows on two sides. This provides a cross-breeze, which is very useful. We have a large green space across from us rather than more townhouses, so the breeze is not impeded.

Even with all of this considered, my first instinct has always been to crank the air conditioning to 68 or 70 all summer long. Despite the fact that I would love to have temperatures as high as 74 or 76 in the winter, I inexplicably want colder temperatures in the summer. Bubelah wants it warmer in the winter, warmer in the summer. Little Buddy so far doesn’t seem to care, but for a toddler’s sake you don’t want to keep the house at 62 (although I suppose if you wanted to dress him up you could).

But we did realize that we could keep it much warmer and accomplish five things:

  • Reduce our costs. This was the obvious benefit, although as I mentioned in this post the benefit was less than I imagined it might be. However, the spending on keeping the house icebox cold was pointless, and every little bit saved helps.
  • Reduce our energy usage and help the environment. We don’t participate in wind energy programs (yet) so presumably our energy comes largely from non-renewable sources. We have a fairly energy-efficient air conditioning unit, but it still requires a substantial amount of energy to run constantly.
  • Keep fresh air in the house. This is sometimes debatable, since the river can get funky, and we do live close to New York which sometimes produces odd smells all its own. For the most part, though, outside air is constantly flowing through the house rather than being constantly recirculated through an air conditioning system. This makes us feel better, although I suspect it’s largely psychological. Since we have a high-end ionization filter on our central air pump (or whatever it’s called) the air is probably technically cleaner when the air conditioning is functioning than when the windows are open. I still seldom meet people who prefer the closeness of shut windows when there’s fresh air to be had.
  • Reduce noise. The air conditioning is downstairs but it does whoosh out of the vents when it runs. We trade that rushing noise for outdoors noise – birds, street noises, children and other suburbia background buzz. It makes you feel more connected to your neighborhood.
  • Make ourselves generally more comfortable outdoors. The transition from indoors to outdoors or vice versa can be rough if you have massive temperature differences. Everyone knows how nice it feels to walk from the 90 degree street to the 70 degree room. This feeling lasts for a few minutes, then it feels uncomfortable as your sweat chills and your lungs struggle with dry, air-conditioned air. If the air humidity is slightly less and the temperature is slightly less indoors, the transition isn’t immediately as pleasant but in the long run it is much nicer. The reverse is true, because when we go out with Little Buddy there’s not the same sense of being blindsided by humidity or heat when you step outside. I find I enjoy sitting on the balcony much more even when it’s hot.

We did all of this by following a few simple steps:

  • Buy a programmable thermostat. If you have more than one thermostat, get a programmable replacement for each. Our house has two, and we can keep the upstairs air-conditioned while keeping the downstairs windows open, which is convenient when Little Buddy goes to sleep and needs cooler air to relax.
  • Put up light-blocking shades, backed by thin sheers. The sun can rapidly heat up your house, so having heavy drapes on southern and western exposures really helps deflect the worst of a hot day’s sun.
  • Keep the temperatures reasonable. Don’t try to sit out an 89 degree day. Use your air conditioning, but keep it at 76, not 72, because you can “re-addict” yourself.
  • Keep all of the windows open. This might seem obvious, but throw open windows everywhere, even in rooms you won’t be in. This keeps the air flowing throughout the floor or the house. If you keep windows closed in just one room, that one room will get stuffy and unpleasant, and tempt you to turn on the air conditioning to “pump it clean”.
  • Take a shower before sleeping. If you take a cool, soap-less shower before sleeping it washes off sweat and cools your body down, making it easier to sleep. This is still my toughest time with the air conditioning, because I am used to sleeping in an arctic chill with heavy blankets. Taking a quick cool shower makes it easier for me to sleep in a warmer room.
  • Keep the lights off. This goes for other appliances, too. Appliances use 40% of your household’s energy, so that generates a lot of heat. Some, like the refrigerator, have to stay on, but consider whether lights and TVs and whatnot need to stay on. Even CFLs generate some heat, although far less than incandescents.
  • Don’t backslide. Don’t think one day, just for a break, you want to sit around in the 60s. If you want cold, go to a movie or a mall. But if you start pulling the temperature back down in your home, you may get lulled into inaction sitting around in a freezer!

Don’t forget if you have a toddler to ensure that all of the windows are proofed against falling out and that any balconies or patios are secure. We are lucky because our two balconies have railing that makes it impossible for a toddler to squeeze through, so Little Buddy is free to come and go on the balcony while we sit a few feet away in the living room.

This is one of those win-win changes you can make. You will feel better, save money and help the environment. The only possible downside is if you’re a sweaty person (like me) you may have to go through more than one shirt per day.

things I learned from my grandparents about money, part 1

Most of my relatives have some very different ideas about money, and by relatives I am including the wide range from my wife to my parents to my in-laws, etc. I realized a long time ago that it is very easy to pick out the flaws in other people’s philosophies or actions while failing to recognize them in your own thoughts and actions. However, I still find it a fairly useful exercise to try and determine where people make good decisions and bad decisions. Even more important is trying to understand the ‘why’ behind those decisions.

My mother’s parents (my grandparents), for instance, have always been very frugal. They were both raised on farms in the 20s and 30s and suffered through the Depression. My grandfather left home to join the Army pre-World War II, serving in the horse cavalry (hard to believe the US still had a horse cavalry less than 70 years ago, isn’t it?)
Here are some of their views towards money that I think are interesting, both good and bad, and my take on them.

  • Investing, a good habit. My grandfather was an early fervent believer in investing. Coming from a rural background and suffering through the Great Depression you might expect him to be very wary of investing, but he was quite the opposite. He invested heavily in the market, and on a schoolteacher’s salary did very well over the years. He did this although he had a state pension and could have chosen to spend that money. From him I learned a very conservative study-buy-and-hold approach. Although I didn’t know it at the time I learned it from him, his approach was basically the same as Warren Buffet’s. While it didn’t make my grandfather a billionaire, it did make him a huge ‘extra’ retirement fund on top of his pension and my grandmother’s.
  • Never selling, ultimately a bad habit. My grandfather maintained an almost emotional attachment to some of his stocks and held them year after year, even in times of declining prices, shrinking dividends and their own advancing age and deteriorating health. They saved these stocks thinking they could pass them on, but as they have moved into more and more expensive housing (nursing homes are much more expensive than regular apartments, obviously) it has become obvious that all of that money will be gone soon, regardless. Had they moved it into a savings account paying 5% ten years ago they could have been earning steady income.
  • Never really spending, good and bad. Although they amassed such a gigantic fortune (relatively speaking) on retirement my grandparents never really spent much. They constantly talked of wanting to pass it on to my mother (an only child) and my brother and myself. They never traveled, although my grandfather dreamed of returning to see a peaceful Germany. They did ‘live large’ in some senses - they ate out almost ever day, they bought new cars for cash every few years while they could still drive and they were almost insanely generous to my parents and my brother and myself. They gave us stocks, cash and other gifts for years. However, it is hard for me to look back on their 20+ years of retirement and think that they never really did much after retiring. I know that part of that is my perception, since I love overseas travel, but I am not sure retirement was meant for watching TV and eating out. That’s a judgment each person has to make individually, I guess. But when my mom was younger and living at home they were very frugal, and even late in life my grandfather’s frugality could be amazing. A heavy, heavy smoker for his entire adult life, he quit cold turkey one day because he thought cigarette prices had finally gotten to high - and hasn’t smoked in 15+ years now. He never worried about the health aspect as far as I know, but paying $3 for a pack of cigarettes instead of $2 was apparently one dollar too much.
  • Avoiding debt, extremely good. My parents and grandparents gave me one gift that I realize is invaluable after I read many personal finance blogs: the fear of debt. I have been convinced since an early age that going into debt is practically a mortal sin, a stain on your character, a flaw. While I think it may have been overstated a bit, this philosophy has made me somewhat unique in a sense: I have never carried a balance on a credit card, EVER. I have had only two debts in my life: a car loan one time and a mortgage on my current house. Other than that, I have never bought anything I couldn’t pay for with my existing funds. So debt has never been a headache for me, which is a great gift.
  • Charity begins at home, mixed. I know this may run counter to many people’s beliefs, but another closely held belief of my grandparents was to take care of themselves and their own before others. This philosophy meant that there was no ‘automatic giving’ to charity until everyone in the family was taken care of. They gave (and still give) to their church every week, but I am sure without ever having seen it put to the test that had I been in need for some reason they would have given that money to me, instead. I know this is a somewhat selfish approach, but I think it’s right. Give when you are able. I do not subscribe to the Christian teaching that I should give ALL I own to the poor, and apparently from the number of Mercedes I see in church parking lots I’m not alone in rejecting that teaching. It doesn’t mean you can’t give to charity - I certainly give to several children’s charities - but take care of your family first.

Those points are really just highlights. The important lesson to remember is that anything your family or your friends teach you about finance is valuable. Sometimes you may learn by avoiding their mistakes, sometimes you may learn by taking their advice to heart - but it’s all learning. From my maternal grandparents, I learned to save and to avoid debt but also that sometimes you need to spend money, too, because there ARE things and experiences in life worth the money. The truly important thing was never the money, it was the security the money bought, and being able to give back to their family, that mattered to them.

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