Vanity Tags? Uh, No.

What sort of slave polishes their shackles and is proud of them?

Vanity tags were a real novelty in 1970 - very few States offered them, and few folks bothered to get them.  However, in the last two or three decades, the use of vanity tags has taken off, as even ordinary middle-class people have started to order them.

States love them, because they generate a lot of revenue for the State.   And in addition to vanity tags, you can get promotional tags promoting everything from the pledge of allegiance, to your college football team, to "right to life", or save the dolphins.

And the cost?  Usually just a low, low $50 to $100 or so.   It sounds appealing - an amount small enough to put on a credit card, but not enough to worry about.   Except, of course, that every $100 you add to your credit card is $100 less you own - and $100 more you owe.

And every year, when you renew the tag, an additional $25 to $50 is added to your registration fee.  So, like any other recurring subscription expense over time it adds up to a lot of money. Cutting recurring expenses in your life is utterly important - they seem trivial and small, but added up, over time, they compound into a ton of dough that is subtracted from your net worth.  Taken alone, they seem small, so why not indulge?  But that is just the point - a small expense, repeated and compounded over time, adds up to a lot.

For example, if you decide that you just have to have a "DUM ASS" on your license plate, and pay $100 for the plate and an extra $50 a year, over a 45-year working life, that would compound, at 7% to $17,387.83

Is it really worth it?   And let me guess, you have these on two cars, right?  That's enough money, over time, to buy a nice car.

But what about saving the whales?  What about these great programs my license plate "sponsors"?  What about it?   Of the money donated through the plate, the DMV usually gets a cut.  And let's face it, if you want to give the endangered whales $50 every year, why not just cut them a check?

Oh, right, you want everyone to know how concerned you are about the whales.  In other words, it is a classic "I'm better than you!" status-seeking behavior.   Those other people out there, probably whale-haters, right?  They aren't as sophisticated and caring as you are - particularly that asshole tailgating you in that SUV with the vanity tags labeled "ISHMAEL".   Arrrrrrg!

So to me, vanity tags are a stupid waste of money.  They are just pure status-seeking behavior, and since everyone has them, they don't convey much status anymore.

And they don't exactly make you anonymous, either, do they?  Not that you are planning on robbing a bank or anything.  But the same people who whine and moan about "privacy rights" on the Internet, or how Google Street View caught a pix of them entering the porno, are the same ones who basically label their cars with a giant "LOOK AT ME!" sign.  You either want privacy or you don't.  Vanity tags is one way of don't.

Cutting expenses in life isn't easy.   And you have to examine each expense - no matter how trivial - and see how they add up.  There is no simple or easy way to economize - despite what politicians want to tell you.  Rather, you have to make many small painful cuts in your budget, that overall, add up to huge reductions, particularly, over time.

Unnecessary expenses are the easiest to cut - no matter how small.   Vanity tags are unnecessary.



Note:  The above image is courtesy of Acme License Plate Maker - go online and create your own vanity tags!

The Waiting Game - Please Wait!

Making you wait is often a means of establishing power in a relationship.

I have noted before that in many transactions, making the customer wait is part of the strategy used by the salesperson to establish power in the relationship and also get a client to "invest" time in the process, so they are less and less likely to walk away from a deal.

For example, the car dealership can take hours to sell you a car - five or more.   Many folks report leaving the dealership at nearly midnight, long after it was closed.   My neighbor went to the car dealer, young children in tow (big mistake) to buy a convertible.  Eight hours later, they come home with a station wagon, two cranky children, and two clearly upset, low-blood-sugar parents.

"The thing about car dealers is they seem to like to keep you waiting. Later, I would find out how important it is for the salespeople to feel they are controlling the customer. If you are waiting for them they must be controlling you. This obsession with control extended to job applicants too. "  -- Confessions of a Car Salesman

And that is part and parcel of the game.   The average persons blood sugar levels will plummet within an hour or two of eating - which is why a small between-meal snack of about 100 calories is a good idea, at about 10:00 in the morning and 3:00 in the afternoon.   (In the old days, they said to lose weight to "cut out the in-between meal snacks" - this was really bad advice, as by the time mealtime rolled around, you would be starving, and over-eat).   Salesmen know this, and know that if your blood sugar is low and you are dehydrated, you are more pliable and easier to "sell" on a new car or hot tub.

In a personal experience, a car dealer tried to play this game on me, dragging out the process until everyone had gone home, and then tried jacking the price on the car.  When I asked for my "good faith money" check back, they claimed it was locked in the safe and the office manager had gone home, but that they would not cash it.  Guess what they did?

Making you wait has so many advantages for the salesman, and none for the customer.   And pretty much, the more odious a deal, the longer they are going to make you wait.

I recounted in Buying Eyeglasses, how a chain store made us wait nearly three hours, before pitching us on spending $2400 on glasses - four hundred dollars apiece, for three pairs each!  We ended up buying two pairs each, at BJ's Wholesale, no waiting, four four hundred dollars total.  The waiting is essential for the salesman to make the closing work.  When people "invest" time in a deal, they get impatient and say, "Yea, whatever, make it happen!" and sign whatever you put in front of them.

And while we were waiting, what were the salespeople doing?   Talking on their cell phones, talking to each other, going to the restroom, tidying up displays - basically just killing time so we would have to wait.  And that pretty much is the plan.   When the car salesman says, "Well, I'll have to check with my boss on this!" and leaves for a half-hour, you know they are just shooting the shit in there, and not discussing your car deal.

I recounted in Problem Clients how I had a client who always demanded to speak to me immediately, whereas when I called him, he was never available, but his secretary would take a message (he was too important for voicemail!)  And when he called me, his secretary would call, get me on the line and say "Hold for Mr. Smith, please!"

It was all posturing, all a smokescreen, and guess what?  He turned out to be a con artist.   I walked away from that client - and he gave me full warning, with his games, what he was up to.

Waiting is power.  When you wait for someone else, the normative cue is, they are important and their time is important.  You, on the other hand, are unimportant, and your time is worthless.   Before you even shake hands with the salesman, this normative cue has been established, and it is very, very hard to unwind this, once it has occurred.   You have basically surrendered before the battle has even started!

Now granted, there are times in life you have to wait for things.  You have to wait for a bus, or wait for a cab.  You have to wait your turn.   And for some busy professionals, like Doctors, whose time really is valuable (and no one wants to pay for) it makes more sense to have a "buffer" of patients, so the doctor has no downtime between appointments.  After all, we all want medical care to be as efficient as possible, right?

A doctor, yes.  I can see that.   A car salesman?   A eyeglass salesperson?  Uh, no.

Being made to wait is not just annoying.   In fact, if you are getting annoyed, you are falling into the trap.   Because once you get annoyed, you stop thinking rationally and start thinking emotionally.   And they can use this against you to sell you crap.

No, waiting is more than just annoying, it is a sign that maybe something it up.   So, the next time someone trying to sell you something makes you wait for long periods of time (more than 15 minutes) then ask yourself why.   After all, it is you who has the pile of money that they want, not the other way around.   Unnecessary waiting is like police tape around a bad deal, just as loud ads are (and guess what?  The people with the loud ads are the ones who will make you wait!).

Just quietly get up and leave - and don't let them persuade you to come back - because if you do, you've surrendered twice.  Chances are, if you think about it, whatever it is they are trying to sell you, you don't really need or want.  And maybe the time you spend waiting is a good time to think about maybe just walking away from the whole idea.

And you'd think that this waiting game would backfire in a big way - after all, if you make people wait long enough, they would eventually get fed up and leave.   You'd think that - but you would be wrong.

Say that Joe and Harriet Homeowner go to the car dealer to buy a new Camry.   They are shuffled around and made to wait hours, at each step of the process.  Just when they think the deal is finalized, there is some other manager who has to "sign off" on the deal, and each time, the price goes slightly higher.

Disgusted, Joe and Harriet leave - after all, it has been nearly four hours, already!   But the salesman intercepts them in the parking lot before they get into their car.   He is so sorry for all the delays, and offers to give them free floor mats as a consolation!  (the floor mats, of course, come with the car).  Joe says "no dice" but then realizes his car is missing and he can't leave.

The salesman explains that his "trade" has been taken over to their trade-in lot, an off-site location that is now locked up and the only person with a key has gone home.  Harriet says, "why not give this young man a chance, honey?  After all - free floormats!"

And they drag them back in, and give them the bad news - the deal can't be made to "work" and the cost goes up another $500, or their "credit score" is too low and they don't qualify for 2.9% financing.  But they can get them financing at 12.5% for sure!

Utterly worn down and beaten, Joe and Harriet sign whatever is put in front of them.

So the secret to winning The Waiting Game is to get out early - or not play at all.   Almost everything sold this way is a rip-off anyway.  Joe and Harriet would be better off buying their neighbor's used Camry for thousands less - and financing it through their Credit Union - or better yet, paying cash.

And if you absolutely must buy a brand new car (I do not recommend this) you can price these things online and even buy online, in may cases.   However, don't act shocked when you get there and find that the internet price has changed for some reason, and you are still made to wait for three hours.

Yea, you really can't win The Waiting Game so don't play is my only advice.   When you are made to wait for something you don't really need in life then just walk away.

The End of Outsourcing?

Folks in India are making so much money in the outsourcing business that today, this is what a "starter home" looks like in India!

I get phone calls, e-mails and even letters from India, asking me to outsource my work there.   And until fairly recently, I have been doing this, for simple things like Patent Drawings and Searches.

I had U.S. contractors who did this work for me in the past, but they started to get so much work, their prices shot way up, the quality went way down, and the turnaround time went from days to weeks, sometimes even a month.  It simply wasn't affordable.

Like many professionals, I end up getting caught in the squeeze these days - people insisting on lower prices (and getting them, due to competition in the field) while costs remain flat, if not increase.    If a client asks for a simple Prior Art search, they might be willing to pay $500 or so for it.

I can hire a searcher to find the references, and then I have to go through them, analyze them, and prepare a search report.   When the searcher charges costs $150, I have plenty of time and headroom to charge for my time.   When they charge $300, it becomes a marginal business, if not a loss-leader.   When they want $350 and up, well, I might as well do it myself and pocket the entire $500.

And increasingly, I am finding this is what I am doing, particularly in simpler cases.   There is really nothing to be gained by farming out such searches.

And recently, my searcher has been bumping his prices from $300 a search to $325.   The numerous people who contact me want $350 or more - sometimes far more.   The quality of the work has started to falter as well.   As they get more and more cases, sometimes they overlook some points in the search - or search the wrong invention.

And in the past, my Indian friends would perform a search in a day or two.  Today, it is taking them a week or two.

This does not bode well - for them.   But it illustrates how Boyle's Law works, with regard to outsourcing.   Just as gas expands to fill an empty space, money does as well.   Starting in the 1980s and accelerating through the 1990's, companies started outsourcing work to India, China, and other overseas companies.   Like gas expanding from a deflating balloon, these jobs hissed out across the ocean to eager and underpaid overseas workers.   It seemed, according to some folks, that there would be no jobs left in the USA within a few years.

But funny things started to happen.  Well, not funny - predictable.   The high cost structure of Union Labor started to unravel, as more and more union shops went bankrupt, or the unions accepted cut after cut in pay, benefits, and work rules.   People out of work finally buckled down and went back to work - at lower wages - after each successive recession, when they realized that the high-paying factory jobs weren't coming back.

But another predictable thing happened - prosperity came to two of the most un-prosperous countries in the world - India and China (and Vietnam, etc. etc.).   Suddenly in China, we are seeing a car buying boom that is like nothing else on the planet.  A new middle-class is emerging in China, and they are spending all the money they are making.   The standard of living is going up.   And people are demanding more in terms of wages, as they end up with multiple job offers.

And the same is true in India.  Tata motors has actually introduced a car with four wheels on it.   Well, actually they have always offered four-wheel cars.   But they have a new car, the nano which is designed for the entry-level motor-scooter buyer, with that all important fourth wheel.   People can afford more in India, and increasingly, they are charging more as well.

As a result, you are starting to read stories in the paper about "in-sourcing" of work.  Companies are bringing jobs back to America, because wages are finally more rational (for basic labor and unskilled workers, in particular).   While wages in India and China remain dirt cheap, the inherent costs in running an operation overseas, the travel, the shipping, and the difficulty of management and control mean that there is a huge cost delta when you outsource.

When labor is $10 a day, that cost delta is wiped out.  When overseas labor wants a raise, suddenly, paying $10 an hour in the USA makes more sense.   But still not $20, or $30, or $50.   Not for unskilled labor, anyway.

My Indian friends are offering to do things like write Patents and responses to Office Actions.  I have never taken them up on this, as this is my bread and butter.  Moreover, it is the skill part of my job - it would be like farming out a portrait and then claiming you painted it.   There is no "one way" of doing these things, and what people are paying me for is my special insight and talent, not to merely review someone else's work.

Does this mean outsourcing is dead?  Hardly.   But it would appear we are reaching an equilibrium point, where the gas is escaping from our balloon more slowly.   While this recession has been harsh for many people, it has been akin to pruning a bush or shrub - it may be painful for the plant, but it will grow back, stronger than before.

People may have to accept lower-paying jobs, but at least there will be jobs to accept.  And once this trend starts, and more people go back to work, the economy will improve, and our workers will realize they have options and are in demand, and they in turn will demand higher wages, and.....

....and the whole damn thing starts over again.

It is an organic process.

50 Million Americans on Welfare? Not Really...

Note: This is a re-posting from January 9, 2012

Kelly's satiric take on the traditional view of Welfare Queens, from The Onion.

One number bandied about by conservatives is that "50 Million Americans are on Welfare!" which is an alarming statistic, because if true, means that 1 in 6 Americans isn't working, but instead staying home and watching TeeVee all day long.

But like so much else, it isn't really true.  And when you have to resort to lying and deception to make your point, what exactly was your point again?  And that is sad, too, as getting people "off the dole" is a good idea.  But your good idea loses currency when it is clearly based on distortions.

What is "Welfare" anyway?  That is the first problem to address, and if you include everyone who gets a check from Uncle Sam, then the number may be far higher than 50 Million.  Of course, all those conservative retirees collecting Social Security can't be counted as being "on Welfare" because they paid into the system, right?  And their Medicare was all paid for too, right?

Well, not exactly.   Most retirees end up taking out more than they put in, and the system is funded by current income, not money squirreled away in the Scrooge McDuck Money Vault by the Social Security Administration.

Exhibit A:  The Scrooge McDuck Money Vault.  Most people believe that 'their' Social Security money is being kept for them, here.  No really, they believe that.

So, right off the bat, we don't count the millions of Social Security recipients because if we did, that would add another 50 million to the count.  And the voter demographic we want to get at in order to cut off all those "Welfare Queens" is that 50 million older people on Social Security.   We want them, who are receiving a government check, to cut off the government checks of others - so the taxes of the very rich can be kept low.

Makes sense, in a sick sort of way.  But how many people really are on "Welfare" as we know it?  50 million like the conservatives say?

Try 4.4 million.

Whoa!  How did 50 million shrink to 4.4 million?  Well the conservatives have a very inclusive definition of "Welfare" as being any sort of government check you may receive other than Social Security of course!

They count medicaid, which is a program, like medicare, but which provides medical assistance for the very poor - and middle class people who make themselves "look poor" to qualify for nursing home care with medicaid.    Yes, those very same right-wing conservatives will deed their house to their kids, so they look "poor" to the government and can get a free ticket to the nursing home, all paid for by Uncle Sugar.
 
50 Million people are on medicaid, and that is a scary number.  And it is costing us hundreds of Billions a year.  But of course, this is much better than "Socialized Medicine" or "Obamacare" and donchuforgetit!

50 Million Americans on Welfare?  Try 4.4 Million instead.  Counting the working poor who receive food stamps and Medicaid as being "on welfare" is more than a little disingenuous.  It is an outright lie.

But these 50 million in medicaid are not all on "Welfare" but may in fact be working or retired as well or receiving Social Security Supplemental Income (SSI - the Welfare for the elderly, about 5 Million people).  So of these 50 Million, clearly some of them are the working poor, not "Welfare Queens".

Similarly, there are 40 million people on food stamps, which again is not "Welfare" in the sense of a check you get for not working but an assistance, again mostly to the working poor or elderly.  These are people trying to get by on $20,000 a year or less - often far less.  But they are earning income and they are working - not lazing about waiting for their gub-ment cheese.

And the average Food Stamp allotment?  $150.  No one is getting rich or buying Caviar on food stamps - but the GOP has lots of "friend of a friend heard it straight from the source" saying that folks are.   But that is not hard data, just made-up stories.  And unfortunately, made-up stories don't help us analyze this in a rational manner.

So, what does this all mean?  Well, the idea that 1 in 6 Americans is "living off" the hard work of the other 5 is sort of silly.   More like 1 in 75 Americans is on what we traditionally call "Welfare".  And, oddly enough, this number has not risen much in the last few years.  The number of welfare recipients has stuck pretty much at around 4 million.

This is a far cry from 50 Million and not nearly as alarming.  But that is the point, isn't it?  To get people all riled up about "50 Million on Welfare!!"  They are baiting you.

The number of people collecting Unemployment Insurance, on the other hand, has recently risen pretty dramatically to 10 million and above, which is not too surprising, considering how the economy has been.   However, unemployment benefits are temporary in nature (unless Congress keeps opting to extend them, again and again) and thus not part of a long-term "Welfare State" trend.  This does not keep conservatives from throwing their numbers in the mix, however.  And of course, letting unemployment benefits expire - as they were designed to do - is one way to get this number down, and get people back to work.

So, why do Conservatives lie about these Welfare numbers?  The real numbers are alarming enough - 50 million people on Medicaid, 40 million on food stamps.  But those are the working poor, and you can't get the 50 million people collecting Social Security all riled up about welfare if you set them against the working poor - or use the real number of 4.4 million who are actually on what we traditionally call "Welfare" (e.g., being paid not to work at all).   But if you can convince them that "Welfare Queens" are all buying Cadillacs - well, you've got 'em.  You've got 'em to vote for you.

And like I said, this is a shame, as it prevents a real discussion from taking place.  If all you have to offer is lies and deception, then what else ya got?  Not much, as it turns out.  And one lie invalidates all of your other arguments.

So, the next time Newt Gingrich tells you that 50 million people are on Welfare, call him out on it - and ask him why he isn't counting Social Security recipients in this math.

Let's work to reduce the number of people on Welfare and other assistance programs.  But let's do it HONESTLY, not by setting one group of people against another or by making up alarming and untrue statistics. 

The Salaryman Trap

A salary job can be a real trap - in more ways than other jobs!

I wrote before, in the Job Trap, how having a "job" to earn a living can be a dead-end, in that it encourages you to view money in terms of monthly cash-flow instead of real wealth you can own.

Salary jobs are even worse.   Back in the day, I used to fly out to Silicon Valley once a month, having a standing reservation on United Airlines, Business Class.  Oh, the frequent flyer miles!  Oh the credit card debt!  It was fun while it lasted - I only wished I saved more of that money!

But what was interesting, visiting these companies (Cirrus Logic, Sun Microsystems, Samsung)  was the people I would meet.   Most were young Engineers, a few years out of school, working in a cubicle on a SPARC workstation (remember those?) using matlab to design integrated circuits, or perhaps writing code.

There were a smaller number of middle-aged people in management - the department heads, legal, human resources, and the like.   At at the very top, there were a few silver-back gorillas, with white hair on the temples, running the whole show - the CEO, the CFO, the COO, and the like.

It was, in a way, a pyramid scheme.  If you looked at the age distribution and the number of years of service, some things became abundantly clear.  Like with a law firm, there was room for a very few at the top, more in the middle, and at the bottom, a large number of young folks, in constant churn.

And the promise - not explicitly made, but implied - was that somehow, over time, if you stayed with the company, you would work your way up this ladder and make more and more money.

And as Lawyers, or young Engineers, we never thought too much about the details of that implied promise - or whether or not in fact, it was practical.   Not everyone could just continue to advance and make more money.  In fact, due to the pyramidal nature of these types of organizations, few would.

What happens to the rest?

What happens to a 40-year-old C programmer or circuit designer?  What happens to the Associate at the law firm if he doesn't "make partner".   What happens to the vast majority of people who work at these places?

Well, they go off and do other things, often for a lot less money.   And we don't like to talk about it, because, hey, we're young hot-shots, making the "good money" with promises of more, and we're not going to be "that loser" who we see going down the elevator with the picture of his wife and kids and his coffee mug in a cardboard copy-paper box.

Right?

Wrong.

The image above is of an Acura coupe - an overpriced Honda that appeals to young people who just "got a good job" and want to show off.  I met a young Engineer once, and we went out to the obligatory Chinese Lunch Buffet in Fremont in his new Acura.  He had traded his BMW in on it, and he was excited as to what a nice car it was.

Some of his older cohorts were smiling and nodding.   They knew the score - a young turk going out and immediately getting himself into debt up to his eyeballs, taking his bi-weekly paycheck and chopping it up into tiny little payments, until pretty soon, he was "living paycheck to paycheck".

And of course, the inevitable happened - the company downsized, and he found himself out of a job.   Of course, he is young and in demand, right?  So he can find a new job, in a matter of months.   And in the meantime, he can cash in part of his 401(k) to make the payments on the house and cars and credit cards.  Right?

After all, he is making good money!  And the future is so bright, he has to wear shades.  From here on out, it is nothing but prosperity and good times!

That was 15 years ago.  I wonder where he is today.  I suspect the Acura is in a salvage yard somewhere near the bay.

Salaries for Engineers and programmers are still doing OK, but in some markets have stalled, as many companies have cut back or gone under, and thus put a lot of people on the street.

And while you might make "good money" at such a job, it never will be really good money unless you decide to accumulate some of it.

Going into debt for consumer goods, cell phones, cable TV, cars, jet skis, fancy houses, and all that crap means that when adversity strikes, you will lose it all and end up broke.

It also means missed opportunities.   When your friends tell you they want to start a new company making an exciting new product - and need a good circuit designer, but can pay you only in stock - what are you going to do?  "I need to make $100,000 a year to service my debts!" you say.   So you let opportunity go by, because you traded it for a jet-ski.

And opportunity does knock in your life.   A friend of mine decided to start a bank.  Yes, give me all that bullshit whiny American crap about how bank stocks are a bad bet.   You might think that, listening to the media.   I was able to only scrape up $10,000 to invest in the bank.   That has since morphed into more than $50,000, in only a few short years.   Imagine if I had been able to invest $100,000.   Yea.

I was able to invest in Real Estate, though, and cash-out when the music stopped, with a seven-figure number.   But, the only reason I was able to do that was because I had a modest house and not a huge debt-load, thus qualifying me to buy those investment properties.

It is temping, as a salaryman, to think, "I am making so much money, my time is worth a lot to me!" - so you buy convenience foods, take-out designer coffees, eat in restaurants, and hire a lawn service.   After all, if you are making $100,000 a year, that is like $50 an hour, right?  So why bother doing it yourself?

But a salary job, as the name implies, does not pay you more money to work more.  So it is not like mowing your own lawn is taking away an hour of work, and thus $50 out of your pocket.   On the other hand, if you do this instead of watching "Jersey Shore" - you will definitely profit and be in better health.

But the second problem for the salaryman is normative cues - and salary jobs are chock full of them.   As I noted in cubicle survival tips, salary jobs are horrific as they place you in contact with a lot of other brain-dead salary people all day long.   And most of them on well entrenched on the consumerist bandwagon, buying crap on time and trying to outdo one another with their status.   And that is where one hears arguments like, "Well, my time is worth a lot, so I hire someone to breast-feed my children" and that sort of crap.

And of course, in the parking garage is the inevitable escalating war of cars - who has the fancier ride and who spent more in an apparent display of wealth.   And when lunchtime rolls around, these same brain-dead drones will encourage you to go out lunch, spend $20 of your hard earned money (even at $100,000 a year, this represents nearly an hour  of your after-tax income) on Chinese or Indian buffet.   And don't forget a designer coffee from the Starbucks in the lobby!  It's only five bucks and you can afford it because you're well off, right?

Right?  And if you say you can't afford it, well, then they will think you are poor or something - even though you both make basically the same salary.

Salary jobs are a trap, as while you may have a good income you may not be getting ahead in terms of increasing your net worth over time.   In the past, most salary people anesthetized themselves by looking to their rapidly appreciating homes as an indicia of their increasing wealth.   Today, that phoney wealth-on-paper has evaporated.   As a result, our nation's savings rate has actually gone up, as people are starting to catch on that we are not as wealthy as we thought we were.

So how do you avoid this trap?  It ain't easy, as the pressures from your peers and the media will be intense.  Your own spouse may be against you - in a big way - over this.   He or She will want - no, demand - that you keep up with the neighbors, in terms of spending.  Suddenly, you have to buy luxury cars and put the kids in private pre-school, and do all sorts of silly shit, financing most of it on time.

The secret, of course, is no secret.  Spend less than you make, max out that 401(k) plan, stop borrowing money for things, pay cash for cars, pay down debt, live within your means, and save up your money for the very real possibility that the "dream job" will go away long before you want it to.

And when that happens, well, you will be prepared.   And if it doesn't?  Well, you will be fantastically rich, then.   And if opportunity comes along, you will be able to jump on it, instead of saying, "No, I'll sit this one out, I have credit card debt and car payments to make."

Sad Sack

There are a lot of Sad Sacks in the world.  Are they depressed, or evil, or what?

On some news sites, you see interesting comments, some of which are clearly trolls.   No matter what the topic of the story is (e.g., fuzzy kittens) some folks jump in and tie it to Obama or Romney ("these kittens would be fuzzier if not for OBUMA!" one says, while another whines, "If Romney is elected, those kittens would starve to death!").

It is, of course, ridiculous.

But with financial news stories, a number of comments are sure to appear, like clockwork, from the Sad Sacks of the world.   And these may be trolls, too, I don't know.   It could be some subtle campaign to get us all depressed and thinking the economy is worse than it is.  I dunno.

But the comments run along a number of lines:

1.  "Saving money?  Who can afford to save money in this economy?  Only rich people can afford to save money!"

2. "My wife and I are living paycheck-to-paycheck every since I lost my job at the old mill.  My car just broke down and my dog died.   Oh woe is me!"

3.  "Saving or investing is just for chumps, anyway.  The whole game is rigged.  You might as well just SPEND IT ALL, because inflation will eat up your savings anyway!  Might as well enjoy your money!"

4.  "Finding a Job?  Make me laugh!  I've been laid off for three years now and I haven't found anything even close to what I used to make.  Yea, sure, there are lots of low-paying jobs out there, but I'm worth more than that!  I'd rather stay home than take a pay cut!"

It is hard to parse these comments.   Are these people depressed?  Poor?  Stupid?  All three?  Probably.  The mentality expressed is somewhat alarming - alarming in the sense that we enacted these 401(k) and IRA plans on the premise that people will make rational choices in retirement.   But given these sorts of attitudes, one wonders if the whole concept is sort of flawed - at least with regard to a lot of folks.

The common denominator is this:  life is too hard, so why bother even trying.  Just go out and spend it all now, and forget about tomorrow.

This is sad - and a sad outlook on life.   And why it is sad is that these folks will end up on a bad place, sure as the sun rises.  They are wallowing in self-pity and engaging in weak thinking, which, when you think about it, are really the same thing.

Whoa.  Wait a minute.   Now you see why we are called the Prozac generation.   The media, the corporate advertisers, the corporations - they all want you to be depressed.  They want you to adopt learned helplessness and just be a quiet and good little consumer.  Watch TeeVee, order that delivery pizza, think about which shitbox econo-car you are going to buy, or worse yet, lease, brand-friggin'-new, so you will be perpetually in debt, powerless, and weak.

Wow.  Pretty slick system for enslaving the masses.

Of course, in order for it to work, you have to get them to watch about five hours of TeeVee a day, eat all that horribly bad chain-restaurant food, and get 100 lbs overweight with a blood-sugar problem.

Um, I guess that describes about half the United States.

You do have choices in life.   You can choose to be a Sad Sack of Shit - wallowing in your own self-pity and anesthetizing your self-inflicted pain with consumer purchases and a lot of unhealthy and shitty food.

Or, you can choose to do otherwise.   Cutting out that five hours of television a day, is a good first start.   Call the cable company and disconnect.

Or maybe you like being a Sad Sack?

When "What If" Becomes "What Is"

Shit happens, as they say - and often unexpectedly.  Are your finances prepared for unforeseen events - or even foreseen ones?  Think about this before buying some new toy like a car or a cell phone.

In a recent "Oh Woe is Us!" piece on MSNBC, they report gleefully that about 1/4 of Americans have no rainy day savings.  And while they tried to couch this in terms of the "current recession" (which technically is over) the reality of the matter is, in the last 20-30 years, this has pretty much been the case with Americans - a large percentage of us are living hand-to-mouth, not because we have to, but often because we choose to.

And I can say this with authority as I was this way once - spending every dime that came on on payments and bills of one sort or another.   I had little saved for a "rainy day" - but then again, most people in their 20's don't have much saved - they haven't had time to.

And of course, a certain percentage of the population is being rained on, at any given time, and thus might have depleted these savings - and is trying to rebuild them.   So it is not hard to come up with a 25% number at all.   And as the MSNBC article noted, these days, people are saving more than they were five years ago.   Recent events have a lot of people spooked, and rightfully so.   And more and more folks are thinking it is a good idea to own money rather than be constantly renting it.

But of course, this does not bode well for "the economy".   When you stop buying Jet Skis and other stupid purchases, the guy selling Jet Skis lays off a salesman, and maybe a mechanic.   And the guy selling ice and cold beer down by the dock maybe goes out of business.   Saving money, we are told by some folks, is a bad idea - for the economy.

But the economy is not a thing, and moreover, it is not your patriotic duty to spend money, when it is not in your best interests.   You have to look out for your own interests, and in most cases, this means being fiscally responsible.  Let the other fellow buy Jet Skis.

The problem with hollowing out your own finances - levering yourself into debt for houses, cars, credit cards, and whatnot, is that if something bad ever happens, well, you are totally screwed.

What bad things could happen?  Ask around, a few folks could tell you.    You could lose your job, have a medical issue, have a child having a medical issue, wreck your car, whatever.  Shit happens, as they say, and if you life is so leveraged that every penny you make goes to pay off loans, well, then what do you do when either (a) the income dries up, or (b) sudden unexpected expenses crop up?

And I say "foreseen events" in the caption above, as many of these events can be foreseen, either as probabilistic likelihoods, or as inevitable consequences.   It is likely you will have a health crises at some time or another in your life.   It is predictable that you will DIE eventually, and should plan on this.

But beyond hospitals and mortuaries, there are other likely or foreseen events that people should plan on, but fail to do so.    One reader recently asked me if he should cash in his 401(k) or borrow money in a home equity loan to put a new roof on his house.

In his world, I guess, a roof leaking is some wildcard, unforeseen event, like the comet that took out the Dinosaurs.  One minute you have a roof, and then the next, BAM!  Meteorite.

But in reality, a asphalt shingle roof on a home has a design life of about 15-20 years, depending on the quality of the shingles used and the quality of installation.  Many contractors use "15-year" shingles, which rarely last that long, while others may use 30-year shingles - but don't count on them being around over 20.

Ditto for home appliances - which last 10-15 years at best.   If you are out shopping for new cars and have 12-year-old appliances in your kitchen, ask yourself if you've set aside enough money to replace them, down the road.

Most people don't think like this - and thus just borrow more and more money and spend it.  When an appliance breaks or their roof leaks, they just borrow more money to cover the contingency.

If you look at your life in terms of these predictable, foreseeable events, as well as the likely probable events, you realize you are not as wealthy as you thought you were.   The cost of a new stove is hanging out there over your head just as sure as a car payment, even if the current one is "only" ten years old.  If you save up and set aside money, then when the control panel finally blows out, you can go out and buy a new one, instead of just scrambling to see which appliance company will finance you on onerous terms.

Rainy days are not something that happens to other people - it is something that happens to you and will happen with regularity.   If you don't put aside money for a rainy day, you always end up chasing your tail, feeling put-upon, and complain about "living paycheck to paycheck".

Sorry, but poor financial planning is not something I feel sorry for.   These same people who complain about living 'paycheck to paycheck' often have smart phones, cable TV, and a new car in the driveway.  And I know this, because some of them are friends of mine...