Is There A Way To Climb Out Of This?

As in inveterate eavesdropper, I enjoy “Dear Abby” type columns. Presently, I like Slate.com’s “Dear Helaine” who answers personal finance questions.

Today’s “Dear Helaine” letter stopped me in my tracks because it succinctly and powerfully captures so many citizens’ dire reality.

 Helaine,

I am 41 years old and have not come into any windfalls of money, nor is there any hope I will. My financial situation is as follows: I make $15 an hour plus tips, and my paycheck is usually about $1,300 every two weeks after taxes. My rent and utilities take up about half of this income. My husband is unable to work because of a disability that is not disabling enough to qualify for Social Security. Our children are 22, 19, and 16. We have been living in a cycle of poverty pretty much for the past 23 years. And yes, we’ve been hit with student loans and medical bills that just don’t get paid—my husband is $30,000 in default. My older kids are working in low-wage jobs, $10 to $12 an hour, but as of now are not contributing to household expenses because I want them to build a life outside of the money-sucking hole of my reality. So, yeah, it’s dire. What kind of financial planning helps people get out of poverty? I am moderately intelligent and a really hard worker. I’m also kind of giving up. Most of the time, I would rather spend $8 on a pack of PBR than plan for retirement or emergency funds. My financial life is an emergency. Is there a way to climb out of this?

As I read it, I thought of Conservative Republicans’ knee-jerk response to poverty, people are lazy. I trust that this woman is telling the truth when she says she’s a “really hard worker”.

I purposely didn’t read Helaine’s response because I wanted to think about it independently. And I wanted to know what you think.

Two initial observations.

• student loans and minimum wage jobs, will their young adult children get college degrees, will those degrees provide them with any kind of competitive edge ?

• the husband is a “net loss”, spending, but not earning, can he do anything to generate some income?

It’s very easy to understand how the author, and the legions in her situation, would simply say “fuck it”, I’m going to enjoy today a little bit because tomorrow is looking real bleak.

I’m going to go back now and read Helaine’s reply. Mine would take a long time to write because there is no easy answer or quick fix to the family’s predicament. Of course the same is true of poverty writ large.

Final thought. Will this woman, her husband, and the 19 and 22 year olds vote? If so, for whom? They, and the legions like them, could determine the election.

[Can’t decide whether to give Olen an “A” or “A-“. Either way, a caring and thoughtful reply.]

Going Against Type

It’s human nature to extrapolate what we know about one another to predict the future. More simply, thanks to our pea brains, we put people in boxes. Case in point, my “friends” love nothing more than making fun of me for my sometimes frugal ways.

Truth be told though, I can open my wallet wide open, it’s just that it takes me a lot longer than the average person to be convinced of something’s value. In the last 18 months I’ve cracked the wallet wide open at least four times. From most to least expensive:

• New crib. Hard to express how fortunate I feel to have been able to make this purchase, the largest of our lives. I looked at enough waterfront properties in Olympia over the last several years to know the agreed upon price represented excellent value. We won’t make money on it because of real estate commissions and a 1.78% excise tax, but we won’t lose any either.

• New car. 2015 Acura TLX. It would be nice if I lived close enough to work to walk, run, or cycle. And close enough to everything else to ZipCar. But the crib is 4-5 miles from civilization and work is 30 miles. Amazing vehicle, no regrets, 90-95% as nice as luxury cars twice as expensive. The linked Edmunds review summary is a joke, my last tank, almost exclusively highway, I got 39.3 mpg. At that rate I can push 600 miles before finding a Costco gas station. I’ve averaged 35-36 from beginning. Perfectly quiet; excellent acceleration if you switch from “eco” to “normal”; buttery, Barbara Streisand-like smooth. Only blemish is a tech glitch. Occasionally, brake warning alert flashes on at random times. Last software update didn’t fix that. And since Dan is wondering, yes, a lot of women check me out while driving my new ride, but that’s been true since the first VW Bug beater, so can’t really credit Acura for that.

• 27″ iMac Retina. Three days old. Just read this article on it. Wowza, like being in Kenya. Never thought I’d own another desktop, but probably shouldn’t put myself in a box. Dig it.

• Last, but not least, this bad boy. The new crib sits amidst a lot of large trees. The wind blows most afternoons. This thing is total kick ass. One of my fav purchases in a long time.

So to my friends, put that list of purchases in your collective pipe and smoke it!

 

 

 

Equal Pay for Equal Work

The U.S. Women’s National Soccer Team is threatening not to play until they get paid the same as male National Team members.

Admirable, but the challenge is building a men’s-like revenue stream for salaries, meaning attracting the same quality and quantity of corporate sponsors. The men’s team gets paid more not because of some vast misogynist conspiracy, but because they have a lot more eyeballs on them both in person and on television.

Why do more people prefer to watch men play soccer than women? I don’t know. Women’s tennis is an interesting comparison. They’ve succeeded in creating similar prize money at least at Wimbledon and the other majors. A lot of people enjoy the women’s finesse and power game more than the men’s power game, probably because their rallies are longer and thus more interesting. In this ardent heterosexual’s opinion, women’s tennis is hella sensuous too (tmi?). Maybe women feel the same way about men’s soccer?

Yesterday, the Ladies Professional Golf Association held it’s first major in Palm Desert, CA. The winner, the best female player in the world, 18 year old Lydia Ko from New Zealand, earned $390k for her one stroke victory on a course I once hacked my way around with the best father-in-law one could ever have. On the men’s side, “journeyman” Jim Herman won the run-of-the-mill  Houston Open for a cool $1,224,000. Ko pocketed less than thirty three cents on the PGA dollar.

Again, way more people prefer watching men’s professional golf than women’s, creating vastly different revenue streams. Why, I’m not sure. It’s okay that I don’t know, but for the women professional athletes who are agitating for equal pay, they better figure it out if they want to succeed in closing the gap.

 

 

What I’ve Learned From Grand Designs

One of the nice things about living in the upper left hand corner of the country is getting a Canadian television channel which airs my current fav television show, Grand Designs.

Every weekday I record the hour long show, and then, in the evenings, watch it while fast forwarding through commercials. The format is simple, each episode Kevin McCloud follows one UK couple through the home building process. In recent years I’ve grown keenly interested in architecture and design, but I enjoy the show for more subtle reasons too.

For example, I really like the way Kevin does what the vast majority of us find so difficult. He routinely befriends the builders while honestly and directly confronting them about their missteps. In other words, he masterfully leverages his rapport with the builders to speak truthfully about their projects.

Other take-aways from a selective sample of middle class to well-to-do Brit builders:

  1. People always underestimate how long a build is going to take. Usually by about 50%. Why is that common knowledge? When will more (or some) homebuilders begin extending their initial estimated timelines?
  2. People always underestimate how much a build is going to cost. Usually by 20%+. The standard “contingency” line in a budget is 10%.
  3. People almost always take on more debt than intended (see number 2).

What’s most intriguing about the show is the inspiring nature of the partnerships, whether straight or gay, married or not. Every relationship is tested by a home build, it’s something different every day often for a year plus. The participants on Grand Designs have common values and visions and just keep getting on despite the unforeseen problems, the endless delays, the mounting debt. The way their friendships carry the day is life affirming.

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Paragraph to Ponder

From Tyler Cowen, “The Marriages of Power Couples Reinforce Income Inequality“:

Universal preschool, further experiments with charter schools, and higher subsidies or tax credits for children are among the policy innovations that might lift opportunities for children of lower earners. Even if those are good ideas, it is not clear how much they can overturn the advantage that comes from being a child of highly educated, highly motivated parents with lots of will and also money to spend on lessons, outings, travel and other investments in the future of their children.

The technical term is “assortative mating”. Read the New York Times marriage announcements for examples. In hindsight, I probably should have “married up”. My wife’s beauty blinded me to the fact that she rarely balanced her checkbook; planned to be a public school teacher; and owed more on her old, beat up Honda than it was worth. It’s a limit of the discipline that few economic models factor in “hotness”.

I suspect Cowen’s extrapolating from the present data too much. Sure assortative mating will continue contributing some to income inequality, but as I’ve written before here, academic achievement among female college students so dwarfs that of males that many female college grads will have no choice but to settle for partners with much more modest economic prospects.

Sentences to Ponder

From Three Reasons for Those Hefty College Tuition Bills:

According to the Bureau of Labor Statistics, in 2014 the median worker with a bachelor’s degree (and no advanced degree) earned $69,260, compared with $34,540 for the median worker with only a high school diploma.

From Federal Health-Insurance Exchanges See Nearly Six Million Apply for 2016 Coverage:

Analysts said lackluster enrollment that trends toward sicker and older consumers could prompt some carriers to leave the exchanges: The biggest U.S. health insurer, UnitedHealth Group Inc., said last month that it is re-evaluating whether to sell plans on the marketplaces because of losses on policies sold on them.

From The home-grown threat:

Since 9/11, over 400,000 people have been killed by gunfire in America and 45 by jihadist violence, of whom half died in two shootings: one carried out by a Muslim army doctor in Texas in 2009, the other in San Bernardino.

[Highly recommended. The single best ISIS-related thing I’ve read in recent weeks.]