AskDong

Just wanted to wish everyone a merry Christmas on what is a warm and sunny day in the Boston area.   I hope everyone enjoys time well spent with family and friends.   The shopping is done, and now is the time to appreciate the personal connections we have in this time of rest.

Nickel and Dimed is a journalist expose by Barbara Eherenreich into to the world of the working poor. I’ve been meaning to read the book for over 4 years now. It’s sat at my desk at work for nearly three of those years, even making the move to the new office. It was first recommended by the bookstore clerk who rung up my purchase of Fast Food Nation, a similarly but somewhat more broadly veined book which I liked quite a bit. I only got around to reading Nickel and Dimed this past vacation as I sat 11 hours in the back of economy, traveling alone.
I’ll acknowledge, I read Nickel and Dimed with the intention of picking it apart. I have tendencies to read most journalistic treaties on topic of money with the eyes and teeth of an attack dog. My reaction to Nickel and Dimed ended up being a magnified version of my reaction to the Millionaire Next Door. They are written with the same intent on proving only what they want to prove despite allegations of being objective. Politically they are at opposite ends of the spectrum, but in practice they speak with a similar voice.

Foremost Nickel and Dimed reminded me how lucky I am, and how easy my own life is. A grueling 12 hours (which I rarely do) at my desk job is far easier than pulling two server shifts at any restaurant. My legs are not tired when I crawl into my warm bed in a spacious apartment in a nice part of town, an apartment that I would never be able to afford if I earned anything near minimum wage or even twice as much.
My biggest problem with Nickel and Dimed is not that I think it’s inaccurate. It’s not, but rather Barbara Eherenreich approaches the whole exercise without any intention examining what the working poor can do to lift themselves out of poverty, but merely to pay a visit to what is without argument or contention a wretched existence. Barbara succeeds best when she tells the story of her coworkers and their struggles and forced when she betrays her determination to fail.

The biggest flaw with her exercise is that she only stays in any one town for a month. By being at one place for such a short period time, it’s impossible to do anything but to live in relative poverty as a wage slave. Nobody rises from minimum wage to a better life in a month’s time. If she wanted to make that conclusion, she could’ve made it without a single day spent cleaning toilets, or serving tourists. While $7 an hour is enormous amount of money in some countries, in the U.S. $7/hour translates to about $14,000 a year. That’s hardly enough to live on which Barbara clearly demonstrates.

The thing is - it’s not supposed to be easy. Being uneducated and unskilled is not a way to go about life. The fact is for many individuals who are struggling to make ends meet are paying the price for poor choices made earlier in life. The mistakes were made in the teens, 20s and 30s. I’m not unsympathetic to the plight. I find it unconscionable that in this great nation of ours that not every citizen is covered by some type of health plan. Nor do I believe that one needs to pay the price forever for poor choice or poor luck. I do believe its society’s responsibility to lend a helping hand to those who have fallen on hard times. But in the end I’m a fervent believer there needs to be a sense of personal responsibility and some consequence to a life led less well.

Another problem with Barbara is her attitude. She has very much an “Us vs. Them Attitude.” I don’t like that attitude amongst conservatives, and I don’t like it amongst liberals. The rich are all idle, and poorly read. Management is always out of touch and heartless. She mocks the employees who cross over to management. She effectively mocks success. Nor do I find her attitude to those who are struggling to get by much better. In her attempts to paint a bleaker picture of what life is like on less than $8 an hour, she comes off as both patronizing and condescending. I’m sympathetic to the desire to illustrate how being poor is nothing that any of us want given that sometimes we as society overly romanticize the “simple” life. However she does not need to mock whatever achievements individuals do make. Her implicit presumption is also that those toiling away will not, and are not capable of making a better life for themselves. While certainly not easy, I know it’s possible to climb the economic ladder. Immigrants to the U.S. do it every generation.

The funny thing is once she finishes chronicling her adventures as wage slave, and gets down to “objectively” detailing the problems in her epilogue, I can’t say I disagree with most of her points.

• Housing – I do believe there is currently a dearth of affordable housing, especially in many urban area. It galls me that many apartments in New York often serve as nothing more than a hotel room for the affluent while low wage workers trek hours from less desirable areas come to clean and cook for the rich.
• Childcare – Rising rates of single parenthood, and two income households has created a crisis in adequate childcare.
• Healthcare – I’ve always felt that adequate healthcare insurance should be distinct from employment. This is not to say it’s as easy as the government providing it. It’s not.  The topic is complicated, but I do believe the current system needs to be adjusted.
• Uneconomic Behavior/Education – Barbara understands many individuals who are making minimum wage or near it do not make economically rational decisions. Like Barbara, I’m not ready to fault these individuals for such behavior out of hand. It’s easy for people who’ve had more education and better circumstances to pooh pooh poor decisions. So many decisions in life are based on experience and circumstance. Psychology has a much greater role in decision making than just rational thinking.

Given that I don’t disagree in the end all that much with Barbara, you would think that I would’ve enjoyed and agreed with the book more. However, I had a hard time getting past her antagonistic attitude. Being a successful is not a bad thing, and should not something anyone should feel guilty about.

On the first Monday of December, I though I would review a couple things to do at the end of the year.

1. Sign up for loyalty programs, such as frequent flier programs. Frequent flier program typically award status level based on flights taken in a calendar year. As a result it makes sense to make sure you’re signed up for the whole calendar year.
2. Make a list of likely big purchase items for the following year. Too often we budget without thought to the big ticket items like vacations, cars, etc. The only big ticket item on my list is a home, but I’m not sure I’m going to do that next year.
3.  Spend whatever might be left in the Flexible Spending Account.  I’m buying contact lenses. The Flexible Spending Account is use it or lose it, and there’s no reason to lose it. What’s allowed as health care expenditures is broad enough to allow for many common purchases such as over the counter drugs.  Stock up for next year.
4. Give to charity. Actually try to give to charity year round, but the holiday season is always a popular time to give as many charities often trying to “get the vote out.”
5. Open up a savings account. There’s no better way to start the new year with a savings account in hand ready to accept automatic deductions.  It’s never too soon to start funding an emergency fund, and it’s never too late to siphoning money off for the next big purchase or investment.
6. Open a Roth IRA. The Roth IRA is really one those accounts you want to open sooner rather than later. Given the current tax law (which is in state of flux), many well paid individuals do no qualify to contribute. You might not think that you’ll join these ranks, but I know plenty of people who didn’t think about opening an account until it was too late.
7. Open a 529 Account.  Even if you don’t have children, opening a 529 account can make sense.  You could open up the account, designate a sibling as a placeholder, and change the beneficiary to your child at a later date. Or even better open a 529 account for family member’s child who might not be as wealth off as you. I don’t have children, and this something I’m going to do this year.
8. Open a Brokerage or Mutual Fund (Vanguard and Fidelity are good choices) account if you don’t already have, and get ready to begin your investing career.
9. Talk to family about instituting a minimal gift policy for Christmas. Call me a Grinch, but I find the extensive gift giving over Christmas both unnecessary and time consuming. I rather spend my time entertaining family and friends during holiday season in place shopping for gifts.  That said, I’m already on a minimalist plan with my family so I really shouldn’t complain. I probably only spend 2 hours gift shopping for the holidays.
10. Use the extra time off from work laying out a financial plan for years to come.  Take the time to evaluate what’s really important in your life, and what those “things” cost.  I think it’s too easy to be caught up spending too much money on things that are easy and offer immediate gratification while avoiding make real progress on the goals that would make us happy. I know I’m guilty of spending a good chunk of change on an expensive meals because I can, instead of spending more time planning tastier meals at home that I know is more financially sustainable.

While almost any of these things can be done at anytime of the year, many of us think on a calendar basis. I know I certainly do.

Some of us write posts about the simple life, and some play the simple life on tv, but few of us actually do it. This past weekend I spent a good amount time chatting with my brother about an old friend of his from college with whom he had just met up with for lunch. His friend and his wife whom I’ll Joe and Susan both went to the same college with my brother, a top liberals art college in the northeast.  Joe graduated with a degree in Geology, and Susan a degree in Biology. Today they are primarily farmers in New England, and have been so since the day they graduated well over a decade ago. They have taken the road less traveled while many of their classmates went on to become lawyers, doctors and bankers.

They slaughter their own chicken, pigs, and cows. They sell bales of hay, chop cords of wood, make and bottle maple syrup. With three children, ranging in age between 7 years and 6 months, they are tired but happy. Financially, however, they could be in better shape. Joe has a part time job with UPS, mostly for the insurance coverage, and Susan is considering waitressing to earn a little extra money once the children are older.

As much as Joe and Susan love the type of life they lead, the simple life for them is also fraught with risk. For example this year they’ve been able to sell 10,000 bales of hay to the drought stricken southeast. 10,000 bales sounds like a lot, but given that these small bales of hay sells for about $2.45 in the midwest, 10,000 bales does not generate all that much income given the amount of work that goes into each bale. Hay has to be grown, harvested, and dried. While Joe has a tractor attachment that does much of this work, such machinery is not free. A 20 year old bottom of the line baler still costs close to $7,000. While this year they have been fortunate that the demand has been high for hay, they could have just easily been the victim of bad weather.

In addition to the risk of drought, Joe constantly faces physical dangers that I can hardly imagine sitting at my desk job. Apparently last year while he was cutting some trees down, he ended up getting pinned to the ground by two fallen trees. He was alone in the forest that is his backyard, and was only saved when Susan found him after he didn’t come home.  I worry about paper cuts.  Joe worries about trees falling on him.  I don’t know how much life or disability insurance Joe has, but whatever he does have he’s paying out of his own pocket given that he’s mostly self-employed.

Both Joe and Susan wake before the crack of down. Joe logs a couple hours at UPS warehouse and comes home to work the farm. Susan milks the cows, feeds the chickens, and gets the children ready for school. They effectively work from 4 in the morning to 6 at night. That’s a long day in the “office.” It’s not like he and Susan can take time off either. Farming doesn’t lend itself to long vacations even if they could afford it. They have not gotten in a plane in over 10 years. I probably don’t go 10 weeks without stepping onto a plane.

I admire the alternate life style that Joe and Susan have chosen for themselves. They did not subccumb to the many temptations for things and status that so many others do They have chosen a simple existence and one that is very much in touch with nature that I think many of us think about wanting. However their life is also representative of how even living the “simple life” is not as simple as we might think.  It can be fraught with risk and stress.  While Joe and Susan certainly practice a frugality forced upon them by their lifestyle where they grow and raise their own food, the rest of their financial life is under constant assault.  Because they have chosen to eschew more lucrative careers, saving for retirement is difficult. The biggest challenge for them is properly guarding against risks via insurance or a sizeable emergency fund. In their case, the emergency fund is not just personal but one for their farm. Can they survive one bad year? Can they survive a broken tractor? We should all be so lucky to be able to choose the “simple life”, but the choice is also one that requires immense financial preparation and hard work.

In general I didn’t come away all that inspired by the story Scott Jones.  While he sounds like man with great ideas and grand plans, he also sounds like workaholic.  Many of his tips are centered on how to squeeze more productivity out of a given day.  While I’m all about getting more time out of life, I don’t think I want more time just so I can work.  That and I’m pretty sure I wouldn’t be able to cut my hours of sleep down to 6.5.

One thing did catch my attention. On the last page, Scott talks about how he tries to do everyday activities differently.  He would watch TV from only two feet, and eat without any utensils (I hope he’s actually going out on limb and not just doing this with a sandwich). While those sound like kooky things to do, and actually they are, there’s something to be said about getting out of your normal frame of reference.  For someone like Scott who is an creative entrepreneur thinking different is his job.  Coming up with new ideas is his life blood.  It’s not easy thinking of new ideas when one has the same routine and habits.

Most of us are not creative business entrepreneurs, but that does not mean we could not use a dose of thinking different in our personal and financial lives.  How many purchases do we make just because we’ve always made them? Do we get to work the same way everyday? I agree with Scott Jones, sometimes the best way to think of new ideas is not to actively think and fish for them but to just go about your business differently.  The ideas will come.  For Scott the idea may be a new business venture.  For me it could be a new business venture, but more likely it’d be a method to maximize my time, or a way to save a little extra money, or a new investment strategy.