Anecdotes from the Downturn

CNN Money is running a series a short stories from those who are struggling financially.  In total there are 26 articles that cover a diverse mix of Americans.  The common theme is that broad swaths of our population have been hit by hard economic times.  However, all of these stories remind me how important it is to recognize the difference between a collection of anecdotes about individuals economic hardship and statistically important analysis of the whole economy.

After reading through all of the anecdotes, the most common hardships are job loss, health problems, and single parent households.   What struck me is that even in good economic times these problems are very real and likely to hurt the prosperity of ANY household.  As it turns out, unemployment is still at solid levels historically speaking, less than 5%.  A net loss of 63,000 jobs in February may significantly impact individual families, but it has almost no effect on the broader economy.   The past nine months of the credit crunch have not made it any harder to be a single parent or any more likely for health to prevent someone for working. 

There also seems to be a big difference in the outcomes for those who have prepared themselves and those who are oblivious to the basics of personal finance.  Simply having an emergency fund and a college degree can insulate most people from the threat of unemployment.  Those who have a degree are less than half as likely as the general population to become unemployed and with a graduate degree or beyond it is less than a 2% chance of becoming unemployed. Finally, if you have little or no debt, there is almost no risk of having significant hardship during a downturn.  Even part time work can put food on your table as long as you don't have debt payments getting in the way.

Another observation I have made recently is that the media, in all of its forms, is fixated on the bad news rather than the reality of the situation.  By reporting on the misfortune of a tiny subset of the population, it skews our confidence in both the system and our own prospects.  We empathize with those who are struggling and worry that we may be next.  By reporting the monthly job data with a headline of 63,000 Jobs Lost in February rather than Unemployment Remains Virtually Unchanged at Historic Lows a reporter gets more attention but also puts a huge spin on the "news."  While the spin may sell more papers and drum up more readers, it is not a good basis for making financial decisions.

Another observation I made is that not everyone on the series was actually struggling.  One profile is about a middle class family with a self employed bread winner.  They bought a house they could afford with a 30 year fixed mortgage and have taken personal responsibility for their financial future.  Future tax increases are their biggest financial worry.  Another profile covers a couple who are nearing retirement.  They have saved diligently and lived a life within their means.  Their biggest financial concern is not about today, but rather the impact of loose fiscal policy and Wall Street shenanigans which may eat into their buying power.  These people are responsible with their money and are in a position to prosper in the future.  Their worries about politics and economic policy are ones that I share, but because of their good financial choices they are far ahead of the game.  Even in tough times they are likely to have a roof over their heads and food on the table.  It is simply a question of whether they will live "the dream" or "just get by."  That is a good problem to have.

The point of this post is to point out that there are reasons that some people are struggling and others are not, and very little of it has to do with what is found in newspaper headlines.  Rather than worrying about national or global economic conditions we should instead focus on the things we can control: living within our means and making good life choices.  If we do that individually then there is little need for pessimism or doubt about the future.

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Dress to Impress

Over the last year and a half I have started traveling for business every couple of months. Usually on these trips I am visiting a contractor which does business for my company. Ultimately my role is to perform an audit or provide oversight into how well they are executing their contractual duties. I have also starting giving briefings to high level managers and decision makers. In other words, at times my job requires me to put forth a professional, credible persona.

A large part of that professionalism is dressing the part. In my normal work environment we don't have a dress code. As an unspoken rule, shorts and sandals are a bit too casual except on special occasions, but day-to-day a tee shirt and blue jeans is perfectly acceptable. I am sometime teased by friends and family because I almost always wear the same thing whether at work or at home: a collared polo-style shirt and blue jeans. When I travel or have a presentation to give that outfit does not give the impression I need to present.

For those situations I currently wear a pair of black slacks, a solid color button-up shirt, and a tie. My entire "dress" wardrobe consists of one pair of dress pants, about four button-up shirts, and less than a half dozen ties. In other words, I can get through a week of business travel and then I am out of fresh options. The problem is that I am finding that in some situations I am still a tad under dressed.

A particular weakness in my current plan is that I know my dress shoes are not up to snuff. I bought them for $30 at WalMart. They are black. They are simple. They also look like I bought them at WalMart... My shoes are clearly due for an upgrade.

Next, in cold weather, or really anytime mother nature is not cooperating, I also look like a schmuck. At issue here is that I only have one real jacket, and it is completely casual. It is a decent jacket for walking around town, but it is more at home on a camping trip than in a board room. Because I am from the South the jacket also is not up to the insane weather conditions I have encountered during my travels this winter (a high temp of -6 is NOT a temperate climate). Thus, I need a better selection of outerwear that is classy and able to stand up to all types of weather.

My last big hole in my professional wardrobe is my briefcase. Again from WalMart for about $30, I bought a messenger bag / soft side brief case. It is made out of nylon and looks more at home on a college campus than by my side during a "power lunch." To top it all off, back in January when I took a trip, the shoulder strap broke as I was walking through the Cincinnati airport. In order to slog through the airport with all of my stuff I really need a bag with a shoulder strap.

A few days ago I was about to buy a new strap for the ailing bag. Then I saw that my options were either pay $18 for a decent padded strap, pay $12 for another crap piece of nylon with plastic hardware and no padding, or worse yet buy a strap of neon green or rainbow color. Rather than throw good money after bad I started looking for a replacement briefcase.

Today I popped into the luggage store at the local mall to see what I could find. I was immediately put off by the $300-400 cases they had filling their shelves. The sales clerk tried to help me out but when I said my price range was $60-100 she just laughed. I was ready to leave but she then told me to feel free to dig through some bags that were behind the counter and lined up below a display case. There I found some treasures. Ultimately I selected a bag that was listed as a Kenneth Cole case new for 2001 (like I care for a classic black briefcase what year it was "in style"), and it had been marked down from $250 to $179 to $139 to $99 and finally down to $79!

I still agonized about the price for a while before I realized that it was just barely more than I paid for my old WalMart bag plus one replacement strap. I decided that it was time to buy a quality product that would hold up for years (it even has a lifetime manufacturer warranty) and project the type of image that is expected of me for important meetings and business travel. This is one of those cases where spending a little money now to make the right impression could pay massive dividends with raises and promotions down the line. Now, if only I can find the same kind of deal on the rest of my professional wardrobe as I did on that case so I will be totally ready to dress to impress.

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New Way to Bank Extra Cash

Today I am taking off for a quick three day / two night business trip.  I don't travel that often, but every couple of months I need to attend an out town meeting or drop in with a supplier.  As a part of my quest to squeeze a little more money out of my budget I am going to try and use these business trips as a way to increase my income.

How can I turn my travel into extra money?  First, I signed up for all of the frequent traveler accounts that I may use while on the road.  My employer lets its employees keep the rewards they rack up for personal use.  For the first couple of trips I wastefully failed to claim these benefits.  I now have accounts with each of the major airlines that service my local airport and a selection of hotel chains that I will use for lodging too.  In fact, with only three business trips and two night of personal hotel stays I have nearly earned enough points to get a free hotel stay, worth $60, by simply doing things I would do anyway.  Using these programs I will earn something of real value as I schlep around for work.

The second way I can put money back in my pocket from business travel is to use my daily spending account wisely.  Rather than be forced to collect receipts for every little purchase while I am out of town, I am given a fixed amount of money to spend per day.  This money, typically called a "per diem" allotment, is intended to cover my food, tips, and miscellaneous expenses I incur.  While this amount is not exorbitant it is certainly more than I need if I spend my money wisely.  A typical per diem can be anywhere from $30-75 per day depending on the type of trip.  Even at $30 a day I can eat pretty well in almost any city and pocket the extra.  In the past I have let this potentially lucrative extra income go to waste by viewing my business trips as an excuse to let loose from my normal budget and "eat like a king."  I would order a $20 steak for dinner and skip the hotel's continental breakfast, while not even thinking about the splurge as wasteful.  Of course, I would only order like that at home, on my dime, for a special occation.

It is important that I remain ethical in how I use my travel dollars.  Like with taxes, I want to claim all that I am rightfully entitled without bending any rules or abusing the system.  For example, it may be in my best interest to fly on an airline that is within my favorite frequent flier program, but it would be unethical to force my employer to pay more for a ticket just so I can maximize my personal gain.  It would also be unethical for me to accept free meals from a client or even worse to solicit those meals in order to pocket my per diem cash.  As it should be with all things it will be ethics first and frugality second.

From now on, it will be like a game to see how much extra cash I will have left at the end of the trip.  It should take some of the sting out of being away from my lovely wife (who hates when I travel) and sleeping in an unfamiliar bed.  Wish me luck and safe travels.  Thanks for reading.

On another note, today the Festival of Frugality #115 went live over at Broke Grad Student.  One of my posts, Frugality Making a Come Back, was featured.  If you have some time head over that way to check out the carnival.

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Class In America

I stumbled onto a special feature from the New York Times about Class in America. It seemed like a good follow up to my post last week about Wealth Porn. I learned some interesting things by reading the articles and running some numbers in their tools. First, based on the How Class Works calculator I rank in the 74th percentile of Americans. My education and salary both push me high up the scale while my net worth brings me down a good bit. If I put my parents on the same scale, they both have masters degrees and make upper middle class salaries; they are at the 90th percentile. I think with enough time I will catch up to them, but I think it is unlikely for me to surpass the level of my parents. I started near the top and I have followed in my parents foot steps.

Another graphic shows income mobility in America from 1988 to 1998. It clearly demonstrates that a number of people from the very bottom are able to rise to the very top of the scale. It also shows that those in the middle and lower middle ranges have an equal probability to end up in any of the income categories with about half improving their standing. However, this does not mean that everyone has an equal likelihood to end up at the top. Only about half of those in the lowest group are able to move up the scale. Those who had the early advantage of starting in the top bracket continue to populate about half of the of the top bracket 10 years later. Thus, it is equally likely for someone at the top to fall as it it for someone at the bottom to move up. That seems to me like the American Dream is alive and well.

Some of what I read was encouraging. Some of it made me think. I recommend everyone take a minute to read some of the content and explore the tools. Comments about class in America and class mobility are welcomed.

I have been featured in the following carnivals lately that I would like to share with you:

• Carnival of Personal Finance hosted by The Financial Blogger
• Carnival of Homeowners hosted by Homeowners Insurance Lowdown
• Festival of Frugality hosted by Mighty Bargain Hunter

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Start the Week Off Right

It is Monday morning and I had a tough time dragging myself out of bed.  Despite my wifes tempting suggestion that we both take a "mental health day," I resisted temptation and got myself to work.  I do my best to be a good cubical drone and use my sick leave in a responsible manner.  However, the urge to abuse a liberal sick leave policy is always just a phone call away.  I wonder how much our economy looses as a whole from people who take a couple extra days for the sake of Monday-Morning-Blues. 

A couple weeks ago I missed two days of work because of a nasty head cold and sinus infection.  My mom chastised me for missing work for such a minor illness.  Of course she was right that I could have pulled myself together, heavily medicated, and kept my chair warm all day; but at what cost?  How many of my coworkers would have been exposed to my germs or distracted and grossed out by my constant nose blowing?  How much work could I have actually gotten done in my drug induced haze?  My dad went nearly 20 years of his life without using sick leave (unless he had been admitted to a hospital and was literally deathly ill).  I have to wonder if his valiant sick-on-the-job efforts actually helped his employer or not.  Is this a generational difference from the days where loyalty to ones company begot a pension and health insurance and all those "old fashion" benefits?

I think that it is reasonable to use about half of my 13 sick days each year and "bank" the rest until I have saved up the maximum.  That way after a few years I can withstand a catastrophic illness that lasts a month or so and still get paid.  Once I have saved up the max do I have a "right" to use up all of my sick days every year even if I may not be sick?  What about if I just feel under the weather or have a headache, would it be reasonable to use up leave for that?  I haven't figure all of this out for myself yet either, but I do know that I am going to use my leave and not let it go to waste like my parents.

Today Aspire 2 Wealth was featured in on a few posts from around the blog-o-sphere.  The Dividend Guy hosted the Carnival of Personal Finance #137.  My post Millionaire Rule #7 was included.  The Carnival of Twenty Something Finance #14 included my post Diapers and 529 Plans - Scary Stuff over at TheLocoMono Website.  Finally, Credit Withdrawal posted a weekly roundup Time Travel Edition that also linked to my Diapers and 529 Plans post.  All of these great sites are worth a surf so check them out if you need some reading material to help your Monday move a little bit faster. 

If you are visiting Aspire 2 Wealth for the first time please take a minute to subscribe to my RSS feed.  The navigation bar at the top can direct you to some of my key posts that will help you get to know me.  Thanks for reading!          

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Loving Your Job (or NOT)

A the last minute work has taken me out of town. I don't have to travel more than a handful of times each year, but something popped up. My only internet access is the nifty iPod Touch I got for Chirstmas. I guess it isn't only a toy; it is a way to blog almost anywhere! Anyway, I'm exhausted from the time change, plane ride, and mile-a-minute information I've encountered today.

Before I take a nap I wanted to share this great piece of personal finance info:

Yesterday Aspire 2 Wealth was included in the Carnival of Money Stories #42. Dan at MoneyMyths was kind enough to put together a great list of posts. My personal pick from the carnival is the post Loving Your Job. It also seems very "on topic" for my life right now. I'll let you guess where I fall on the issue. At some point I'll flesh out my thoughs in a full post about this topic. Till next time...

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