Everybody Loves Your Money

A friend of mine sent me a very long article about men who are in their 40’s and are not working.  These guys aren’t “retired” they just haven’t found jobs since their last.  They claim the demographic is mostly lower skilled men who have high school educations.  I found it very, very interesting to read, both because it described a couple different men’s situations, and because I’ve often wondered what I’d do if I was in my 40’s and couldn’t find work.  Your 40’s are supposed to be some of your higher earning years so I have no intention of not working.  Mostly I’m just a little fearful I could meet the same fate.  I’d like to think that I would be more immune because I have a college degree, but heck, today’s 4 year degree is yesteryear’s high school education.  With global outsourcing it’s not even a tiny bit unreasonable to think I’ll lose my job to someone in another country.  I try to protect myself from this by looking at what my company considers to be core competencies and make sure that I’m not doing any sort of transactional work that is easily sourced or automated.  I try to stay as high as I can on the value chain.  My current job, as well as my last job, both focused on setting strategy and analyzing how the company can do things faster, better and cheaper.  By staying up at the more strategic level and being one of the people that manages the vendors that work is sourced to, I hope to stay out of the outsourcing fray.  Of course nothing is guaranteed and it’s not hard to envision them looking at my team’s jobs and figuring out a way to source it.  Anyway, I got waaaay off subject.

So, I’m reading this article and found a few interesting tidbits:

“I have come to realize that my free time is worth a lot to me,” he said. To make ends meet, he has tapped the equity in his home through a $30,000 second mortgage, and he is drawing down the family’s savings, at the rate of $7,500 a year. About $60,000 is left. His wife’s income helps them scrape by. “If things really get tight,” Mr. Beggerow said, “I might have to take a low-wage job, but I don’t want to do that.”

About 13 percent of American men in this age group are not working, up from 5 percent in the late 1960’s. The difference represents 4 million men who would be working today if the employment rate had remained where it was in the 1950’s and 60’s.

Instead, Mr. Priga supports himself by borrowing against the rising value of his Los Angeles home. Other men fall back on wives or family members.

Here’s a link to the full article.  Definitely worth a read

So, what can I do to protect myself from a similiar fate?  Well, I’m saving like hell.  We are capped out at what we can save in my 401k each year per the IRS.  I’m also funding a ROTH ira each year.  What I need to do next is move some of our savings in to the market in a standard brokerage account.  If I find myself out of work in my 40’s I hope to be able to generate enough interest/investment income to cover my expenses.  Of course the big unknown is how much health care will cost.  All the planning in the world can’t help me there.

I don’t know why I do it to myself.  I think I’m subscribing to the wrong magazines.  I was so excited to get 4 years of Road and Track for something like $12 on Ebay.  Four years!!  That was a bargain, or at least it seemed so at the time.  You see, I’ve always loved cars.  The only problem is now I see every car that comes out.  They write up huge articles about each car in this magazine.  I drool all over them.  Never borrow a car magazine from me unless you don’t mind touching lots of saliva.

What I really need to do is subscribe to Money magazine, and Kiplingers.  I’ll actually get information I can use and I won’t drool all over the place.  The only problem is that I haven’t found a good deal on the subscriptions.  “Money” doesn’t ever seem to be a very good deal on Ebay, or anywhere else.  They certainly don’t sell subscriptions at the bargain basement prices of a lot of other magazines.  Oh well.

So, what got me on this tangent?  Well, I saw a picture of the BMW M6 convertible.  Geez.  I’d even go for an M3, but both are so far out of my reality, I’ll just have to stare at them in a magazine.  It almost feels like car porn.

I keep reading articles about ARM’s.  Man.  As interest rates climb, I can’t help but think that many, many people are going to find themselves in trouble.  Even if they aren’t in trouble, they will most likely be seeing more and more of their income go towards mortgage interest.

With inflationary fears floating around, it isn’t hard to imagine rates going even higher.  I’m eating up the interest rate hikes.  I’ve got a fixed rate mortgage, no consumer debt and have money in the bank earning me interest.  Not a bad situation to be in as the rates go up.

Other articles I’ve read talk about how little disposable income many people have in their budgets.  I’m sure a percentage of these people with no disposable income probably have adjustable rate mortgages.  That’s a scary proposition.  Basically, to stay in your house, you have got to sacrifice other expenses.  Hopefully you have some to sacrifice.

So, how about a little feedback.  I’ve got a 30 year fixed at 5.75%.  What do you have, and if it’s an ARM, have you thought about how you will be affected?