Everybody Loves Your Money

It’s been a tough week.  There’s really no other way to put it.  Layoffs at work have hit closer to home than they ever have before and the overall mood in the office is absolutely horrible.  Since last Friday I’ve been slowly hearing about many friends and really good employees that have been given their layoff slips.  Why?  Because the company has decided to try to outsource as much as they can to improve the bottom line.  Did they have to?  No.  We showed a very good profit last quarter and I believe we’ll continue to see very good returns.  I definitely feel a bit bitter about the whole situation and am really kind of mad at my company right now, and I didn’t even get a layoff notice!  Okay, enough about that.

I read an article today that talks about a recent Slate commentary from Charlie Munger titled “Basically, It’s Over”.  If you aren’t familiar with Charlie Munger, he’s been the sidekick of Warren Buffet for decades and I consider him to be pretty damn smart.  While you can always find gloom and doom articles out there about the end of America etc etc, I’ve always been impressed with both Warren Buffet and Charlie Munger.  They have always seemed incredibly honest and they have a great way of putting things.  So, when I read the article, I have to admit, it put a bit of fear in me.  I’ve often wondered how long we can sustain the massive debt levels that we’ve seen over the last decade (and beyond).  There is not a limitless supply of money or resources in this world and sooner or later all the excess spending at the government and personal level is going to come back to haunt us.  It appears that it might be sooner than later.  I found the comments about “blind optimism” to be very interesting.  While I haven’t studied history as much as I should have, I do know that we’ve seen many societies rise and fall.  It’s fairly likely that eventually the US will fall from world dominance and now seems like as good a time as any.  With trillion dollar deficit spending, the rise of a global economy and educated global workforce, rising unemployment and consumer debt levels that have never been seen before, it’s not a tough case to make for a rather gloomy future.

On the plus side, I just saved a ton of money on my car insurance……

Anyway, go check out the Yahoo article and the original Charlie Munger article as well.  Definitely worth reading.

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Another week, another free breakfast.  IHOP is giving away a short stack of pancakes today from 7 am to 10 pm.  There probably won’t be quite the lines that there were for the Denny’s giveaway, but you don’t get as much food either.

http://www.ihoppancakeday.com/pancake-day-details.html

In a sign that not all people are capitalistic monsters, Bob Moore, the founder of Bob’s Red Mill in Oregon, has decided to give his company to the 209 employees that work there.  Bob could have sold the company for a large sum of money but decided that money isn’t everything.  WOW!

Bob has turned down a number of buyout offers over the years and the business continues to grow steadily.  A company news release shows that they are growing over 20% annually.

In order to qualify for a stake in the ownership, an employee needs to be vested over a three year period.

I’ve been down to their retail store in Oregon and was very impressed with the operation.  I have purchased a number of their gluten free products and have never been disappointed.  It’s a great company!

Anyway, I just love reading stories like this.  It seems to blur out many of the other negative stories out there about “profit at all cost”.  I bet Bob sleeps pretty darned good at night!

Previously I mentioned that we were working to get our daughter registered as a UK citizen.  She is eligible for British citizenship because my wife was born in England, although she lives in the US now and is also a US citizen.

As we thought about it a bit, we realized that we’d be foolish not to register our daughter as a UK citizen.  While she is automatically a “UK citizen by descent”, it makes sense for us to get her officially recognized so that she’ll be able to freely move in and out of the country and work there if she chooses.  It also gives her access to UK healthcare which might come in handy some day if we happen to be there visiting, or if we lose our insurance here in the US and she is in need of care we can’t afford.

We have also been contemplating moving to the UK when we retire.  My wife would love to live back in the UK.  She spent summers there when she was growing up and obviously feels a strong connection to the country.  When we first started talking about this we thought we’d discovered an incredible option for our retirement that would let us live comfortably and have free health care.  (I would have to wait three years to become a UK citizen to qualify for the healthcare but that’s not a big deal).  As we put more thought in to it, it became clear that our plan wasn’t as great as it first appeared.  While we would ultimately have universal health coverage over there, it definitely wouldn’t be free.  It hadn’t initially occurred to us that we’d really end up paying for this healthcare through much higher taxes to our pension, investments and social security income.  Our assumption is that it would probably end up being more expensive than just staying in the US and buying private health insurance.  Once we hit medicare age (assuming it still exists), we’d almost definitely be better off staying in the US.

The one situation that it still might be a good idea to move to the UK is if we end up having very little money because I invested all of our money in a fool proof pyramid scheme or finally fell victim to a “hard luck” story from Nigeria.  In that case, if we were low income and wouldn’t be showing much income, we might be better off moving to the UK.  We would face very little taxes and would have access to the social benefits that the UK offers.

Who knows what will happen in the next 20 years before we retire.  It’s likely that we’ll retire here and spend time in Arizona or somewhere else warm in the winters but just having the additional options makes us feel fortunate.

My wife, Kate, was born in England and moved here when she was five with her parents.  She became a US citizen many years later and now has dual citizenship in the US and in the UK.  It never occurred to me that there could be any benefit to having citizenship in two countries until Kate flew to England a few years ago to visit her family.  I was back at home working when I got the call from England.  Kate was having stomach cramps and she was planning on going to the doctor.  My first thought was, “Oh no.  I hope she’s okay” and then, “Oh crap, this is going to be an insurance nightmare!”.

After a couple hours of worrying about Kate, she called to say that she was back from the doctor and everything was okay.  The doctor had prescribed some medicine for her and she had already taken the first ones and was starting to feel better.  As I let out a sigh of relief Kate said, “Oh and the best part is that there is no charge!”.  I said, “What??  How can that be?”  It never occurred to me that, in England’s eyes, she is a citizen and is eligible for government health care.  I can’t tell you how relieved I was that Kate was okay and that there would be no 2 hour phone calls arguing about how my health care provider in the states should help cover the cost of the care.

A few years later we became parents to a wonderful little girl.  When she turned 6 I happened to wonder whether she had any rights to citizenship in the UK since she was born to a UK citizen (even though we live here in the US).  After a couple hours of Googling and reading way more than I cared to, it became clear that, indeed our daughter IS a UK citizen.  They consider her a “UK citizen by descent”.  This means that she is a UK citizen but that if she was to have children when she’s older they wouldn’t have automatic rights to UK citizenship (unless of course she was living in England at the time).

We are now in the process of gathering birth certificates, marriage licenses and passports so that we can get our daughter officially registered as a UK citizen.  While it isn’t necessary for us to do this right now, by doing it now, we will save her the grief of trying to find these documents if she ever decided to move to England and had to prove her citizenship.

So, what’s the big deal of getting our daughter documented as a UK citizen?  Well, the first one that comes to mind is it gives her the freedom to move to England if she chooses to later in life and will give her unrestricted access to employment there.  The second reason is that she would always have England as backup healthcare if we were to ever lose our coverage in the states.  Believe me, if my daughter was to get sick enough to require significant care and we didn’t have health insurance, I’d be more than happy to fly her over the pond to England for treatment.  While this isn’t very likely, it’s just one more option for her.

So, those are a couple of the reasons that we are following through with getting her registered as a British citizen.  Are you aware of any others?

This week is a really tough week at work.  People at all levels of the company are getting laid off so there is a lot of “staring at the ground” going on as people deal with the prospect of losing their income.  While this has happened many times before at my large company, it’s hitting closer to home than it ever has before.  I’m seeing good friends getting their notices and I know that many more are coming later in the week.  I keep wondering how many of these people have prepared for a layoff.  It’s times like these that I like to go through my mental list of things I should be doing in case I am faced with the same situation.  (I’ve been told that I’m not at risk and should be able to keep my job so I’m breathing relatively easy for now).

Am I saving enough?

It’s a thought I have often.  We are saving well over 20% of our before tax income in our retirement accounts and are trying to build our emergency fund up higher, although I will confess I’ve slipped up on that goal more than a few times.  The good news is that we do have at least 6 months of income saved up and it’s easily accessible.  When you combine that with the safety nets that the local/federal government provide (unemployment benefits), our emergency fund should last us more than a year.  On top of that, the most likely scenario is that one of us would still be working.  In that case, we could go for years without my income because we have kept our fixed expenses very low.

Is my resume current?

I haven’t done a very good job of keeping up my resume, but with a few minutes of work, I think I could have it tuned up and ready to send out.  I’ve also kept up my contacts at previous companies and try to maintain a large network of contacts that I would certainly get in touch with if I found myself looking for work.  The most likely way that I would find a new job is through referrals and connections.  Blindly sending out a resume in this environment would likely not yield any results so my personal network is as important as ever.

Am I doing all I can to be valuable at work?

I’m definitely reevaluating my role at work and am going the extra mile to make sure things are done right and done quickly.  I’m also keeping in touch with my boss to be sure I’m doing all that’s needed.  I actually just met with him yesterday to lay out performance goals for the year and then we had lunch afterward.  My sense is that I’m still considered a valuable member of the team and would be one of the last to go if layoffs were to happen in our group.  I’ll continue to watch my performance and volunteer for extra work.  By doing this, it will help me gain even more visibility with my management chain and hopefully reinforce that I’m one of the key players on the team.

Are we keeping our bills to a minimum?

I’m still religiously watching our fixed monthly expenses so I know we are doing all we can to keep our bills low.  Our total fixed bills for things like mortgage, utilities, gas, food etc are still floating around 50% of our after tax income.  If we were to lose our jobs, we could probably reduce that another 5-7% by really locking down spending and getting rid of expenses like Netflix, cable and a couple other “extra” expenses that we have now.

All in all, I think we are doing all we can to prepare for the day that we might be faced with a layoff.  By spending far less than we make, and saving some of our monthly excess income, it is providing us with a level of security to weather most any storm.  If we hadn’t been doing this for so long, I think we’d be much more stressed out about potentially losing our jobs, that’s for sure.

There’s a storm brewing that’s going to rain on Verizon and give you unlimited amounts of sunshine.  Skype is now going to be available on a number of Verizon’s smart phones.

This is good news for consumers like us.  Whether the wireless carriers like it or not, the momentum is shifting in our favor.  I think our wireless experience is going to come down to cost/coverage in the very near future.  You’ll be able to get unlimited data plans and the days of taxing you to death with texting plans and calling plans will finally be behind us.

The savvy wireless phone users will realize it’s very much to their advantage to shift their phone numbers to calling services like Skype or Google Voice so that you will be able to freely move from one wireless carrier to another based on price and coverage alone.  I’d liken it to your ability to switch DSL/Cable providers to get the best price every year.

I think it’s high time that the wireless carriers lose their leverage over their customers.  I think we’ve overpaid for mediocre service for a long time.  I’m excited to think that we can shift these carriers to being “dumb pipes” so that we simply use them for the connection.  No longer will we have to settle for crappy phones with crappy services.  With phones like the Nexus One and the Iphone (and the hundreds that are coming down the pike) we’ll be able to slowly forget what carrier we are even using, except for the data bill that shows up each month.

Of course I’m exaggerating a little bit because I think we all know that the carriers aren’t going to be marginalized that easily, but I think the writing is on the wall.  The tides are shifting in our favor and it’s just a matter of how long it takes to be complete!

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According to multiple outlets, Heather Mills, ex-wife of Paul McCartney, has managed to burn through $54.5 million dollars in less than two years.  Heather received the funds in her divorce from McCartney in 2008.

Heather claims that plenty of the money was given to charities or “ethical businesses” and she also paid for a couple properties for her daughter.

Just to put this in perspective.  In order to go through that much money she’d have to have a burn rate of $2.27 million dollars a MONTH.

Unfortunately Heather didn’t take time out of her busy schedule to peruse the multitude of personal finance blogs out here.  Had she done that, she might have realized how she could have made that initial money work for her so that she’d have a lasting legacy and fund her “causes” indefinitely.

Imagine if she’d invested those funds to generate annual income that she could have used for her charity causes, supported her daughter indefinitely etc.  This seems very similar to the fate of lottery winners who get a large sum of money and then use it like an unlimited bank account, only to have regrets when it’s all gone.

Let’s just do some simple math and see what she could have done.

$54.5 million invested very conservatively could have easily yielded 4%.  That equates to $2,180,000 each year, or $181,000 a month.  That’s without eating in to the principal.  So unfortunate……

Yahoo has an article up that shows how much customer misery there is out there with the big banks.  Check out these stats:

The report, Forrester’s annual Customer Advocacy rankings, ranks nearly 50 financial services firms in the United States by the percentage of each firm’s customers who agree with the statement: "My financial provider does what’s best for me, not just its own bottom line." The results are based on a survey of about 4,500 consumers.

The bottom seven of this year’s rankings, first to last, are Bank of America, Chase, Capital One, TD/Commerce, Fifth Third, Citibank, and in last place, HSBC.

Among Bank of America customers, 33 percent agreed with the statement above, while 31 percent of Chase customers agreed, 29 percent of Capital One customers agreed, 28 percent of TD/Commerce Bank customers agreed, 27 percent of Fifth Third Bank customers agreed and 26 percent of Citibank customers agreed.

A full 33% of Bank of America’s customers believe that their bank is looking out for them.  That means 67% do NOT.  Wow.

Have I mentioned I’m a big fan of credit unions?  The number one reason that I like doing business with a credit union is that they aren’t trying to make a profit from me.  That results in higher rates on deposits, lower rates on loans and lower fees.

Anyway, go check out the article.  It’s worth reading

Today I was browsing through the homes for sale in my general area (after work) and came upon a really nice looking place that is exactly the kind of property I’ve always wanted.  It was relatively close to the city but had a very definite “country” feel to it.

The house sits on about 1 acre of land, is about 3600 square feet (way too big for us, frankly), has a 3 car attached garage and a separate 40 X 50 shop with a large bonus room above it.  What really caught my eye was the massive shop and the 1 acre+ lot.  We certainly don’t need a house that big and we aren’t really interested in moving but I was intrigued by it and decided to drive over and take a look at it.

When I arrived, I saw the telltale signs of a bank owned property.  The yard, which you could tell was well kept previously, was showing signs of abandonment.  There were papers taped to the inside of the window that said “Winterized” which is a sure sign that a bank has hired a property management company to drain the pipes and turn off the water.  Since it was vacant and obviously bank owned, I decided to walk around it and peek in the windows.

As I peered in the first window I could see a kitchen with granite counters, hardwood floors, and beautiful cabinets.  What I did not see were any appliances.  The people that lost the house took every single appliance, including the oven, (leaving a large hole in the wall), the range, (leaving a gaping hole in the island), the dishwasher and the refrigerator.  Surprisingly the sink and faucet were still there.  I also noticed that they took various switches off the walls and I believe they took a few of the light fixtures.

When I peeked in the second window, I could see the first few stairs before the staircase turned right and out of sight.  It was obvious that they weren’t too careful as they moved out because there were large gouges in the sheetrock and about a 14” hole punched in the sheetrock on the landing.

As I looked around outside a bit, it became clear to me that the people that owned this house played a large part in building it as well.  It may have even been built by the owner.  There were just subtle hints that some of the work was not done by a contractor.  The reason I say this is that, while the work was done fairly well, I don’t believe someone would have accepted the quality of the work on a few things.  I wandered over to the side of the large shop and noticed that there were large piles of decking and various types of lumber that was obviously used in the construction of the house and outside decks.

As I was leaving, it occurred to me that this was most likely the former owner’s dream house.  It looks like they put a lot of blood, sweat and tears in to the construction and were probably very happy to be there.  What isn’t clear is what went wrong.  Why did they end up losing the house?  Where did they go?  I can only imagine the stress, sadness and anger that they felt as they had to walk away from their dream.  What struck me even further was the thought that this same scenario has probably been played out thousands of times across the country.