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January | 2008 | The Grumpy Pundit

Monthly Archives: January 2008

No Good Work Goes Unpunished

Posted by on January 6, 2008 No comments

There is a school of though, which I have seen advocated on certain online forums, that no matter what your job is you should be willing to do anything your boss tells you. For example, if you were a highly paid specialist engineer and your boss told you to make him some coffee and then mop the floor, your response should be a cheerful, “Yes sir!” You will then be rewarded by raises and promotions.

I have to shake my head in cynical amazement at these optimists (some of whom at least claim to have gotten actual promotions through cheerfully doing whatever shit job is thrown at them). In any company I’ve ever worked at, or any company everyone I know has ever worked at, that sort of attitude is only going to get you more shit jobs to do. As the saying goes, “If every day you do a little more than people expect from you, pretty soon people will expect a little more from you every day.”

It is an unfortunate fact that advancement in the workplace has nothing to do with hard work. If anything, working hard will make it less likely that you will be promoted. The way your boss sees it, the more work you do, the bigger the hole in his department when you leave. He might have to hire two people to do the work you’re doing. Or spread the work around to other people, which is not going to please his other subordinates. Or even the nearly unthinkable option of having to do some of the work himself.

Faced with the choice of keeping you in your place and piling work on your desk, or piling the work on his own desk, your boss is going to keep you where you are every time. He isn’t concerned about what’s good for the company and he sure as hell isn’t concerned about what’s best for you; he’s concerned about his departmental budget and keeping his own ass and desk clear.

I’ve seen this first hand. My wife has a very strong work ethic. She kept working long days, over my objections, right up to the day before our son was born. She was constantly working late, taking work home, frantically working away at every project that landed on her desk, in every job she ever had.

It got her precisely nowhere. She never once got a promotion at any of those jobs. When she finally moved on to another company (or, in the case of her last job, quit to be a full-time mom for a while) it usually took two or three people to replace her.

(A variation on this situation is when the company wants you to start at some low-level job — frequently, though not always, clerical — but promises that they will promote you to something else later. They won’t. Ever. Once a secretary, always a secretary, at least as far as that company is concerned. Don’t fall for it.)

It isn’t only your boss that you have to watch out for, of course. Your co-workers will be more than happy to slack off and let you pick up the workload. Work will flow to you to match your willingness to accept it. The rewards will flow to the guy who goes out drinking with the boss while you’re working late.

I’m not saying that you shouldn’t work hard at your job. You should do the best job you can. I’m saying that when it comes time to decide if you’re going to go that extra mile, take on that overtime, take all that work home, think about if your boss or your company would go that extra mile for you. Odds are they wouldn’t. Do your job and do it well, but never forget that your first responsibility is to yourself and your family, not your employer.

How do you get ahead then, if hard work won’t do it? By jumping ship. Move to another company. (Or, if your company is big enough, another department, but don’t count on that; your boss will be working against you. Something else I have firsthand experience of.) You’ll be in the same trap there, but if you played your cards right you’ve got a better position and higher pay. Then, when you’re ready, jump ship again. If you’ve been in the same position for three years, start checking out the job market. You are probably underpaid and overworked.

Does that seem harsh? Disloyal to your employer? Well, if they are loyal to you, you’ll find no advantage to be gained by jumping ship. Your salary is already as good as it’s likely to get. If it isn’t, ask yourself this: Why should you put your employer’s well-being ahead of your own? What have they done to deserve such loyalty.

You’ll probably find that the answer is: Nothing.

Diversify Your Paycheck

Posted by on January 14, 2008 No comments

I haven’t had a job since the end of 2000, when the Dot-Com I was working for dropped dead by the side of the road.

That sounds a lot worse than it really is. I have a long history of making money that doesn’t come from an employer and after a few months of trying to find a new job I gave up and haven’t tried since. Instead, I went back to being a tech-for-hire, a computer consultant, a techno-mercenary. The upside of that was that it was work I could do, and I had just enough contacts to get a marginal start. The downside was that I had to work with computers (and users) all day long, and I had just enough contacts to get a marginal start. The most technically adept consultant in the world will starve if he can’t find clients willing to pay for his expertise.

Fortunately, I had time to build up a client base because my wife was working full time. I had a pretty good base built up when, two years ago, my son was born and that all changed. All of a sudden, my dubious and variable consulting income was the sole support of my entire family. It was unsettling.

Two years later, though, there’s still food in the pantry and money in the bank.

Some people would consider it very risky to have a family depending on the uncertain income of the self-employed. You’re too vulnerable to loss of clients, or simple slow-downs in business, where there may not be much work for weeks at a time. The stability of a ‘real’ job is much more desirable.

Perhaps at one time that was true, but I don’t think it is anymore. The so-called ‘real’ job is no more stable than being self-employed. Sure, you have a steady, unvarying, paycheck coming in twice a month…for as long as it lasts. If your employer goes bust, or simply decides that for whatever reason they no longer need your services, you suddenly no longer have an income. (This has happened to me numerous times.)

Financial advisors are always talking about diversifying your investment portfolio, but you never hear them talking about your income portfolio.

As a consultant, if one of my clients goes bust, or decides for whatever reason that they no longer need my services, or re-locates out of the area (and this has also happened to me numerous times), I still have the income from all my other clients. The money I make being self-employed may not be as steady as a regular job, but it is much more fault-tolerant. If one client goes offline, I can keep running on the others; my money comes from dozens of businesses and individuals and it would take a lot for me to lose all of them.

The feast-or-famine cash flow does take some financial discipline to manage, but now that I’ve gotten used to it I like it better than a single paycheck. Perhaps I just have little faith left in the stability of employers, but the diffuse nature of my income is comforting, not worrisome.

It may be useful to you to think, not in terms of earning a paycheck, or an income, but rather of multiple sources of income. That might mean adding investment income to your salary (which could be as simple as interest on your bank accounts), taking up selling things on Ebay, or even a second job. Besides the financial benefits, adding sidelines exposes you to people and experiences that you might not otherwise have encountered. If you are currently between positions (don’t feel bad; that’s going to be more common in the near future, as the economy sags) consider becoming your own employer rather than selling yourself to the highest bidder. Maybe it isn’t right for you, but you might be surprised. Keep an open mind, at least; if you’ve been laid-off then you certainly know how fragile the so-called steady job can be.

In this modern, globalized economy, we’re all freelancers. Think about what you can do to protect yourself from the whims of the market. Your boss might be adding your name to a list right now.

To Rebate and Stimulate

Posted by on January 20, 2008 No comments

As the US economy worsens, and economists start talking not just about Recession, but Depression, there is some panic in the air. Not from consumers or retailers or bankers, but politicians. The economy heading into the dumpster in an election year is a nightmare for incumbent politicians of any party. Americans may protest long-running wars, but they vote their wallets.

It is certain that the government is going to do something to ‘stimulate’ the economy. A tax rebate is the method that both parties seem to have united behind, differing only on the details. The current proposal, which I will use for discussion here, will see up to $800 returned to each taxpayer ($1600 for couples filing jointly) some time this summer. In theory, the recipients will take that money and run out to the mall and buy a bunch of stuff, stimulating the economy and saving the economy (and numerous Congressional seats).

The problem is, tax rebates as a means of stimulating the economy don’t work. It was tried in 1975 and it didn’t work, and it was tried in 2001 and it didn’t work then either. The problem is that it’s too little money, too thinly spread. It simply doesn’t generate the sort of spending that tax rebate advocates claim it will. People spend based on their predicted permanent income, not temporary windfalls. One-time payments like this tend to either be put into savings, or used to pay some bills.

This time the politicians are talking about up to $800 per taxpayer, rather than the $300 they returned back in 2001. It’s still too little, too late.

A few numbers may illustrate the scope of the problem.

Through this discussion I am going to assume, just for the sake of argument, that the average refund would be $1000 (remember, the rebate is up to $800 per taxpayer). I think the real average check (to single and joint filers combined) would be closer to $750, but to keep the numbers simple I’m going to be generous in my assumptions.

So the hypothetical average household gets a $1000 check this summer to pump some money back into the economy. That household has an income of about $48,000 a year. It spends over $58,000 each year. The $10,000 difference is either drawn from their savings or added to their debt. Their total household debt already tops $115,000, of which about $8000 is credit card debt and $10,000 is other short term debt (mostly student loans or car loans).

The interest on their credit card debt alone amounts to about $1300 a year.

The proposed tax rebate would hardly touch the household’s income shortfall, slightly reducing the rate at which they are sinking into debt. It won’t cover one year’s interest on their credit cards. It probably won’t even cover a single mortgage payment.

It’s pissing in the wind and claiming to be a rainstorm.

The miniscule size of the rebate, compared to the scale of the problem, is only part of the reason why the rebate stimulus won’t work.

To see the other reason, let’s assume that a significant number of people do go out and spend their rebate. Think about where most of the goods at your local mall are actually made. Manufacturers in China, Thailand, and Japan would probably get more of a boost than any in the US. The retail sector would get a short-term jolt, but we simply don’t make much for people to buy anymore.

In my opinion, the purpose of stimulating the economy would be better served by spending that money on some sort of public works project. At $1000 each for, let’s say, 100 million tax returns, that’s we’re talking about $100 billion. (This is just illustrative; the actual rebate total will probably be quite different. I’m just cobbling together some figures to show the scale.)

Now, $100 billion isn’t a great deal of money by government standards, but there is quite a bit that could be done with it. It would pay room, board, tuition, and books for every college student in the country. It would buy health insurance for every uninsured family in the country. That’s not the sort of thing I would suggest, though. Not that those aren’t necessarily worthwhile goals, but they don’t directly stimulate the economy. (Tuition relief to college students would help a great deal three or four years from now. The current system of university education is on its way to destroying the middle class, but that’s the subject for another day.)

I’d rather spend that $100 billion on building things. That money would build a hydrogen fuel network that would include about 75% of all the filling stations in the country. It wouldn’t supply the terawatts of power required to make the hydrogen, but it could be done.

We could convert every car in the country to run on ethanol. (It wouldn’t be a good idea–burning food like that is idiotic and you can see the result in the higher prices you pay at the grocery store–but you could do it.)

We could buy up the tens of thousands of abandoned houses being created by the mortgage crisis, renovate them, and use them for low income housing. (Using apartment properties just creates min-ghettoes in otherwise decent neighborhoods. Scatter poor families one at a time in middle or working class neighborhoods and the transplants are much more likely to adopt the values of their new neighborhood, as opposed to taking the old neighborhood with them.)

We could repair the thousands of decaying bridges that otherwise aren’t going to get fixed until they fall down.

We could build power plants. Improve roads. Build schools. Build something.

Spending the money on this sort of infrastructure improvement is superior to a tax rebate in every way but one. Rather than just handing people a check and telling them to go have a night out on the town it puts people to work, gives them a paycheck and something to do. It builds things that benefit society as a whole.

The only thing it doesn’t do is get votes.

The tax rebate isn’t intended to stimulate the economy. It is intended to stimulate the voters. The politicians will hand you a check and say, “See? I care. Go have yourself a good time and remember me come November.”

Public policy decisions are typically not made with the intent of actually solving a problem, but rather with the intent of appearing to be solving a problem. It is the appearance that counts, not the result.

I’ll take their idiotic check, though. Like everyone else, I have bills to pay.

There’s a Bad Moon Rising

Posted by on January 28, 2008 No comments

As I mentioned last week, the US economy seems to be headed for the crapper, and it is very possible that much of the developed world will be dragged down with it. Many of you may be too young to have seen it before, but this sort of thing happens every now and then.

You may not be affected much; there are some people who do well even in very bad times. (The people who had jobs during the Great Depression were quite comfortable. There were very, very many people, though, who did not have jobs, and it was brutally hard for them, for many years. And when I say brutally hard, I mean like dumpster-diving behind department stores to scrounge discarded wrapping paper to use as toilet paper. Think of that when your life seems tough.) If your job is secure and your company is solid, or you are already wealthy, maybe you have nothing to worry about.

If the economy does get as bad as nearly every economist thinks it may, though, you could be in for some hard times. Probably not Great Depression bad, but bad enough. If you are already established in your career (and spending habits), you may suddenly find yourself struggling to maintain your lifestyle. If you are a college student about to graduate, you may find yourself stumbling right out of the gate, unable to find the sort of job you would like. As a student, you have an advantage over the thirty-something who was just laid off in that you’re used to not having any money. On the other hand, you’ve got all those student loans to pay back, and you were probably unwise enough to accumulate some credit card debt too. Good luck.

It has been a while for me, but all of my childhood and much of my adult life were spent in…financially adverse conditions. I don’t like it, but I’ve done it before and I can survive it again. Even better (for you, you lucky devil you), I can pass along some advice that may be helpful to you after your boss stops by your cube to drop an ominous, “Could you come into my office for a minute?” There’s nothing earth-shaking here, and any truly poor people reading this are probably going to be thinking, “Damn, these well-off people sure do whine a lot,” but I’ve seen first-hand how poorly many people respond when faced with a downturn in their financial status. Maybe this will help.

The important thing is to adjust your expenses to fit your new income. That may seem like common sense, but it is exactly what most people don’t do. If you take nothing else away, remember that. Everything else is details.

(You may not have much choice anyway; banks are tightening up and credit isn’t going to be as easy to come by as it used to be. Even if you (foolishly) want to keep spending and racking up debt, you may not be able to.)

If you were foresighted enough to have saved up an emergency fund, this is where it pays off. You’ll still want to manage your expenses carefully, to get the most out of it, but you don’t have to worry as much about losing your house or car, or putting food on the table, as someone who doesn’t have one. Congratulations. Just remember that you should only dip into the emergency fund to pay for essential expenses. If you use it to pay the cable bill or buy a new TV, you may find yourself unable to pay your mortgage down the road.

Preventative Maintenance

It wouldn’t hurt to periodically evaluate your finances even if you’re not having any financial difficulties. Do it the next time you have an hour or so free. You may be surprised at how much you’re paying for some things, possibly things you aren’t even using anymore. Sometimes just making a few changes can save you some money without cutting back at all on what you’re getting in return. For example, I recently made some changes to my phone, TV, and Internet services which are going to save me about $110 a month, but get me overall better service. That’s $1300 a year, just for spending about half-an-hour on the phone. A couple years ago I shopped around my home and auto insurance and ended up getting better coverage while cutting my bill by several hundred dollars. Don’t assume that the great deal you got years ago is still a great deal today. Shop around.

If you can do it painlessly, why not save the money now? Someday, in the not very distant future, you just might be glad you did.

Triage

The first thing you want to do when you find yourself with a sharply reduced (or non-existant) income is to take a hard look at all your expenses. The essentials are food, utilities, housing, transportation, and possibly certain debt payments. I include phone and Internet service (both very important these days if you want to get another job) in with utilities. Everything else is secondary. Make a list if you have to. Write down everything you spend money on in a given month and organize it into two columns: Essential and Not Essential.

Now, look at the non-essential stuff and see where you can cut back. Do you have to eat out five times a week? Do you really need the top-of-the-line cable package, with all the hi-def movie channels? Try eating out just once a week, and basic cable. Hit the liquor store instead of the bar and buy your booze by the bottle instead of by the drink. Maybe you can live on one new pair of shoes a month instead of five. You get the idea; cut out or cut back on the things you can do without. Don’t cry too much if you have to say goodbye to HBO; with any luck you’ll be able to get it back again in a few months or a year and if you missed anything good you can catch it in repeats or on DVD.

Every dollar you save by cutting back in the non-essential expenses is another dollar that you can spend on the stuff you have to spend money on. HBO you can live without. (Yes you can. Really. Be strong.) Groceries, not so much.

If money is so tight that you’re not sure you can even pay all of your essential bills every month, buy food first. Your money will go farther if you can cook — frozen dinners are handy, but a lot more expensive than making your own meals — but whatever; buy the food first. Screw the mortgage company and the phone company; you have to eat. If you don’t even have enough money for that, give serious thought to calling your parents and seeing if your old room is still available….

After you’ve stocked the ‘fridge and pantry, pay your utility bills. You have to have electricity to live (quite literally in some cases; here in north Texas a number of people die every summer because they don’t have air-conditioning) and you’re going to have a hell of a time finding a new job without a phone. The water bill, if you have one, is no place to cut corners. You may be able to save a little here, by downgrading your phone and Internet service, for example, or being more careful about wasting electricity, but in general don’t mess with the utilities. Pay them if you have any money at all left after groceries.

Only after you’ve put food on the table and kept the lights and water on should you worry about paying the mortgage (or rent). Yes, you have to have a place to live, but the thing is, it takes a long time for the bank or landlord to throw you out of your home. It won’t make anyone happy, but you can run a month or two behind and still survive. Lack of food and water is much less tolerable.

If you have a car payment, you’ll have to use your judgement as to whether it should be prioritized above or below your housing. That will depend on how essential a vehicle is in your area and how quick you think the bank will be to repo it if you fall behind. I usually ranked the car payment as more important than the rent. Putting gas in the car and fixing it if it breaks is more important than making a payment. If you need a car it’s not going to do you any good just sitting in the driveway looking pretty.

Credit card and other debt payments are last of all the essential expenses. Bad things may happen if you don’t pay them, but you probably won’t be deprived of a place to live. (If you owe money to the certain people, of course, you may lose more than your home. Or certain other people may provide you with a place to live, but one you probably won’t like.) Try to make at least the minimum payment on your credit cards, and as you watch the balance pile up resolve to get rid of those credit card balances forever once the money starts flowing again.

There is some slight of hand you can do with credit card debt, like opening a new card and taking advantage of their low-interest balance transfer option, and I’ve had to resort to that in the past, but you can only do so much of that. That is another reason to carry as little debt as possible.

Ramen Again?

I could go into a lot of detail on specifics of where to save money on this or that, and maybe I will sometime, but the important thing is to think in terms of trying to save money. The wrong mindset is what will do you long-term harm. Studies have shown that most people, faced with a financial setback like losing their job, don’t change their spending habits. They keep right on as before, but either draw from savings or go (deeper) into debt to make up the shortfall. (Same thing, really; drawing money out of savings is just another kind of debt; you’re borrowing from yourself.) Maybe you’ll have to do that even if you do cut back on your expenses, but wouldn’t you like to minimize that debt?

You could think, “This isn’t going to last forever; I can afford to run up the credit cards and pay them off after I get a new job.” Or you could think, “This isn’t going to last forever; I can live without the HD cable sports package for a while.” Guess which one is going to leave you with an empty bank account, and maybe a foreclosure notice from your bank?

Who knows; maybe you’ll find you enjoy cooking your own meals, and you might find some good books to read. The best things in life may not be free, but they can be cheap.