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The Grumpy Pundit | Pursuing Happiness And Cursing The Darkness. | Page 15

If Saving is Outlawed, Only Outlaws Will Have Savings

Posted by on April 7, 2008 No comments

If you try to save some of your money you must hate America.

OK, no one has actually come right out and said that yet, but that is basically how US fiscal policy works. The US economy is based on consumers spending, and the system is set up to punish anyone who tries to save their money instead.

Take this tax rebate thing their going to be sending out soon. You’re supposed to immediately take that money down to your local mall and spend it. If you put it in the bank, or use it to pay down debt (like a sensible person), you’re not stimulating the economy like you’re supposed to.

It’s not just a matter of the government hoping that people will spend instead of save, either. They actually punish savers. Ever listen to the news and hear some reference to “The Fed” lowering interest rates in order to stimulate the economy. What that is is a tax on savings. When interest rates go down debtors don’t have to pay as much, but savers don’t get as much return on their investment. What the Fed is basically doing when they lower interest rates like that is taking money away from people who are trying to save it and giving it to people who want to spend it.

(You will also sometimes hear about The Fed lowering interest rates “to combat inflation.” That’s because lowering interest rates, and making more money available for people to borrow, is inflation, and every now and then it’s necessary to give the appearance of doing something about that.)

I don’t really know why the US Government wants its people to keep spending and go deeper into debt, but I can speculate. It probably never occurs to them that the economic well-being of individuals and families matters. Families just have mortgage and car payments, groceries to buy, and college tuitions to pay for, after all. They don’t have ticker symbols and trade on Wall Street.

Ordinary people, in other words, only matter in-so-far as they affect those stock prices, by giving their money to some company or other (or — horror! — not doing so). Perhaps I’m being overly cynical, but try listening to any day’s financial news, then tell me I’m being too cynical.

Of course, if you want to have money to send your kids to college, or to retire on, you have to save anyway. Just be aware that everyone’s hand is against you. You are, in your quiet way, an enemy of the state.

Be proud.

Once More Unto the Breach

Posted by on March 31, 2008 No comments

The past several weeks have been very frustrating ones at work, not just for me but for one of my clients as well. What with one thing and another I’ve been averaging six long days every week. That’s a lot of time in front of computers.

It started with a client’s move to a new office space. From the client’s point of view it went well enough, but I had to work my ass off to make it so. Due to some organizational changes on their side my input on their IT structure was cut off and I had to work with the result of decisions made by non-technical people, who used criteria that I have not yet been able to decipher.

At any rate, the move itself went well, but not long afterwards they began to have odd networking issues, mainly people intermittently not being able to print to certain network printers. While I was still trying to figure that one out, their Exchange email server began to go offline.

The problem with the email server was that the database size had grown to the limit Microsoft had set for that particular server license, and it was going offline periodically as punishment. Part of the networking problem was that they were out of user licenses. (They use a lot of seasonal workers, swelling the user list, which then shrinks down again, so we typically only have to add users there about once a year.)

A big part of the blame for those things falls on me. I screwed up. Partly through distraction from the several other projects I was working on at the time, partly through disgust with the way decisions were being made (or not made) at that organization (and quite specific indications that any input from me would be ignored anyway), I wasn’t paying close enough attention to those things.

The email problem was quickly diagnosed and it was easy enough to keep things moving along while waiting for a new mail server to come in (which had originally been planned for a month earlier, right after their move). The network oddities, however, had me pulling out my hair and took much longer than I would have liked to track down. It turned out to not be just a matter of the user licenses, but also the switch that one of the network printers was attached to, a hardware failure with the printer itself, a bad network switch, and a bad cable connecting two switches back in the server room. Six different intermittent problems, in other words, all showing similar symptoms, and it took a while to track them all down.

Shortly after getting all those problems finally exorcised, the new mail server came in. I started setting it up and the new software told me that I had to apply a patch to the old server before setting up the new one. OK, no problem, it’s a routine patch.

Except this time. That patch blew the old server from Hell to Christmas. I worked furiously all night to try and get it back up and running before people came in to work the next morning, and was only partially successful. I started installing the patch at 9pm and it was 3pm the following day before I had everything fully up and running again.

(Then the next day I had to go in and try to install the patch again. A process I faced with some trepidation, after my ordeal of the days before, but I did it.)

The point of all this is that the client has had several days recently when their computer infrastructure wasn’t working worth a damn. There are some lessons to be learned here.

First, the client is not, so far as I know, particularly unhappy with me. I am sure they are not thrilled about the problems, but I haven’t taken too much of a hit because of it. The key here is that I’ve been working with them for a number of years now and the systems have generally worked quite well, and I worked my ass off trying to resolve the various problems as quickly as possible. Also, because of the way I had things set up, the impact of some of the problems was minimized. During the hours in which their mail server wasn’t talking to the outside world, for example, they could still use the Internet and the rest of the network, and inbound mail was queueing up on the email gateway so nothing was lost.

Everyone screws up now and then, and things break sometimes. If you consistently do a good job for your clients (or your boss, though that’s more problematical), you’re building up credit that will serve you well when something goes wrong. Relatively major problems at rare intervals are more tolerable than constant annoyances.

Second, I had to go outside the organization’s chain of command and bother some people whose job it wasn’t (but who were willing, much to their credit, to make some noise and make things happen) in order to get some decisions made. As a result, we’ve done some reorganizing and clarified the lines of communication and generally made it a lot easier — I hope — to get things done in the future.

When everything is going well, there’s no motivation to reorganize and try to make things work more smoothly. If you bust your tail holding everything together with chewing gum and duct tape, no one is going to notice, because you are holding it together. Things that work well are invisible, and eventually taken for granted. That’s not a bad thing, usually. A company’s computer network, for example, shouldn’t call attention to itself. But, like an economic downturn that shakes out weak companies and makes the economy stronger in the long run, sometimes it takes a failure somewhere to bring problems to light and provide the motivation for a proper fix. Every failure is a source of lessons to be learned.

Looking at all of this work from another angle (and all that fuss and bother with that one client was only part of it; there were lightning-blown computers, server migrations, and so on and so forth), I’m bloody exhausted. My wife asked me if I was going to bill the client for all of the many hours I spent fighting that crashed mail server. “Most of them,” I told her. I’ll probably give them a bit of a break, but for the most part, they’re going to get billed what I worked. I didn’t make any mistakes on that one; it was just a bad break and unfortunately the nature of computers is such that every now and then you’re going to have to deal with a crash. The big wad of hours I’m going to bill as a result is, to me, like collecting on life insurance. I wish it hadn’t come to pass, but since it did I’m not going to turn down the money.

Speaking of which, the money has been pretty good these past couple of month, but there comes a point when I just want some free time to spend with my family and to get some rest. As I believe I’ve said before, no on ever lay on their death bed wishing they’d spent more time at the office.

Minor disasters in the workplace can sometimes be made to turn out well, even an improvement over the pre-disaster state. The price can be high, though, for everyone involved. Sometimes there’s nothing for it but to throw yourself into the breach and do what needs to be done, close up the wall with the bodies of your English dead, and afterwards collect your pay. But no amount of money is worth not being there while your child grows up.

Toddler Lockdown

Posted by on March 23, 2008 No comments

Having a baby limits your personal freedom more than just about anything this side of a prison sentence. It’s a life sentence too, with the possibility of parole after eighteen or twenty years. If you’re lucky.

Those of you with children know what I’m talking about. For the benefit of the rest, I will elaborate.

Your first few weeks with a new baby are a blur of diaper changes, howling, and being covered in disgusting bodily fluids. Your baby will probably sleep for most of its first week on the outside and you may begin to think that this is not so difficult. Don’t fall for that. It’s a trick. Once the baby wakes up she or he will, it seems, not sleep again for several months.

Infants have only one means of communication. Crying. It’s your job to try and figure out what the problem is. You’re as likely as not trying to solve that riddle at 2:30 in the morning, after having only slept for a total of three hours over the past two days. Good luck.

Things that were very easy before, like jumping in the car and running over to the store, suddenly become major productions. Not only are you tethered to a baby that may, at any moment, start howling like a fire engine, but there is a whole caravan’s worth of support hardware that you have to haul around. At night, someone always has to be available to cover nighttime feedings and other crises. (After the first few weeks I had, much to my wife’s disgust, learned to sleep through the routine nighttime wake-up crying. A few times, though, our son managed to get his leg caught between the slats of his cradle and woke up with an entirely different “Daddy, daddy, something’s got me!” cry that would snap me out of bed instantly.)

In short, your entire life now revolves around providing support to a tiny, helpless, human being who is entirely dependent on you. It affects everything, down to taking time to use the bathroom.

It gets a little easier when he begins sleeping through the night, but there is another trap out there waiting for you. Not long after that your helpless little baby becomes mobile.

The one saving grace of the early months is that the baby will stay where you put him. Lay him on a blanket on the floor for a few minutes while you go to the bathroom and he might start crying, but at least he’s going to be there when you get out. Once he becomes mobile, though, you have a whole new set of problems. Now the whole layout of your house might have to change, especially if you have stairs. (Our boy could climb stairs before he could walk.)

Toddlers become very mobile. They won’t even stay with you in the store. They’ll hare off to the other side of the store, where they remember finding toys the last time you were there. They’ll hide on you, or run around obstacles in a deliberate attempt to lose you. Elevators and escalators are fascinating new toys.

They are also endlessly curious. Any sort of container is liable to be opened and dumped out, just to see what’s in it and if it’s any fun. Or tastes good. A cup of water is almost as likely to be dumped on the table (splash, splash!) as to be drunk. A moment’s inattention to what the little imp is doing might cost you twenty minutes in cleanup.

As of this writing, my son, Nathaniel, is two and a third years old and our life revolves around him as much as it did when he was one month old. Getting him dressed is usually a tag-team wresting match and shopping is a major expedition (and likely to result in the purchase of more little toy cars, regardless of what it was we were originally shopping for). He can climb like a monkey and has to be watched carefully to make sure he isn’t getting into something dangerous that he couldn’t reach the week before. He is as demanding as ever of our attention and has a broader vocabulary with which to tell us what he wants. Even what kind of car I buy is determined primarily by the fact that a toddler is going to be riding in it. Now, though, instead of crying endlessly he’s scampering around the house, or demanding to watch Wow Wow Wubbzy one more time, or pushing me down behind the couch with instructions to “Hi’n’see’.”

Being the parent of a young child is, in many ways, like being a prisoner. I wouldn’t trade it for anything.

I am luckier than many parents in that I am self-employed, which means I have some flexibility to set my own hours. I try to make a little time every morning to play with him before I leave for work, and I try to be home every evening not later than bath time. Sometimes I am lucky enough to have a day when I can work from home and spend much of the day with him. He loves that.

Most days, though, I leave in the morning and get back around suppertime. When Nathaniel sees me getting ready to leave in the morning he knows he’s not going to see me all day and he gets quite upset. He will run to me and throw his arms around my legs and if I pick him up he will wrap his arms and legs around me and resist any effort to get him to let go. Eventually we get him pried loose and I drive away, with him still sobbing, “Da’y, Da’y!”

Under the circumstances, it is hard to work up any enthusiasm for heading off to work.

The last couple of months have been very busy ones for work, with me frequently working six out of seven days a week. I have very mixed emotions about that. On the one hand, of course, the money is very welcome. On the other hand, I hardly saw my son at all.

Toddlers are toddlers for such a very short time, and watching them discover the world, all bright and new in their eyes, is such a joy, that I begrudge any time away from my family. Right now, I am still a superhero to Nathaniel. It won’t be very long before he’s a teenager and I’m a public embarrassment to him. As far as I’m concerned, every hour is precious.

But the bills still need to be paid.

It’s an irreconcilable situation and I have no particular words of wisdom for anyone else who may be struggling with the same balancing act. We all have to set our own priorities and find our own paths.

I’m sleep-deprived and my house looks like it’s been carpet-bombed with toy cars. I’m giving up my two-seater pop-top roadster for a sensible family car. My library is still mostly in boxes because we don’t have money to spend on expensive bookcases and Nathaniel would just pull all the books off the shelves anyway. We hardly ever get to go anywhere because by the time we get out the door it’s his naptime and he falls asleep in the car. If we’re lucky. With all the germs the kids pass around on their playdates, I’ve been sick more times in the last two years than in the whole ten years previous.

And I’m a superhero. Da’y, da’y!

Here Comes the Cavalry…But to Whose Rescue?

Posted by on March 17, 2008 No comments

Right now, I would like a lot of people to lose their homes.

OK, that’s perhaps overstating the case a bit. Allow me to explain.

You have surely by now heard about the housing crisis in the US. The one where home values are dropping and people who bought homes they couldn’t afford are being foreclosed on, and the banks who hold the mortgage paper are getting killed. (As I’ve said before; your bank doesn’t want your house; they want your money.) The Federal government is frantically slathering money all over the problem as politicians scramble to be seen saving the homes (and mortgages) of millions of registered voters.

The trouble is, that’s how this mess started. What with lots of loan money out there looking for borrowers, and lots of Federal guarantees on the loans, there was more and more money chasing houses and in certain markets the home prices became grossly inflated. The houses were soon priced out of the reach of most people, including the people who had actually bought them. As will happen in a free market, with no buyers the prices fell. With houses now worth less than the mortgage, many home owners are stuck in a terrible financial crunch.

Now the Fed is spending hundreds of billions of dollars — our dollars — to try and prop up those unreasonably high home prices, so the banks and homeowners won’t be hurt so badly.

Personally, I think it’s a damn bad use of my tax dollars. I don’t much care if those homes are ‘saved.’ I want home prices to drop precipitously. You heard me; I would love to see home prices in those overheated markets drop by 50-75%. (Any realtors or bankers reading this just fainted.) Yes, that would be ugly. Many families would suffer great financial hardship, and many banks would lose piles of money. But let’s be honest here. Their greed and stupidity got us into this mess. Do we want to spend hundreds of billions of dollars rescuing them?

In other words, should the rest of the country pick up the tab for them, so they don’t have to suffer the consequences of their bad decisions?

No. Let the people lose their houses, let the banks crumble. It will all sort itself out, fairly quickly. People who bought houses they couldn’t pay for will lose them, but home prices will fall back to a level at which people can actually afford to buy them. People who bought within their means will be unharmed. Lenders who engaged in shoddy practices will go out of business. Banks who behaved more sensibly will survive.

Let the prices fall and the economy will rebound fairly quickly. Keep the prices artificially high, and the economy will limp along for years. It’s like being very sick for a day or two, but then it passes and you feel better, versus just feeling kind of sick for weeks or months. You’re better off taking the hit and moving on.

That won’t happen here, of course. There’s an angle that I haven’t mentioned yet. As far as I know, it has hardly been mentioned at all. There’s a third party panicking at the sight of falling home values, besides the home owners and bankers.

The city and county tax offices. Most local governments get a majority of their revenue from property taxes. With values dropping, the tax base is eroding out from under these local governments. They got used to fat budgets when grossly inflated home values sent tax dollars pouring their way. (And that huge tax burden doubtless has a lot to do with why many people are walking away from their houses.) Now they have to cut back, and governments hate cutting back. They don’t like trimming a budget. If home prices continue to fall it’s going to put increased tax pressure on the remaining home owners to take up the slack in the tax rolls, and local services are going to decline, both of which are going to contribute to causing more people to walk away from their houses. Further diminishing the tax base.

Local governments desperately want to keep their inflated property taxes. I suspect, but cannot prove, that that has more to do with the Federal bailout of home owners than any desire to save people’s homes.

Governments don’t really care about people, you see. They do, however, care a great deal about their budgets.

Let’s Do The Time Warp Again

Posted by on March 10, 2008 No comments

It’s that time of year again, when most people in the United States waste time resetting clocks. I always get a reminder the day after the time switch; my two-year old son’s sleep schedule is thrown all out of whack. He sleeps late and is cranky in the morning, and doesn’t want to go to sleep in the evening. This makes me and his mother cranky as well. It takes about a week to get him settled back in.

Daylight Savings Time is one of the greatest boondoggles ever put over on the American Public, right up there with trickle-down economics (which was at least honest; Reagan pretty much came right out and said that the rich would trickle all over the poor). It is supposed to save energy, though everyone knows it doesn’t, and now there’s proof. Hell, DST kills people, when an already sleep-deprived American public takes to the roads the following Monday.

Daylight Savings Time. It actually causes people to use more energy, it disrupts people’s sleep schedules, causing traffic accidents and an incalculable amount of misery and grouchiness. (How many more mistakes do workers make on the Monday following the ‘spring forward?’ Would you want to buy a car built on that morning?) So, then, why do we stick with it? Who benefits from all this extra expense and misery? As near as I can tell, only one group. Only one group of people is wholeheartedly in favor of Daylight Savings Time.

Golfers.

Yes, golfers. No matter what price other people may pay, they have an extra hour of daylight and can get in an extra hole or two of golf.

Keep that in mind as you blunder your way through the day, wishing you could take a nap. If you happen to meet a happy golfer do all of us a favor. Kick him in the balls.

Golf balls, of course. What did you think I meant?

Turbo Budgeting

Posted by on March 3, 2008 No comments

With all the emphasis I place on living comfortably within your means, it may come as a surprise that I don’t bother with a budget.

Yes, it’s true; the tight-fisted, penny watching Grumpy Pundit doesn’t use what is possibly the most often recommended means of managing your home finances. And you probably shouldn’t either.

Heresy!

Now, if this were the conventional sort of financial advise blog, I would jabber on for a bit here about how to set up a budget. I’d tell you to list your monthly expenses and total them up, and total up your monthly income, and carve away portions of the former until it fits within the latter. Most likely you would nod thoughtfully and make a mental note to do that, then go watch TV and forget about it. If you were feeling particularly dutiful, though, you might fire up your bootleg copy of Excel and fill in a few numbers, take your best guess at a few more, and decide that if you cut your drug habit back to $500 a week that’ll still leave you $50 a week for groceries and let you save up a little money for a spring break trip to the coast to get laughed at by girls who are much too young for you.

Or something like that.

At any rate, after reading my conventional advice and spending a bit of time fudging numbers in Excel (come on; do you really know how much you spend on groceries every month?) you might actually come up with a budget, determine that you can spend this and that much on these and those things and you might stick with it for a week or two and then you’ll forget about it. Right? Come on, be honest. You can’t even stop watching that crappy TV show that was funny last season, but sucks this season. Do you really think you’re going to change your spending habits just by whomping up a spreadsheet and deciding to?

(OK, sure, there are a few people who could do that. They aren’t surfing the web for financial advice.)

But this is the Grumpy Pundit Blog. We do things differently here. I’m going to tell you how to live within your means, and even save money, without wasting any time on a budget that you’re not going to pay any attention to anyway.

First rule. Pay your bills in full. That is, don’t carry a balance on your credit cards; pay them off every month.

Second rule. Pay yourself first.

Sounds pretty simple, doesn’t it? But simple does not mean easy and most people can’t manage it.

If you can follow the first rule, you are automatically living within your means. You are not spending any more than you are making. The adjustment you have to make here is not a budgetary one; it’s mental. You must fix the idea in your head that what you buy in a month must be paid for that month. Be as extravagant as you like, but remember that the credit card bill has to be paid off completely when it comes due. Do that and your spending is automatically limited by your income.

That may seem obvious, but it is a — perhaps the critical step to getting control of your finances. Pay your bills on time and in full. It’s a simple rule that is easy to get your head around and I find that simple rules like that are much easier to stick to than a complicated budget.

But what if your credit cards already have balances on them and you simply can’t pay them off each month? Simple; pay off all the new charges plus interest. Don’t let the balance grow. Cover what you spend each month out of that month’s income (or, if you have to, your emergency fund).

It may take you two or three months to adjust to that. Once you have, it’s time to go to Rule 2.

Pay yourself first. This reverses the way that most people save money. Rather than taking anything left over at the end of the month and putting into a savings account, decide how much you want to save each month and put that into savings before you pay your bills. If possible, set up an automatic transfer so you don’t even have to think about it. (If you are carrying a balance on your credit cards put the extra money towards paying that off instead.) By doing this you are adjusting your spending to fit your savings rather than adjusting your savings to fit your spending.

Let’s try an example to see how this works. Let’s say that you make $4000 a month and after you finish paying your mortgage, car payment, utilities, groceries, etc., (including that money that just seems to melt out of your wallet; the two or three hundred a month you never can quite account for) you have $1000 left of the month’s pay.

Then the credit card bills come in. You have outstanding balances of $3000, with $1200 in new charges.

Uh, oh. There isn’t enough to even pay all the new charges. You grit your teeth, remind yourself, “Pay in full,” dump that $1000 on the credit cards and resolve to cut back on your spending so you can do better next month.

Next month you’ve got $1100 left before the credit card bills (progress!). The credit card statements land with a thud on your dining room table and amount to $3250 in balances carried over plus $800 in new charges. Pour all $1100 into the credit cards, to start paying down that debt.

Fast forward several months. You’ve paid off the credit cards and gotten your average credit card bill down to about $700 a month. You figure you can start saving $300 a month now. Pay that $300 a month into your savings account first. Then pay all the other bills. Conceptually, what you are doing is subtracting that $300 from your income, forcing yourself to live within that reduced income. It’s like your pay was cut to $3700 a month and now you have to cut back.

These are, as I said above, very simple tricks. They are, however, very powerful tricks. The magic isn’t in what numbers you juggle around, it’s getting yourself into the habit of following one simple rule that’s easy to grasp and focus on. Whether it’s setting yourself an exercise plan (“I’m going to work out for twenty minutes every Sunday night.”) or managing your household finances, creating a simple rule for yourself and sticking to it come hell or high water is the way you get things done.

Pay your bills on time and in full. That’s all the budget you need.

Pay yourself first. Decide how much you want to save and put that money aside automatically, before paying any other bills.

Do those two things and you’ll be ahead of nearly every other person in the United States. Practically no one will be as good at managing their money as you. Take pride in your accomplishment.

Oh, and think about that exercise plan too.

For Just A Little Bit More

Posted by on February 25, 2008 No comments

I am finally preparing to make the new-car purchase that I talked about nearly a year ago. (What have I been doing for the past year? Saving money to buy the car with.) As I review the options, I have found myself falling into a common trap, one that the manufacturers of many consumer goods set deliberately.

I began by looking at the Civic and Mazda3, which are both very capable cars for about $18,000. Relatively easy on the wallet, as such things go (which is to say, not very). Then I felt a sudden and quite irrational urge for an SUV. Possibly because it finally sank in that I was going to be hauling my son around in this thing, possibly because the city has removed a section of the road from near my house, requiring me to drive over the rubble to make a left turn. Even at their best the streets here in Lane Closed Ahead, Texas make a 4×4 SUV seem more reasonable than you might think for the suburbs.

At any rate, the SUV I mentally latched onto (the Nissan XTerra; reliable, inexpensive — as such things go — and well-mannered both on and off the road) costs more than the above small sedans. About $2,500 more. Not all that much, really, when I’m already looking at spending eighteen or nineteen grand. Just a little bit more.

Then, not able to get past the inherent absurdity of driving a four-wheel drive truck around the city (despite the terrible roads), it occurred to me that about the same money would buy me a Civic Si, the zippy sport-sedan version. Nearly all the virtues of the standard Civic Sedan (though not frugal at the gas pump), but with gobs more horsepower available and much-improved handling. Just the thing for carving a bloody swatch through the LORD OF THE FLIES traffic environment in the DFW metromess.

Reading reviews on the Civic Si, though, shows surprisingly low performance numbers. The handling is indeed razor-sharp, but the accelerator punch is somewhat lacking (probably because Honda’s VTECH engines require you to, in technical terms, rev the shit out of them to get the best results). Well, I thought, I’m up over twenty-one grand; I think the Mazdaspeed Mazda3 is about at that price. It has more power on tap than the Civic Si, the handling is about as good, and the interior looks even nicer. It only comes in that ugly hatchback style, but let me see how much it is.

About $22,500. Just a little bit more….

Hmm. But the crash-test ratings on the Mazda3 still suck. Maybe the Honda Accord? The version with the V6 engine performs pretty well. It’s almost $26,000, though.

And that’s when I realized what I was doing.

I had run myself up more than $4,000 and climbing over my original target price with “It’s just a little bit more.”

Consumer products, whether cars, refrigerators, or MP3 players, all have their pricing structure set with modest intervals between the available options specifically to move you up the ladder to a higher-end product. Say, for example, that you’re looking for an iPod MP3 player. The iPod Shuffle holds 1GB of songs and costs $50. Not bad. A gigabyte is quite a bit of music and fifty bucks is pretty cheap. But wait; the Nano, which holds 4GB of songs, sells for $110. Four times the storage, for about twice the money. That’s a pretty good deal.

But wait, there’s more. The 8GB version of the Nano sells for $180. You can double your storage again — eight times the music of the Shuffle that you were first looking at — for about 65% more money. Spending just a little bit more gets you a lot more capacity.

Oh, but what’s this? The iPod Classic sells for $235 and it holds a whopping 80GB of music. That’s eighty times the capacity of the humble Shuffle that you first looked at. What a deal!

You’ve also talked yourself into spending nearly five times as much money. That may really be a good deal (I happen to own an iPod Classic), but if you went into the purchase only intending to spend fifty bucks you might find yourself looking at your credit card bill a few weeks later and wondering why it’s so high.

This is just an example (and the exact prices may have changed by the time you read this), but it illustrates the selling technique. The idea is to ease you up the price-ladder, teasing you along with enticing features that you can get for just a little bit more money.

Now, sometimes spending just a little bit more is worthwhile. If you can get a significantly better product for a small bump in price, and can afford the small bump in price, give it serious thought. But know when to stop. Bumping again from your new price threshold will almost certainly not get you the same kind of return on your investment. It’s not such a big deal when you’re talking about a hundred dollar music player, but it can be quite significant when you’re talking about a car or a house (when ‘just a little bit more’ can be tens of thousands of dollars).

Stick to your original budget if you can (you picked that number for a good reason, right?) but if you simply must bump it up ‘just a little bit more’ only bump once. As a rule of thumb, if the amount is significant stick to within 10-15% of your original budget. Go over that and you’re quite likely to go a LOT over. Grit your teeth, focus, and concentrate on moving the price down if at all possible, not up. Your bank balance will thank you.

Don’t take more than one step up the ladder. It’s a long one and you probably won’t like where it leads.

Now, if you will excuse me, I have to locate a four-door sedan with absolute reliability, impeccable crash-test results, excellent gas mileage, and thrilling performance, all for under $20,000.

Perhaps while I am at it I will cure cancer and bring about peace in the Middle East.

Freedom Begins With ‘No.’

Posted by on February 18, 2008 No comments

If you want to have any time to yourself, it helps to be an asshole.

You know how it is. Everyone wants a little piece of you. The boss wants you to work late, your co-workers want you to help with their projects, and your spouse wants you to run errands and do chores around the house. Telemarketers and survey outfits call and request ‘just a few minutes’ of your time. Teenagers knock on your door and try to sell you magazine subscriptions so they can win a trip to Paris. (“Can I go with you?” I asked on young lady. Ah, no.) Friends and relatives suck you into the drama of their lives, so you somehow find yourself hustling some blind guy you’ve never met before, and his guide dog, to the airport so they can leave town before some petty criminal exacts revenge on them.

OK, maybe that last one doesn’t happen to everyone.

The point is, many of the people you come into contact with will want some of your time and if you get a reputation as a soft touch, someone who is always willing to help out, they’ll be on you like buzzards on a rotting cow-carcass. With similar intent and outcome. Just about everyone wants to be liked, though, so it is hard to say ‘no.’ It feels good to help someone, to make them happy. It only takes a few minutes — or a few hours — of your time, so what’s the harm?

When you get right down to it, though, hours are our most precious resource. There are only 24 of them in a day, and only so many days in your life, and you don’t know just how many. The limit is strict, but unknown, like a checking account with an unknown balance and no way to make new deposits. Keep writing checks and eventually you’re going to find the hard way that there’s nothing left.

The more you let people absorb your time and effort in things that are important to them, the less time you have for things that are important to you. Those minutes and hours, once spent, can never be regained.

Certainly, unless you are completely asocial, there are people with legitimate claims on your time that you don’t begrudge at all. If you don’t enjoy spending time with your spouse, or your children, you have obviously made some poor decisions somewhere and need to seriously re-evaluate certain aspects of your life. But wouldn’t you rather be spending time with your family than helping the friend of a friend move? You have to go to work to make a living, but do you really need to take your work home with you every night?

If you are self-employed, the decisions become even harder. You don’t just have one boss, you have a dozen, or two dozen, or many many, clients and most likely every one of them thinks you are available every hour of the day or night. Does it fill you with joy when some stranger calls you a 8am on a Sunday morning with some trivial problem? (“My computer is acting funny.”) You will get calls and emails from people who expect you to drop everything and help them, right now.

These aren’t just random stranger, though. They’re paying customers. Whatever their sense of timing, you need their money to pay the mortgage and put food on the table. You force a smile into your voice and say, “Sure I’ve got a few minutes for a conference call. Our Valentine’s Day dinner reservations aren’t for another hour yet.”

Between the people you want to give your time to, and the people who are paying for some of it, and the irreducible minimum of time you have to have for yourself (even if it’s just three or four hours of sleep with your head down on your desk), there isn’t much left over for the real leeches. That’s when the magic word comes in.

No.

The most fundamental form of freedom any of us has is the ability to refuse. If you cannot say ‘no’ and make it stick, you are not free. You belong to anyone who asks you for something, whether it be money, time, or the clothes off your back.

My wife is a very nice person and hates to hurt anyone’s feelings. She has a terrible time with telemarketers. They make their spiel and she tells them that she’s not interested. They’re expecting that, of course, and launch into the second act. She refuses again. This can go on for some time before she finally extracts herself or I come along, take the phone gently from her hand, and hang up. (My own method is to let them go through their spiel, say ‘no,’ and hang up before they can respond.)

I, of course, am an asshole. I’m willing to be rude. I hate telemarketers of all varieties and would like to see every one of them die a painful death. Yeah, yeah, I know; they’re just trying to make a living. Well, screw them; they don’t deserve to make a living by stealing precious minutes from my life. Letting them steal more minutes just to avoid hurting their feelings is just foolish.

Of course, some of the people who impose on you will be human beings, not telemarketers, and deserve more consideration. At some point, though, you have to set boundaries and stick to them. Pare your time commitments down to the things that matter to you, not to the people asking. They’ll keep taking as long as you’ll keep giving. Be polite, but firm. “No. I’m sorry, but I can’t do that.”

You may even have to rein in the people who want to give you money.

I’ve had to do that. Not that the volume of time was overwhelming as such, but the fact that the interruptions could come at any time, day or night or holiday was oppressive. I was on-call 24/7/365 to a couple of dozen people and as the strain of it began to affect my health. My son grew from a baby to a toddler and his demands on my time — which, frankly, meant a lot more to me than someone being unable to check their email on a Saturday night — increased every day.

I began to say ‘no.’

It was not easy turning down money, saying to a client, “I’m sorry, but I can’t do that for you anymore. I just don’t have the time.” But something had to give and I decided it wasn’t going to be me. I lost clients last year, companies and individuals who I had worked with for years. Nice people, most of them, but they were the clients whose claim on my time was out of proportion to the compensation I got for it. They, in other words, weren’t worth the stress they brought me.

Fortunately, it worked out for me. My business with other clients, more reasonable to work with (and more prompt about paying their bills), increased and made up the shortfall. With fewer things to focus on, I can do a better job on what is in front of me. And, most importantly, I sometimes get to spend extra time with my family.

Technology has put a tether on many workers now, chaining them to the office with email and cell phone, so there’s no such thing as time off. The average American worked a 45-hour work week in 2007 and vacations are almost non-existent (only 14% of workers get to take their two weeks). A long weekend — and checking the Blackberry a few times an hour — is the best most people can hope for.

Is your paycheck worth the time you put into it? Does your stomach hurt when the boss comes looking for you on a Friday afternoon and you know your weekend is about to disappear?

Is it time to draw the line?

That one little syllable of negation has tremendous power. It’s magic. It can let you reclaim your life, if you’re willing.

Sometimes you have to be rude. Not a team player. Anti-social. Selfish. An asshole.

But free.

Decisive Action

Posted by on February 11, 2008 No comments

My son has what many people would consider a surprising, and probably inappropriate, amount of decision-making power. He is, as likely as not, the one to pick what we’re going to eat on Friday night. He picks out nearly all of his own toy, and always has. He has some say in where we go for family activities.

It’s not a lot, and we phrase the questions simply when asking for his input, but then he is only 25 months old.

From the very start of his life, I have done my best to involve him in what was going on, rather than simply doing things to him or making him do things. When he was only a few weeks old I would explain the diaper change process to him while putting him up on the changing table. “OK boy, what we’ve got here is a toxic waste spill in your diaper area. We’re going to have to open up your onesie, remove the befouled diaper, and send in a specially trained HAZMAT team to clean up the area. Then we’ll get a fresh diaper on you…oh, and a fresh onesie too, looks like. OK? Good, let’s get started.”

He would stare up at me, giving every indication that he was listening intently. I don’t know if he understood a word I was saying, but it helped him stay calm (he hated laying on the changing table).

When he was about six months old, and we started introducing those little containers of vile mushed vegetables into his diet, he picked out his high-chair. We narrowed our selection down to two possibilities and then asked him which one he liked better. He made his selection by grabbing one of the trays and trying to eat it.

That was about the age when we let him starting picking out his toys, too. Or perhaps he was a month or two younger then. (That first year is a blur, a blur probably familiar to any parent. My mother asked once at that time, “What did you used to do before Nathaniel was born?” I replied, “Sleep.”) At any rate, we would carry him over to the shelves of toys and he would grab at the ones that caught his eye. Some he’d put back down again, some would hold his attention. Those, we bought.

Hardly any of his toys sat idle. He played with them all.

Now that he is talking fairly well — well enough to get his opinions across — he dictates most of the TV viewing during the day and is quick to veto any unfortunate music selections while in the car.

He doesn’t have completely free rein, of course. We will most likely ask him what he wants for breakfast, but his choices are limited. If he asks for ice cream or pizza, we present him with an array of options. “No, I’m sorry, we can’t have ice cream for breakfast. How about some toast? Or cereal? Eggs?” And he’ll — usually — pick something from the approved list. If he picks the place for our Friday night-out dinner, we give him a list of places we’d pick from anyway, so what’s the harm in letting him pick? If nothing else, it serves as a tie-breaker between my wife and me.

In short, he gets to make a lot of decisions that are important to him, but which have very small stakes from my and my wife’s perspective. If we’re going to buy a high-chair or toy anyway, why not let him pick which one we get? If he wants to watch DIEGO or SUPERWHY, why not let him? If we have other plans, well, his decision gets overridden, but there’s generally no harm in letting him have his way on these small matters.

(Not that they are small to him, of course. Which cartoon he watches, or which toy cars he takes upstairs at bedtime, for example, is utterly trivial to us, but of tremendous significance to him.)

The point of all this isn’t just to spoil the boy. Keeping him happy is important, of course, but there is a more important issue at stake, a matter of deliberate policy.

I want him to absorb at the earliest possible age, to have rooted deep in the fabric of his personality, the habit of making decisions, and the idea that he has input and influence over the course of his life. To most people, that probably does not seems like something that would have to be specifically cultivated. Perhaps for most people it isn’t. Perhaps my own background is causing me to overcompensate with my son.

My parents took the opposite approach, you see. Any idea that my opinion mattered, that I had any say at all in what happened in my life, was beaten out of me at an early age. I was simply dragged from one place to another and told what I was to do. I didn’t want to be an astronaut when I grew up, or a fireman, or doctor, or President. None of the usual childhood ambitions. The highest pinnacle of accomplishment that I could imagine was simply to be left alone.

I remember the moment, in 7th Grade, when I realized that at some point in the future no one would be dictating my schedule, requiring me to be in school for X number of hours five days a week. Yes; I was about twelve years old before I realized that I would ever have any say in what happened in my life. It would be years more before I really absorbed and internalized that concept. Even now, thirty years later, I tend to drift, pushed by events rather than taking charge of them, unless I concentrate on taking control.

Parents, involve your children in the decisions that affect them, no matter how small they are. Let them decide. Let them learn from the earliest possible age that they can act on the world around them, and not only be acted on by it. Teach them that they have choices. You may be doing them a tremendous amount of good. Order their lives for them, and you may never know how much harm you have done.

Freedom is choice. Teach your children to be free.

Investing Starts At Home

Posted by on February 3, 2008 No comments

If you have read many of my past entries, you may have gotten the impression that I am in favor of living in a hovel, huddling in the dark around a bare lightbulb for light and warmth, and eating only room-temperature ramen noodles, while saving every penny for a possible future emergency.

Even my wife would admit — reluctantly — that that’s an exaggeration. The fact is, that just wouldn’t be any fun. I am a strong believer in saving money now so you’ll have it later, and I have been since I was very small. (I remember loaning my mother money when I was nine years old, and insisting on getting interest on it. Not enough — my mother was a very poor risk — but I was young.) I also believe, however, that there is enough misery in this life without inflicting more of it on ourselves than we have to.

As it happens, we live in a nice house in a quiet suburb, have numerous computers, TVs, and other personal electronics, drive good cars, and dine out as often as is practical with a two-year old in the house. It’s not a fancy life, but it’s a comfortable one.

There are, of course, qualifiers to the above. The nice house is in a good neighborhood, but not one of the local ‘prestige’ suburbs. A similar house a few miles to the east would have cost us another $30,000. It wouldn’t have been a better house, just one with a more prestigious address.

I bought a good home theater system ten years ago and it still works great. Someday we’ll upgrade to a big flat-panel TV, but there’s no hurry.

We tend to buy new cars and keep them for a long time. Mine is ten years old now and due for replacement (As I’ve talked about before.) but my wife’s is only a few years old and good for many more. She wanted an SUV, but instead of looking at one of the big, fancy gas-guzzling ones that would have been too big for her to be comfortable driving anyway, we got a modest little Honda CR-V. It runs great, does everything we need it to, and she likes it. All for half the cost of a fancier truck.

Our biggest luxury is probably that we have someone come in every couple weeks to clean, and a crew of guys who come every couple weeks to mow the lawn. No excuses there; that’s pure laziness, paying other people to do things we don’t have time, or don’t want, to do ourselves.

If you are above the poverty line it’s almost certainly possible for you to live a comfortable lifestyle within your means. Simply don’t spend more than you make, and judge the merits of the things you purchase based on how they will serve you, not on what other people will think of them. Bragging rights are expensive and if every month finds you a little deeper in debt, you can’t afford them.

Don’t be stupid in what you spend your money on. My wife was at our bank a while back and one of the bank officers pounced on her, trying to get her to take out a home equity loan. “You own your own home? Why don’t you take out a home equity loan and go on a vacation?”

A vacation? THAT is the sort of thing people are taking out second mortgages on their houses for? No wonder foreclosures are at their highest rate since the Great Depression.

Just to be absolutely clear, borrowing to purchase necessary durable goods, like a house or a car, can be a good idea. Borrowing to finance something as transitory as a vacation is just plain stupid.

People do it, though. I heard a news story the other day claiming that in the past ten years the American consumer has spent $3 TRILLION dollars more than he has earned. The amount of debt that some people have accumulated in order to finance a lifestyle they can’t afford is staggering. Don’t be one of those people. You can only write bad checks for so long before they start coming due, and for a lot of families across the country they are coming due right now.

But, there is no need to suffer either. In THE MILLIONAIRE NEXT DOOR the authors talk about the research they did into the lifestyle of the average millionaire. They go on at great length about how these millionaires are typically working-folks who have simply accumulated a lot of money by the simple method of not spending much. They live very simply and save a great deal of their income.

What the authors don’t talk about, though, but what jumped out at me was why these people are saving. Almost all of them said that they were saving all that money so that their kids could live a more affluent lifestyle. In other words, these millionaires did not see their own frugal lifestyle as something to aspire to, but rather something to suffer through.

My wife and I have a tradition, going back about twenty years now, of going out to eat on Friday night. Sometimes we go out to a nice restaurant, sometimes we order in Chinese or pizza. Sometimes, if we’re sick or the weather is bad enough, we’ll go out for breakfast on Saturday instead. Since our son was born we’ve done more fast food than fancy dining out, but the point is we do something. It’s an expense that the truly cheap would avoid, but I consider it money well spent. Guys, your wives will put up with a lot if they know they’re going to get that night out at the end of the week. Trust me on this.

Small luxuries like our maid service and the weekly night out are important. Having some nice things in your house will make living there more enjoyable, and watching your child play with his new toys is its own reward.

Keeping your family happy is more important than adding a few dollars to the savings account. It’s not an expense; it’s an investment. The most important investment there is.