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The Privileged Argument – An Evil Cycle Repeats

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They say that if you don’t learn from history, you’re doomed to repeat it.  We’re seeing a dark history start to repeat in its newest form, the Privilege Argument.  The cycle goes something like this:

  1.  People are unhappy because they don’t feel they make enough money.
  2. People wanting to gain power tell the unhappy people that the reason they don’t have enough money is that some other group of people are wealthy and keeping them down.
  3. Other people, who think that the people who want to gain power are super cool and really smart with all of the answers, repeat their rhetoric.  The term, “useful idiots,” was coined for this group of people since they have been fooled by the people who want to gain power and are therefore useful for obtaining their aims.
  4. The people who think they don’t have enough money rise up against the group of people who have been demonized, either physically through riots or by electing the ones who want to get power because of their promises to take the money from the demonized group and give it to the poor group.
  5. The demonized people are imprisoned, banished, or killed in gruesome ways and their property stolen.  Much of their wealth is destroyed very quickly, making everyone poorer.
  6. The people who wanted power become dictators, oppress the people, and lots of people are shot or starve.

Examples of this pattern are:

The Bolshevics, Russia, early 20th century:

The Marxists, under Lenin, convince the Russian people that the Czars and Russian Elite are the cause of their problems.  They rise up against the leaders with violence and put the Bolsheviks in power.  Lenin isn’t too bad to start, but eventually Stalin rises to power and kills millions of people.  The Russian people live a sad life with long lines for necessities and scarcities of things like toilet paper.  Eventually, the USSR falls, but the corruption left from the remains of the old Soviet party remain today.

The Nazis, Germany, mid-20th century:

The German people are unhappy after the loss of WW1 and the severe restrictions placed upon them by the nations who conquered them.  Inflation is rampant with wheelbarrows full of cash being needed to buy groceries.  The Nazis, under Adolf Hitler, convince the people that the Jewish people, who run many of the shops and banks, are the cause of their plight.  (Note, the Nazis were Socialists, not right-wingers.) The people put Hitler in charge, who proceeds to try to take over the world.  Millions of Jews, Poles, homosexuals, and Gypsies are put to death in concentration camps.  Millions of people are killed in WW2.  Today some neo-nazi groups remain, still spreading a rhetoric of hate.

Hugo Chavez, Venezuela, Early 21st century:

Hugo Chavez convinces the population of Venezuela that the wealthy white farmers and foreign oil companies are the cause of their problems.  The people rise up and put Hugo Chavez in power.  The farmers are chased off of their land and the farms are given to squatters who have no idea of how to run a farm or have any desire to do so.  The foreign oil companies are chased away and the wells taken over by a corrupt government-owned oil company.  Today the country is starving to death and those who oppose the dictator in charge have their meager food rations withheld.  One of the effects of centralizing distribution of necessities is that those who oppose the leaders can have necessities withheld.  No need to send in troops with guns to control the population when you can just turn off the supplies to them.

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The sad thing is that despite these examples (and there are a lot of other examples), the cycle keeps repeating.  This is because this philosophy, take money from the wealthy (who must have become wealthy by oppressing others) and give it out to people who aren’t wealthy (because it must be that they are being oppressed), sounds good to people.  Often a government is put in between since that insolates the people who are taking the money from the ones that they are robbing:

We need the poor to have food.  Let’s have the government provide food. 

The government is seen as a limitless source of funds that can be used for whatever social good is needed.  This is separated from the other side of the coin, which is required for the “government” to provide the food since the government itself produces nothing:

The government is running out of money.  We need to raise taxes so that the government doesn’t run out of money.  Wealthy people can afford to pay more since they don’t need all of that money.  In fact, the wealthier you are, the greater the percentage of your wealth you should pay since you have obviously done evil to become that wealthy.

Even if the taxes become burdensome to the point where less food (and everything else) is being produced since those who are most productive decide to leave the society or simply do less, taxes are held high because the goal has gone from feeding people to punishing the wealthy.  If you try to cut programs back, you get the argument:

 How dare you not support programs that are providing food to the poor.  You’re taking food away from poor people.

For some reason, these ideas tend to be promoted not by the poor but by individuals who have been successful.  Perhaps this is out of a sense of guilt because they have succeeded while others have not.  They do not feel guilty enough to take on the whole problem by themselves, however, by giving away a good share of their wealth.  Instead, they demand that others give away their wealth and use the force of government to cause this.

There also seems to be a feeling of superiority by this group of do-gooders over the people they want to help.  It is true that many of the do-gooders are highly educated and very intelligent, but they lock themselves into an echo chamber and never allow their idea that “government” can just do it all to be questioned.  (Many of the useful idiots tend to be highly educated and taught by professors who themselves have been isolated from the need to work in a real economy where costs must be balanced by revenues and where raising prices reduces the amount of revenue collected.  Because they have tenure, they are isolated from economics, so they are free to advocate for their theories without any real effects coming to them.)  The do-gooders, because they believe they are superior to those they wish to help, believe that others cannot make a better life for themselves through the path that the do-gooders themselves have taken – education, learning of skills, hard work, seeing to the needs of others – because others are inferior and not capable of taking their path.  Racism also often enters in here, with the do-gooders telling themselves that those of other races can’t make it due to racism by others (even though the do-gooders control most of the necessities for success like at least half of corporate board seats and all of university admissions), but deep-down the do-gooders believe that those of other races cannot make it due to a defect in their race.

Today the argument has resurrected itself in the idea of privilege.  The idea is that certain individuals have privilege, and therefore are able to be successful.  Those who are not privileged cannot improve their lot.  If someone does not have privilege but succeeds anyway, it is chalked up to blind luck that could not be replicated.  White males, in particular, have been singled out as privileged, although virtually anyone whose family has saved and worked to earn money to provide things like a college education or a stable home-life is seen as privileged.  Nevermind that the reason they are “privileged” is usually that their parents sacrificed and worked hard, spending a great deal of time providing things of need to others, to put them in that position.  Those who are seen as privileged are the ones being demonized in this journey through the old cycle of demonize, take, then oppress.  This is the way in which those who want to gain power this time are trying to convince the poor and middle class to put them into power:

People who are privileged have an unfair advantage and there is no way someone who is not privileged can succeed.  Put me in office and I’ll tax and punish the privileged to level the playing field.  If you have succeeded, you must have been successful or lucky, so you should feel guilty and support the righting of this great wrong.

To see an example of this philosophy, read The Funnel of Privilege by Bridget Casey.  Note that she talks first about how some are privileged and her envy of them when she was younger (envy is a powerful tool used by those seeking power), then describes how she was able to make it and get a degree despite not being privileged.  One would think that this would negate her whole argument and she would be advocating for free markets and encouraging others to follow her path.   Instead, she inexplicably concludes that others who are not privileged probably won’t be able to make it without special assistance.  For some reason she thinks that the path she chose is closed to others, either because things have changed or because she was somehow special – maybe she had the privilege of intelligence or just good fortune or something.  Note the arguments that emerge when I challenge her on this on Twitter, suggesting that others could improve their lives and move into the middle class and even the leagues of the wealthy by spending time trying to serve the needs of others through education and work like she did:

Notice that she first demonizes me, saying that my secret goal is to keep those in the middle class and those who are poor working as slaves for the wealthy.  (Somehow I’m part of this secret society trying to keep the poor down because I’m not for large, incentive robbing government programs that encourage people not to produce and thereby make society as a whole poorer.)  Again, the wealthy are seen as oppressors of the poor, only becoming wealthy because they took advantage of the poor.  My personal observations are that those who become wealthy tend to be very giving people who spend a great deal of effort creating businesses and things that greatly improve our lives.  They also make great sacrifices in order to build their businesses and provide for others.  I don’t know of anyone who became wealthy through a business who didn’t spend 12-hour days in the office at least.  (If you want to learn how to become wealthy without starting a business, but through investing, pick up a copy of The SmallIvy Book of Investing where I lay out the game plan needed that anyone with a middle-class income can follow.)

She also can’t understand why those in the middle-class would be against things like universal healthcare.  The reason if you use a little bit of logic is simple:  It is because those who aren’t wealthy can’t afford to pay for other healthcare if the public healthcare is of poor quality, so they lose their ability to choose their healthcare if they are taxed to pay for a public system.  Those who are wealthy can just buy better healthcare, education, etc… if they don’t like the public system.  They are free to travel the world if needed to get better things.  Those in the middle-class and the poor are not.

Certainly, those whose parents worked hard and put money away so that their children could go to college debt-free start out their adult lives on a better footing than those who didn’t and therefore start with a large student loan.  Certainly, those who grew up in a home where their parents made sure they did their homework and helped teach the lessons they didn’t understand from the classroom had an advantage over those who came home to an empty house.  Certainly, those who grew up in a mansion and were given a car when they turned 16 had an advantage.

But the things that will make those who were disadvantaged successful is the same things that will make those who are advantaged successful:  Gaining skills, working hard, choosing a good career path, meeting the needs of others, and spending less money than they make so that they can put money away and invest.  To do otherwise would make those who are advantaged fail just as it will make those who are disadvantaged fail.  If advantage were a guarantee of success, the wealthy families would always be wealthy, but more than half of second-generation wealthy lose their wealth and more than 80% of third-generation wealthy do.  It is behavior, not your starting point, that is the greatest factor in your success or failure.

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The post also draws comments from others who question their own success, thinking that maybe it is only because they are privileged.  (See Krista G’s comment below, where despite her coming from a modest background and working hard for her success, believes now that she somehow must have been privileged or she would not have been successful.)  Note also that they attack my narrative, that people who work to improve themselves and commit themselves to doing useful things for others can better their position in life.  My narrative is seen as keeping us from “making reforms that will make life better for EVERYONE,” where “making reforms” mean they wish to give the government more control and allow them to take money from the wealthy to fund public programs and my ideas are standing in their way.  Again, the demonization of those who object to their plan.  This is the useful idiots pushing the agenda of those who want to seize power by centralizing authority:

Hopefully, people won’t be fooled again this time.  People who are free are able to improve their lives.  There are thousands of people who are first-generation wealthy in free countries like the US.  There are millions of others who have entered the middle class despite a meager start.  The secret is spending time providing for the needs of others, spending less than you make, and investing to increase the rate of your wealth growth.  The way to do this last item is covered in The SmallIvy Book of Investing   for those interested.  The way to stay where you are is to become obsessed over things like privilege to the point where you give up and don’t try to succeed.  People who are successful will tell you, the harder you work the luckier you become.  

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

If You Really Want to Close the Wage Gap, Here’s How

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We’ve all heard the statistics, that women only earn 81 cents for every dollar that a man earns or some such number.  Progressives argue that this is due to sexism and discrimination, so we must have the government go in and set salaries, have affirmative action in promotions and hiring, and probably remove some men from CEO seats and insert women.  But these solutions are neither fair nor will they be effective at both creating an equal society and one at maximum productivity.  As usual, Progressives can make us all equal but they do so by making everyone broke (except for a few progressive oligarchs).

I was reading a really interesting post on Money After Graduation called The Impossible Price of the Motherhood Tax.  In this post, Bridget Casey really nails it when it comes to the reason for the wage gap, at least when it comes to men and women of equal education and vocations.  On average, women and men make similar incomes coming out of college and through their early twenties, but then they diverge.  The reason that men make more than women after this point comes down to one obvious reason:  children.

In Canada, where the author resides, new mothers can use the unemployment system to take either a year or a year and a half off (depending on where you live) when they have children and receive a little over half of their pay while they are off (they can actually start a couple of months before they have children).  (Dads can take some time off as well, but it starts after the baby has been home a few months.)  Their employer is required to take them back in the same job and at the same pay when they return.  In the US we obviously have no government mandated system, but many women (and some men) take time off when they have children.  Some, those who wish to continue to work, then put their children into daycare at 6 months or at a year or two.  If they have very understanding employers, they may be able to come back into their old job.

Others stay home until the children are in kindergarten or older, which normally means finding an entirely new job, possibly in a different line-of-work.  Because they are not able to work full hours even once the kids are in school, they often take part-time jobs in whatever is available with the needed hours and flexibility.  Even when the children are in high school and full-time work is possible, many find that they don’t want to work full-time anymore since their priorities have changed or they don’t want to go through the effort needed to regain skills and get on-the-path again if they even can.

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As the author points out, the reason for the wage gap is that parents who stay home as full-time parents, even for a couple of years, miss out on experience, raises, and promotions.  This is not a temporary issue since future raises and promotions typically build upon where you are now.  If you miss out on 20% now, you’ll always be 20% behind, even if you work full-time after that.  And because most of the time it is the woman who stays home, men in their thirties, forties, and later will tend to make more than women in the same industries. It has nothing to do with sexism by the employer.  It is due to a break in a career.  There could be some sexism involved, in that an employer who fears that a woman of child-bearing age might go on maternity leave, might not select her for a critical position.  Women who never have children might, therefore, be passed over for the best opportunities.

She advocates that it is an investment to pay for daycare since then women (and men) who are the initial primary caregiver for the children will not miss out on as much time at work.  (She does not advocate that Canadians forego the year of paternal leave, although doing so would make sense if your career were your primary concern since taking a year off per child does not help your career progression either.  I’m guessing that there is a feeling of entitlement to that paid leave, so while daycare is an investment, foregoing paid leave is not.)  While I agree that taking less time off would help, it would not solve the issue.

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The problem is that while you can lessen the initial effects of having a child on your career by limiting your time off, the person who remains the primary caregiver for the children will continue to see their time split between kids and work.  If a child has a cold or another illness, the caregiver must take time off work.  If the kid’s school gets done at 3:00, the caregiver must leave work on a schedule to pick up or meet the children.  The people who make the most in the workforce are those who have their employer as their primary responsibility.  They are able to work over as needed, come in weekends sometimes, and perhaps travel on short notice.  Unless you have someone who can take the children when plans change, often on short notice, this cannot be a person who is primary caregiver.

While Ms. Casey advocates for 32-hour work weeks and the ability to work from home so that stressed mothers can take care of that pile of laundry, the truth is that those who make the big incomes are often putting in 100-hour weeks and are always at the office.  (They are also not doing laundry when they are supposed to be on-the-clock.)  Their employer knows that they are dependable and able to drop other things to be there when the business needs them.  Someone who is the back-up when childcare falls through cannot meet that kind of responsibility.

One idea would be to have both parents split the responsibilities.  The issue here is again, to really advance in salary and position, you need to be able to put work first.  If both parents are putting in just enough hours at work and taking time off sporadically due to the normal childcare issues, neither parent will get into one of these high-paid roles.  They will both top out in salary and stature.

The only solution I can see, if your goal is to equalize pay, is for more women to choose to be the primary bread-winner and more men to choose to become full-time parents while the kids are young and then part-time or self-employed workers when the kids are older.  This will mean that women who are planning to focus on career will need to choose men who have traits of great parents (patience, charisma, responsibility, energy, organization) rather than the type-A traits of a CEO.  They will need to also shy away from professionals with gobs of college and look for guys who would be willing to give up whatever they do to focus on parenting.  Women will soon discover what men have known for ages:  To be successful in a career, you need someone behind you that will relieve you of other responsibilities so that you can focus on career.

For the guys, I think the real issue is that men currently gain most of their identity and their pride from their work.  This will be difficult to overcome, but eventually, I think that they will find that being a fulltime parent is far more important than things that most people do at work in a given day.  They may also find that the benefits when the kids get older – having more time off during the day and the home to themselves – also can be nice.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

It’s Time for the Public Sector to Follow the Private in Retirement Plans

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Let’s say that you went to a bed and breakfast, checked in, and went up to your room.  The room was a mess with bed-clothes strewn on the floor, breakfast dishes piled up on the table, and a big black ring around the whirlpool tub and soap suds near the drain at the bottom.  You are then told that you owe a $100 cleaning fee to get the room back in shape so that you can enjoy it.  At least, you might get to enjoy it, but then again they may need to raise the rates after you pay the cleaning fee, or maybe they’ll just shut the place down entirely.

You protest, saying that you were not the ones who used the room last and that the ones who did should pay the fee.  The host replies that the last people have gone, that someone needs to pay to have the room cleaned, and that the someone is you.  You try to back out of your reservation, but you’re told that you must pay the fee or they are calling the cops.

How would you feel?  Would you feel that you had a responsibility to pay the fee?  Would you begrudgingly do so, hoping that the next person would pick up the tab for you?  If you paid the fee, would you then feel entitled to having the fee paid for you by the next guest?  A guest who, just like you, hasn’t stayed in the room yet and had nothing to do with any bargain you make with the inn keeper.

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The same thing happens with things like public pension plans and Social Security.  People long ago made agreements with politicians long since gone to receive something far in the future in exchange for their services or tax money.  In the case of public workers, voters and residents forty years ago received services for which they paid some taxes, but salaries were low in exchange for promises of generous retirement pensions, free healthcare for life, and other benefits.  Those benefits were not paid for by the residents who hired the politicians who made those deals.  They only paid for the salaries of the workers and in exchange they received various city, state, and federal services. Now that the workers are retiring or have been retired, the next generation is expected to pay for those retirement benefits.  This next generation is paying for the retirement of workers from which they received no benefit based on agreements they did not make.  Kind of like needing to pay for a room to be cleaned that you did not use.

Social Security is the same way.  Back in the 1930’s, people voted for President Roosevelt and a Congress who created Social Security, originally charging about 2% of pay in exchange for just enough retirement income to avoid starvation and to keep the lights on.  Voters at the time agreed to pay these taxes and pay out benefits to people who were starting their retirement at that point even though those people had paid next to nothing into the system, in exchange for the promise that they would receive a payment in the future.  As it looked like more people were going to retire than the system could sustain, the tax rates were raised in anticipation of needing more money, eventually reaching more than 12% of pay even though benefits remained flat.  This would have helped, but all of the extra money was spent as soon as it was collected, leading to the current situation where benefits will need to be cut in the near future unless taxes are raised further.  Again, people who had no part in the agreement are expected to pay up.

What if they say, “No?”  What if they decide to cancel Social Security, or cancel public pensions?  If they are forced to pay for these items because they are in the minority, what if they just decide to work minimal amounts, or quit work and raise a garden, producing just enough to feed themselves?  What if they move away to other countries or simply stop working and go on the public dole themselves?  What then?  Are you going to try to force them to work?  Isn’t that called, “slavery?”

Sorry, but those in the next generation are no more morally obligated to pay these bills than you would be if you would be obligated to pay for the cleaning of a room if you showed up to a bed and breakfast with a dirty room.  They did not make this agreement.  They did not continue to vote the politicians in who made these arrangements.  They did not look the other way while all of the extra money raised for Social Security was blown on battleships and public rail lines.  It is neither their agreement nor their responsibility.

“But someone needs to pay the bill,” you say.  There is no good answer for this.  Somebody will feel some pain because of bad agreements made years ago.  Perhaps the pain should be spread around a bit, but perhaps those who made the deals should take a greater share of the pain.

Going forward there is a better way.  Public employees and public retirement plans should follow the lead of private employers.  Rather than a future promise, retirement should be paid for as-you-go.  If a politician promises a lavish retirement in the future, the city, state, or Federal government should pay for their share of it right away by putting money away into an account owned by the employee.  Future governments are free to stop putting money into the account, just as the employee is free to leave and find another job if the retirement benefits being funded are not to his/her liking.  When the employee retires, his/her retirement is paid for and there is no need to rely on future taxpayers.

Likewise, money for Social Security should be paid into private accounts.  These could be invested automatically in broad stock and bond market index funds to eliminate the risk of poor personal management.  When individuals are ready to retire, they would have their own account and not need to rely on future workers contributing in order to continue to receive a check.  Isn’t that a better way?

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

An Easy Way to Make College Affordable

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Paying for college is a concern of many parents, and well it should be.  College debt is a concern of many graduates, and well it should be.  An issue is that the children of parents who decide to do something about paying for college by saving up money and doing without some things so that they will have at least some of the money needed for room and tuition end up with about the same amount of debt as those whose parents save nothing.  This is because colleges just raise the tuition for those children whose parents have saved.  OK, they actually reduce the tuition for those whose parents have not saved, but it is really the same thing.  Go into college with $50,000 in a college savings account and the college will figure that you can pay $50,000 more than someone without a savings account.
Now if the child with the $50,000 account came from parents who made $250,000 per year while the child without anything came from a family making $30,000 per year, the difference in tuition is understandable.  But often both families may make $80,000 per year.  One family just choose to maybe drive older cars or vacation locally so that they could put a few thousand dollars away each year into an Educational IRA, while the other family was trading in cars every few years and vacationing at Club Med, living for today and figuring that they would worry about college later.

              

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The issue with this system is that it encourages exactly the kind of behavior you don’t want.  It encourages spending and penalizes savings.  This means that more people show up at the financial aid office with no savings.  People are not foolish — they will find ways to go to college for less or for free if they can.  Why save up if there is no advantage?  As a result, not only do only children from poor backgrounds show up with nothing to contribute.  Many children of middle-class families who could have paid a significant portion of their own tuition and room-and-board show up as well without any savings.

Because colleges need to provide a lot of grants (as does the Federal Government) to prevent their colleges from being full of only the children of the wealthy who can float the tuition with their yearly income, they raise the base tuition so that those who can pay, pay more.  This provides more money for grants and scholarships, so long as people don’t decide it isn’t worth the cost and as long as all colleges do the same thing.  Because the cost is higher, however, it means fewer people are able to pay full tuition from income, which means more student debt and less people saving up since when the amount they can saved is dwarfed by the cost, they figure, “Why bother?”

So what is the easy solution to fix his issue?  Simple – stop using college savings when determining eligibility for tuition reductions and other grants.  Instead, base tuition rates purely on income.  Children who come from families with little income would still find a lower tuition bill that they can afford, but those from a family with a higher income will need to put away more money, use more of that income to cover tuition, and/or take out student loans.  Because tuition would be lower for everyone (since the colleges would be giving out less tuition aid because more people would be paying most or all of their bill), the cost would actually be lower for everyone.

Several colleges could also band together and establish a birth-to-college saving plan where parents could contribute an amount each year based on their income as their children grow with the guarantee that tuition and a certain portion of room-and-board would be covered for any of the colleges in the network.  This would eliminate the uncertainty we currently see when it comes to college tuition and also means that everyone will be paying what they can.  Parents whose children decide not to attend college could have their money returned with a reasonable interest rate applied.

So what do you think?  Would it work?  Do you have a better idea?  Let’s hear it!

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Become An Owner Instead of a Worker

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When we’re young, we trade our health for money.  We work long hours.  We lift heavy things and wear down our tendons. We spend hours typing or doing other repetitive motions that cause carpal tunnel syndrome.  We spend hours on our feet and wear down the disks in our backs and develop heel spurs.

We trade this wonderful gift of youth and health that we’ve been given, the ability to keep pushing it for may hours, to bounce back when we fall down and heal fast when we get cut, for cash by working way too many hours.  We go in before dawn and leave after dark, never getting out to see the sun and the woods and the oceans.  We work hard to go on a vacation, which is then rushed and filled with work thoughts and emails back to the office the whole time.  We buy large, beautiful homes that we spend all of our free time maintaining and cleaning when we aren’t working to pay the mortgage.  We buy things on credit and then spend a quarter to half of our time working to pay interest payments.

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While we’re young we can make extra money by just pushing it a little harder.  We can make that car payment if we work overtime on weekends so we can drive that shiny new car to work and have it sit in the parking lot all day, slowly decaying away.   We can take on that second job and get all of the cable packages and five different web streaming services.  We can keep buying clothes to impress people we don’t like and buying all of the latest gadgets to look good for people we don’t even know.

When we get old, we trade our money for health.  Any money we’ve saved up through those long hours of work goes to treatments, surgeries, and drugs to reduce the pain our weary bodies feel.  We spend money to try to have the ability to walk and run and jump and heal like we did so easily while we were young.  We get surgeries to be able to walk after long hours of carrying heavy loads have destroyed our knees.  We buy prescriptions to lower our blood pressure after years of sitting idle at a desk, eating poorly, and letting our health decay.

Stop.  Stop today.  Stop right this minute and change your life.

Become an owner instead of a worker.  Instead of getting that new car, drive your old one for a few more years and send those car payments you would have made into a stock mutual fund and become an owner in a group of companies.  Buy a smaller house for cash and invest the money you save on interest.  Stop buying things to impress people and just buy what you need so that you can spend time with your family who don’t care what the label on your blouse or jeans says.

Start building a portfolio so that you will be getting dividend payments and capital gains instead of paying interest payments and penalties.  Let others work for you so that you don’t need to work those extra hours.  Expand your lifestyle by waiting a little while to buy things, instead investing the money in mutual funds, then using the distributions from those mutual funds to add to your income.  Direct some of that money back into buy more mutual funds, and your income will expand on its own.

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Everybody can become an owner.  You can start a mutual fund account with Schwab for only $1.  You can start investing through Vanguard funds for only $3,000 ($1,000 if you start a retirement account).  Start an account and start sending a little of your paycheck in each month to build your wealth.  Own things.  Build things.  Stop just using all of your effort to generate entropy.  Stop having your money flow into your back account through direct deposit and then back out again to bills through auto pay without your even seeing it.

The next SmallIvy book, Cash Flow Your Way to Wealth, will be coming out in about a month.  It gives the game plan to go from worker to owner.  Subscribe to this blog to make sure you get your copy when the time comes and don’t miss out.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Are Working Women Choosing the Wrong Guys?

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Traditionally women sought out guys to marry who showed that they could earn money and provide for a comfortable lifestyle.  Looks and personality were also factors, and certainly some women married guys with few prospects to provide an income out of love, but the ability to earn a living was always important. At one point in history this was probably the guy who could hunt and build a cabin, or who had land and could raise crops and animals, but with time it morphed into the guy who could earn a six-figure salary.  The guy with the nice car, nice clothes, and nice watch was the one who got the girl.  Guys would buy the meals and pay for everything on dates, give gifts, and even give an expensive diamond ring when proposing in part as a way to show the ability to provide.

For many guys, attractiveness, both physical and inner beauty, were important factors when looking for a wife.  Finding someone who was fun to talk to and nice to be around, and someone who was caring and nurturing, could also be important factors.  Few guys really cared about a woman’s ability to pay for things because they had always assumed that they would be earning money for the family.  Many guys might even feel intimidated if a woman earned more than them and was the primary breadwinner, and therefore not even seriously consider a woman who was more successful.  Likewise, many women would not respect a man who earned less than them.

Gender roles are all changing, however, with many women are choosing to primarily focus on a career.  Women are moving into top roles at companies and gaining parity with men in many fields.  There are even more women attending college then men in the US, so it only makes sense that many women are moving into the position of primary breadwinner.

Given this shift, one would expect more men to be taking the role of caring for and training the children, along with managing the household since it would make more sense for the wife to work.  Given this trend, you would therefore expect women to start seeking men who would be better at raising children.   You would expect them to be looking for men with qualities such as patience, concern, devotion, communication, an ability for multi-tasking, and selflessness instead of seeking the type-A personality with little patience who is quick to anger.

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And yet it seems as though men’s role has rarely changed, so we have ended up with scenarios in which both parents work and where both are heavily focused on their careers.  This can result in some high household incomes, leading to the generation of lots of tax revenue, but it leaves the children being raised by others or by themselves.  It is as if both parents have decided to leave the cave and hunt because the hunt has become such a focus that both parents have forgotten why they were hunting in the first place.  Society has suffered as the internet and television has raised the last generation of children and imparted its morals upon them, the morals of Harvey Weinstein and individuals in the darkest corners of the world.

Maybe it is time for career-minded women to seek out men who can better fulfill the role of primary caregiver and mentor for their children instead of choosing men based on their ability to provide.  A woman who can ear a six-figure income doesn’t need a man who can do so as well.  Most people who really crunch the numbers will find that a family will actually come out better on one income with a spouse spending time doing things like preparing meals at home and taking care of the children than they will with two incomes.  In addition, time spent in childcare for one’s own children is tax-free, where extra income made at work is taxed at the highest rates.

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Our children really need to become more of the focus.  Why wouldn’t we want to spend time training our children to be good, self-sufficient citizens that share our values and make the world better rather than creating the next report or presentation that will just be forgotten in a week?  Children are our greatest legacy and will make far more of an impact that anything most of us will do in the office.  Why would we be satisfied to pay a stranger minimum wage to simply watch our children rather than to make sure our children are educated, motivated, and cared-for?

So what do you think?  If you are a woman who is focused on your career, would you marry a guy because he would be a good parent instead of finding someone who would be a good provider?  If you are a guy, would you be satisfied raising your family instead of going into work each day, and would you feel important doing so?

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

What do you think?  Please leave a comment?

Contact me at vtsioriginal@yahoo.com

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

An Update on The Kiosks are Here!

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About a year ago I wrote the post below after seeing an ordering kiosk in a McDonalds down in Alabama.  I was in our Hardees last night, and they now also have kiosks in addition to a single person taking orders.  It looks like order takers will be replaced by kiosks and smart phone apps very soon.  The way to fight back is to give great customer service, making the restaurant make more per hour than your salary by your being there instead of a cold, humanless machine.

McKiosk?

McKiosk?

I was reading a stat this weekend that one in three working people were in a union in 1970 but only one in ten are now.  The author of the editorial used this to explain why wages have stagnated, but I took a different meaning.  Given that once a company is unionized it is virtually impossible to de-unionize it, this statistic means that we saw a lot of union jobs go away, forever.  A drive through Detroit (with your windows rolled up and at top speed, not stopping at the lights) would also show the effect of trying to force companies to pay a worker more than what the value of what he was doing was worth.  This, combined with absurd work rules (in some union car plants, you needed to continue to pay workers who sat and read the paper in a room in the plant if you didn’t have enough work for them), has chased a lot of companies out of the country or just out of business.

Now the same folks who brought us the unions and ran great American cities into the ground have their sites set on minimum wage workers.  With demands of $15 per hour wages, organizers are convincing some  misguided fast food workers (many workers wisely don’t participate because they can do the math) to protest at their place of business.  Note that the average McDonald’s worker produces about $13.50 in value for his/her company, so the company would be losing $1.50 per worker per hour if they paid $15 per hour.  Multiply that by thousands of workers, and you would see millions of dollars in losses each year.  No company could withstand that.

The solution for companies faced with rising labor costs who can’t just move out of the country as did the factories is to cut the number of workers.  Enter the ordering kiosk.  The picture above shows kiosks I found at a McDonald’s in Florida last week.  There were six kiosks setup and they were getting a lot of use by the customers without many complaints.  I went ahead and ordered at the counter (I like to support the workers, plus I would rather have a person help me with my order than go to a machine), but a lot of others chose the kiosks.  Smart phone apps are also being rolled out.  Raise costs enough and you’ll just have a cooked burger appear on a conveyor belt and you would add the toppings yourself.  The restaurant would just need to employ a couple of people to load the burgers into the hopper.  They could eliminate the need to clean by just making it a drive-thru with no table service.

People with three kids and a home should not be in these jobs.  These are jobs for teenagers and young liberal arts majors to take as a first job to learn the skills needed to get the next job and move up the ladder.  If you take these jobs away by raising the minimum wage or by protesting until McDonald’s and other employers relent, you’ll be cutting off this critical pathway to a better life that a lot of people need.  You can’t get a job without experience, and without minimum wage jobs, you can’t get experience.

So if you’re a fast food worker and want to keep your job, what can you do?  Be the best worker that ever existed.  Show up ten minutes early.  Leave your cell phone in the car and concentrate on doing your job to the best of your abilities.  Smile at the customers.  Help them with their orders.  Make suggestions for them to save a few cents by bundling items.  Provide value for your employer so that they have more business because of you.  Make customers visit your store to see you, rather than go to the place across the street with the kiosks.  In short, act like you work at Chick FilA.  Plus, don’t demand to be paid more than you create.

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

What do you think?  Please leave a comment?

Contact me at vtsioriginal@yahoo.com

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Revisited: Why Do Soup Kitchens Need Volunteer Servers?

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A couple of weeks ago I posted the question, “Why do soup kitchens need volunteer servers?”  It seems like if the only issue were that people needed food, all you would need to do is to provide the food and the space and those who were eating could fix the food and clean up when they were done.  The issue is that, generally, those who are in need of a soup kitchen have other issues going on.  It isn’t just a matter of them needing food – they need food because they have an addiction, mental disorder, or another issue. That same issue also makes it necessary to staff the soup kitchen and have volunteers prepare and serve the food.


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But today I also had another realization, or I should really say, revelation:  The reason that soup kitchens need volunteers is that it is good to have the volunteers and the patrons interact.  People who volunteer for serving at soup kitchens and other activities are generally the best of the best in a community.  They are often business and community leaders or future business and community leaders.  They are people who work to produce things and services – they are builders and doers.  They often have a great attitude, always looking to the bright side.  They are givers, which is what makes them successful in their business life.  They also generally have their priorities in order and a good plan for life.

It is good for the patrons to meet people who are making good choices.  Such individuals can serve as examples of people making good choices and doing things to both better their lives and the lives of those in their communities.  They are often successful, and show that good choices lead to success, happiness, and security.  Hopefully, some of the patrons will see their example and start to get themselves out of the hole into which they have put themselves.  They can also see how making better choices can lead to a better life.

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It is also good for those who are succeeding to interact with those eating at shelters and soup kitchens.  Often it is difficult to continue to make the difficult choices that help you succeed financially when everyone else around you is spending with wild abandonment.  It is good to see where you could be if you don’t prepare and have contingencies like an emergency fund, life and disability insurance, and a paid-off home.  It is also good to remind yourself often of the blessings you have, because most people are just one major medical event or a job loss away from being on the other side of the counter.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why Do Soup Kitchens Need Volunteer Servers?

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Do you ever wonder why soup kitchens need people to volunteer to cook and serve the meals?  If the real issue were just providing food to people who were just down on their luck, you could just drop the food off and provide a kitchen.  Those patronizing soup kitchens rarely have anything pressing to do, so they could take it from there: prepare the meals, dish everything out, and then clean up the kitchen when they were done.

Yet soup kitchen usually use volunteers for all of the food preparation, serving, and cleaning.  And the volunteers are often people with a lot of things going on in their lives, including their work, family commitments, home maintenance, and volunteer activities.  As they say in any volunteer organization, if you want to get something done, find the people who are busy.


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The reason volunteers are needed is that there are normally reasons why those patronizing the shelters don’t have food, and it goes way beyond food not being available or being priced too high.  Many people have addiction issues.  Others may have mental conditions or personality disorders.  A few may have physical conditions that severely limit them.  In any case, it is normally the behaviors of those using the shelters that both causes them to be short of food and the necessity for volunteers to get the meals cooked and served.  If you were to just leave a pile of food and the keys to the kitchen, it is unlikely that the results would be desirable.

While many of us regularly do what is necessary to provide food and shelter for our families, we don’t do what is necessary to protect ourselves beyond the basics.  We get the unlimited data plan on our phones instead of putting away money for an emergency fund.   We buy meals out several times per week but put away nothing for retirement.  We buy our kids the latest fashions but don’t buy life insurance to protect their future should something happen to us.  We have cable but no disability insurance.

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As a result, we have no financial security should anything disrupts our lives.  If we get into a car accident and have medical bills, we need to go into debt and possibly start on the road to bankruptcy.  If we are disabled or die early, our family’s financial future is irrevocably changed and they may struggle for the rest of their lives.   When we get to retirement age, we don’t have the resources needed to pay for basic expenses and need to rely on others.

Suze Orman said it best in an interview in Money Magazine this month:

“Money is about security. It’s there to make you feel safe when everything is going well and to protect you if the worst happens.”  

Hopefully, you protect yourself against homelessness by doing things like getting and keeping a good job and staying off of drugs.  But sometimes things that are bigger than the normal day-to-day expenses come along like a hurricane, medical crisis, or an earthquake.  Sometimes the heater breaks in the middle of winter or a sinkhole opens up under our home.  Sometimes we get laid off or are forced to retire earlier than expected.  And retirement will come at some point and then you’ll need to have enough stored up to last you 20-30 years, even if Social Security and Medicare disappear.

If we have an addiction to shopping, or hobbies, or games, or stuff to the point where we are not preparing for if the worst happens while we have the opportunity, we are similar to the drug addict stopping in at the soup kitchen for a meal because he can’t hold a job.  In both cases while we may feel that we are unfortunate by circumstance, it is what we do and what we fail to do that makes us vulnerable.  Our choices stack firewood, just waiting for a spark to start the blaze.

Suze Orman also said something else that is true when you have saved and invested, such that you have money:

“I can use my money now to try to help as many people as I possibly can. I love that,” she says. “When you have money, you should never live a life where you isolate yourself from others and just use it for yourself. Money is there to make the world a better place and to help those who really can’t help themselves.”

While we can plan and do our best to be ready for disasters, there are times when we need help no matter how prepared we are.  We need to put ourselves into the position where we can help others when disaster strikes.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Is Amazon’s Deal for the Needy a Good Thing?

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Recently Amazon announced that they will offer Amazon Prime for a special discounted price for those on EBT cards:

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Now, Amazon is a private business and they can do whatever they want to do with their pricing, but in some ways this seems like a dangerous precedent to set.  Most things are priced based on the value of the good or service to the consumer, the number of competing sellers, the location where it is being sold,  and other factors.  As long as there is enough competition, the price of goods will drop to the point where the seller receives the minimum amount of profit needed to justify the effort of providing the good or product for sale.

By selling the same goods to different consumers at different prices, based on the life situation of the consumer rather than how they buy the goods (retail, online, with coupons, etc…) as is normally done, Amazon is changing the way things are priced.  They are means testing their customers, which will inevitably result in customers who make more money paying a premium to cover the people who are making and paying less.

 


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If Amazon is the only one who does this, it really won’t matter for the average consumer because the system will simply not work.  If you go to Amazon and it costs $30 for a month of free shipping and videos because others are only paying $5.00 or even getting the service free, but then there is another service that offers the same service to everyone for $19.99, consumers with means can just switch to the lower cost service.  As Amazon loses customers to the other service, they’ll need to increase the price they charge the remaining people paying full price or quit offering the discount.  If they raise prices, that will chase more people off, until Amazon will be forced to change or cease to operate.

If other companies follow suit, however, that would set up a socialist system, where people pay according to their means and take according to their needs.  Prices would rise for the people who had more since they would now be subsidizing those who made less.  Because the goal in such a system is to produce the least amount possible, since producing more simply means you pay more.  Plus, you “win” when you get more than you pay for in a Socialist system, but you “lose” when you provide more than you get.  For examples of this, look at how people will avoid paying student loans back when possible, even choosing a low paying job to keep their income low rather than taking a better job and getting on the path to doing well.

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So what are your thoughts?  Is this a great marketing idea that will just bring Amazon customers it wouldn’t have anyway?  Do you think it is a great way to help the poor?  Are you resentful that you need to pay full price while others get a discount for the same thing?  Let me know your thoughts.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.