How Do You Spend Your Day? And Why College Is Expensive

Here’s an interactive chart from the NY Times of how various groups of people spend their time over the course of a day.

Like many of you, I have fond memories of college. Here’s one reason why; The pie chart below shows the average full-time college student spends their day.

“Educational activities” only take up 4.5 hours a day (including studying!), and even if you add in work it totals only 6.5 hours a day. This paper says this is over 30% less than a few decades ago.

Full-time students allocated 40 hours per week toward class and studying in 1961, whereas by 2003 they were investing about 27 hours per week.

While college is more cush, like we discussed before tuition is growing more expensive at an alarming rate. And even while people say “tuition bubble”, this chart shows that it’s been going on consistently for a long time. Hat tip to Economix blog.

So it seems, we are either getting a lot less education for our money, or we’re just getting charged more for giving them more amenities for their paid vacation, or both. At this rate, my kids will just download course material directly into their brains from iTunes, spend the rest of the four years on vacation, and college will cost a full decade’s worth of income. That $100 auto-investment into a 529 just ain’t gonna cut it…

Chart: Unemployment Lasting Way Too Long

Above is a chart of the median duration of unemployment from the past 50 years, based on data supplied by the US Department of Labor. That’s quite a scary spike we have going right now. (Chart source, via The Atlantic and Greg Mankiw.)

Not coincidentally, the Senate just voted to extend employment benefits again after much debate. This means that the federal government will continue to provide up to 99 weeks of unemployment assistance, including the first 26 weeks provided by individual states.

People will argue whether this is the best way to combat the problem. I don’t know the answer, especially with the huge deficit, but I do feel that with two years of unemployment available that there is less excuse not to learn some new marketable skills if you need it. Also, this just makes my cash hoard of a year’s worth of expenses that much more important to me. I really didn’t think an emergency fund would provoke such a strong psychological response, but it has significantly lowered my daily stress levels.

If you don’t have your warm fuzzy cash hoard yet, open a separate online savings account and start socking something away! Just look at the chart again if you need motivation.

Happiness Is Earning $60,000 A Year?

Nobel laureate and founder of behavioral economics Daniel Kahneman performed a TED Talk this year about how as humans our “experiencing selves” and our “remembering selves” perceive happiness differently. Basically, he says that our memories of experiences differ from what really happened during the experience itself.

But what ended up being the catchy soundbite was in the Q&A session after his talk, where he tells us that while millions of dollars won’t buy you happiness, a job that pays $60,000 a year might help. This is based on a survey of 600,000 Americans:

“Below 60,000 dollars a year, people are unhappy, and they get progressively unhappier the poorer they get. Above that, we get an absolutely flat line. I mean I’ve rarely seen lines so flat.”

“Clearly… money does not buy you experiential happiness, but lack of money certainly buys you misery,” he said. But the real trick, Kahneman said, is to spend time with people you like.

I found this talk through the GatesVP blog, who offers this analysis:

In most parts of the US you already have access to a very good and healthy life at 60k. You’ve pretty much covered everything commonly deemed as a necessity and you probably have some money left over for “entertainment”. So the jump to 90k really just gives you a little more “entertainment” and maybe some bigger stuff, but that’s it.

And if you’re the type who’s not happy with being in the top 20%, then how much further do you need to go? Top 10%? Top 5%?

Really, 60k for one job is far enough “ahead of the game” to keep happy those that can be kept happy. And that’s probably why this is true.

According to the 2008 US Census, making 60k a year is in the top 20%. I pretty much agree, especially with the idea that humans are creatures of comparison. As long as we’re doing a little bit better than our neighbors, then we tend to be happy. What do you think?

You can view the entire TED Talk below. The Q&A session starts at about 17:15, and a transcript is available on the right sidebar here.
[Read more…]

Amazon Kindle Most Highlighted Passage

The most highlighted passage on the Amazon Kindle eBook device is:

…the more money they made the next day on the streets. Those three things—autonomy, complexity, and a connection between effort and reward—are, most people agree, the three qualities that work has to have if it is to be satisfying. It is not how much money we make that ultimately makes us happy between nine and five. It’s whether our work fulfills us.

From the book Outliers by Malcolm Gladwell. Full list via MR and @willwilkinson.

Unemployment Rates vs. Level of Education

I ran into a friend today that has been unemployed for a while. He seemed pretty beaten down, and doesn’t even really seem to be trying anymore. “1 out of every 10 people can’t find a job.” Almost like that stat made it okay. Well, it does seem like a huge amount of people. Is there less stigma attached to being unemployed now?

However, he does have a degree and some experience. This reminded me of a graphic in Businessweek of the benefits and costs of college. They compared unemployment rates when separated by level of education. People who don’t have a high school diploma have triple the unemployment rate of someone with at least a bachelor’s degree.

You can view the original article here [pdf], which also has an interesting chart showing that higher education expenses have been increasing at double the rate of medical care since 2000. College tuition and fees are up 92% (!) since 2000. That trend simply can’t continue… can it?

Federal Family and Medical Leave Act: Know Your Rights

Dealing with a serious illness in the family is a very stressful event. I did not really understand the Federal Family and Medical Leave Act (FMLA) until recently, and I think everyone should be familiar with it. This law helps ensure that no worker is forced to choose between a job and his or her health or family’s needs.

In general, if you work for a business with 50 or more employees and have worked with their for at least a year, then the FMLA requires them to allow you up to 12 weeks of unpaid, job-protected leave within a 12-month period in the following situations:

  • to care for a new child, whether for the birth of a son or daughter, or for the adoption or placement of a child in foster care;
  • to care for a seriously-ill family member (spouse, child or parent);
  • to recover from a worker’s own serious illness;
  • to care for an injured servicemember in the family; or
  • to address qualifying exigencies arising out of a family member’s deployment.

This is in addition to whatever paid leave benefits your workplace may offer.

Individual states have enacted laws that reduce the minimum business size and also expand the definition of eligible family members, for example to include domestic partners or grandparents. The Wikipedia FMLA page offers a good summary.

Many employers will not volunteer this information to you, as it often puts them in uncomfortable and costly positions due to having to find temporary replacements and also holding your job for you. They may even put up resistance to it. Definitely read up on this law and know your rights.

If you feel you have experienced a violation of the Family and Medical Leave Act, you can file a complaint with the Department of Labor. Contacting a lawyer who works in that area would also be wise, especially if you seek damages.

What about health insurance benefits during unpaid leave?
Under the FMLA, an employer must maintain the employee’s existing level of coverage (including family or dependent coverage) under a group health plan during the period of FMLA leave, provided the employee pays his or her share of the premiums.

More reading
U.S. Department of Labor
Family and Medical Leave Act of 1993 Fact Sheet
National Partnership for Women & Families

3 Requirements For A Satisfying Job

Within the book Outliers by Malcolm Gladwell, I found a great distillation of the requirements for a satisfying job. Whenever I think of times when I have been unhappy, at least one of these things was missing.

  • Autonomy. You get a role in deciding what you do every day. Even if you might not always get decide exactly what you do, you can choose how to get it done.
  • Complexity. It must be an intellectually stimulating challenge. As the book states, it should “engage both your mind and imagination.”
  • Connection Between Effort & Reward. The harder you work, the greater your income or recognition (at least eventually).

20 Common Attributes Of People Who Improved Their Financial Situation

I recently received a review copy of Jean Chatzky’s The Difference: How Anyone Can Prosper in Even The Toughest Times, where she attempts to understand why some people easily move from barely getting by into a life of comfort and/or wealth, while others get stuck or even fall backwards. What are the attributes that set them apart?

From her research, she divided people into four groups: The wealthy, which have on average assets of $2 million, not including home equity. The financially comfortable, who save regularly and have a financial cushion. The paycheck-to-paycheck, who are getting by but are one unexpected expense away from stumbling into the last group, which are the further-in-debtors. Here’s how the population breaks down:

20 Factors

As you can see, plenty of people are living paycheck-to-paycheck. But what about those who only used to live that way? She found that 75% of the wealthy and nearly 100% of the upper-middle class originally came from middle class backgrounds.

Here are what Chatzky says are the twenty key elements of those people who improved their situations. You don’t need to have them all, but she says that you need, on average, ten factors to make your way to financial comfort.

Financial Attitudes
– feel stocks are worth the risk
– devote money to savings
– save regularly for emergencies
– invest for retirement
– reduced debt

– want to retire comfortably
– want to be financially comfortable during working years too
– always knew what they wanted to do for a career
– made it a goal to accumulate $1 million
– want to own a home

– are confident
– happy
– optimistic
– competitive
– leaders

Nonfinancial Behaviors
– have a college degree
– socialize with friends at least once a week
– exercise at least 2-3 times a week
– read newspapers regularly
– are married

Sounds simple enough, eh? I call some of these “duh” factors. The rest of the book tries to explore these factors and ways to actually get yourself to really believe and/or achieve them, since simple doesn’t mean easy. For one, there are many levels of “wanting” – do you have the resolve to make it happen? Or, how is exercise related to wealth?

How To Be Happy With Your Work

Bud Caddell shows us how to be happy in business with a clever Venn diagram. Very insightful and concise!

Which is harder? Saying no to work that pays well, getting better at something you’re not, or learning to monetize? It was definitely tough for me to say no to something you do well and get paid good money for. I had to save up enough money first to be comfortable with getting better at something else I like better. Via Daring Fireball.

Your Own Financial Rescue Plan, Part 1: Adequate Cash Reserves

Well, the big boys are getting their rescue/bailout plan, but I guess ours got lost in the mail… So what should we do? I think that everyone should take a second look at their cash reserves. Do you have enough?

What Job Security?
These days, I don’t see any job as safe. My company went from interviewing people to hiring… nobody. Even local and state governments are facing major budget deficits. At a minimum, I would want a few months of living expenses to tide me over until I find another job. I still remember the dot-com bust days when former tech workers ended up living in their cars.

A Reason Not To Invest In Stocks
Hey, if you’re looking for an excuse not to buy any more stocks for a while, beefing up your emergency fund is not a bad one. Any money you may need within 5 years should be in cash or short-term investments anyway.

A Reason *To* Invest In Stocks
Ironically, after you build up a nice cushion, it may actually make you feel better about investing in the stock market. I definitely helps me to keep short-term money separate from long-term money. As such, I’m still applying my upcoming income towards maxing out my 401(k) for 2008. But after that, I will probably start to save another three months of living expenses, for a total of 9 months in cash.

Less Credit Available
A lot of people used to simply assume that their home equity line of credit (HELoC) could serve as their emergency fund. But these days, it just takes one letter in the mail that says your HELOC is frozen or greatly reduced. You don’t want to be forced into taking an early withdrawal from your 401(k) or IRA, or paying exorbitant credit card interest.

If anything, apply for a credit card with a low fixed interest rate now while it is still offered. Here is a list of no fee 0% APR balance transfer credit cards. Just buy goods as you regularly would, and pay the minimum while saving the difference in an interest-bearing account. (Don’t go buying more stuff, obviously!)

Looking Ahead
For me, an alternative reason for increasing my cash reserves is that I can also use it later for investing in real estate. I still don’t see many opportunities with good cashflow right now, and may not see them for another couple of years. But I want to be ready, as the no-money-down days may never come back.

Where do you keep it?
As long as it is safe and liquid, I just go by rate. Use the new FDIC insurance estimator if you have lots of money. Both Vanguard and Fidelity are participating the money market fund insurance program, so they are super-duper safe now. . Well, your old money is safe. Still, I consider money market funds with Fidelity and Vanguard as safe as FDIC-insured, although this is only my opinion. However, my cash is currently split between:

  1. Series I US Savings Bonds – Bought in April with 1.2% fixed rate, now only 0% fixed rate available. Note that they are illiquid for the first 12 months. Rates adjust semi-annually. I earn 4.38% for 1st six months, 6.06% for 2nd six months. With recent inflation, my 3rd six months should also be pretty good. Exempt from state income tax as well.
  2. 12-Month 5% APY CD at WaMu/Chase – Sadly, no longer available.
  3. Low or no-minimum banks with high liquidity – A big chunk currently in transit to Everbank at 1.10% for first 6 months.

Trying To Learn From Millionaires In The Making

CNN Money has recently put up a new profile in their series on Millionaires in the Making. This one about the caught my eye because of they share similarities to us. They are married and under 30, with no kids. A relatively high combined income. Lives in an area with a high cost of living. Saves half of their income. But they have a net worth of over $500,000 already? Maybe I could learn a few things.

Jobs. He is a software engineer. She used to process mortgage loans. But now she bought a retail store selling fancy soaps. Combined income is $174k, but they don’t break it down. Their balance sheet lists the store being worth $125,000 with a $72,000 business loan. It is also unknown what this store value is based on – a multiple of net annual earnings?

From what I know about such shops, they are really hard to make successful, but can be very lucrative if you are. With the current economic downturn, I don’t know if I’d be selling $10 soap. All in all, too risky for me.

Housing. They rent a house from his parents for $650. I know for a fact this is at least 50% below market rent, probably much more. Smart move for them, but hard to replicate for the average person.

Real Estate Invesments. They made $110,000 from buying and selling a condo during the boom years. I cannot necessarily attribute this to skill, and I certainly can’t duplicate it. They then went out and bought three rental properties in Arizona and Texas, which have current negative cashflow of $750/month. Their balance sheet says they have $40k in home equity, but you have to wonder how realistic those values are. Previously, one rental sat empty for 9 months. Not mentioned is their mortgage situation; are these adjustable-rate or fixed?

Overall, I’d say they have only broke even in this department. I wouldn’t want those properties.

Stock Investments. $88,000 (37% of portfolio) is in Microsoft stock. Even if purchased at a discount as a fringe benefit, many ESPP participants sell as soon as possible to grab the profit. Rest of portfolio is 99% stocks, though not much other detail. Lots of risk here, much of which is connected with his job as well. MSFT performance has not been impressive. Hmm, not much learned here either.

Spending and Priorities. According to the graphic, their non-housing expenses are about $17,500 per year. This is right at about our spending levels, which is $18,000 per year.

The article then goes into how they never travel and rarely eat out (and split meals when they do). However, she also wears a $20,000 engagement ring, and they own 4 cars including a $30,000 Subaru WRX. Although not what I would do, who cares if that’s what truly makes them happiest. I wouldn’t call them misers. They tithe to their church and still control spending, which is respectable.


This couple is doing the “big stuff” very well. They make a lot of money, and only spend about half of it. Multiply this by many years and you get a fat net worth. But other than that, I can’t really say I want to emulate them. They have a lot of risk in a boutique shop, cashflow-negative rental properties, single-stock investments. None of these created their high net worth, in fact they might have even detracted from it.

But we do share the same goals of early retirement, so I wish them luck. They might need it!

4 Free Reports With Your Personal Insurance, Employment, and Tenant History

Most of us know about the free credit reports from This is mandated by the Fair and Accurate Credit Transactions (FACT) Act, which basically says that consumers should be able to see (and dispute) the massive amount of information contained in private corporate databases. But in addition to credit information, there are a lot of other databases with your personal information floating around. You can get one of each report free every rolling 12-month period.

Insurance Claims History
If you would like to know what the insurance companies are saying about you behind your back, you definitely want to get a free copy of your CLUE Personal Auto Report and Personal Property Reports, which you can get instantly online or by calling 1-866-312-8076. CLUE stands for Comprehensive Loss Underwriting Exchange.

The C.L.U.E. ®Personal Property report provides a seven year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.

The C.L.U.E. ®Auto report provides a seven year history of automobile insurance losses associated with an individual. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.

In addition, you should also request your free A-PLUS report (Automated Property Loss Underwriting System), which is a smaller database that also contains information about property loss claims. Insurance companies use this data to decide your premiums, so you’ll want to clear up any mistakes right away as they are probably costing you money right now!

This brings me to another use for CLUE reports. If you are seriously looking at buying a home, you should spend the $20 and get the CLUE report for the property and see its claim history. For example, if the water heater broke and flooded the basement two years ago, you may have a hard time finding homeowner’s insurance due to mold concerns.

Employment History Report
When a potential employer runs a background check through ChoicePoint, this is the information they see. It doesn’t seem to claim be comprehensive, as their site states:

The ChoicePoint Workplace Solutions Inc. Employment History report contains information related to your employment history as well as other information regarding your background. […] Our files would only contain information on you if ChoicePoint provided your Employment History Report to an employer.

I would think you’d still want to make sure nothing inaccurate is on there. To get your free employment history report, call 1-866-312-8075. More information here.

Tenant History Report
This report will can be important if you are a renter and someone runs a background check on you at ChoicePoint.

The Resident Data Inc. Tenant History report contains information related to your tenant history as well as other information regarding your background. […] Our files would only contain information on you if ChoicePoint provided your Tenant History Report to a housing provider.

To get your free tenant history report, call 1-877-448-5732. More information here.