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 AnnualCreditReport.com. 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.

Side Jobs To Make Extra Money: Pizza Delivery Driver?

Being frugal is popular again, as is making some money on the side. Yesterday, I saw what I thought was the perfect definition of “recession”. It was a current generation red Audi S4… with a Papa Johns sign on top. I wasn’t quick enough to snap a picture, but here is my artist’s rendering:

Is there any way that such a job could even cover the depreciation on this $50,000 car? I’ve worked as a restaurant cashier, host, and even drive-thru window person, but have never done pizza delivery. But my friends have, so I asked them for their experiences. I also found a few interesting discussions online about the job here and here. In fact, pizza delivery even has its own Wikipedia entry. Let’s take a peek into the lifestyle of a “food transportation engineer”…

The Pay
The compensation varies, but a ballpark number seems to be minimum hourly wage + ~$0.75 per delivery to cover car expenses + tips. You pay for your own gas. Some places can pay under minimum wage by treating you as a waitperson since you technically get tips. Other places will pay car expenses per mile. If your pizza parlor charges a delivery fee, you will probably get a cut but your tips will probably go down as well. A rough average for tips is about $2 per delivery (10-15%). However, tips can be hit and miss, and can also depend on things like the day of the week and neighborhood. Surprise! Many ex-drivers say that residents of upscale neighborhoods are the worst tippers.

Back of the envelope calculation: A busy 6 hour night shift at $7 an hour plus 6-10 deliveries/hour x $2 tip per delivery is about $115-$165 gross. (I’m leaving out the per delivery charge because it supposedly offsets car costs, though most drivers say it doesn’t cover all of it.)

(Aside: It’s funny how all my friends will probably remember their big tips until the end of time. I still remember my $20 tip from working as a parking attendant almost 10 years ago.)

Pie shops are always looking for delivery people, and the entry requirement is a car and a valid driver’s license. You can work flexible hours, including evenings and weekends in addition to your day job. You can also quit whenever you want.

Lots of short, stop ‘n go trips will kill your car and cut into your profit. Most people have beater cars, which is why the Audi was also surprising. Factor in the cost of more frequent oil changes, higher mileage bringing your car value down, replacing tires more often, and higher overall maintenance from wear and tear. Note that your personal car insurance might not cover accidents that occur while working. Also, gas prices aren’t getting any cheaper!

Drivers-sales workers, which includes taxi drivers and pizza delivery workers, are the 4th most dangerous job category in America, right up there with fishermen, timber workers, and construction laborers.

You are often expected to help out around the restaurant in between deliveries, including things like taking orders, food packaging, garbage disposal, and other tasks.

The Fringe Benefits
For some reason, pot and pizza seem to mix very well – from the managers to the workers to the people buying the pizza. I’ll leave it at that. And although illegal as well, taking in much of your income in unreported cash tips can be very tempting for tax evasion. Oh and of course… free pizza!

Nine Traits Of The Middle-Class Millionaire

Russ Alan Prince, author of The Middle-Class Millionaire, has been trying to understand a new sub-class of Americans called the “working rich”. Prince defines them as those with net worths between $1 million and $10 million, but who still work for a living. After conducting a survey of both middle-class millionaires and those just plain “middle class” (defined as having income of $50,000 to $80,000 and net worth under $1 million), he distilled these differences into 9 traits for Forbes. Apparently, middle-class millionaires:

  1. Work Longer. The average middle-class millionaire puts 70 hours a week into the job. They take 12 vacation days a year, seven fewer than the average middle-class worker.
  2. Value Networking. More than 60% say knowing “many, many people” is very important in achieving financial success.
  3. Take Risks. Over 90% of middle-class millionaires admit to having made a major career or business decision that had a bad outcome.
  4. Avoid Vanilla Corporate Jobs. Over 80% own their own business or a have a stake in a partnership.
  5. Do It For The Money. 74% say that choosing a career “for its potential financial rewards” is very important to achieving success.
  6. Don’t See Themselves As Rich. Fully one-third of those worth $1 million to $10 million think of themselves as middle class (the other two-thirds consider themselves upper middle class). Meanwhile, 21% of middle-class people (making $50,000 to $80,000 annually) call themselves members of the upper middle class.
  7. Put Family First Over Community. The values the mass affluent place the most importance on are ethics, responsibilities to loved ones, parenthood and children’s education.
  8. Pay For Help. Half of them have hired personal or career coaches.
  9. Put Family First In Vacation. Over 60% of middle-class millionaires say that spending time with family is an important component of a vacation. By contrast, only 28% of middle-class workers think so.

Overall, there are some interesting differences. But I personally don’t see these as a “how-to” template – There’s no way I’m consistently working 70 hours a week – the whole point of being smart with money for me is to work less. Also, I feel like some information is missing. Are working millionaires older than average? Being a working millionaire at 30 is a lot different than at 60.

What Are We Saving For, Anyways? Our Life Goals and Retirement Plans

I’ve talked about this in bit and pieces under the Goals category, but I thought I should organize our life goals into one post. Hopefully, this will outline our priorities and shed some light on why we choose to do the things we do.

First, I’d like offer what I am afraid people think our life goals are:

Incorrect Goals

  1. Find the highest paying job possible. Work long hours, but tolerate it for the money.
  2. Live a very spartan lifestyle, with minimal luxuries and worrying about money constantly.
  3. At age 65, abruptly stop working so hard, finally relax and begin enjoying our life. Hopefully live long enough to enjoy this period.

In fact, that’s not what we want at all:

Actual Goal #1 – Finding A Job That Fits
If your going to spend almost 50% of every weekday doing something, shouldn’t you enjoy it? Sure, even great jobs have their challenges – bureaucracy, boring meetings, office politics, the occasional annoying co-worker. But finding a job where you don’t dread getting out of bed in the morning was a huge priority for me. It took a few different degree programs, a couple of resignations, some stressful interviews, and several rejections, but we are definitely making progress in finding work that is challenging, enjoyable, and reasonably well-compensated.

I would also add that having a simple lifestyle initially allowed us to take some risks in order to get where we are now.

Actual Goal #2 – Less Work, More Life
[Read more…]

Framework For Thinking Through Personal Finance

(Warning: The following post is very stream-of-consciousness and written on very little sleep.)

While doodling today (I doodle a lot) I started thinking about money and how it such an overwhelming issue at times. I read so much advice from so many different directions, my head starts to spin. I ended up drawing this:


Basically, the idea is that if you want more money, you should focus in on one of these three areas:

Spend Less
Either through buying less goods and services, or by finding a lower price for the same goods and services, one can spend less money each month. Much of this is psychological, as most of what we buy are “wants” and not “needs”. Long-time habits and deeply ingrained notions may need to be broken. Priorities need to be consciously decided. However, there comes a point where it is simply not possible to spend any less.

Invest Better
With the money that is saved, one would want to make it grow as much as possible. Here, I am focusing more on passive investments like stocks, mutual funds, bonds, or gold. There are many competing theories as to whether skill is a factor in picking stocks. Personally, I believe that the markets are mainly efficient, and that “beating the market” is exceedingly unlikely. All that can be done is to maximize your risk/reward ratio. Therefore, there is also a maximum value on how “well” we can invest.

Earn More
This is done via work, either through being an employee, or starting your own business and becoming the employer. Ways to advance in your career include more education, better interpersonal skills, or otherwise achieving positive results and getting promoted. Other more individual ventures include real estate investing, building a business with employees, or creative works that produce “passive income”. These come with additional risk of losing money, but also offer added upside.

Priorities and Diminishing Returns
I feel that the first two, Spending Less, and Investing Better, should be the first to be addressed. If very little attention has been paid to these two areas, a lot of progress can be made. Of course, it can probably be a lifelong process to make sure these things continue to be taken care of. Lots of energy can be spent trying to optimize both (!). However, at some point, I think there will be diminishing returns. When you start considering about whether you should flush the toilet every time you use it in order to save water, perhaps it’s time to focus on other things. 😀 Similarly, there is only so much I can make from maximizing bank interest and picking a optimum asset allocation. Of course, if you reach a happy place already, you don’t even need to Earn More.

In a way, I think Spending Less and Investing Better are appropriately located at the base of the triangle. After building a good foundation, you can start taking some risks in the Earning More area. I think for most people this is the hardest part. It can be very hard to increase one’s salary if they feel they are stuck in their current career. Maybe they are comfortable already. Taking classes, switching jobs, it can be very stressful. On the other hand, it is also the one with limitless boundaries.

I know I already discuss these things on a daily basis, but I think it can also be good to methodically examine one’s progress in each of these areas every so often.