The Amateur Financier

Ah, the Fair Tax.  It seems hard to argue with a Tax that has ‘Fair’ right in the name, doesn’t it?  It also isn’t a half bad idea; taxing spending rather than income, greatly simplifying the labyrinthine maze of taxes that currently exist, and making taxes more transparent and obvious are all arguably good goals.  Heck, in my early days as a blogger (almost a year ago to the day, actually), I was pretty strongly in favor of the Fair Tax, and I’m still more in favor of it than I am of our current tax system.  (Not that that’s saying much; there are few tax systems that would NOT be an improvement on our current situation.)

In the time since I first published that post, though, I’ve become more disenchanted with the tax; the flaws (included some I mentioned in that initial post) are shining more brightly while the advantages seem to be tarnished.  So, when Joe Plemon asked if the Fair Tax was too good to be true, I had to respond with a resounding YES, and provided several points that I’ve yet to see addressed by the Fair Tax supporters.  Here’s three points I raised in my comment, ones which I’d love to see addressed by Fair Tax supporters:

1) The Fair Tax is more complicated than it looks: One of the major selling points of the Fair Tax is that it’s much simpler than the current tax system; just a single flat tax rate on all purchases (with some exceptions; see below for more on these), a ‘prebate’, or monthly check to everyone in the country, (which is equivalent to the Fair Tax on income up to the poverty level), and that’s it.  No complex forms to fill out every April, no need to wade through piles of old receipts to maximize your return, and no (or a greatly reduced in size) IRS!  It sounds like a dream, right?

Well, it’s not that simple; even the Fair Tax has its complications.  For example, it exempts corporate spending from taxation, as well as the sale of used goods.  These exemptions do make logical sense; corporate taxes are passed along to the consumer (corporations, being legal fictions, can’t truly pay taxes), while taxes on used goods would be a form of double taxation, on the original sale and on the used product.

But in order to track all of this, you end up having to make things more complicated.  How are purchases for businesses going to be distinguished from personal expenses?  Won’t we see the same sort of abuses of ‘business expenses’ as we see under the current system?  (For example, luxury airplanes considered as business necessities.)  Used items represent another problem; the need for the seller to keep receipts (or have some other way of proving that the item is used) in order for the buyer to save on taxes.  Given the difficulty people have keeping receipts when it saves them money on taxes, why would they be any more responsible when it’s not their money they need to worry about?

2) The Fair Tax tax rate would need to be higher than claimed to generate enough income: Proponents of the Fair Tax maintain that the tax rate of 23% they tout will be adequate to (more than) generate the current level of income from all the taxes it would replace (not only the income tax, but corporate taxes, Social Security Taxes, estate taxes, etc.).  That number is little bit odd; it’s tax inclusive, meaning it incorporates the amount of tax in the total from which the percentage is derived.  If you read it as a normal sales tax (which is tax exclusive), it would be 30%.  A $100 item (before Fair Tax) would have a $30 Fair Tax added; $30/$130 gives us 23%

All of that said, in order for the Fair Tax rate to be as low as proponents maintain (whether you consider it a 23% tax or a 30% tax), the number of goods that fall under the tax has to be significantly larger than those currently subject to sales taxes.  As FactCheck.org notes, for the Fair Tax to provide the income amount it claims at the noted tax levels, many things we don’t currently pay sales taxes on would have to be taxed.  These include things like purchases of new homes, rent, doctors’ and lawyers’ fees, and interest on credit cards and mortgages.  If you start exempting any of these items from the Fair Tax, you’ll have to make up the income in some way, likely by increasing the rate of taxation on everything else.  (FactCheck, in that same link, also makes a decent case that the rate would have to be higher than the 23%/30% being discussed in order to make everything revenue neutral anyway, in part because people would inevitably cheat on the tax as they do on taxes now.  They found research suggesting a 34-39% tax exclusive rate would be needed for revenue neutrality.)

3) How will foreign nations react to the Fair Tax?: This, more than any of the my issues so far, seems to be something that nobody has answered.  The Fair Tax website makes quite a few claims about how the Fair Tax will boost US competitiveness in the global market; it’ll make US exports cheaper to other countries, foreign imports will become more expensive (since the Fair Tax will add on top of the taxes the foreign manufacturer paid in their own country), and jobs and investment money will flow into the United States.  It’ll be a golden time for Americans!

But the problem is, changes like this don’t occur in a vacuum; other countries will react, perhaps badly.  Imagine for a moment that the shoe was on the other foot; say the European Union decided to switch over to a Fair Tax style system, and all the predictions the Fair Tax supporter are making come true to benefit them.  The EU becomes a competitive dynamo; their exports are cheaper in our stores, our products are more expensive over there, and businesses start to uproot to relocate in Europe, taking jobs with them.  Heck, even sales of American items to tourists declines, since all goods purchased in a foreign country are subject to the Fair Tax on being imported.

Given this situation, you’d expect the US to respond in some fashion, possibly imposing tariffs on imported goods, possibly insisting that US made goods be sold Fair Tax free, possibly by switching over to the Fair Tax ourselves to negate the competitive advantage.  As America goes in this little example, so goes Europe (or possibly some of our other major trading partners) if America opts for the Fair Tax.  At best, the advantages of the Fair Tax would be blunted (if the Europeans enact their own version), at worst, it could spark a tariff war that leaves everyone worse off.  Without having some idea of how the other major countries of the world will react, it’s impossible to say whether switching to the Fair Tax will be a net benefit to the country.

Those are the three big issues I see with the Fair Tax; but there are some other ones to consider.  While not as potentially harmful to the case for the Fair Tax as those mentioned above, they could change some opinions if people knew the Fair Tax:

• Can be regressive.  For a short example, consider this: you and I spend the same amount, paying the exact same amount in Fair Tax.  But if you earn twice as much money as me, your tax rate (as a proportion of your income) will be lower than mine.  (For a longer example, FactCheck’s article (near the end) notes that people who earn between $15k and $200k will pay more under the Fair Tax, while those who earn above $200k will pay less.)
• Could encourage ‘under the table’ spending.  Taxes on income lead people to hire workers off the books, so as to avoid paying said taxes; in the same way, sales taxes, particularly one as sizable as the Fair Tax (however you want to calculate it) can drive purchasers to the black market.
• Would devastate the tax preparation market. There is a fairly sizable market out there devoted to helping people prepare their taxes each year, covering computer programs, accountants, and any number of tax guides.  If the Fair Tax is passed, there’s much reshuffling of these businesses (and the IRS, for that matter) which will need to be done.

Readers, What’s your take on the Fair Tax?  Am I being too critical of a great tax plan?  Did I miss any flaws in the system?  Any non-Americans who can give me more insight into how foreign government would react to the US enacting this tax plan?

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I’ve been thinking quite a bit about perception and reality.  Particularly, if being successful at something causes you to believe that it’s easier to do than it actually is, or that ‘anyone can do it’.  If you make yourself a success at something, no matter what it is, do you start to think that other people could achieve your level of success, no matter what their situation?

In The Blogging World

What got me started thinking about this topic was reading a somewhat old blog entry from Trent of The Simple Dollar.  When reviewing the book, ‘Bargain Junkie’, he commented that the author should start a blog, as ’she’d probably end up earning more revenue from it than she would from this book over the long run.’  It’s not the first time he’s touted the profitability of blogging over other online activities; one instance that sticks in my mind is his commentary on Mechanical Turking, when he mentioned building something for yourself (like a blog), rather than spending the time to earn $7.61 an hour Mechanically Turking.

It’s probably a good time to add a little bit of a different perspective here: I’ve been a blogger for well over a year, I’ve written close to four hundred posts (this will be 393 of the ones published here), and I’ve recently managed to turn my blog into one of the two hundred thousand most popular on the web.  I’ve also just recently managed to earn my first $100 dollars from this blog; if you count the costs of setting up the blog (and some technical help I’ve gotten along the way), I’m still several hundred dollars behind. If we assume that each entry I’ve written took one hour to complete (a much lower amount of time than it actually takes, plus one that ignores the time reading and responding to comments, setting up and monitoring the blog itself, etc.), I could have earned $2990.73 by Mechnical Turking during that time, a much higher profit level.

Don’t misunderstand me; I have a great amount of respect for Trent.  He works hard, writes well, and is by all accounts putting in the hours to make The Simple Dollar a success.  But I can’t help but wonder whether that same success causes him to think of blogging as a (potentially) highly lucrative activity, while for me (and most of the other 100 million bloggers out there, if Monevator is right about the average blogger’s daily earnings), the reality is that blogging is much less profitable than many other pursuits he would consider not worthwhile.

Investor’s Choice

It’s far from just Trent and other bloggers, though; just about everyone seems to take the view that the things they can do, everyone else can do. When you master a particular talent or skill, it soon becomes a second nature, and you sometimes forget that not everyone can, say, take a car engine apart and put it back together or figure out complex math problems in their head.

To cite one example from my own life: I never learned how to ride a bicycle.  There’s a number of reasons, from the fact that I spent much of my free time as a child reading to being in day care much of the time and not getting much of an opportunity to learn.  So, when people say things like ‘as easy as riding a bike’, they’re indicating a much different view of bike riding than I have; to my mind, it’s a rather difficult feat.  My experiences have shaped my view of bicycle riding, in the same way (but with the opposite end result) as those of the kids who learned to ride and biked everywhere.

You see this tendency to some extent with investors (or at least, with those investors who end up writing books); when they have success with a particular investment type, they start to see it as highly profitable and usually easy, and recommend that investment (and many times, only that investment) to others. Investors who have success investing in a particular instrument, whether it be stocks, bonds, options, futures, real estate or something else entirely, consider their option one of the best.  So, you end up with Robert Kiyosaki promoting real estate and building a business, for example, while Jim Cramer is strongly in favor of stock investing.  Each of them had success in a particular field, and as a result, they lean strongly toward those types of investments, in some cases even insulting other, equally good investment options.  Success skews their perception of the investment landscape, leading them to focus on some investments as opposed to others.

On The Other Hand…

Of course, the inverse situation is also possible; failure can skew your perception, as well.  Perhaps Trent has a clear view of the effort/reward ratio for blogging, while I (with my admittedly low earnings thus far) have a distorted perspective.  There’s a psychological concept, learned helplessness, where an animal or person, if repeated prevented from helping itself in unpleasant or harmful situations, continues to act helpless even if it is no longer restrained.  Perhaps my situation is similar; with so little profit made on my blog in the first year I was writing it, perhaps I’ve simply internalized the idea that try as I might, I can’t actually make a living by writing a blog.

Of course, it might go even further than that; perhaps I’m finding messages in Trent’s writing about the profitability of blogging that aren’t really there.  Perhaps, because of my own interest in blogging and relative lack of success therein, I’m attributing to him ideas he doesn’t really have regarding the ease and profitability of blogging, when he’s mentioned nothing of the sort.  Perhaps I’m projecting a strawman of a professional blogger onto him so I have something to attack to feel better about my own lack of success.  (Nah…)

All of that said, I’m still not sure just how much our successes and failures influence our outlook on life; they clearly do, but just how is a question a bit tougher to determine.  How difficult a particular activity will seem and the potential for profit or other rewards depends a great deal on the person who is doing it, their skill, knowledge, and abilities.  The truth, as it so often does, probably lies somewhere in the middle; blogging (to go to our original example) can be profitable, and it can be unprofitable.  It all depends on factors both inside and out of your control.

Does success at something skew your view on its difficulty?  How about failure?  How much does our perception affect our reality?  (Alright, now I’m going WAY beyond the scope of the original question.)

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Alright, a little background before we get started on this entry.  Because I am in between jobs, and because I’ve been trying to improve my blog, I spend quite a bit of time online at home.  Thanks to my Yakezie membership, I’ve downloaded the Alexa Taskbar, which, among other features, displays some of the most popular trending stories and topics near the top of my web browser.  This arrangement mean that I have the opportunity to see some of the most popular topics of conversation as they develop.

Today, there was an especially unusual topic: Noah’s Ark was found!  At this point, I had to go and check the calendar, to make sure that April Fool’s Day wasn’t moved to the 27th while I was attending a ceramics convention with my fiancee.  (Just in case you were worried: no, it wasn’t.)  No, the truth is possibly even odder: an expedition in Turkey claims to have found the actual remains of Noah’s Ark.

The Arc they found is decidedly less cartoony

If true, the results could be quite profound for history and science. Meteorologists have long maintained that there simply isn’t enough water in the world to flood the entire world up to the top of Mount Ararat, and proof that a boated sailed up to that height would certainly raise some interesting questions.  History would have to be altered to note the new reality of the Arc as truth rather than myth.  The changes would be quite profound.

(That said, I think the impact on religion is less than what some might claim.  The story of Noah’s Ark is part of the Talmud, the Bible, and, if memory serves properly, also mentioned in the Koran; finding the Arc doesn’t ‘prove’ any of these religions correct.  Plus, there are other traditions that maintain a belief that there was a great flood; even proving that there was a Noah who built an Ark, gathered animals, and sailed in it to survive the flood doesn’t preclude other survivors elsewhere.)

The Lessons to Learn

1) Expect the Unexpected: It seems no matter how odd your expectation become, life manages to be even weirder.  Of the many things I may have expected to happen today, finding Noah’s Ark would not have made the list.  I doubt that finding Noah’s Ark would be on the list, well, ever, really.

In the same way, unexpected things happen during our daily lives; being prepared for multiple eventualities is an important part of life.  (See how I tied this back into personal finance?)  It’s impossible to prepare for absolutely everything (like the rediscovery of a five thousand year old boat), but the more prepared you are, the more circumstances you can handle, the better off you will be.

2) Trust, But Verify: A great policy from Ronald Reagan, one that you should especially keep in mind when confronted by things that seem to stretch the bounds of your imagination.  While one can hope that things of such importance are handles truthfully, that’s not always the case.  Even though news of this discovery has only been up for a day, already there are skeptics doubting the Ark.

While you shouldn’t automatically assume that everyone is lying, you need to have healthy skepticism, particularly when discussing issues of this nature, where there is much to be gained from false claims.  There have been plenty of claims involving the discovery of the Ark, dating back to at least the 1930’s.  While it’s quite possible that this time it’s different, we still need to retain our skepticism.

3) People are Basically Good: As with any discovery that threatens to greatly change our perception of reality, the universe, and life itself, there’s quite a bit of disagreement.  As is too often the case with discussions on the internet, foul language is tossed around, intelligence is insulted, and generally, things get very unfriendly, very quickly.

Here’s the truth: the people who believe that this is the true Noah’s Ark are, by and large, good, hard working, and intelligent people, led by faith or their own feelings to their beliefs.  Here’s another truth: the people who doubt that this discovery is Noah’s Ark are also mainly good, hard working, and intelligent people who have good reasons for their doubts.  Neither group is evil or stupid; there’s simply a disagreement on the truth of the matter.

On that note, I suppose I should share my view on this Ark discovery.  I am currently leaning toward skepticism, although I’d be willing to be proven wrong.  (Unless, of course, the discovery and confirmation of the Ark triggers the end of the world; I’m perfectly happy for the world not to end for another half century or so, at least.)  I’m interested to see how this whole thing will play out; it is surprisingly engaging.

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Since I’ve read Baker’s Unautomate Your Life, I’ve been meaning to take some serious steps toward simplification and making my life less stressful.  In a possibly ironic twist, it seems that since reading it and dedicating myself to that goal, my life has gotten even busier.  Between my recent trip and the fact that finals are steadily approaching for Sondra (leaving her with less time at home and more chores for me), it seems to be all I can do to keep up with everything, let alone getting far enough ahead to actually take a break.

Still, one of my favorite suggestions in the e-book was to make a list of everything you own (or everything in one room) and then to get rid of half of it.  The idea of cutting down on my stuff and getting rid of some of the dead weight sounded rather good.  So this weekend I finally got started on my own plan to reduce the amount of stuff I own, beginning with one of the biggest collections I have: my books.

The Plan

The basic plan is pretty simple: create a list of all the books I own, divide them into different groups, and then handle them accordingly.  I’m planning to be a bit more elaborate than Baker, though; I’m not content with just selling or keeping my books.  The four groups I intended to use are as follows:

1) Keep: The books I most want to keep go in this category.  My goal is to keep it to one third to one half of the total number of books I own; otherwise, it starts to defeat the whole purpose of trying to sort through my books.  I’ll have to fight the urge to keep all of them.

2) Sell: One of the major goals of this whole experiment is to cut down the number of books that I own.  Selling several of them would help to clear out the old bookcase AND raise a few bucks as well.  My plan is to use the Selling on Amazon to clear out between one quarter and one third of the books I own.  The only possible problem is resisting the urge to spend all the money I earn on more books… (The books I’m giving away for my contest are in this category; speaking of which, there’s still plenty of time to enter.)

3) Trade: While we’re on the subject of getting more books, I intend to trade one third to one half for even more books.  I intend to use PaperBackSwap to trade some of the books I haven’t read in years (heck, there might be a few I haven’t read since last millenium, for that matter).  It is a bit opposed to the grand plan of cutting down on the number of books I own, but since there’s no way I’m going to stop acquiring new books, at the very least I can cut down on my costs.

4) Unread: The last category consists of all the books I purchased, and haven’t yet had a chance to read.  It’s not really a permanent category like the rest of them, but more of a ‘To-Do List’.  Sadly, it’s nearly a quarter of the books that I currently own; on the plus side, that means there’s plenty of things that I have yet to read.

The Progress

Well, I’ve managed achieve my goal with the books in category one, keeping them all.  I’m currently working on setting things up on Amazon and PaperBackSwap; I made a list of (almost) all the books I currently own, but never having used those services before, I wasn’t sure just how much information I needed.  I’ll need to go back and gather the ISDN numbers from all my books in order to use those services (well, I don’t need to for Amazon, but since I’m doing it for PaperBackSwap, I might as well do it for all the books).

Once I have things up and running, I’ll have to let you know where you can find the books I’m selling (although most of the books I’ll be selling will be humor and fantasy, rather than economics or money-related, so I’m not sure how many of you my readers will be interested).  Here’s hoping I can cut down my book collection, get some more books, and maybe make a little money, to boot!

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So, I am apparently quite an idiot when it comes to blogging, after all.  I was looking at my Feedburner information, and made an edit to my feed address.  Low and behold, when I finally returned to Feedburner, I discovered that the number of people following my feeds had dropped to about one fifth the previous total.  Non-techie that I am, I didn’t think that changing the feed address would automatically cut off the feeds of everyone who had been watching me.  (Being a man, and a fan of multi-tasking, I didn’t read the warnings listed on Feedburner until AFTER I made these changes.)

Well, what’s done is done, and I lack both the knowledge and ability to reverse the feed address now that I’ve changed it.  I’m going to have chalk this up to a valuable learning experience, and do my best not to repeat it any time soon.  In the mean time, I need to just spread the word on my change of feed address (although, I’ve already regained nine of my original sixty some odd readers, so apparently word is getting around somehow.  I’ll have to do my best to alert the rest of my former followers to my mistake and ask them to start following the new feed.

Now that all the important announcement type stuff is out of the way, it’s time to get to the real fun of this post: the great articles from around the web that I’ve come across.  Because I’ve been so sluggish about getting back to reading my feeds following my trip with Sondra, I’ve got several weeks backed up that I’m to go through.

Contests

Let’s start with a contest that I won: The Find the Kraken contest held by Money Funk!  (It was also announced here.)  I managed to find the Kraken, followed the instructions, and won a $25 dollar Fandango gift certificate.  I’m absolutely ecstatic about it; now I just need to find a good movie or two I can take Sondra to.

Reader Input Needed: Let’s Solve Our Problems – A contest from 20s Money, with prizes yet to be announced, that asks readers to help solve some of the most pressing problems in the world today.  Here’s hoping some good solutions come up, and that some politicians happen to be listening in!

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Doing Anything You Can to Survive-Silence and Surprise in the Night – A chance encounter with a ‘lady of the night’ leaves Financial Samurai wondering about prostitution and what you would be willing to do in order to survive.

Combat the Closing Techniques: The Consultative Closing – Finally, a closing technique that you don’t have to fight with every fiber of your being.  Here’s hoping more corporations start putting an emphasis on cooperation with the consumer as a method of selling, so that Eliminate the Muda doesn’t have to keep doing these posts.

Debt Free News from a Debt Free Reader – I love to hear stories about people getting out of debt, and Enemy of Debt rarely disappoints.  Learn about Don of MoneyReasons and his journey out of debt.

Greenwash: Clorox Green Works – With environmentalism being one of the latest big things, businesses are looking to cash in, making their products ‘greener’ with natural ingredients and less harmful preparation methods.  Of course, as Mrs. Money notes, some companies find it better to make their products appear green without actually making them more environmentally friendly (that is, ‘greenwashing’).

14 FREE Ways to Spend a Friday Night (Fun Included) – A guest post on the Canadian Personal Finance Blog, a whole list of good ways to spend an evening that won’t cost you a cent.  I especially like the movie critic night and book club; it’s good to be social as well as frugal.

The Fair Tax: Is It Too Good to Be True? – In a word, yes.  Joe Plemon makes an excellent case for the Fair Tax (one which I’ve made in the past) and I ended up playing Devil’s Advocate and pointing out some of the flaws (or at least, unanswered questions that remain).  If you’re looking for a good view of the tax, pros and cons, it’s worth reading.  (I’ll have to post my own ‘problems with the Fair Tax’ entry later this week.)

What’s An Emergency? – A good question, especially since so many of us have ‘emergency funds’ devoted to paying for just such situations.  Ninja of Punch Debt in the Face discusses his pending need to buy furniture for a new place, but wondering how to pay for it.  Definitely food for thought (as I’ve nearly exhausted my own emergency funds…)

Maximize Your Retirement Account – A good examination of the advantages of investing in a retirement account, as well as ways to find money to invest.  Christine of Money Funk fame provides some excellent advice, as well as sharing her own situation.

The Scarlet “D” – If you’re eager to get a clean financial record, “Debt” can be as much of a mark of shame as a big red A sewn on your clothing.  Stay At Home Mom CFO talks about the shame that her persistent debt still causes her.

Why 99.7% of Investors Should Avoid Actively Trading Stocks – From the cost of trading that adds up when regularly trading to the competition with corporations armed with supercomputers and dozens, hundreds, or even thousands of employees, there are many reasons why active stock trading doesn’t work for most small investors.  Luckily, Austin is here to remind us of all these factors.

Fixed or Variable Mortgage? – A question posed by Young and Thrifty, though dealt with by anyone who needs a mortgage to purchase a home (which is most of us).  High risk tolerance and healthy finances seem to be the key if you are looking at a variable mortgage.

Never Lend Money to Friends and Family! – Excellent advice; there are few things that strain relationships more than money issues (politics and love being the few that pop in my mind).  As Elle of Couple Money notes, if you must give money to a friend or family member, it’s probably best to make it a gift, not a loan.

Recurring Expenses Can Kill Your Budget-Choose Wisely – Recurring expenses, those you have to pay on a regular (weekly, monthly, quarterly, etc) can quickly add up, costing you much more than you expects.  As Free From Broke reminds us, we have to choose which of these expenses we consider truly worthy and limit ourselves to those if we hope to grow our wealth.

Financial Freedom…Now What? – Reaching that point where you have enough money to do whatever you want is a goal many of us have, bu what then.  Ryan of Planting Dollars asks what you would do if you had health and wealth enough to indulge your deepest desires.

9 Overlooked Tax Tips for Self-employed Folks like Me – Seeing as I’m slowly moving towards self-employment, it seems (if I can turn this blog into an even better source of income, I’d stop looking for another job in a heartbeat).  This guest post on Wealth Pilgrim provides a nice list of possible tax deductions for the self-employed out there.

5 Ways You are Wrecking Your Finances – A nice list of ways people get into trouble in the first place, as noted by SingleGuyMoney.  Avoid making these mistakes, and you’ll never need to use advice on how to fix your finances.

What is Your Credit Card Payoff? – A nice article on Redeeming Riches about a tool to figure out how long it will take you to pay off your credit card balance.  I’ve been able to pay off my card every month, but if I wasn’t, I’d definitely want to know when’s the soonest I could get the debt monkey off my back.

Where The Amateur Financier Was Mentioned

Free From Broke mentioned the last in my series covering different schools of thought on money, Moneyisms: The Austrian School

Monevator made some excellent points about the nature of markets (and human reactions), as well as explaining why pessimism of the ‘the market is down, it will never rise again’ type is never a good thing.  Oh, he also mentioned my review of On the Wealth of Nations.

Speaking of Monevator, he also mentioned my post reminding everyone that Correlation is Not Causation while discussing immigration.

My review of Unautomate Your Finances was mentioned (and quoted) by Baker, the author himself, in a round-up featuring commentary on the book.  Not too shabby, if I do say so myself.

Coffeecents, a blog on Wordpress, wrote an article on sunk costs, and linked back to my own piece on that same concept.

My article on the new health care bill here in America was referenced as background information for Joe Plemon’s article about said bill; before too long, the Amateur Financier will standard classroom study material!

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It’s here once again, that day when we all (or at least, all us Americans) look at our relationship with the planet on which we live and see how we can improve it (or at least, keep the Earth from getting too outraged and chucking us into space to fend for ourselves).

Fortunately for us, there’s lots of intersection between living frugally and living environmentally friendly.  Both lifestyles put much more emphasis on planning for the long term, cutting down the amount we consume, and looking toward the future we leave ourselves and our children when we’re old and gray (or have transferred our minds in self-sustaining holographic bodies to cheat the Reaper; trust me, it’s coming).  Here’s a few ways to save some money AND help to do at least a little bit toward saving the planet:

1) Reduce: The first of the three R’s, and one of the foremost points of good personal finance (right after, or possibly intermingled with, ’spend less than you earn’).  If you reduce the amount of ’stuff’ you on which your spend your money (and to which you and society at large commit materials), you can cut your expenses and also decrease your impact on the planet.  Ways to reduce your use of resources (and spending of money) include:

• If you don’t need (or really, really want) it, don’t buy it: It seems a bit trite, but then, so do most simple solutions to complex problems.  Limiting the amount of ’stuff’ you purchase will help you to save your money and keep resources from being used to make even more stuff.
• Try to make more stuff yourself: One of the advantages of making things yourself, from your own meals to furniture (if you’re really handy, at least) is that you can usually reduce the amount of waste generated as a by-product.  You can also usually get the raw materials cheaper than you could the finished product (compare the cost of a meal in a restaurant to one you cook yourself, for example), allowing you to save money while you are expanding your skills.
• Buy in bulk: This one may seem counter-intuitive; how can buying more help you to use less?  But consider that buying larger quantities usually cuts down on the amount of packaging used; buying one 50 unit box rather than five 10 unit boxes will generally use much less packing material.  Add in the fact that the larger packages generally have a lower per unit price, and it’s a win all around.

2) Reuse: The second of the three environmental R’s, and a great way to cut down your expenses, as well.  If you’ve limited your purchases and make sure to reuse everything that you can, you’ll be well on your way to cutting your expenses and minimizing the impact you have on the Earth.  Some hints on how to do so include:

• Buying reusable items: There’s been a trend as of late toward disposable items, from disposable plates to mop heads.  In almost every case, you’ll be able to save much more money by buying a more durable, non-disposable version and reusing it after cleaning.  (The environmental case for reusing materials is not so clear cut, as using all that water in washing every time negates some of the environmental benefits, but it’s still generally recommended.)
• Share the wealth: If you no longer need something (like baby clothing once your children are no longer babies), pass it along to friends or family members who do have babies, cutting down how many sets of adorable bunny costumes need to produced, to cite one embarrassing example from my youth.  Bonus: If you do need something in the future (a sudden addition to the family, for example), you can ask for the item back, reusing it even more.  My extended family passed baby clothing back and forth between my mother and her sisters for nearly a decade (I had a lot of cousins who were born during the Reagan years).
• Share the wealth (stranger edition): What if you have a small family, or nobody in said family wants to share with you?  Well, strangers are pretty good sources of stuff, too; sites like Freecycle enable you to get things that you need, and pass on what you don’t need anymore to someone else.  Both opinions cut down on the amount of resources used.

3) Recycle: You knew it was coming; the third and most famous of the three R’s.  Recycling items that you can no longer use cuts down on the number of raw materials used (well, in theory; as already mentioned, the math gets tricky in some cases).  Want to maximize your benefit to the Earth while minimizing those tricky complications?  Try to:

• Take advantage of existing recycling programs: If your city has an existing recycling program, where a truck comes around to collect material put out for recycling on street, for example, why not use it?  The added fuel burned from one more stop is likely negligible, and you’re likely to be paying for the program anyway via property or other taxes.
• Make your own recycling program: Remember in grade school when you would use brown paper bags to cover your school books?  That’s the sort of recycling you can do to ensure that you’re benefiting the planet and not hurting it.  Find other uses for broken or old items, even if you have to take them apart to do so, can keep your environmental footprint (and spending) as small as possible.

That’s all, folks; hopefully, you have wonderful Earth Day, and find plenty of ways to save the planet (and your wallet) today and every day!

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You might think, after reading the title to this post, that I’ve lost my mind, or at least, am trying to boost my blog’s visibility on the search engines.  (For some odd reason, anything that involves young attractive women garners a sizable amount of attention.)  That’s not the case (well, the second one might be a tiny bit true); there’s actually a serious question to be answered here.

Specifically, that question is why, in our current legalistic, anti-discriminatory environment, can Hooters get away with hiring um, ‘highly qualified’ young women while keeping out the older women, the ‘less qualified’, and of course, men?  (By the way, I’m still looking for a job, so if any Hooters managers in the Northwest Pennsylvania area are hiring, give me a ring.)

The only 'Hooters' you're going to see in this article; sorry to disappoint.

In other businesses, there’s been a movement away from such hiring requirements.  To cite just one example, stewardesses (back before they were flight attendants) used to have a long list of qualifications in order to hold their position, from height and weight restrictions (arguably important when space is limited, as on early planes) to being women (that’s starting to get a bit questionable) to being young, attractive, and unmarried (can you see those qualifications ‘flying’ today without leading to protests and legal actions?).

Now, of course, such restrictions have all but disappeared in the flight attendant field; I’ve been on several flights, and the stereotypical beautiful female stewardess (launcher of a thousand ‘Coffee?  Tea?  Or Me?’ jokes) hasn’t appeared on a single one.  (More often than not, I have a male flight attendant; this is probably for the best, as my last flight was with my fiancee.)   Given all of this, why can Hooters use gender and ‘high qualifications’ as a hiring qualification while airlines can’t?

Bona Fide Occupational Qualifications

The answer is bona fide occupational qualifications.  Title 29, Chapter 14, Section 623 of the United States Code (wow, that’s a mouthful) allows companies and other employers to make particular qualifications a condition of employment, even ones that violate other sections of the anti-discrimination law, in situations:

where age is a bona fide occupational qualification reasonably necessary to the normal operation of the particular business, or where the differentiation is based on reasonable factors other than age, or where such practices involve an employee in a workplace in a foreign country, and compliance with such subsections would cause such employer, or a corporation controlled by such employer, to violate the laws of the country in which such workplace is located.

The goal of this subsection is to prevent anti-discrimination laws from forcing companies or other organization to make hiring decisions that would oppose the mission of said organization.  The Catholic church doesn’t have to hire non-Catholic priests, bus and plane companies can set age, eyesight and physical fitness requirements to ensure rider safety, and companies in countries that prohibit women from working can hire all men for their operations in those countries.

All of this gives Hooters the legal protection that they need to justify their hiring practices.  You can legally hire only attractive women to work in your wing and beer joint if they are necessary for the normal operation of the business.  (No argument from me; goodness knows that with all the places to get wings and beer, you need to have something to set your chain apart from the crowd.)

This hasn’t stopped several men from raising law suits regarding discrimination against men in Hooter’s hiring practices.  In response, Hooters has raised the bono fide occupational qualifications argument, that their qualifications for waitresses are needed for the business model to work.  (Again, when your business model is getting guys to come in, ogle girls, drink, and eat wings, it helps to have plenty of cute, attractive girls in skimpy outfits to facilitate the ogling.)  As a result, Hooters has added positions for men (again, I’m available), although for the waitresses, it’s still young, cute, ‘highly qualified’, and of course, female.

So, next time you head out to visit your local Hooters, remember: you’re not just trying to get drunk, eat wings, and stare at cute girls, you’re supporting an innovative business using a bono fide occupational qualifications methodology to support sales.  If that works on your wife, girlfriend, or other significant other, let me know; there’s no way I’m trying on Sondra without some proof.

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(Warning: This article (and for that matter, the book it’s reviewing) makes fairly frequent use of the word bull**** (without the apostrophes) as well as other terminology that you may find offensive.  If you would be offended by such terms, I suggest you vacate the blog entry now.  If not, then welcome!  Please feel free to read on.)

Office speak, corporatese, and other forms of weasel-words are prevalent in the modern office environment.  Whether to spare feelings (see ‘downsizing’ as opposed to ‘firing’), to disguise true intentions (again, see ‘downsizing’), or simply the result of trying to keep up with the company down the street in terms of utter incomprehensibility to outsiders or other plain thinking people (did I mention ‘downsizing’?), an unusual vocabulary dominates the modern corporate landscape.  How can you even figure out if you’re being insulted or complimented with all the slang being tossed around?

Enter The Dictionary of Bull****.  A compendium of useful (and too often over-used words) for surviving in the modern corporation, there’s plenty of information to be found.  Just about every word you’ve heard hurled around by a middle manager (or mentioned in a Dilbert (c) strip, if you’re lucky enough to not be a cog in a large corporate machine) is included, complete with a snarky definition.  Is it a useful resource or just a waste of time?  Let’s read on and see!

Summary

Most of the book is laid out in dictionary style, covering various buzzwords in alphabetical order.  While fitting for a book with ‘dictionary’ in the title, it makes for a rather boring chapter by chapter summary (’After the As, the next chapter covered words that begin with a B’), instead we’re going to look at several example definitions to show you what sort of snarky (that’s snide and sarcastic, by the way) definitions you’re going to encounter:

Accountancy: the art of lying, in a dull manner, using lots of numbers and charts

Blog: 1. an acronym for Boring Loser Of Grand-design

Customer: 1. pleb, idiot

E-tailer: 2. a cutesy reworking of ‘retailer’ in time honored e-fashion

Guesstimate: 1. a half-assed estimate

Homer, to pull a: to succeed in spite of being a complete idiot, derived from the exploits of animated TV star Homer Simpson.

Key: 2. of a person or element of a project or process: eminently dispensable, often forgotten.

Layoff: 2. firing people

Out of the Loop: 1. uninvolved 2. shut out 3. excluded 4. shunned 5. unloved

Quality Control: The process of ensuring that all products are manufactured to an acceptable standard; the process of filtering out obvious errors of judgment (rarely successful).

Runaround: See Wild Goose Chase

Staff Reduction: mass firing

User-centric: Impossible to use

Wild Goose Chase: See Runaround

Zoo, the: 1. What the sales team call the creative team, 2. What the creative team call the sales team, 3. What the production department call the entire company

Alright, that’s enough to give you a good taste.  Scattered throughout the definitions are a few boxes allowing you to create your own Bullshit Job Titles by choosing one word from each of three columns (giving results like ‘Principle Quality Liaison’).  Immediately after the definitions are a series of Bullshit Builders, which allow you to build your own bullshit sentences in much the same way.

The book ends with a series of short essays (no longer than five pages, at most) about different areas of bullshit.  There’s a chapter on sales bullshit, designed to help you thwart those people trying to sell you the latest and greatest devices.  There’s an example of mission statement bullshit that manages to use almost every buzzword from the dictionary part of the book.

The chapter on interviewing manages to mix some helpful advice in with the humor(good for anyone who actually intends to go on an interview).  There’s a chapter on how people bullshit with their bodies (and how you can bullshit back), and the book concludes with a chapter about how retailers attempt to bullshit you.

Pros

-Pretty Darn Funny: Most of the entries in this ‘dictionary’ are pretty hilarious, and it’s great fun to read through them, seeing which you’ve heard before and what they mean. (Hopefully, you heard them through comics or stories, rather than through your boss…)

-Decent Definitions: Once you get done having a chuckle at the definitions, you can stop and realize that it’s actually pretty accurate.  Most of the entries, while aiming to be funny first and foremost, give you a good idea of what the term actually means.  For terms with multiple definitions, there’s a tendency to give a straight definition for number 1 and joking definitions for the subsequent numbers.

Cons

-Pretty Offensive: Even getting aside the frequent use of the term ‘bullshit’ (and similar words), many of the definitions and other material ends up being rather derogatory to one group or another.  Just in the ones I provided, there are insults to accountants, bloggers (over two full pages of blog related terms are mocked), QC workers, salespeople, and retailers.  If you have a thin skin and an office job, there’s a good chance you’ll be offended before the book is over.

-Somewhat Soul-crushing: I’ll be completely up front: this is a very dark humor book. If you are in a job where these terms are tossed around regularly, this book is a bit like salt for the wound.  Even if you aren’t in such a job, it’s still a bit depressing to think about how many people have to deal with the stuff mentioned in this book everyday.

Conclusion

The Dictionary of Bull**** could be a good book for you if you don’t mind a bit of dark, dry British humor to go with your job.  It provides some fairly solid definitions with plenty of laughs (hopefully, not at your own expense) along the way.  Just one last thing: if your job sounds too much like this book, you might want to consider a career change.

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I’ve been doing a great deal of thinking lately about the minimum wage.  This might be in part because I’ve been looking into part time, minimum wage level work until I’m able to get something more permanent.  (It’s probably a bad sign when even Wal-Mart is not hiring; I’m not sure if there is a ‘Wal-Mart Hiring’ economic indicator, but it’s not looking too hot at the moment.)

I’ve been trying to think about what would happen to the economy if the minimum wage were to change.  As with any effect on the economy, there will be ripples that stretch out to affect other people and groups besides the minimum wage earners; no man is an island, especially not in the current economic climate.  So, what would be some consequences of doubling the minimum wage?

• Higher Unemployment: If it costs more to hire people, companies are going to try to trim back employment as much as they can.  Depending on how much the companies react to the change in labor costs (the elasticity of the labor supply),there probably won’t the amount of decreased employment needed to keep labor costs constant (that is, doubling the minimum wage won’t lead to half of minimum wage workers being fired; unless companies are employing a vast excess of workers (not very likely, at least currently), they need to keep the bulk of their workers to keep the business running).
• Higher Wages: For the workers who maintain their employment, there’s likely to be higher wages.  Not only will those earning minimum wage (or between minimum wage and twice minimum wage) have their income bumped up to twice the previous minimum wage, but it will have a ripple effect through the economy.  If you were earning a premium above the minimum wage due to experience or education, you’d expect to continue earning such a premium, even if the minimum wage increases.  A study of the doubling of the minimum wage in Indonesia shows just that sort of increase.  (Along with the aforementioned decline in employment and decrease in investment.)
• Higher Prices: At least some of the cost of the higher minimum wage will be passed along to the consumer.  Ultimately, it is the end consumer who will pay for any increase in labor or other production costs; how much of an increase, and how persuasive it ends up being, will depend on any number of factors, including the percentage of the final cost of the product that is attributable labor costs.  (Here’s one perspective on how labor costs affect the final price paid, although you likely find others that will argue such a change will have a much greater effect on the final prices.)
• Lower Benefits: If the minimum wage rises, there is high likelihood that other benefits will decline as a result.  Companies will endeavor to keep their business costs constant (if not reduce them when possible); if labor costs rise due to higher wages, there will be a backlash to attempt to lower them by eliminating benefits or other non-wage costs of keeping employees.

Seems like something of a push; depending on your perspective, the benefits of raising the minimum wage may outweigh the disadvantages, or they may not.  If you’re unemployed, likely to be unemployed if your company is squeezed, or earning substantially more than minimum wage (and thus, unlikely to see too much of a boost from a higher minimum wage’s lifting effect), a higher minimum wage is likely to hurt you more than help; jobs will be scarcer, and prices will be higher, neither situation helping you much.  If you’re employed at or near minimum wage and you can dodge getting ‘downsized’, increasing minimum wages will put more money in your pocket (and if you aren’t getting any benefits besides a wage, there won’t be anything to lose to offset the higher wage).

Let’s consider a different tactic; what if the minimum wage is abolished?  What if employers could offer any wage they want?  We’d expect to see much of the opposite situation as we did above; unemployment would likely decrease (few companies would say no to more employees if they could get them cheaply enough), wages would likely decline (new workers could be hired for less, and current workers would either accept lower wages or get fired) and prices would decrease with the lower costs of input.  (The benefits are a bit hit or miss; it’s unlikely that companies will suddenly pay for full benefits for minimum wage workers just because the minimum wage drops.)  Several other effects of losing the minimum wage are discussed here, along with a few arguments against dropping the minimum wage.

Conclusions

I don’t claim to know exactly what we should do about the minimum wage; that’s a question a bit above my authority.  Lowered unemployment and prices vs. higher wages and more equitable distribution of corporate income; these are arguments that should be decided in a democracy by the people after debate and due consideration.  My goal is simply to raise the argument (and give myself an excuse to research into some of these issues).

What do you think?  Would the benefits of doubling the minimum wage outweigh the downside?  Should the minimum wage be abolished, so every person gets paid what they are willing to accept?  Do you think your opinion depends on how much you’re currently earning (that is, those earning minimum wage are more eager to boost their own income, while those earning much more are thinking more about higher prices at the supermarket)?

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The contest is now over; the entries are being collected, and the choosing will commence soon.

As you’re probably aware if you’ve been reading The Amateur Financier for a while, I’m a big fan of books, in particular personal finance books.  Since last June when I started to do my book reviews, I’ve managed to do a total of twenty-two, with plenty more on the way in the near future (I have a small pile of personal finance books I’m still working my way through, so don’t worry that I’ll run out of books to review anytime soon.)  To share the love of personal finance reading, and to celebrate my official induction into the Yakezie, I’ve decided to hold my first ever contest!  So let’s get right to it, starting with everyone’s favorite part of a contest, the prizes:

The Prizes: As you likely guessed from reading the title of this post (or deduced from the first paragraph), the prize for this contest is going to be a sizable number of personal finance books; a total of ten, in fact.  Yes, while trying to clean out my bookcase attempting to find the perfect prize to celebrate my success as a blogger, I created a list of ten personal finance books that should set you on the right path, financially.  If you win my little contest, you will receive:

• Start Over, Finish Rich by David Bach: A guide to recovering your finances after the disastrous last few years.
• The Best Invest Advice I Ever Received by Liz Claman: A collection of investment advice from some of the biggest power players in the nation.
• Eat The Rich by P.J. O’Rourke: A humorous look at different economic systems used around the world, from capitalism to socialism and back again.
• Yes, You Can Get a Financial Life! by Ben Stein and Phil DeMuth: A decade by decade guide to managing your funds, from your twenties to retirement.
• Rich Dad, Poor Dad by Robert T. Kiyosaki with Sharon L. Lechter: Kicked off the entire ‘Rich Dad’ series, as well as being an eye opener itself.
• Jim Cramer’s Mad Money by, obviously, Jim Cramer with Cliff Mason: If you’ve wondered about the method behind the madness of Cramer’s Mad Money show (or doubted there was a method at all), consider this your answer.
• Master Your Money Type by Jordan E. Goodman: Money rules for every different approach you can take to your money.
• Be a Real Estate Millionaire by Dean Graziosi: A surprisingly deep book on real estate investing from a guy most famous for late night infomercials.
• The Lies About Money by Ric Edelman: A thorough guide to what’s wrong with the investment industry, and how you can protect yourself and continue to profit.
• Making Money by Terry Pratchett: Alright, I’m stretching the definition of ‘personal finance book’ here; Pratchett is a humorist, and Making Money, in spite of what you might think from the title, is a comedic novel, not a personal finance guide.  But, after reading through the other nine books, you’re almost certainly going to need a good laugh or two.

There you have it; enough books to get a great start on your personal finance library, and get an array of opinions on everything from general money management and personal finance to investing in stocks, mutual funds or even real estate.

The Contest: It’s going to be a pretty simple and straightforward contest; by doing one of the following three things, you can get an entry into the drawing for these ten books:

1) Comment: Leave a comment on this post that let’s me know which of these books you’re most looking forward to reading (or, if you’ve read one or more of them already, you can say which one you enjoyed most).  Are you a Mad Money fan and looking forward to going behind the scenes, or a late night TV junkie who wants to learn what Graziosi is always talking about?  Are you a fan of Bach or Kiyosaki and want to proclaim your love?  Leave a comment including mention of (at least) one of the mentioned books, and you’ll be in the running to get them all.

2) Tweet It: Help me share the contest and you can get another entry.  Create your own unique tweet, use the ‘Tweet’ link near the top of this page, or simply copy and paste the following: ‘Contest Time @amateurfinance Win Ten Personal Finance books: http://tinyurl.com/y3qxmcf’ (It clocks in at 87 characters, so you can customize it with your own comments)  No matter which method you use, please include the @amateurfinance; that will make it easier for me to track all the entries and ensure you get proper credit.

3) Blog It: Have a blog of your own?  Share this contest and get another entry for a chance to win!  Simply include a link here in a round up or other post, let me know in the comments or via email (theamateurfinancier [at] gmail [dot] com) that you’ve done so (just in case I don’t get a trackback), and bingo!  Another entry with be yours.

You can do all three of these things, so that’s up to three entries per person; only one entry per person for each action, though, so don’t post eight comments, send fifteen tweets, and write four blog entries in an attempt to boost your chances.

The Drawing: I’m going to accept entries until April 30th (that’s two weeks from now; plenty of time to blog, tweet, and comment).  I’ll put all the entrants into a spreadsheet and use a random number generator to select a winner in the most impartial method possible, probably in the first few days of May.

The winner will be contacted via email (or possibly a personal message on Twitter or so) and announced on May 5th, in a special Cinco de Mayo celebratory post.  In the fairly unlikely event that the winner doesn’t want one or more of the listed books (perhaps they already have some of them, or just don’t care for some of the authors), I’ll also select two runners up, who’ll get any of the books not wanted by the first winner.  The books will be sent out using the US Postal service once I’m certain who is getting what, and will hopefully be there within a week of the announcement.

There you have it; all the details of my first (but probably not last) contest.  Good luck to you all!

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