The Amateur Financier

Tomorrow, I’m going to be starting a new job.  That’s the good news.  The bad news is that it’s not in my chosen field of biochemistry, or even a related physical science position.  No, I’m going to be working part time at Wal-Mart for the foreseeable future.

Don’t get me wrong, I am glad that I am getting back to work.  Besides getting more money, which is always a good thing, it’ll give me something to do to occupy my time (although, I’m sure I could come up with other things I’d rather be doing).  It’s just sort of bittersweet to end up working a job for little more than minimum wage (I’ll be earning less per hour, I’m sad to say, than I earned at McDonald’s when I worked there during high school) after years of schooling and further years of work experience.

The Philosophy of Work

Of course, it goes a bit deeper than that.  Working at Wal-Mart doesn’t just hurt because of the salary or similar tangible issues, but because it seems like a step backwards in my life in general.  There is a tendency to conflate people with their jobs.  We assume that people in particular professions have particular personalities (the boring accountant, the pompous director, etc.).  When we meet new people, one of our first questions is ‘What do you do?’; how they answer determines much about what we think of them.  Heck, I continue to refer to myself as a biochemist, as a short hand for my education and previous careers.

Is it sad that I envy the guy with the overflowing desk?

In a very real way, it seems that you are what you do.  When you are unemployed, it not only affects your pocket book, it affects how you view yourself and how others view you.  In the same way, your job is you, in a very real and solid way.  This can be a good thing (as when you have a good job that’s well respected and well-paying) or a bad thing (again, when you are unemployed).

All of this gets me to thinking, as you might have guessed.  There are several questions that come to mind when thinking of work and employment.  Here’s hoping I can get a good conversation going.

Question 1: Do you think people’s personalities cause them to gravitate to particular jobs, or that working in a job tends to generate certain personality traits?  Or is there no link between employment and personality?

If you had asked me back in college, I would have said that there was no link, but now that I’m out in the real world, I don’t think that’s the case anymore.  I lean towards the second option; I think that working in the quality control field has helped to boost my attentiveness and made me more meticulous (‘picky’, if you want a more negative word), but perhaps there’s something in my nature that makes such work more attractive to me.  I’d like to hear what other people think on this subject.

Question 2: Why do we put so much emphasis on our jobs, anyway?

Is it a remnant of tribal culture when everyone had a role in ensuring the tribe survives?  Does it date to the middle ages and inherited jobs (leading to such last names as Baker and Chapman (shopkeeper), for instance)? Is it a thoroughly modern invention, coinciding with the rise of the suburbs and the middle class?  I’m curious as to when what you did for a living became, well, your entire life and identity.

Question 3: Is the idea of a career starting to disappear?

With downsizing, mergers, and mid-life crises making the idea of staying with the same company for your entire working life (and that company staying the same, as well) a thing of the past, I have to wonder what the work world of the future will look like.  The number of people who expect to finish their career in the same position where they start (or even at the same company where start their career) is practically non-existent.

Given the massive shifts in the working world in the past several decades, it’s intriguing to imagine what work will look like in the future.  Will the average American’s work schedule in ten or twenty years in the future look like the Four Hour Work Week, short periods of work supplemented by passive income, broken up by frequent mini-retirements?  Or will people be working longer, harder, and more diligently than ever, desperate to generate any sizable amount of income?  It’s kind of fun (and a bit frightening) to think about where the state of work will be in the next few years.

Bonus Question: If you didn’t HAVE to work, would you?

The $64,000 question (or probably twenty times that amount, if you want enough to retire and generate a reasonable income); if you had enough money to never need to work another day in your life, would you anyway?  Would you do the same thing you’re doing now, quit your day job and start your dream career, or stop work entirely and have fun with your life for the rest of your days?  I’m leaning toward the second option, but then, it takes different strokes for different folks, after all; perhaps there are other people out there who love their jobs (after all, there are plenty of senior citizens who continue to work, even though they don’t need the money), and still others who are ready for a lifetime of lounging around the pool with drinks that have umbrellas in them (some of whom reach that point before they even graduate high school).  Where do most of my readers end up going?

So there are some of the things that have been dancing around in my head with my new job currently upcoming.  Thanks for indulging me, and please let me know what you think about jobs and work and people in general; hopefully, it will help me stay sane through hours of training…

I’ll be honest; I’m not very good at managing my time.  It seems there’s always more work to be done than there is time to do it, and to get one thing done, it always seems that I need to put off another.  Eventually, things just pile up to the point where they threaten to topple over and crush me under the weight of my ‘To-Do’ pile.

Hence, we’re going to go a bit off-topic today, and discuss some ways to manage not just money, but time, as well.  Sadly, the easy and most effective way to get more time, using a time machine to relive the same hours and days multiple times is currently out of reach.  So, instead, we need to focus more on making the most of the time that we have.

The field of time management is a large and growing one, due to the need for people to get everything they need and want to do in the 24 hours we each have during the day.  (Even that doesn’t take into account the need for sleeping, eating, showering, tooth brushing and other daily maintenance rituals.)  Finding ways to manage your time effectively can make the difference between being productive and being overwhelmed by our to-do lists.

Time Management Basics

There are many, many time management techniques; in any bookstore, you can find nearly as many books about managing your time as you can about managing your money.  If you want to help use your time as effectively as possible, here are a few techniques to help you get your work done:

1) Don’t Multi-task: There’s been a tendency with the rise of personal computers and other personal computing devices from cell phones to iPads for people to try to do multiple things as well.  You have multiple windows open, each allowing you to work on a different task.  In the same time it would take to get one task done, you can accomplish two, three, or even more.  It’s a miracle, right?

Well, it’s not the case.  As the New York Times notes, not only does it take time to return to the task at hand after going off to check email or instant messages, but there’s also a greater tendency to browse internet sites.  In short, attempts to multi-task lower your productivity (which should be no surprise to anyone who, like me, keeps more than one tab open on their web browser).  Focusing on one task at a time will allow you to be more productive and get much more work done.

2) Set Goals: If you don’t have goals you want to accomplish, preferably written done and easy to view, you can determine what needs to be done and how to do it.  Setting goals will help you to create a schedule that allow you to do everything that you need to do in the time you have available.

A simple way to set goals is to sit down at the start of the work day (or whenever you are getting ready to work) and spend a few minutes to make a list of what needs to be done.  Write down the goals, the level of priority for the goals (a simple system might be three stars for vital tasks, which need to be done that day, two stars for moderately important tasks that should get done but could wait for the next few days, and one star for low priority tasks that can wait for a week or more), and the estimated time to accomplish the task.  Then set up an order of tasks to do, and try to stick to that list.

3) Make your goals measurable and specific: If you want to ensure that your goals are met, you need to have a way of verifying their completion.  A goal of making more money isn’t very specific; a goal of creating alternate income equal to $1000 month after six months is both measurable and specific.  Guess which one is more likely to be accomplished?

Specific and Measurable are the first two parts of the SMART goal-setting system.  (The A, R, and T stand for Achievable, Realistic, and Timely.)  Making sure that your goals fall into the SMART system will make them much more likely to be achieved.

4) Avoid Perfectionism: One problem you may fall into is the desire to make all of your work perfect.  Resist the urge.  Spending excess time on getting every single little detail of everything you do to be absolutely perfect will eat up your free time and leave you unable to get your work done.

Don’t interpret this as an invitation to do shoddy work; rather, it’s simply a matter of weighing costs and benefits.  The chance of finding a mistake on the fourth proofreading pass is fairly small, and the time and effort you’ll need to devote to doing so with every piece you write will slow up your productive flow significantly.  Save going over your documents in explicit detail for the most important things you write.

5) Find time for yourself: If you don’t make some time for yourself, you’ll drive yourself crazy.  Set aside time for yourself, as well as spending time with your family, will improve your attitude and make you more productive.  I recommend setting aside an hour or two for yourself, to read, exercise, or simply go outside and enjoy nature.  (I also recommend setting up a weekly ‘Date Night’ if you’re in a relationship; it will do wonders for your relationship and should help to cheer you up, as well.)

There you do, a few simple techniques to make your time last longer and make you more productive.  Good luck with managing your time!  (We’ll be back to managing your money again soon.)

Every so often, I have a stunning flash of brilliance.  An idea that is so simple, seems so obvious, that I’m sure there’s something that I’m missing.   An idea that, if implemented, seems to solve not one, but several large social problems at once, making me a huge hero to the entire country, or possibly the world.

But then I take a step back, and really think about how that would work.  How could I, a normal mid-twenties guy, come up with a solution that’s alluded our policy makers and government leaders?  (On second thought, don’t tell; I’m pessimistic enough about the government already.)

In the spirit of sharing my money insights (one of the goals of this blog, after all), here’s the idea I recently had to fix unemployment and government spending, all in one swoop.  If I’m missing something, or being too optimistic about how some of these changes would actually affect things, be sure to let me know; I can’t present my new proposals to President Obama and the Congress if it’s filled with obvious bugs.  Here we go:

1) End the minimum wage: There are plenty of companies out there that would gladly employ more people if it didn’t cost them so much.  It’s Econ 101: the higher the cost, the lower the demand, and it works for employees as well as other goods and services.  If you’re forced to pay $7 an hour per employee, you as a business owner are going to want fewer employees than if you can only pay $4 an hour, which in turn is fewer than you would have if you could pay $1 an hour.  (Don’t worry, minimum wage workers, we’ll get you more money in just a bit.)

2) End current federal welfare programs: There’s currently a morass of federal programs that provide aid to the poor and those in the lower middle class.  (Although, there’s some argument about that point.)  Eliminate all those disparate programs (with the possible exception of Social Security, which is based on how much money you put into the system, at least in theory), to clear the way for something much simpler.  (For that matter, if you can eliminate most or all of the state and local welfare spending, we can really attempt to streamline the process.)

3) Change the poverty line: As mentioned yesterday, there’s much disagreement about the current poverty lines, which are just the inflation adjusted poverty lines first calculated back in the 1960′s.  Society and our spending habits have greatly changed in the mean time, and the previous poverty line levels don’t seem to be accurate (to say nothing of the fact that they don’t provide much in the way of adjusting for the different costs of living in different parts of the country).  The likely result will be to increase the poverty threshold, also increasing the number of people considered to be living in poverty.

4) Create a new benefits system: Now, if we want to make a simpler, easier system for public benefits, the easiest thing to do is to set up a single welfare program that will give out weekly (or biweekly, or monthly) checks to everyone who is unemployed or unable to work.  These checks will add up to the new poverty line for each person, which should (if we set a more realistic poverty line) be enough to allow them a decent chance to make a place for themselves.

5) Encourage work: Too many programs currently in existence suffer because they promote less work from recipients; if you work and bring home money, you end up getting less in government benefits.  To combat this, our new welfare program should encourage work, allowing people to increase their total income by working.

As the number of hours worked increases, the total amount the person earns (in wages plus benefits) should rise as well.  If someone is working twenty hours or less, the benefits they get should bring their total income to an amount higher than the poverty line, say 110% of the poverty line.  Working twenty-one to thirty-nine hours a week, and you’re guaranteed total compensation of 130% of the poverty line, while working forty or more hours a week (that is, full time) ensures that you’ll get 150% of the poverty line.  (Note: this would be total work time; if someone found two twenty hour a week part time jobs, they’d be able to collect the full-time benefits.)  No more worrying that working will decrease your government benefits; any job you take, no matter what the pay, will increase the money you take home.

6) Change who pays for welfare: You might have noticed one fly in the ointment up to this point: with the government covering the slack for businesses who pay their employments a wage less than the poverty line and no minimum wage, there’s not much incentive for companies to increase their wages.  They can pay $1 an hour, and their workers won’t complain (well, more than workers normally complain) because the government (that is, taxpayers) will pick up the tab.  Great news for businesses, not so great for tax payers.

To make this whole thing work without sticking it to the taxpayers, we need to change who is paying for this whole thing.  Our new welfare program will be paid for with taxes on corporate profits, for all corporations.  If discount stores and other currently minimum wage employers drive down wages for their employees, the tax that they, and all other corporations, pay will have to rise as a result.  Between the tax burden on their own bottom line, the tax advantages of paying out more money as wages (since they’d be company expenses and above the line deductions) and pressure from other companies who want to lower their taxes, there should (hopefully) be a fairly small drop in what companies actually pay their emplyees, even those on the bottom rungs of the corporate ladder.

Altogether, this plan should increase the number of people who are employed, simplify government spending, and encourage work, all while minimizing the tax implications for individuals.  Not bad for a sudden flash I had late last night, eh?

So there you have it; my plan in a nutshell.  Are there any flaw that I’ve missed?  Has anyone proposed a plan like this that I simply haven’t heard before?  Anyone have something they’d consider changing or adding?

I’ve been giving some thought lately to the poverty line, and poverty in general.  One of the major goals of just about every reformer, on the left and the right alike, is to reduce the number of people currently living in poverty and to improve the ability of those who do to earn more money and get out of poverty.

A Brief History of the Poverty Line

That’s where the poverty line comes in; if we don’t keep track of how many people experience poverty, how can we know if public policies and private enterprises designed to decrease the prevalence of poverty are working?  The United States government has a definition of poverty that attempts to define the level below which it is impossible for for a person (or a family) to provide themselves with the necessities of life.  In particular, the government adopted the Orshansky poverty line as its official measure of poverty in the country.

This definition dates back to the 1960′s, when then President Johnson declared a ‘War on Poverty’.  In order to fight something (and in this case, attempt to eradicate it), you need to be able to define and measure it.  Luckily for Johnson, around the same time, Molly Orshansky, who was an economist working in the Social Security Administration, developed a rather simple method of measuring and defining poverty, the ‘Orshansky Poverty Thresholds‘

Orshansky’s method was fairly simple.  At the time, the average family spent about one third of their income on food.  By measuring the cost of a bare, but nutritionally adequate diet and multiplying by three, Orshansky determined an income amount below which an individual or family would have a hard time keeping themselves fed.  This same figure has been adjusted yearly to account for inflation, but the same initial calculation forms the basis of our current poverty line, the same as it did back in the sixties.

Should the Poverty Line Calculation Change?

But as time goes on, lifestyles and spending habits change.  Rather than spending one third of after-tax income on food, today’s families spend closer to one-sixth; a poverty line determined now using the same method as Orshansky would likely be twice as high.  To complicate matters more, there are differences in the cost of living between states (and between urban, suburban, and rural areas in the same state) that are not reflected in the official poverty line (although, Alaska and Hawaii have higher poverty lines set to reflect the higher costs of living in those states).

It’s not purely an academic question; much federal spending and significant amounts of state and local welfare programs are aimed at those below the official poverty threshold.  About $320 billion in federal spending at the national level (between Medicaid and other anti-poverty programs) is directed at those below the poverty line, or influenced by the current roles of those in poverty.  Changing the definition and level of the poverty line could have a major impact on which people receive government benefits, and how much the government devotes to such programs.

The debate over the poverty line also extends to other issues, like the minimum wage.  If the minimum wage provides insufficient income to meet the minimum needs of a family (the minimum wage of $7.25 provides about  $15,000 in annual income, just above the current federal poverty limit for a family of two), it means more federal spending to make up the difference.

Changing the Poverty Calculation

Given how much government spending depends on the definition of poverty, defining it smartly is a major priority.  Rebecca Blank of the University of Michigan proposes one such method, which would make a more accurate measurement of where people are capable of supporting themselves and determining who falls below that level.  It would redefine how income is calculated; rather than using pre-tax income, it would use post-tax income and add in near-cash benefits like food stamps.

It would also try to provide a more accurate picture of what amount of money is needed to provide a minimal existence, taking into account not only food spending, but housing, clothing, and out of pocket medical expenses.  It would also try to take into account the differences in family size and composition.  (If I may be so bold as to suggest my own recommendation, adding in a ‘cost of living’ factor to adjust for areas where housing and other expenses are higher would make it easier to determine who might be struggling to survive in higher income areas.)

How likely is it that these changes (or other updates to the federal poverty line) will actually be made?  That depends; the only politician who can change the poverty measure is the President.  While this would seem to make it much easier to change the formula by which the poverty line is determined (after all, you only need one politician to agree, rather than a consensus agreement), it also means that the President, and the President alone would bear the consequences of any changes.  In our polarized (and some would argue, falsehood laden) political environment, even the most reform oriented President is likely to way the good of changing the poverty line to be more inclusive against the chance that rivals would crow about ‘the vast increase in poverty’ during his term.

That said, I’m hopeful that we’ll see a more reasonable definition for poverty in the near future.  There seems to be growing consensus that our current definition is at best, out of date and more likely completely incorrect.  Having an accurate measure of who is unable to meet their minimal spending needs is important to determine how much anti-poverty spending should be done, and how it should be targeted.