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What’s Your Clean Energy Future?

Written by William Cowie - Leave a Comment

Do you think it’s a good idea to get away from fossil fuels for our energy needs? If so, you’d be one of millions. Fact is, we are totally dependent on energy for our daily lives, especially electricity. (You can’t read this post without electric power, for example.)

Where Does Power Come From?

Most electricity, by far, is generated with fossil fuels: coal, oil and natural gas. However, this is unsustainable in the long run, as we all know by now. In recent times, new methods of generating electricity have been taking root with processes that rely on sources which:

  • do not pollute
  • do not contribute to climate change
  • do not deplete a finite resource
  • are not destructive (in terms of damaging the Earth), and
  • are sustainable over the long term.

Three new processes of generating sustainable electricity have been attracting more attention in the past decade (hydro-electricity presently is the oldest and the largest renewable energy source):

  • Wind turbines
  • Photovoltaic (solar cells)
  • Solar thermal

(The difference between photovoltaic and thermal is that the former turns the rays of the sun directly into electricity which can be used for anything, while solar thermal is limited to heating water or air.)

Wind energy output has tripled since 2008, according to the American Wind Energy Association, although it’s from an admittedly small base. In 2013, wind energy made up 4 percent of all U.S. electricity generation, but a full 30 percent of all new generating capacity.

In comparison, solar is still small potatoes, as this chart depicting data from the government’s Energy Information Administration shows:

Renewable Energy – Wind vs. Solar (quadrillion of BTUs)

reweable energy - wind vs solar

Although wind energy output tripled since 2008, photovoltaic (PV) solar energy generation is growing much faster at the moment because its costs are dropping at the rate of about 15 percent per year.

Speaking of cost, clean energy costs much more than old energy, and that’s one of the biggest impediments to widespread adoption of alternative energy generation these days. Hydro-electric power is the cheapest sustainable energy source, but environmentalists have pretty much put the kibosh on the construction of new dams. In addition, wind and solar remain much more expensive alternatives to traditional fuels.

Cost isn’t the only deterrent

Then there is the issue of storage. Electricity is generated as it is needed, and what’s not used is wasted. That means your utility has to anticipate when you will turn your computer on so the power is there for you. (And yes, they actually do track that. Interestingly, they’ve noticed that tablets and smartphones have reduced legacy computer current usage.) The point is that any extra power they generate is lost forever. Over the years, utilities have become good at load management, relying on stable, low-cost, fossil-fueled power plants. They have “base load” generators which run round the clock, plus additional generators which come on when more electricity is needed and are shut down when demand subsides. These new renewable energy sources present a problem, however: You may not need the power they generate the moment the wind is blowing. The situation is reversed when a cloud passes over a solar installation, reducing the amount of energy generated and available at the very moment you need it.

Energy storage is the next biggest problem (after cost) for wind and solar power. That’s why Abengoa’s new Solana thermal solar power plant is significant — it comes with energy storage built in, which allows it to generate power for six hours after sunset. Time will tell if the benefit of storage will outweigh the cost involved and if this becomes the future for clean energy generation.

How does this impact you?

1. Expect to pay more: Clean energy costs more than “dirty” energy, and those costs will be passed on to consumers as clean energy supplants traditional power sources.

2. Expect complications: The lack of storage, and the variability of the new sources of energy, will expose you to more power shortages when the weather conspires to deliver “whammies” every few years. As the nation transitions to cleaner power, your need to prepare for power outages will increase.

3. Become self-sufficient: As the cost of household electricity continues to rise and the price of solar energy continues to drop, it makes more and more sense to consider adding solar (thermal or PV) capacity to your house. Geothermal energy and even residential wind turbines are other options to consider. Whichever technology you choose, this investment will show returns which increase every year.

The biggest downside to adding clean energy to your home is, of course, the initial investment. The numbers range from below $10,000 to over $100,000, and depend on a whole host of variables such as the amount of power you want to generate, how you want to store your energy, whether you want to maintain a connection with the power grid, and so forth. I was intrigued to observe that the number $30,000 seems to pop up more than any other … for just about any clean energy option.

That’s obviously more than your daily Happy Meal at McDonald’s. In order to encourage homeowners to make this investment, the government has offered various incentives, and can probably be expected to offer more in the future. That obviously reduces the up-front cost. How quickly you earn that investment back depends on your current energy usage and your passion for a clean earth. Worst case, though, you can probably expect to get the cost back when you sell your home.

If you live in communal housing (condos or tracts with strict homeowners association rules) your ability to make the world a cleaner place may be limited. However, as electricity costs continue to escalate, we can probably expect to see new construction projects that include some form of clean energy, which is actually more cost-efficient on a per-unit basis when installed in clusters, and may significantly increase the marketability of those units.

Bottom line: In 20 years’ time, you can expect to see the “cleanness” of electricity generated in America rising significantly and, with that, its cost. That rising cost should make any investment in clean energy sources for your home energy well worth it.

Published on June 25th, 2014 - Leave a Comment
Filed under: Energy, Real Estate, Taxes

Making time for money

Written by Richard Barrington - Leave a Comment

One can’t give financial advice for very long without realizing that most of it is not earth-shattering insight. It usually comes down to common sense. So then the challenge becomes one of analyzing why people don’t apply common sense to their finances more often.

Temptation is a big reason, of course. One person goes over a credit limit because she is absolutely convinced she deserved a fancy vacation. Another cannot save any money because he feels he has to buy a new car every nine months. Those situations are tough to deal with because, when you confront people who do this kind of thing with reason why it is a problem, they will start out agreeing with you but then immediately segue into a long rationalization of why they only did it because the circumstances were exceptional.

Believe it or not, though, temptation is not the most common reason people fail to make the right money moves. I find that it more often comes down to time. People are aware of what they should do, but they just don’t quite get around to it.

From a management standpoint, saving time by not addressing important tasks is a false economy. A little investment in time can lead to an ongoing payoff without any further effort. In other words, rather than costing time, attention to these tasks would actually leverage the use of your time in the long run.

In this sense, managing money is much the same as managing a business. A little investment of time in the right spots can produce an ongoing return without much further effort. These are the type of money tasks you need to make time for.

5 money tasks you need to make time for

Here are five money tasks that could have an ongoing return once you take care of them:

  1. Creating a formal budget process. Notice that I said “budget process” rather than budget. Yes, ideally everyone should formulate a detailed plan of expenditures and income at some point, especially early in their careers when income is most likely to be tight. Going into that kind of detail is the best way to get a good sense of where your money goes; but realistically, not everybody is likely to set out a fully detailed budget. So, you at least need a process that will limit your expenditures — such as a fixed allowance, and rules about how you use credit. Setting strict, big-picture limits tends to force the details to take care of themselves.
  2. Set a refinancing target. People occasionally look at mortgage refinancing if they happen to notice that mortgage rates are low. That is way too random because mortgage rates can move up and down quickly, and the potential reward here can pay off for many years. Look at refinancing not from the standpoint of where rates are, but from the standpoint of where rates would need to be for it to be worthwhile. Once you have set that target, it would only take an occasional glance at mortgage rates to see if they are moving within range of that target.
  3. Update your insurance. Insurance tends to sit quietly in a drawer while your life is changing dramatically. Your driving record, your financial resources, the value of the possessions in your house, and the needs of your spouse and children may all be very different from when you last bought auto, life, and homeowners insurance. Check to make sure your insurance is adequate, and shop around to see if you are getting the best rates for your current needs.
  4. Shop your credit card business. This is one of those slippery things where what you bought may be very different from what you are getting today. Your credit history may have changed, your credit card company may have changed its rate policies, and the competitive landscape of the credit card industry is changing all the time. In short, what was once a good deal may not be so attractive any more. If you regularly carry a balance on your credit card, you should shop for the lowest rate you can find. If you do not carry a balance, you should shop for the most generous rewards package on a no-fee card, since this is essentially a free benefit if you are not incurring interest charges.
  5. Shop your banking business. Fees on checking accounts and rates on savings accounts are changing all the time. You won’t know how competitive your bank is unless you check periodically — at least once a year, or whenever you are notified of a rate increase.

We all draw the line somewhere. We choose not to pursue every money-saving opportunity if we perceive our time as being worth more than the potential savings. However, for those opportunities which represent ongoing savings, a little investment of time can have an out-sized reward.

Published on June 23rd, 2014
Modified on June 20th, 2014 - Leave a Comment
Filed under: Insurance, Mortgages, Planning, Productivity, Saving & Investing

A new career stepping stone? More apprenticeships coming to companies near you

Written by FCN Staff - Leave a Comment

This post comes from Jenny Paxton at our partner site LearnVest.

apprenticeships blog

Apprenticeships—formal programs that consist of on-the-job, paid training, mentorship and related classroom education—may be the solution to the pressing skills gap between employers’ needs and job seekers’ training.

Yet despite the obvious benefits, the number of these programs dropped 40% between 2003 and 2013, according to the U.S. Labor Department. So what gives?

One reason could be that apprenticeships are linked with unions and a blue-collar image: Two-thirds of programs in the U.S. are in construction industry (though programs are now offered in other professions, like certified nursing assistants and IT administrators).

To encourage more apprenticeships, President Obama announced earlier this month the availability of $100 million in grants devoted to apprenticeship programs in high-growth industries.

“Apprenticeships are a way to link more Americans to jobs in some of our in-demand fields, like IT and health care. They let you earn while you learn,” Obama said at a community college in Pennsylvania.

South Carolina, Wisconsin and Michigan are a few states that have taken advantage of more innovative apprenticeship programs. As an added benefit to employers, some states offer tax credits for each apprentice on payroll.

While companies might fear apprentices will leave for higher-paying jobs at the program’s conclusion, advocates have found apprenticeships in fact help with retention rates. The programs are an investment in the employee, which is often reciprocated with loyalty to the company. Some employers also avoid this problem with non-compete agreements upfront.

But another discouragement to apprenticeships is the idea that young people should stay in school rather than pursue a “tracked” program. On the other hand, supporters of the programs say these opportunities offer more intensive hands-on experience than college degrees or internships do.

Business owners skeptical of the programs can look to South Carolina’s encouraging results, where the number of companies offering apprenticeships has increased to 647 from just 90 in 2007.

More stories from LearnVest:

10 All-Inclusive Resort Secrets—Revealed

How I Did It: Opened My Own Etsy Shop

8 Ultimate Opening Lines for Fearless Networking

Published on June 20th, 2014
Modified on June 2nd, 2014 - Leave a Comment
Filed under: Working

Don’t look a gift employer in the mouth

Written by Jeffrey Steele - 3 Comments

Even if you’re not a news junkie like me, I’d be willing to bet that you’ve seen or heard one news item ad infinitum over the past several years. That nugget is the story about Americans’ retirement readiness, or lack thereof. We are endlessly informed by the media that we’re not ready to retire — and that we won’t be ready unless we start banking lots more dough.

Years ago, there wouldn’t have been a need for newspapers and magazines and broadcasters to hammer this mantra into our heads. That’s because the rules were different then. You were hired by an employer, you worked there your whole work life, you earned your pension and retired. You then lived off your pension and Social Security. A few years later, you drifted off to the Happy Hunting Grounds, leaving whatever was left of your nest egg to your children and grandkids.

Since then, we’ve had an almost perfect storm of happenings that have led us to this point of non-retirement readiness. First, pensions began to be phased out by employers in the 1980s and ’90s, being replaced by defined contribution plans — such as 401ks — that today dominate the retirement savings landscape.

Many have wrongly underestimated the significance of this development, one keen observer told me recently. What that shift from defined benefit to defined contribution plans essentially accomplished was to take decision-making out of the capable hands of financial experts heading employer pension plans and put it in the butter fingers of average Americans without a personal finance clue.

At the same time, advancements in medical science were adding years to the length of the average life span. That meant you no longer bought the farm a few years after traditional retirement age, but two to four decades afterward. And like icing on a catastrophic cake, now there is the danger that Social Security and Medicare benefits will be pared back, leaving oldsters even more exposed.

In short, once upon a time, financial experts with years or even decades of experience made determinations about the funding of retirements that were short in duration and buttressed by Social Security checks. And today, Joe and Jane Sixpack — whose first and foremost priority in life is watching each and every episode of “Dancing with the Stars” — make the decisions about funding their retirements, which are long in duration and may not be so ably assisted by Social Security payments.

And the media world’s talking heads label it “news” that we’re not prepared?

Take what’s coming

If you are among the legions who are behind in funding your retirement, you’ll need to maximize every single opportunity to save. Your employer may not be doling out pensions. But that doesn’t mean you shouldn’t closely scrutinize each offering the boss does provide to help you bank crucial retirement bucks.

The very first place to focus is upon your own employer’s 401k plan. According to research by Lincolnshire, Illinois-based Aon Hewitt, the talent, retirement and health solutions business of Aon PLC, 82 percent of Americans in their 50s are indeed participating in their 401k plans. That means 18 percent — almost one in five — are not participating, possibly because they believe they will be flattened by Elvis’s UFO on the day they retire.

Next, if at all possible, ensure you are saving at a level that will qualify you for your employer’s match, which generally kicks in at three percent.

Aon Hewitt reports that 80 percent of people participating in their employers’ 401k plans are saving at rates enabling them to garner full matches from employers.

So again, something like one in every five is leaving free money on the table. The employer match is like a fountain of gratis greenbacks showering toward your retirement piggy bank. If it is at all possible for you to do so, make sure your hands are cupped to gather them in.

If you’re 50 or older, you can save at a higher rate than those under 50, thanks to what’s called “catch-up contributions” that allow you to funnel an extra $5,500 a year into your employer’s 401k plan.

In essence, there’s a maximum dollar amount that can be saved. For those under 50, it’s $17,500; for those above that threshold, it’s $23,000. The chance to save more per year in a tax-privileged plan could mean a much larger stash of retirement savings for you to whittle away playing golf and sailing your sailboat.

Grab other offerings

Once you have begun funding your 401k to the maximum level of your ability, look around for other cash grabs your employer may make available. Let’s say you don’t want to fully retire in your 60s or 70s but want to transition into the kind of “encore career” for which you’ve always yearned.

Many employers offer partial or full tuition reimbursement. Plan your late-stage training well enough, and you could conceivably go back to school, use the employer-tuition reimbursement to fund your training, and still be able to work a mandated one or two years for your employer after finishing your training.

Also take a look at any corporate discounts that might be available. According to retirement funding experts, this is one place average Americans too often leave cash on the table. That’s cash that could finance your retirement lifestyle.

In conclusion, you may not be able to do anything about the yammering media refrain about lack of retirement readiness. But you can do something about the free retirement goodies your employer offers as a benefit of employment. You’ve given your bosses a lot. Let them give you something for a change.

Published on June 18th, 2014
Modified on June 16th, 2014 - 3 Comments
Filed under: Retirement, Saving & Investing

10 tips most first-time home buyers don’t consider

Written by Suba Iyer - 3 Comments

It’s been exactly one year since my husband and I purchased our first home. As one might expect, we’ve learned a number of valuable lessons this past year. There are plenty of articles full of useful tips for first-time home buyers. I am not going to repeat them. Instead, I will list the lessons I personally learned that I didn’t find covered anywhere else.

  1. Think long-term and think re-sale: Are you planning to have kids? Will you be taking care of elderly relatives? You might be planning to live in your first home for only a few years. In that case, who is your target audience when it comes time to sell the house? If you buy a house in a very bad school district or a house on a very busy street, when you are ready to sell the house, most families with children will be out of your list of potential buyers.
  2. Make a list of items to check: Home-buying is an emotional process. Ideally, you should set aside all your emotions when evaluating a house. Practically, that is impossible. Instead, make a checklist of your must-haves, nice-to-haves and other essentials. Then print copies of this checklist. Every time you visit a house, take the checklist along with you; take photographs so you can cross each item off your list. If you fall in love with the house and your checklist shows that the house has none of your must-haves, it will at least make you pause and think.
  3. Look at ALL the expenses when you are budgeting for the house: When budgeting for the house, don’t stop with principal, interest, taxes and insurance; add in utilities, cost of commuting and upgrades. Call the utility companies that service the house you are considering and ask for an estimate of what the cost will be, whether there are any budget plans available, etc. Will the gas budget for your car go up if you are moving further away from the places you frequently visit? Budget all of these expenses and see if you can still afford the house.
  4. Ask for the homeowners association contract before you make a decision: Our long term plan is to rent out the house, if and when we move away. With this in mind, once we identified the neighborhood we found most desirable, I asked for a copy of the HOA contract after going to an open house in the area. It turned out that none of the houses in that neighborhood could be rented out. If you are buying a house that is part of an HOA, it is absolutely essential to read the HOA contract before you do anything else.
  5. Research grants and other sources of funding: When I was researching our mortgage options, I came across so many grants and funding sources I have never heard of before. I always thought the income limit for qualifying for these types of funding would be very low, but I was pleasantly surprised by the generous income limit on many of the options. There are many different options based on profession (grants for teachers, farmers, etc.) as well as the area of the potential house (whether it’s in a rural area, high-poverty area, etc.) Research all the grants and funding options you are eligible for before you automatically decide you won’t qualify for anything.
  6. Be sure to read your contract before you sign it: A house is probably the largest purchase you will ever make in your life, so make sure you understand the terms of your contract. If you don’t understand any of the terms, ask your mortgage broker and your real estate agent. If they won’t explain the terms clearly to you, fire them; there are enough people who will be more than happy to help you and work for your business.
  7. Learn about the neighborhood demographics: If you are buying a house in a neighborhood full of renters, it only takes a few bad renters or bad landlords to drive the neighborhood down fast. If the neighborhood is full of single people, will you be happy there if you have very young kids?
  8. If you like the view, buy it: Buy the view, not the house. A set of people in our neighborhood are at war with the county for approving a new development next to ours. The reason? There was a wetland and a nice wooded area with a view of snow-peaked mountains from their homes. They bought their homes for that view. Now, within a year of moving in, their view is gone. Unless you own the land between your house and the view, don’t buy a house for the view.
  9. Look beyond the staging: I read about staging while I was researching buying a home, but I never expected the amount of staging a house goes through. The psychology does work; staged houses look far better than houses that are still being occupied. One house we went to had nightstands with lamps on it next to the bed that really increased the appeal of the room. In reality, though, there were no plug points anywhere near the lights. So practically that setup would not have been possible without remodeling. When you are considering a house, mentally try to remove the staging. Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can be easily fixed later.
  10. 10. All the old advice about buying your first home is true. Some examples — have an emergency fund, save for a down payment of 20 percent, get your credit into a better shape and don’t buy more than you can afford. If you need a refresher, here are some good articles: Roadmap for a Successful RelocationShould You Buy a Home Now?11 Tips for First-Time HomebuyersRenting vs. Buying: The Realities of Home-OwnershipPay Off Mortgage Early or Invest?

Do you have any tips to offer first-time homebuyers? Are there any specific things to consider in the current housing market?

Published on June 16th, 2014
Modified on June 13th, 2014 - 3 Comments
Filed under: House & Home, Planning

Flex or Fiction: How Accommodating Is Your Job?

Written by FCN Staff - One Comment

This post comes from Anna Williams at our partner site LearnVest.

flex job

When it comes to work perks, flexibility is one of our favorite nice-to-haves—whether that means occasionally telecommuting from home, working variable hours or being part of a job share. In fact, a 2013 LearnVest study found that more than half of us would prefer a flexible schedule.

But are employers actually meeting this growing request?

Yes and no, according to new research from the Families and Work Institute. On the one hand, employers are increasingly allowing workers more daily flexibility—think perks like occasionally working from home (67% of companies offer this, up from half in 2008). Companies are also more willing to let workers attend to personal needs during the day, like picking up a sick child from school or spending the morning waiting for the cable guy.

But when it comes to more innovative, long-term flex options, employers are drawing a harder line. Perks like sabbaticals, job shares, or the option to go part time are becoming increasingly rare, the study finds. For example, just 18% of companies today are open to job shares, while almost 30% of firms were in 2008.

What’s behind the switch? It’s likely an effect of the smaller staffs left in the wake of the recession. “[Companies] may be more reluctant to offer long leaves because they don’t have the financial margin to cover that,” Ken Matos, senior director of research at the Families and Work Institute, told the Wall Street Journal. “And they may be using day-to-day flexibility to compensate for the extra work people are doing when you have a smaller staff.”

If you’re itching for a more accommodating schedule, learn how to successfully negotiate for perks like sabbaticals and flex time, or take a cue from these real parents who scored flex jobs.

More stories from LearnVest:

10 All-Inclusive Resort Secrets—Revealed

How I Did It: Opened My Own Etsy Shop

8 Ultimate Opening Lines for Fearless Networking

Published on June 13th, 2014
Modified on May 30th, 2014 - One Comment
Filed under: Working

Is The American Dream Dead?

Written by William Cowie - 3 Comments

Is the American dream dead? A majority of people say it is, according to the recently announced CNN Money survey, as well as several others done at academic institutions like Xavier and Youngstown universities and other private organizations. Although the samples, questions and methodologies differ from survey to survey, the results all seem to indicate that the American dream (however people define it) is dying.

The term “American dream” was coined in the Great Depression the first time a major economic meltdown happened in full view of the entire nation through mass media, like radio and national print. It is a bit ironic that author James Adams penned this in 1931, the depth of the Great Depression: “The American Dream of a better, richer and happier life for all our citizens of every rank … is the greatest contribution we have as yet made to the thought and welfare of the world.”

You could make the case that the American dream has turned out to be America’s greatest export to the world. Entire societies, from Japan and China to Russia and Dubai, have undergone significant changes, all shifting toward the American dream, however they translate it into their version.

What Is The American Dream?

Ask ten people and you’re bound to get eleven answers. It’s one notion about which everyone seems to have a vague idea but few actually articulate down to a short list. A number of surveys consider the following components when they discuss the American dream:

  • Owning your own home
  • Getting married
  • Having kids
  • Getting a degree
  • Retiring at 65

Other studies reveal more nebulous definitions, with terms like:

  • A good life for my family
  • Financial security
  • Freedom
  • Opportunity
  • Pursuit of happiness

Homeownership, the number one item in the Learnvest/Chase study, was ranked number one by only 7 percent in the Xavier study, illustrating the wide disparity in how people articulate the elusive dream.

When you sift through the noise, though, the essence of the American dream boils down to a system of hopes, aspirations and beliefs: If you do the right thing and work hard, you believe that you will get ahead, that you will one day accomplish the things to which you aspire, and that each generation will have a better life than the previous one.

However, that system of hopes and beliefs is crumbling as this economic recovery has not benefited the majority. We are now seeing a generation which believes it will not match their parents’ standard of living.

That is profound because it is the first time in this nation’s history that has ever happened.

What Does It Look Like?

  • More kids are staying at home with one or both parents.
  • It is harder to find jobs that pay more than minimum wage and involve a full 40-hour week.
  • Job rewards are falling behind: pension, health, job security, job satisfaction/pressure.
  • Job security is dead: Fewer people believe that dong the right thing and working hard will work.
  • Education is costing more and guaranteeing less.
  • Student debt is now the largest category of debt after home mortgages.
  • Trust in leadership (both public and private) is at an all-time low.

Hard statistics bear this out. The labor force participation rate for those under 25 has been declining for a while and shows no sign of turning around. Conversely, the participation rate for those over 55 is rising, at a time when their forebears checked out of the workforce and retired.

If you had to pick a notion which captures the quintessence of the American dream, it’s probably retiring in a paid-off home. Some stereotype that as old fogies playing golf in plaid pants all day, while Missy plays endless rounds of bridge with the blue-rinse set in the senior center. Today’s generation may deride the image, but increasingly they realize they may never attain what their parents could take for granted — a lifetime of diligent work yielding financial freedom to do whatever you want to do.

If you look further, you can see other, more subtle, signs. Walmart has displaced Sears as America’s retailer of choice, showing how consumers have spurned “good quality at a fair price” for “everyday low prices” regardless of quality.

What Can You Do?

The reasons this generation expects to do worse than its parents are many, and, for most of us, don’t matter as much as figuring out what we can do in the face of our declining prospects.

1. Reset your expectations

All unhappiness, my wife tells me, comes from unmet expectations. Most Americans started life expecting they’ll end up with a better life than their parents. When, after some years, it starts to look like that’s not going to happen, they get frustrated and impatient. Immigrants, on the other hand, who grew up with an entirely different set of expectations, arrive in the States with wide eyes and beaming smiles. To them, America is still the land of opportunity. It’s not surprising to see that almost all of the surveys note that the American dream is still alive to a much greater degree in immigrant households.

The difference? Expectations. Immigrants seem to have lower expectations. By simply lowering your expectations of material comfort, career advancement and peer group acceptance, you remove a lot of the pressure you put on yourself. In essence, you reset your life compass to a slightly lower north. Just changing what you regard as your version of the American dream will increase your happiness.

And isn’t happiness, at the end of the day, what the American dream is all about?

2. Reset spending

It’s simple math, really: Spend less than you earn. No need to beat that dead horse.

It does get complicated, though, when you have to commit to expenses into an unknown future, like on a home lease or mortgage. We’d all like to be able to buy a home for cash, but the reality is most of us can’t do that these days. Instead, we have to make spending commitments which count on a future income.

The solution to that problem is obviously to keep those commitments to a minimum and to sacrifice to amass an emergency fund that can see you through any periods when you won’t be able to keep those commitments from income.

3. Understand that debt is more dangerous than ever before

I suspect many people nod their heads in agreement to that headline — and then incur debt anyway because they feel they can justify it. That feeling of justification is often rooted, directly or not, in the American dream.

However you look at it, debt is nothing but impatience expressed in dollars. And those with aspirations for better things take on debt when they can’t afford them.

The key to finding your way in a “dreamless America” is not falling into the trap of thinking that “things will get better in the future, at which time I can pay off this debt.” Is this hard? Painful? Unfair? Frustrating? It’s all of the above and more, but it’s still the prudent new reality. As Marty Schottenheimer always says when asked how he feels about not winning a Super Bowl: “It is what it is.”

Much better to assume things will never get better than to assume they will and live an unhappy life.

4. Be content with what you can afford

Kiss the Joneses good-bye and don’t try to keep up with anybody. I’m an immigrant, and unabashedly a believer in the American dream. But I’m not stupid enough (any more) to sacrifice my journey for a destination which often ends up being a let-down. Are there things I’d like but don’t have, places I’d like to see which I haven’t? You betcha. But I’ve learned, as someone once said, to be content with what I do have (and did see).

This recommendation is not a financial one; it’s one of identity and emotion.

Happiness is what the American dream is all about. I grew up in Africa, where I saw contentment in a hut of less than 400 square feet, no plumbing, no phone and no electricity. The people had no degree, no job, no pension — just family and enough food to get by. When you look at those wide smiles, you can’t help but realize you don’t need “stuff” to be happy. We’re privileged that what we might call a low standard of living in America is the lap of luxury to the majority of people in the world today.

No matter how distant your dream is, you can be content. By scaling back your expenses and expectations — and, above all, avoiding debt — you can stay content until the day you die.

What do you see as the American dream? Do you think you will reach it?

Published on June 11th, 2014
Modified on June 9th, 2014 - 3 Comments
Filed under: Economy, Retirement, Saving & Investing, Working

The economics of running out

Written by Richard Barrington - One Comment

In a sense, personal finance is a battle of conservation. People manage their resources in the hopes they won’t run out of the essentials — only what people find essential can differ. This centers around the fear of losing money or some other aspect of your financial life, and overcoming that fear should involve some element of minimizing the reality of it happening.

Offensive vs. defensive finance

Fundamentally, some people approach finance on the offensive, while others are on the defensive. People on the offensive are driven by acquiring more, or advancing their careers and social standing. People on the defensive care more about keeping what they already have than acquiring more. Both an offensive and a defensive mentality towards finance can come from a fear of loss — but what you fear losing determines whether your approach is offensive or defensive.

What do you fear losing?

These common fears of loss may determine how you approach your finances:

  1. Time. People who frequently say “life’s too short” are likely to be more defensive than offensive financially. Rather than being driven by career advancement or amassing wealth, these people’s priorities are to save time for themselves, and they won’t hesitate to spend money on a vacation or other experience that they feel will enhance their appreciation of life.
  2. Money. These are people who are concerned about career setbacks, financial losses, rising prices, or anything else that might cause them to run out of money. Often, these are people who have had to claw their way up from a difficult financial situation and never want to have to do it again, making them very defensive financially.
  3. New things. It is easy to see this simply as greed, but if you look closely, acquisitive people are driven by a fear of loss in a way — they would miss the constant thrill of having new things, so they are always on the offensive financially, looking to make and spend more money.
  4. Prestige. Acquisition is sometimes not about the things themselves, but about social standing. Fear of losing that standing makes people aggressive financially, as they seek to get further ahead of their peers.

To a large extent, concerns with time, buying things, or prestige require a philosophical solution — you need to find a way to stop these concerns from becoming obsessions. People can be obsessed about running out of money too, but this is also a very real concern. So, conquering the fear of running out of money requires both a philosophical and financial approach.

Conservation, not compulsion

For people whose fear is someday running out of money, the trick is to conserve your resources without becoming compulsive about it. Here are some approaches that might help:

  1. Shoot for conservative targets. This means low return assumptions, but a high longevity assumption. This will force your savings targets higher, but reduce your risk of unpleasant surprises later in your retirement savings.
  2. Give yourself an allowance. Being careful financially is great, but you should not compulsively save every possible dime. Give yourself a set allowance that you are allowed to spend. This will allow you to enjoy your money, but also the discipline of keeping discretionary spending within a known limit should also make you feel more secure.
  3. Keep your financial plan current. This is advisable anyway, because so much can change over the years, but in the context of overcoming the fear of running out of money, updating things regularly (such as once a year) will help you feel confident that things are on track.
  4. Have a what-if plan. Setbacks such as market corrections or a job loss are part of financial life. The problem is, when they occur the emotional distress involved makes it difficult to think rationally. Try building some what-ifs into your financial planning — some negative scenarios to make you think through how you would cope with them. This will help you think through the possibilities more calmly because, to some extent, the more you plan for setbacks, the less you have to worry about them.
  5. Give something away. This is definitely more philosophical than practical, but sometimes the philosophical side of things is a necessary part of getting comfortable with your financial situation. If you have a fear of running out of money, it can dominate your thinking to the extent that however much you earn and save is never enough. Most likely, though, you can give some money to people less fortunate than yourself without jeopardizing your financial future. This will demonstrate that letting go of some of your money is not the end of the world, but it will make that point without the guilt involved in splurging on yourself.

Personal finances are exactly that — they are personal, which means there is an emotional as well as a practical component to them. For this reason, both the reality of your financial situation and your perception of it are vitally important.

Published on June 9th, 2014
Modified on June 5th, 2014 - One Comment
Filed under: Frugality, Miscellany, Saving & Investing, Working

Overwhelmed at Work and Home? You May Be Living on ‘Contaminated Time’

Written by FCN Staff - One Comment

This post comes from Colleen Oakley at our partner site LearnVest.

contaminated time

“There just aren’t enough hours in the day.”

“I’m crazy busy.”

“My to-do list is a mile long.”

If you’re like most Americans, you likely say one (or all) of the above statements on a regular basis.

A few years ago Brigid Schulte—a journalist for The Washington Post and a mother of two—did too. “I kept waking up in a panic at 4 A.M. worrying—not only about all of the stuff on my to-do list that I hadn’t done that day and how much more there was to do,” Schulte says, “but also whether I was missing my life even as I was living it.”

And then she started to wonder why she—and so many people she knew—was living this way. So like any good journalist, she started doing some research, which led her to write what she calls an “accidental book”: “Overwhelmed: Work, Love and Play When No One Has the Time.”

“It’s a journey to understand what happened to leisure in America—why I, like so many, felt so compelled to unthinkingly overwork and overparent and overdo,” she says. “And how I could begin to create time for what philosophers and psychologists say are the three great arenas that make for a good life: work, love and play.”

Since this balance is what everyone is seemingly searching for these days, we sat down with Schulte to find out more about trying to live a less overwhelmed life.

LearnVest: I think that a lot of people today can relate to your book. How did we get to this point? Are we really more overscheduled and overwhelmed than our parents’ generation?

Brigid Schulte: Yes! A generation ago people knew the difference between hard work and overwork—the latter of which has become our reality. Work hours began to rise in the 1980s. Now Americans put in among the most extreme hours of workers anywhere in the world. Why? Because of what’s changed and what hasn’t.

What’s changed: the world, technology, the economy, gender roles. What hasn’t: cultural attitudes and expectations and unconscious bias. I think the writer Katrina Alcorn [author of "Maxed Out: American Moms on the Brink"] said it best: Our society expects people to work as if they didn’t have families or lives, and to have families as if we didn’t work. And that’s just not the reality for the vast majority of Americans.

About 40% of all children under 18 are being raised by a sole breadwinning mother or mom who outearns her spouse. But you would never know that by looking at our workplace cultures, policies and laws.

At the same time, the standards for what it takes to be a good mother have continued to ratchet up. Social scientists now say that the gap between what we consider the ideal and what we’re realistically capable of doing has never been wider. Since so much hasn’t changed as the world has, we’ve created an impossible bind for most people—not just mothers.

RELATED: Does Work-Life Balance Actually Exist?


You heavily researched this book. So what was the most surprising thing that you uncovered in the process?

I hate to admit this, but it was how ignorant I was of the forces that had shaped my own thoughts, actions and life. For example, I had never heard of family responsibilities discrimination [employment discrimination based on needing to care for family], nor that pregnancy discrimination was so real and so rampant—even though a federal law banning it was passed in 1978.

I also didn’t know that we have virtually no family policy in the U.S., unlike every other advanced nation on earth. And that all meaningful conversation on the topic stopped in the 1970s. Nor did I realize how ambivalent this country is about working mothers, although it explains a lot of the guilt I always felt, and why we don’t have fully flexible workplaces or supportive policies or cultural attitudes that see mothers and fathers doing excellent work and preserving sacred time for family—or any worker, really, who wants to work and have a full life.

What are the consequences of living in this pressure cooker?

The health consequences are huge. The National Institutes of Health is involved in a multimillion-dollar multiyear study and has found that overwork, the squeeze between work and life, and managers who value face time and long hours, is associated with higher stress levels, poorer health, poorer sleep patterns, more anxiety and absenteeism.

And the Yale Stress Center has reported that constant stress—the body was built for short bursts of stress, followed by a return to calm—is not only bathing the organs in the stress hormone cortisol (it’s been linked to higher rates of heart disease, high blood pressure, obesity, diabetes and cancer), but it may also shrink the prefrontal cortex of the brain. That’s the “thinking” part of the brain that governs executive functions like thinking, learning, remembering, planning and decision-making.

RELATED: Infographic: Could Workplace Stress Kill You?

In leisure, all of civilization, in essence, has been created—art, philosophy, history, science, discoveries, innovations—and all in long periods of uninterrupted leisure.

Aside from preventing these health issues, why is leisure time so important? In today’s culture, it seems looked down upon.

I have to be honest that there were times when I was embarrassed to tell people that I was writing a book about leisure. It seemed so silly and trivial. We clearly have lost all sense of its value as we’ve gotten wrapped up in busyness and the feeling that we always have to be “productive” and “doing” something.

But then I began to read more and understand that without leisure time, we wouldn’t have civilization. It’s exactly when we take our nose off the grindstone and have time outside of work—outside the routine of survival—that our thoughts wander and wonder, that we make new connections, figure out how to solve old problems in new ways, and have the kind of insights that come in “aha!” moments. In leisure, all of civilization, in essence, has been created—art, philosophy, history, science, discoveries, innovations—and all in long periods of uninterrupted leisure.

So what can people do to find leisure time in their hectic lives?

The first thing is to stop and recognize how strong the pressure is to overwork, overparent, overschedule and be busy. Then, when it comes to your to-do list, do a brain dump to get everything out of your head and clear mental space. Then give yourself permission to not do any of it.

And give yourself permission to designate joy, fun, play, reflection and idleness or quiet time as top priorities—and schedule them in until it becomes routine. You really don’t have to earn leisure by getting to the end of the to-do list. You never will. So flip the list. Put joy first.

Finally, what’s the one thing you hope people take away from your book?

That the way we’re living is unsustainable—we’re not doing our best work, giving our best to our most important relationships, or living our best lives. We need to completely rethink the way we work, unstall the stalled gender revolution and our automatic assumptions about who should do what, and recapture the value of play—it’s what makes us human, and rewires our brains in creative and positive ways.

In researching the book, I found so many bright spots. I’m hoping not only to spark a national conversation about changing the way we work and live, but to show that, in many places, in many ways large and small, it’s already starting to change. And I find that really exciting.

RELATED: 8 Easy Ways to Curb Health and Wellness Costs

Published on June 6th, 2014
Modified on May 30th, 2014 - One Comment
Filed under: Family & Life, Productivity, Self Employment, Uncategorized

Sensational Way to Triumph in Negotiations

Written by Jeffrey Steele - Leave a Comment

Before reading this post, please grab a steaming cup of coffee, and recline in the most comfortable chair you can find. If one is near, lift a warm puppy to your lap and stroke the soft, furry pet as you read. All set? Proceed.

When professor and author Thalma Lobel was ready to finalize the sale of her Tel Aviv apartment, she sat down with the buyer for final negotiations. She and her husband had determined they would go no lower than a figure they had decided upon earlier. But holding a warm cup of coffee, Lobel found herself granting the buyer price concessions she hadn’t originally intended to offer.

What made her warm to the buyer’s lower offer? Was it the warm coffee?

Lobel’s research into that question has resulted in her new book, Sensation: The New Science of Physical Intelligence, offering insights about the impact of physical sensation on negotiating psychology that you can take right to the bank.

Who knew, for instance, that holding hot or cold beverages could have such an impact on your perception of an individual? Who knew that it makes a difference whether you’re sitting on a hard surface or a cushy armchair when it’s time to hammer out the details of your salary increase? Who knew that resumes printed on thin paper are taken less seriously than those on thick paper?

Beyond these findings are others that could contribute to greater earnings over your lifetime. Among them is the discovery that bright light can enhance your ability to generate problem-solving ideas. Or the finding that the smell of peppermint can bring about the sense your workout is less difficult than it is, leading you to get in better shape and, as a result, pursue your career more vigorously.

A book by its cover

That Lobel’s book is all about physical sensation is evident without even cracking the actual tome open. The front cover is soft to the touch, while the back cover is rough. Touching the book results, Lobel says, in “embodied cognition.”

Inside, Lobel, a research psychologist at Tel Aviv University and one of the world’s leading experts on human behavior, takes us into an understanding that unrelated environmental cues and physical experiences impact our decisions in all kinds of profound, even shocking, ways, without us ever recognizing they do.

Let’s start with the warm — and cold — coffee. In a study by Yale University professors, participants were led by a research assistant one by one into a room where they would be asked to judge someone they’d never met before.

While escorting them into the room, the assistant asked each participant to briefly hold her coffee while she juggled papers. Half the participants were handed a warm cup of coffee; the others received an iced coffee. Later, the participants who’d been given the warm coffee judged the individual they met as more warm-hearted and caring than those who’d been given the iced coffee.

Another group was instructed to hold a warm or cold therapeutic pad in a focus group. Later asked to pick between receiving gifts for themselves or for a friend, holders of the warm pad were more likely to choose the gift for a friend.

Hard and soft, red and grey

Other studies reported by Lobel demonstrated that sitting in a soft, deeply cushioned chair made individuals more open to negotiation, while sitting on a hard surface, like wooden chairs found in many libraries, made them inflexible.

In yet another study, men participating in an experiment were shown photos of a woman. In each photo, the only difference was the color of the blouse the woman wore. Each man saw the woman in either a red, blue, green or grey blouse. Asked to rate the woman, the men shown her in a red blouse rated her as more attractive, and were willing to spend more money on her on a first date.

Financial takeaways

These are just a few revelations from the book, but each points a clear path to financial behaviors as rational as choosing the best savings account or best credit cards. If you are up for a salary review, for instance, come prepared not only with a list of your job achievements, printed on the thickest paper that will travel through the printer, but several other props as well.

Devise an excuse to carry a hard-seated wooden chair into your boss’s office. Have an assistant wheel a pillow-top bed in for the boss. Arrange for another assistant to accompany you in with a tray of liquids. Proffer the steaming cup of coffee to your boss, while accepting a Slushee for yourself.

You’re sure to get the raise. It will be a great talking point on that first date you have coming up. If you’re a woman who likes first dates with big spenders, go shopping for crimson tops. If a man not inclined to blow too much money on a first date, prepare that confirming phone call.

“What to wear? Well, if you’ve got a grey blouse, that should be fine.”

Now, if you followed my instructions in the first paragraph, you can put down the coffee and the pup. You’re certain to have found this post just … sensational.

Published on June 4th, 2014
Modified on May 29th, 2014 - Leave a Comment
Filed under: Miscellany, Working

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