Personal finance tips, tricks, and commentary

Why lower gas prices are fleeting

William Cowie November 12, 2014 • Energy

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If you didn’t hear it on the news, you probably noticed it the last time you filled up your car: gasoline prices have been dropping lately after holding fairly steady for a year or so, following world oil prices.

After clicking your heels at the gas station when nobody was looking, you probably got in your car and started wondering: Is this for real? How long can it last? Is this just one of those blips you can clearly see on the chart, or are we seeing a fundamental shift toward lower energy prices? If lower energy prices sound like a dream, that’s because, in our lifetimes, we’ve only see them go up. However, the notion of a long-term drop in energy prices may not be so totally far-fetched.

Three mega-trends could account for the drop:

1. Natural gas

America has been the world’s largest producer of natural gas for a while now, and at record low prices. Common sense says the natural (no pun intended) thing to do is to switch to natural gas usage from liquid petroleum wherever possible. Doing that, though, is not quite as simple, because natural gas usage is limited by infrastructure: You need pipelines to bring the gas to where it is needed. The nation’s major railways are considering a wholesale switch from diesel fuel to natural gas … but they can’t until pipelines are installed to bring the gas to their refueling points.

There is one area where the switch has been happening, and that is home heating energy sources are shifting away from heating oil to natural gas.

2. Conservation

For more than a decade, we’ve seen a myriad of initiatives, plans and efforts to reduce our use of oil in general, and imported oil in particular. This chart, produced by the White House from Energy Information Administration (EIA) data shows that we are currently importing less than 50 percent of our petroleum needs these days:

One of the biggest reasons for importing less oil is we are using less of it, regardless of where it comes from. This chart drawn from EIA data shows just how dramatic that drop is:

One of the biggest reasons we use less oil is the increasing fuel efficiency of automobiles sold in America. According to the EIA, average fuel efficiency has almost doubled from just over 15 miles per gallon (mpg) in 1977 to almost 30 mpg in 2013. What is remarkable about that is that the average horsepower per vehicle has gone up over the same period, not down — increased efficiency, indeed.

3. Production

Oil is being pumped from more locations at more places around the globe. Even more important, though, is non-OPEC production sources are growing, giving OPEC less control over capricious price-setting. The USA, in particular, has seen its share of world oil production increase dramatically in the past few years, and it shows no sign of slowing down anytime soon.

However, even though America is the largest oil user in the world and its demand has been dropping, China, India and other developing nations are increasing their demand for oil, and that has kept prices from dropping.

But this year, that seems to have changed. For some reason, prices started plummeting during the summer months. What could the reason be? Could it be that demand somewhere suddenly started increasing?

In a word, no.

If you dig a little deeper, it becomes apparent that we are witnessing a power struggle of enormous proportions. America’s oil production is increasing as it’s usage is dropping, and a lot of American oil is hitting international markets because the mix of oil we produce doesn’t suit our refineries. Saudi Arabia, concerned that crude oil production in the USA and other countries could be cutting into its revenues at a time when the Arab Spring is causing it to increase its domestic spending, is putting on an old-fashioned monopoly play. It is pumping out more oil to drive prices down, ignoring distressed calls from fellow-OPEC members to back off. As prices drop, the Saudis seem to hope the nouveau-riche oil producers will start losing money and be forced to quit. Their production cost is around $27 a barrel, while the US shale oil costs over $60 a barrel.

In the long run, those oil princes in Saudi Arabia, to cope with their post-Arab-Spring world, need or want oil prices of $100 a barrel or more. From all accounts, it seems they are content to push the price down for a short while just in order to flush out some of their producing competitors; but as soon as that mission is accomplished, this dip will be nothing more than a dip in a chart.

In other words, this is a high-stakes poker game, with billions of dollars at stake … and that includes what you pay at the pump. Will the Saudis succeed? They did before, as the first chart shows, and they have always managed to secure their billion dollar income stream from competitors. Time will tell, but, in the meantime …

What does this mean to you?

The general public has demonstrated a tendency to make long-term decisions based on the assumption that immediate circumstances will continue forever. In past years, when gas prices dipped, sales of gas-guzzling SUVs soared, and sales of energy-efficient smaller cars slumped. If that history were to repeat itself, you can expect to see sales of smaller cars, hybrids, and electrics to slump yet again. Along with that, you can expect those used car prices to drop too.

Therefore, you are entering a window where, if you haven’t done so yet, you will be handed a golden opportunity to fetch a good price for that SUV that keeps growling at your wallet whenever you pull into a gas station. Conversely, you can expect to see better and better deals on the gas sippers.

However, don’t make the mistake of thinking lower gas prices are the new normal. A few oil princes in Saudi Arabia are playing a game, which will end soon.

As they say in show business: “Stay tuned.”

In praise of not planning

Richard Barrington November 7, 2014 • Planning•Retirement•Saving & Investing•Working

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It’s a good thing that I am a planner by nature because, dealing with personal finance as I do involves a lot of long-term planning. So it might seem a little odd for me to take this position, but there are times when your finances might be better for not having made a plan — or at least for not being completely ruled by your plans.

Don’t take this too literally because planning has its place, but planning can also become tyrannical. It intimidates people from undertaking projects. Once a project is undertaken, too much reliance on planning can make people blind to better alternatives.

So the message here is don’t let planning become obsessive. The following are some examples of when freedom from planning can come in handy:

An opportunist’s career. I have benefited greatly from not having a career plan. I went to college with the intention of becoming a journalist, but the job market was so tight when I graduated that I basically took the first non-fast food job I could find, which was in the operations department of an investment firm. One thing led to another: I got promoted, the firm grew, and I started to learn about the business. It turned out to be a very rewarding career, financially and psychologically. Then, when I got older and wanted to slow down a little, I decided to quit, take some time off, and see what happened. I gradually got into freelance writing, and that has snowballed into a legitimate second career. So, I am back to my first love — writing — but with more money in the bank and more marketable skills because of my investment experience. Not only didn’t I plan this, I’m certain I couldn’t have. Instead, not having a career plan made me more open to seizing the opportunities that presented themselves to me.
The intimidation of big goals. So, let’s talk retirement savings. Suppose you are just starting your career, making about $30, 000 a year, and I tell you you’re going to need to save $2 million to retire. From the point of view of someone making $30, 000 a year, that may seem impossible — so intimidating a goal that it does not seem worth starting. I know someone who actually says he doesn’t save for retirement because he’ll never be able to afford to retire anyway. He’s just joking — I think. Anyway, suppose instead we look at your budget. We find a way to carve a couple hundred a month out of that $30, 000 a year for retirement savings. For now, we don’t worry about how far that will get you in the long run. The important thing is that you have made a start, and when you get a little closer to the destination, starting to fill in the details will make more sense.
Analysis paralysis. The other thing about retirement planning is that you can get caught up in the details involved. How do you figure out what you will be earning in ten years, or what inflation will be over the next 30 years? There are several similarly difficult assumptions to make in order to put together a retirement plan, and the problem is some people get so caught up in trying to formulate the perfect plan that they delay getting started. You are better off just making some big-picture guesses and then adjusting your assumptions as the answers become clearer.
The deception of long projections. One reason not to get too caught up in your assumptions up front is that any slight inaccuracy is going to become magnified over the time frame involved in retirement planning. And inaccuracies are often more than slight. Who knew that savings account rates were going to drop to nearly zero or that we would see two major bear markets within the first decade of this century? Those developments have made a mockery of some very well-thought-out retirement plans, so understand going in that this is largely an exercise in guesswork.
Adapt and survive. Not obsessing about planning does not mean blithely going through your career unconcerned with retirement saving. Start early, do the best you can, and take stock of where you are now and again. Just don’t go into it thinking that a good plan will see you through the next 40 years. There will be surprises and, even if those surprises shoot holes in your original plan, don’t give up and think your efforts were for naught. Keep yourself open to adapting to survive.

Ultimately, none of the above should discourage you from making plans, but they are simply reasons not to get too attached to your plans. After all, any plan is just a vehicle to get you to your destination, so don’t mistake the plan itself for that destination. You should not wait for the perfect vehicle in order to get on your way, and neither should you refuse to dump your current vehicle if a better one becomes available.

Zeroing in on target-date funds

Jeffrey Steele November 4, 2014 • Planning•Retirement•Saving & Investing

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For those investing for retirement, target-date funds sound like a great idea. Say you want to retire in 2030. Simply purchase a 2030 target-date fund, the wisdom holds, and the fund will do a lot of the heavy lifting for you when it comes to your investments.

But like that time you tried to pass your literature midterm by scanning the Cliff’s Notes of “Crime and Punishment, ” taking the easy way out may not be your best strategy here either. As one expert says, target-date funds are “the one-stop shop for mutual fund investing.” In selecting the holdings comprising the fund, target-date fund managers choose a higher concentration of high-risk, high-return holdings in early stages, gradually converting to lower-risk holdings as the target date nears.

The result is that the target-date mutual fund investor is investing more aggressively at younger ages, when he or she can afford to take greater risks, and more conservatively at later stages, when lower risk is the order of the day and something to be avoided.

“A target-date fund is really a mutual fund of mutual funds, because instead of owning a basket of stocks or bonds, they own a basket of other mutual funds, ” says Phillip R. Christenson, chartered financial analyst with Phillip James Financial in Plymouth, Minnesota. “Each fund has a ‘glide path’ that dictates how the fund will adjust its allocation over time.”

For example, he says, a 2030 target-date fund might start with a 75 percent allocation to stocks. By the time 2030 arrives, the fund’s allocation will have been adjusted down to perhaps 35 percent in stocks, reducing the risk.

The result is that one of the most challenging aspects of investing for retirement, asset allocation, is performed for the investor. The investor gains diversification across a variety of asset classes, and enjoys the sense of not having to wade even toe deep into the varying merits of different investment choices. That makes target-date funds a favored choice among many who recognize the need to invest for retirement but are new to the market and relatively unschooled in its nuances.

Not so fast

Unfortunately, like a lot of areas of life that promise an easy approach if you put on blinders to cost and just leave things to others, target-date mutual funds have a number of drawbacks. The first, and one of the biggest, is that they tend to suffer from above-average expense ratios.

And those higher expenses can nibble away at returns over a longer period of time, like between now and, say, the year 2030.

Another negative is that in an ideal world, a number of factors making up your individual investor profile would be taken into account in determining the right investments for you. They would include your financial goals, your investment time horizon, your income, your assets outside the stock market and your ability to sleep at night should the market cliff-dive. But target-date funds consider only one of those factors, investment time horizon, in their investment allocations.

An additional downside is that target-date funds operate as if you have no other assets in your portfolio. Again, in a perfect universe, when making investment choices you would choose stock market investments you don’t already hold. Doing so adds the attractive virtue of greater diversification to your portfolio.

But when choosing target-date funds, you may be investing again in stocks you already own, resulting in less, not more diversification.

In addition, says Christenson, “a [target-date] fund won’t know if you have other stocks in your portfolio, so the fund may have you at a 50 percent allocation to stocks, but when you look at your overall portfolio, that’s actually allocated 70 percent to stocks. Is that the right allocation for you?”

Under the hood

One of the most suspect issues about target-date funds is this: If you are retiring in 2030, you’ll want to know the target-date mutual fund is selecting underlying investments just right for that 16-year window.

But how can you be sure it will achieve that goal when different 2030 target-date funds have widely differing investments underpinning them? You’ll be taking on more risk in some 2030 funds, less in others, based on which you choose.

Christenson examined a number of target-date funds for the same year, finding that not only did the allocation differ, from say 80 to 70 percent in stocks, but the quality of the investments varied as well. “One fund might invest in very high-grade bonds, whereas another might invest in riskier junk bonds, ” he says.

“You have to look under the hood to see exactly what they own.”

Hmm. And how many target-date mutual fund investors will even know how to open the hood?

Ultimately, what many tout as target-date funds’ greatest attribute, simplification, ends up as their undoing as a bull’s-eye of a great investment. These funds not only simplify, they oversimplify. That turns out to be a significant handicap in a world where every investor is different, and requires different investment strategies.

The ultimate takeaway on target-date funds: Aim higher.

How to make money from home by starting a daycare

Suba Iyer October 3, 2017 • Family & Life•House & Home•Working

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Quite a few parents choose to stay home because their entire salary would go to daycare if they went back to work full time after the birth of their child. If you are one of the stay-at-home parents who loves kids and wants to make money from home while taking care of your own kid, have you thought about starting your own home daycare? I have.

I did some research and interviewed a mother of two who did exactly that. Unfortunately, she burned out and closed her daycare even though it was popular among the parents. I believe this is what will happen to me as well; so after giving it some serious consideration, I decided not to pursue it. Still, I thought it would be interesting to share the interview I had with the mother, in the hopes that it will be beneficial to other stay-at-home parents who are interested to earn income while they stay at home with their children.

Q. What is an at-home daycare? How does it work?

A. Although each state most likely has their own definition, at-home daycare is typically your home, opened up to a limited number of children (unrelated to you) of various ages. A home daycare program will typically offer structured learning in a safe environment. Most of my daycare children started as infants and grew to be toddlers under my care. I prepared a program for each day for that age group. I also reported (via handwritten notes) to the parents each evening on the events of the day.

Q. Why would parents use an at-home daycare when they could go to a big center?

A. Loving, affordable, safe and convenient childcare is always in demand. Many households have two-parent careers and need someone to handle the children. Some of these parents will prefer daycare in a home as opposed to a commercial setting, believing that it is a more kid-friendly solution. Others may find it is cheaper, more flexible or more suitably located than a commercial center.

Q. How much can you earn with a daycare at home?

A. Each state will have its own limits on the number of children that you can enroll in your home daycare program. To find your state’s requirements, just do an Internet search on “Child care license” plus the state abbreviation. Ours has an upper limit of eight; but with that many children, you might need an assistant!

What you should charge differs by the age of the child, the location of your home and the hours you will be open. You might have different rates for day vs. evening. You may need to charge more for infants and toddlers because your state may allow fewer children of that age to be cared for by one adult.

Some daycare homes require the parent to pay whether or not the child is in attendance (say perhaps a parent takes the child out for a week for a family vacation). The daycare home is reserving that spot and so would like to be compensated. I did not charge when children were absent.

In my small town, I charged $90 a week and enrolled six children. As my ongoing expenses were low — basically being lunch, snack, diaper wipes and an occasional piece of equipment — my profit margin was high. Based on my personal experience, depending on the cost of living in your area, I estimate you can make anywhere from $400 to $1500 a week. Of course, your mileage may vary.

Q. How do you go about starting a daycare home?

1. First, review what your area’s legal requirements are.

You may find, for instance, that your home is not currently well suited to childcare and would require expensive maintenance or upgrades, such as, outdoor fencing or new electrical wiring. States who license want assurances that providers with a license meet certain standards regarding health, lack of criminal records, and so on. And be aware that all adults in the home may be subject to meeting those requirements, not just the provider.
You may also find that you don’t need a license. Some states allow providers to care for a few non-related children without one. In our state, that number is four. Still, for marketing purposes, you may want the reassurance factor that being a licensed home provides prospective parents.
You will also need verification from other members of the household that they are willing to share the home with additional children. Your parents may not meet the exact drop-off and pick-up schedule agreed upon, causing you to still be caring for their children when it is time for other household activities to begin. For my daycare license, I also had to get permission from each adjoining neighbor.

2. Look at start-up and operational costs.

What training might you need?
What emergency measures (including hiring others to come in and watch the children if you have to be away) will involve cost?
How do you plan to market your services? I advertised through the church bulletin and on signs posted in the neighborhood as well as ads in the paper. So my cost of marketing was negligible, but I can easily see this expense getting out of control if you have a lot of competition and are starting new.
What equipment and supplies will you have to buy? I did purchase added equipment — a play kitchen, additional toys and other items. Some of these came from garage sales, others had to be new.
Is your home adequately child-proofed? What needs to be done to make it child-safe? How much will that cost?

3. Consider the risks involved.

You should also consider the risk that you are incurring in being responsible for other people’s children. What could possibly go wrong? Children may fight with each other, fall and break a bone, run into something and get a concussion, wrongly accuse you or another adult in the house of something, and so on.
How are you covered financially and planning-wise to handle the risks? An umbrella liability policy should be considered at a minimum. In addition, you might consider incorporating your daycare home into an LLC or S-Corp as additional personal protection if the unthinkable should happen.

Q. If you had an opportunity to re-do the whole thing, what would you do differently?

Purchase an umbrella liability policy and incorporate my business
Hire an assistant to help out part of each day and be on call to take over if there was an emergency. For $540 a week, my time was utterly and absolutely devoted to caring for, feeding and educating those six children, plus my own two, for a span of around 11 hours a day, five days a week. With eight children, it was nearly impossible to leave the home. So I had to use non-care time for the gathering of supplies, planning and preparation.
Charged more! It was a feasible way for me to earn the money I needed back then — and one of the few available to me — but it was THE most exhausting job I have ever done. It was an exhausting, lucrative, emotionally satisfying way to earn money while still being home to care for my own two children; but I burned out in three years. If I have to do it again, I will most certainly charge more. I will compete based on my quality, not on the basis of price!

If you are a stay-at-home parent, what options have you considered that would allow you to work from home?

Funding Higher Education with an ISA

William Cowie October 25, 2014 • Education

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Have you ever watched the popular television show “Shark Tank”? In it, entrepreneurs pitch their young businesses to five rich tycoons (the “sharks”) in hopes of attracting an investment from one or more of them. Some entrepreneurs are youngsters with a great idea, some are savvy veterans, and others are ordinary families hoping to turn a great idea into a million-dollar business. Not all get an investment. When you do get an investment, it usually takes one of two forms:

An equity stake in your business
A royalty on gross sales

The sharks don’t invest in every business that gets pitched to them. They especially don’t invest in businesses where where the pitch revolves around a tear-jerking story. They don’t care that you had hardships, no opportunities, or that you’re the most upstanding citizen on Earth. They only care about two things:

Getting their money back
Getting a handsome return, in addition to just their money

Crowdfunding

You may also have heard of Kickstarter and other sites which offer something similar: an opportunity for entrepreneurs to raise money to fund their ventures. But as the name implies, you don’t attract investments from one or a few individuals; you attract a crowd of investors to fund your idea. The crowd usually gets a financial stake in the new business in proportion to the money invested, but not necessarily. For $5 invested, all an investor may get is a discount coupon on the new product when it gets launched.

In one form or another, crowdfunding has been around as long as the human race, it seems, whether the person giving the money has a direct stake in the venture’s financial results or not. Grandparents giving kids money to start a lemonade stand or paper route are classic examples. Don’t let the down-home examples fool you, though. The City of Green Bay, Wisconsin, is a master at this: In 2011, they raised over $60 million for the NFL team it owns, the Green Bay Packers, by selling shares which have no votes and no share in any profits. It was just a huge civic-crowdfunding exercise.

Not Loans

You can think of venture capital as the halfway point between crowdfunding and “Shark Tank.” Anybody has access to venture capital, just like they have access to crowdfunding; but the venture capitalists (VCs as they like to be called) are even more stringent than the sharks in their focus on the money generated by a fledgling business.

What all of these funding mechanisms have in common is: They are not loans. Loans have to be paid back — with some interest — whether the venture fails or succeeds. None of these investments carry that requirement. If the venture pays off, they make way more money than the interest on a loan. However, if it doesn’t, investors lose it all with no recourse.

Risk

The essence of crowdfunding, venture capital and the “Shark Tank” is that they put up money and take a big risk. The risk is that the venture will be a bust. Think of when England would send merchant ships to the Far East to trade for tea and spices. Fifty rich shareholders would invest a million dollars (in today’s money) to build, outfit and crew a ship, which would take two years to sail to India, Indonesia and China.

Sometimes the ship would come back and the shareholders would split five million between them. That would be wonderful. They would throw lavish parties and hire painters to paint portraits of their wives.

Frequently, though, the ships would not return, and the shareholders would lose all that money. That would be a tragedy — no parties and no paintings.

In other words, every venture had a chance for either riches or tragedy. They called that chance risk. They understood that when they pony up the money for a trip, they might lose it all. However, they take the risk because, along with the risk, there’s the promise of a rich reward.

When you invest money for your retirement, you limit your risk with something called diversification. You are not alone.

Instead of three investors putting everything they have in a single ship in the olden days, fifty investors put a tenth of their wealth in a single ship. Instead of sending just one ship, they sent four or five. If one goes down, others will survive and make it back. Lloyds of London is a famous place where ship owners shared risk and reward. There are, as you can see, many ways for investors in risky ventures to alleviate that risk through diversification.

You, Inc.

Imagine you’re a high schooler, and you’re thinking of going to college. College these days almost costs as much as one of those shipping expeditions to the Far East. “But, ” you think to yourself, “I should make a lot of money with a degree. Everyone tells me I’m smart, but I don’t have the money to pay for a college degree, and neither do my parents. Hmmm… I wonder if I could persuade all of those people who tell me I’m smart to put their money where their mouths are?”

The good news is that you can. And your friendly Congress is looking at ways to help you do it. The wellspring of three-letter acronyms is mulling yet another one for the Income Share Agreement (ISA).

ISAs allow students to raise funds to pay for their degrees by selling shares in their future earnings, kind of a cross between crowdfunding and venture capital. ISAs are financial instruments that can be administered by the government or by private financial institutions. Their defining characteristic is that an individual gains access to cash for a college degree in exchange for a promise that they will pay back a fraction of their earnings for a prescribed period of time to the entity that put up the money. And, by grouping a number of students’ funding, it spreads the risk over many students.

It is like a venture capitalist investing in You, Inc. A graduate who earns less than expected will pay back less than the full amount of the initial funding, while graduates who earn more than expected will pay back more than their share.

Does anybody do anything like that? The New York Times recently published an article about online “trade schools” like the App Academy, which charges no tuition, but will take 18 percent of the income graduates earn in their first year.

This is a classic good news/bad news situation.

Good News, Bad News

The good news is obviously that, with something like an ISA, more students will have access to increasingly expensive higher education. Furthermore, when a hundred investors invest in a pool of a hundred students, the diversification allows them to spread the risk, much like those old ship owners from days gone by.

The bad news is that outside investors, more likely than not, will, like venture capitalists and the sharks on “Shark Tank, ” focus strongly on the financial outcomes of the education. If you are a student looking to get investors to fund your engineering or medical degree, you are much likely to attract ISA money than, for example, for a degree in art or history.

But, is that a bad outcome? This is not to disparage a degree in the liberal arts; but the moment outside money, whether it be student debt or something like an ISA, enters the picture, the financial return on higher education becomes much more important.

What limits the use of ISAs? Uncle Sam. At the present time, there are well-used mechanisms in place for the Federal Government to assist colleges with grants and loans, but not ISAs. Because of that, most students would only elect an ISA over a traditional loan or grant if they were tapping into private sources of funding.

We live in a time of evolving technologies and opportunities. The student debt problem is pushing the issue of higher education funding into the crucible of change.

Would you, as an investor, invest in an ISA for a student you know? For one you don’t know? Would you, as a student, accept a form of education financing that, in effect, indentures you for a specified period of time?

10 Steps on the Career Ladder

Richard Barrington October 25, 2014 • Planning•Working

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With the unemployment rate recently edging below 6 percent, the job market is starting to look healthier than it has been since before the Great Recession. While that market does not yet favor employees the way it did during the 1990s, it has recovered enough to justify a more ambitious focus. People who had to scuffle to find a job can now start thinking about their next career move.

Climbing the Career Ladder

How you handle your career is one of the most important financial tasks you will ever tackle. Think of it this way: Your career is an income-generating asset, and unless you become very wealthy, it is probably the biggest income-generator you will ever have. Beyond that, though, it is how you spend most of your waking hours, so handling your career correctly has a huge impact on your happiness as well.

Mention a climb up the career ladder to most people, and their first thought is moving into the job of their immediate supervisor. This might be the most obvious move, but it is often not the best. Besides looking at how to move up, you should consider whether it may make more sense to move out or sideways instead — out to another organization, or sideways to a different type of role that might eventually lead you in a more productive direction.

Here are ten steps to help you determine and make the right moves on the career ladder:

Visualize your long-term goal. Each step leads in a direction, so before you plot any short-term move, think about where you want to be in the end. Otherwise, your career can become a series of short-term steps that don’t lead where you want to go.
Identify the right fit. Now shift your focus to your next move. After all, you aren’t going to go from entry-level to a corner office in one promotion. Look at the organization and identify a position that is both a step in the right direction and a good fit for your current skill set and experience.
Assess your peer group performance. Basically, look at the staff the way your employer would. Is there any reason you stand out as the next to be promoted, or are other people out-performing you? Don’t neglect your current job while dreaming about your next one.
Consider the company’s growth. Look outside yourself to the company as a whole. Is it dynamic and fast-growing, or is it stale and losing market share or stuck in a shrinking market? Growing companies create opportunities; stagnant ones generate layoffs.
Look at outside opportunities. If your company does not look like it is going to create the right kind of opportunities, scan the job market for alternatives. Even if you don’t make a move, this will give you a stronger sense of how your current situation stacks up within the broader employment market.
Target appropriate skills. The move you want to make may take skills you don’t yet have — perhaps an additional degree, or a specific type of training or experience. Just because you’ve been out of school for a few years, don’t consider yourself a finished product. In a changing job market, updating your skills is not only necessary for advancement at times, but it can also be the key to job security in your current position.
Make your interest known. Don’t just throw your hat in the ring when an opportunity arises. Make it known that you are taking the long view of your future in the company. Politely but assertively letting it be known that you are interested in advancement will help management view you as a natural candidate when openings do arise, and might help you get some coaching on what you need to do to get those promotions.
Be open to feedback. Speaking of coaching, this only helps if you are coachable. You might not like criticism, but it is the only way to understand how to improve.
Know your financial worth. Don’t just demand raises because you think you are due. Make an analytical assessment of what your performance has been worth to the company financially, and what it would command on the open market. You are most likely to optimize your salary if you know enough not to sell yourself short — or overreach.
Be comfortable at your own ceiling. Decades ago, something called “the Peter Principle” posited that people keep rising until they reach the level of their incompetence. From an employee’s perspective, people often rise to the level of their misery. If you find a comfortable niche, value it. Don’t feel compelled to keep climbing just because the next step is there.

The key about taking this approach is not to judge yourself by another person’s path or pace. Think about what suits you, and that can help forge a career that is uniquely your own.

When Taking Vows, Vow to Spend Less

Jeffrey Steele October 22, 2014 • Family & Life•Frugality•House & Home

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Talk to anyone 19 to 90, and they’re likely to have very clear memories of their first experience going steady. Mine came at the decidedly ancient age of 17, and I can recall that star-crossed life chapter like it happened last week.

My perky, mahogany-haired, 16-year-old inamorata and I didn’t have much in common other than a passion for hours-long sessions in lover’s lane. When we stopped long enough for a conversation, I became aware that her hopes for the future centered on a single day — her wedding day.

It didn’t matter that we had no money. It didn’t matter that I was headed to my freshman year of college and she still needed to matriculate from high school. It didn’t matter that there was no way in hell to support ourselves as newlyweds.

All those niggling nuisances were subordinate in her fevered mind to the big gala she foresaw unfolding the day she cantered down the aisle dressed all in white.

About the time it dawned on me that I was an easily replaceable cog in her dreams of that day, I was gone like last spring’s prom decorations. Ever since, I’ve harbored a deep distrust of those whose views of marriage centered not on the life they would build for themselves after the wedding, but on the wedding itself (and not just on the day itself, but how much would be spent on the day).

Lessons in Love

That’s why I lapped up the recent take by the Wall Street Journal on the George Clooney-Amal Alamuddin multimillion dollar nuptials in Venice like a parched Mojave nomad at a punch fountain. Titled “Mega-Weddings: Why You Should Say ‘I Don’t, ‘” the October 3^rd piece by Brett Ahrends confirmed all the suspicions about weddings I’d harbored for decades, but had never been fully able to articulate.

Not only is a costly and extravagant wedding no predictor of a successful marriage, it is actually a harbinger of trouble in paradise, followed by the retention of his-and-hers divorce attorneys. Citing a recent Emory University paper titled “A Diamond is Forever and Other Fairy Tales” by Andrew Francis and Hugo Mialon, Ahrends asserted there’s an inverse relationship between levels of big spending on wedding ceremonies and a couple’s duration as blissfully wedded partners.

I tracked down the report the Journal cited, and pounced on some intriguing factoids that should hearten any couple planning a wedding reception at Denny’s.

“Spending $1, 000 or less on the wedding is significantly associated with a decrease in the hazard of divorce in the sample of all persons and in the sample of men, and spending $20, 000 or more on the wedding is associated with an increase in the hazard of divorce in the sample of women, ” it reported.

Predictably, it wasn’t just the spending on the wedding, but all the collateral expenditures that also foreshadowed an appearance in divorce court.

“Spending between $2, 000 and $4, 000 on an engagement ring is significantly associated with an increase in the hazard of divorce in the sample of men, ” the authors reported. “Specifically, in the sample of men, spending between $2, 000 and $4, 000 on an engagement ring is associated with a 1.3 times greater hazard of divorce, as compared to spending between $500 and $2, 000.”

There it was in black and white, proof positive that blowing wads of cash on lavish weddings and Hope Diamond-like wedding rings was more closely linked to love on the rocks than a more fiscally conservative approach. It quickly made me wonder why a study was even necessary to reach that conclusion.

Wouldn’t it make sense that two people renting out the Giza Plateau for a wedding in the shadow of the sphinx might be less focused on one another, and staying married, than a couple eloping on a Megabus to suburban Buffalo?

It does to me.

From That Day Forward

Just think, if a guy and gal recognize even before they’re even married that free-flowing wedding spending doesn’t necessarily translate to happiness, they may embrace the reverse in other situations throughout their life together. And that could stave off arguments over lack of money, which is known to be a huge factor in divorces.

Big New Year’s Eve celebrations? They’re often a lot less fun than the simple, cozy evening spent at home away from staggering drunks. Spending big on costumes at Halloween might not yield as great a get-up as shopping for odds and ends at Goodwill, and fashioning your own one-of-a-kind guise.

Braving the crowds at the Cineplex for this seasons’ blockbuster could yield less enjoyment than taking in a little-known independent flick at the local art house. And the major league cost of parking and those $13.50 chicken nuggets plates at a big league baseball stadium? It could make you decide you had a better time rooting for up-and-coming phenoms at a Class A Rookie League game.

Yup, there are lessons galore to be learned from a less-expensive wedding. From homes to cars to vacations and more, it’s not impossible to get more by spending less.

Are you among those making the mistake of spending a lot on a wedding? It may not be too late to have your walk to the altar altered.

Top 10 Money Mistakes New Parents Make

Suba Iyer October 24, 2014 • Family & Life•Insurance•Planning•Retirement•Saving & Investing

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Having a child is an exciting and exhausting experience. The feeling of holding your newborn in your arms cannot be described in words. Along with this exhilarating feeling, though, comes sleep deprivation, hectic schedules and the determination to provide nothing but the best for your precious little one. Even with the best intentions, it is very easy to lose track of finances or make unwise decisions with money. Here are some of the top money mistakes new parents make:

Not having life insurance (or skimping on insurance): We do not want to think about dying, especially after a bundle of joy just entered our lives, but we need to make sure the little one is provided for after us. A childless couple may need little or no life insurance, but having a child changes everything. If you do not have life insurance yet, please start shopping for a policy.
Ignoring disability insurance: According to the U.S. Social Security Administration, one in four of today’s 20-year-olds will become disabled before they retire. What protection do you have for your biggest asset — your ability to earn income?
Buying life insurance for the baby: I never knew people buy life insurance for babies until I started receiving at least one brochure a week from companies selling whole life insurance. Some even kept calling me with different tactics, either to scare me into thinking about any potential illnesses my baby could have in the future that would make her ineligible for insurance (if I don’t buy something right now) or to make me believe I am building her a solid financial foundation with the investment portion of the whole life insurance product.
I can easily see how these arguments would work on parents who want to do everything possible to give their kids an advantage in life; however, neither of these arguments are valid reasons to buy insurance for your baby. With the recent changes in the health insurance law, the chances of not getting insurance due to an illness are very slim. Even if that were the case, the insurance that is provided by these baby insurance products are too small to really make a difference. And regarding the second argument of providing a solid financial foundation, you will be better off by putting that amount in a college savings account and teaching your kids about finances. How much income does your baby bring in? Zero dollars? That is exactly how much insurance you should get for the baby.
Over-spending on baby items: The Internet is filled with lists of items you need for the new baby. In my experience, the best way to go about this is to buy the absolute basics — a place for the baby to sleep, a few Onesies (or sleep-and-plays if you are having a winter baby), diapers, car seat, a few bottles if formula feeding. For the rest, purchase other items as and when you feel the need after the baby arrives. You might find you never miss anything.
Falling into the must-have traps: This is similar to the previous point but causes a lot more damage because the cost is high. I am talking about how it is expected of a family with kids to need a bigger car, a bigger house and a nursery that is completely set up before they welcome the baby.
Forgetting what is more important, financially — your retirement: Saving for college is important, but even more important is saving for your future. You can get a loan for college, but there isn’t one to fund your retirement.
Ignoring college savings: After you fund your retirement and other immediate goals, make it a priority to re-work your budget to find money to start a college savings account. Start small and set it up to automatically increase the contribution with every birthday. If you get cash gifts for birthdays and other holidays, make sure to immediately set aside a portion of it to go to the college fund.
Postponing estate planning: Many parents assume that, if they don’t have a big estate, they don’t need a will or any type of estate planning. If you have any assets and you want your beneficiaries to receive them without a lot of hassle, set up a trust or a will. When you add a minor child to the mix, it gets even more complicated if you don’t have anything set up. Who will get custody of the baby in case you go? How will your money be spent? Do you want your child to get access to the money right away or do you want to set some money aside for his or her education? Do you want your child to get all your assets or do you want to donate some to a charity? Meet with an estate planning attorney if you have not already; the first meeting is most likely free and you will be able to figure out how much assistance you need to put a plan in place.
Not taking full advantage of all the tax/employer benefits: Most people only think of insurance and 401(k)s when they think about their employer benefits. A lot of employers offer much more than that — a flexible spending account, dependent care account, gym memberships, discounts to stores and even subsidized child care. Find out all the benefits you are eligible for and take advantage of them.
Failure to plan: When the baby comes, it is pretty much “stop everything else that is going on in your life and take care of the baby.” It is a lot easier and better to make a plan as soon as you know you are going to have a baby. The number of options available to save money might also go down the longer you wait.

Those are the big money mistakes of which I am aware. There are also other things like missing the deadline for a bill which can be fixed by planning ahead and automating bill pay, but from personal experience most of the companies will understand and waive the late fee once if you explain your new life change.

Have you made any of the mistakes above? What do you think are the top money mistakes new parents make?

The Latest Occupational Hazard? Binge Working

FCN Staff September 25, 2014 • Working

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This post comes from Jacqui Kenyon at our partner site LearnVest.

Have you ever gotten absorbed in a project on your laptop, only to look at the clock to see that three hours have passed?

TODAY Money calls it the “hypnotic effects of technology, ” and it’s just one of several factors contributing to a new and dangerous office trend: binge working.

With more and more employees connected at all hours, anxious about money and job security, and pumped up on good ol’ caffeine, working beyond any semblance of a normal office day is becoming more common—and sometimes with dangerous results.

Several binge-working-related deaths have made the headlines in recent months, including Mita Diran, a 24-year-old copywriter who worked a 30-hour stretch before collapsing and dying shortly thereafter.

Although Diran’s is an extreme case, there are many negative consequences that can stem from binge working, including a decrease in work quality, unplanned long-term absences and health problems. Ken Matos, who researches workplace trends at the nonprofit Families and Work Institute, told TODAY that the long-term effects will also include shorter lifespans for those who forsake taking breaks in the evening and on weekends.

The Real Reason Behind the Bingeing

Why do employees feel the need to toil for so many hours in a row without rest? It’s not just about how technology enables workers to be available at all times. Matos says there’s a deeper reason: Companies recognize and reward the wrong attributes.

“Organizations can develop a culture that focuses on the effort expended rather than the quality provided. I call these cultures of self-sacrifice, where employee value is measured not by how productive they are but by how much time and personal sacrifices they need to make to complete their work, ” he said. In this mindset, Matos says, it doesn’t matter if two employees produce the same quality results—whoever sat at his or her desk longer is considered the better employee.

Does this sound like your office? Check out our ten signs that you’re burning out—and how to stop it.

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

How California’s Drought Will Affect You

William Cowie October 14, 2014 • Consumer•Economy•Frugality•Miscellany•Saving & Investing

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Statistically, 80 to 90 percent of you live outside of California. When you read reports of the drought in California, then, your reaction may be something like, “Bummer for those dudes. Patti, please pass the peas.” You might want to reconsider, though, because chances are this drought could affect you more than you think.

Saying the drought in California is severe is a bit like saying the Queen Mary is a nice little boat. At least one Bay Area scientist says that, based on historic tree ring data, the 2013-2014 rainfall season is on pace to be the driest since 1580 (not a typo). That’s more than 150 years before George Washington was born!

How much longer will it last? A bigger question is: Will this drought continue, and how will it affect you if it does?

The answer to the first question is not encouraging. The toughest previous droughts in modern recorded history occurred between 1987 and 1992 and the Dust Bowl era of 1928-1932. The peaks of those droughts coincided with major recessions. And the current drought is already considered worse than both of those.

But, compared to some of the droughts in California’s history, it’s still minor. Scientists at California State University, East Bay, looked at historical data by examining the rings of old trees. They discovered California has a history of what they call megadroughts: droughts lasting ten or twenty years in a row. That means things could get considerably worse before it gets better.

Where does the water come from?

Given that California is arid, the state can’t make it on its rainfall alone. Fortunately, it’s flanked by the Sierra Nevada mountains, the highest mountain range in the lower 48 states. It’s the snowfall in the Sierras which accounts for much of California’s runoff, mainly through the Sacramento and San Joaquin Rivers.

And that’s the heart of the problem. Below are two NASA satellite pictures taken exactly one year apart, on January 18, 2013 and 2014. You can see the stark difference in the Sierra snow pack between those two dates:

: Image: NASA

In years when the runoff from rain and snow are insufficient, water users make up the difference from the state’s natural underground reservoirs, called aquifers. The aquifers, just like man-made reservoirs, depend on the runoff from rain and (mostly) snow to be replenished after the droughts ease.

The aquifers have always been sufficient to see the state through droughts, and the subsequent natural run-off replenished them again. However, it appears they are now being depleted at an unprecedented rate, creating concern that their level may have reached an unsustainable level. NASA and the German space agency DLR, collaborating on the Gravity Recovery and Climate Experiment (GRACE) satellite mission since 2002, released this composite image of the aquifers in California’s Central Valley recently:

: Image: UCI/NASA

The situation is so dire, California’s governor recently passed legislation mandating water table management throughout the state.

Who uses the water?

Contrary to popular opinion and bandwagon-jumping celebrities, it’s not irresponsible suburbanites with their backyard pools and manicured lawns that use the water; it’s nature. About half the State’s water is left alone, or “given to nature, ” to run off in streams and rivers. In times of drought, those sources are left untouched for the most part. Farmers use 80 percent of the remainder, and homeowners use only about 10 percent of California’s water.

Because farmers are by far the biggest users of water, they are the ones most affected by the drought.

What does this mean for you?

The Central Valley of California is to agriculture what Silicon Valley is to technology. Producing more food per acre than anywhere else in the world, it’s America’s top dairy producer and accounts for about two thirds of the entire nation’s fruits and nuts as well as over a third of America’s vegetables. It is also the largest producer of cut flowers.

Farmers have been adjusting for decades to rising water costs, switching their valuation metrics from yield per acre of land to yield per gallon of water. As a consequence, wholesale crop changes are taking place before our eyes. For example, cotton fields are being replaced by almond groves, because nut trees in general use far less water per dollar of revenue. Corn acreage in California has dropped 34 percent from last year; and wheat is down 53 percent, according to the USDA, either replaced with other crops or simply left fallow because there isn’t enough water.

It is obvious that food prices are going to rise because of the drought, and that has already started.

That’s not the worst part, though. California, on its own, is the world’s ninth largest economy, and agriculture is a significant component of its economic output. If the drought continues, thousands of jobs in California will be lost, hurting employment in the largest state of the union.

Dropping demand from the largest state in the union is bound to ripple through the entire nation to manufacturers of fertilizers, pesticides, seed and farm equipment, as well as food processors and transporters.

At a time when the nation’s economy is hanging in a delicate balance, that would be the last thing it needs. Think that’s perhaps a little dramatic? The last two major droughts peaked in 1932 and 1992, both low points in recessions (or in the case of 1932, depression). Given that food is the lifeblood of a nation, not just in terms of direct sales and employment, it’s not too much of a reach to expect a continuation of the largest drought in modern history to become a trigger for another recession, especially considering the fragile state of the American economy these days.

There’s not much you can do about food prices, except to brace yourself and not be surprised. However, there’s a lot you can do to prepare for another recession.

How do you prepare? In short:

Pay down your debt
Create or expand your emergency savings account
Do not buy any upgrades: wait till the recession, when you can get everything a lot cheaper
Stay away from speculative bubbles

Next time you see or hear a report on the drought in California, it might be worth your while to tune in. Forewarned is forearmed.