College contingency plans

Posted on August 18, 2020August 18, 2020 by Danielle

Gandalf and Frodo I’m a big fan of always having a plan B, and having more than one stream of income. You can only control you own actions, and try to have a plan on how you might cope with unexpected events. That’s why we diversify our portfolios, have an emergency fund, and try to think of some type of side job that keeps some money coming in if the main gig goes kaput. The era we’re currently enduring highlights the worth of these principles. So let’s apply them if you, or your nearly-adult child, is in college at the moment.

If you’re returning to campus

I wouldn’t. If we view the recent experience with the Univ. of North Carolina at Chapel Hill, it’s entirely possible that schools that open will rapidly close down. This means that all the expense of moving clothes and tiny refrigerators, purchasing sheets for the extra long twin that exists nowhere else on earth, getting there, getting a college wardrobe (often for a different climate than where you live), etc., will all be spent again getting out of there. It’s easily hundreds, if not more, directly down the hairy dorm drain.

Nevertheless, I see the desire to get rid of parents/kids and live your life independently. I’ve heard that some students are still renting apartments near campus and using those as a base to study remotely. My concerns, as might be anticipated, are about health (and costs).

Sign a HIPAA form. Without permission, a school or health service cannot discuss student health with parents. Often the school will include these with registration, but double check to make sure one is on-file with the student health service and if possible, with the local hospital and any doctors that the student may use.
Double check insurance. Some types of insurance may not have in-network providers in the campus area. Know what and whom the insurance will cover, and take a list of in-network hospitals and maybe a few names of internists with you. Bookmark the insurance tool that allows you to check whether a health provider is in-network. You don’t want to be scrambling to find this out in an emergency. If your health insurance is lacking, you may want to purchase the school’s insurance, if only for backup.
Where is the nearest emergency room? For urban campuses, there may be a choice and the whole family should know where the student would go (or where EMTs would take them), so that no one has to experience the horror of calling around to find someone.
If you need medical care, how will you get there? What if you’re too sick to drive, or call a ride-share, or even walk to the health service? Does the school have anyone to send to check up on you, or are you dependent on friends (who may also get sick)?
How will you get food or prescriptions? Even well-intentioned friends may not be dependable for three meals a day for many days. They also may not be eager to get something contagious. This is even harder if you’re not living in a dorm with food service. Be sure you know what pharmacies, groceries, and restaurants will deliver, and if it applies, whether they’ll deliver to a dorm.
Have a credit card. Okay, maybe everyone does but these have more protection than a bank debit card. This is one instance where student and parent should be able to see charges coming up as an alert, and because fraudsters are happy to take advantage of the sick, the protections are worthwhile. Even being on a parent’s account builds credit history.
You might need an emergency fly out plan. More than one university closed its dorms while students were on spring break. Students were then faced with returning to campus to clean out their rooms. This would be a really good time, if returning to campus, to take only the minimum with you until we all see whether this is going to work.

If you’re working remotely

Yeah, we’re all climbing the walls. There’s little that will substitute for the chief advantages of learning IRL. You won’t get the spontaneous conversations with professors and students; won’t get a campus job assisting a prof; won’t get the late-night debates about profound life issues; won’t get to meet famous people brought on campus; and will have a much harder time getting drunk and getting laid.

However, actual college study is much more about what you do yourself—reading, thinking, forcing yourself to develop your writing and argumentation skills. In fact, learning remotely is much more about self-instruction, with the advantage of professorial guidance and, most important, personalized feedback—the one thing that is hard about self-instruction. College is a great time to become the person responsible for your own learning. While you may be accountable, and appreciate the accountability, nobody is going to track you the same was as in high school. Even on campus, many people can’t muster the self-discipline, and those people are called dropouts. Work your goals: you’re in control of your learning.

Sure, it’s not what you dreamed of. Sure, it’s tough and you’re missing out. So is everybody. It’s a great time to learn to roll with the punches and make the best out of a bad situation—a most valuable and frequently used adulting skill. Don’t hesitate to get help—you don’t have to “desperately need it”. Therapy or counseling can also be growth enhancing, helping you to a better life. Most mental health professionals are doing tele-health appointments, and many insurance policies will cover those, at least right now.

On the other hand, you might find that you have more time than what you’d have on campus. You’re not walking to class, and you’re probably not going to parties, working, or hanging out in the campus cantinas. This is a great found opportunity to learn something additional—coding, home repair, guitar, adulting skills. My most recent newsletter had a much longer article on these ideas, so email me if you’d like a copy.

“I wish it need not have happened in my time,” said Frodo. “So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”

Working from home is great, right?

Posted on May 13, 2020May 13, 2020 by Danielle

A recent New York Times article opined that big office tower landlords are really nervous that tenants will never come back, or greatly reduce their rental footprint. Why? Because companies have discovered that many employees can work from home. You betcha.

The comments on this article were starry-eyed positive—yay, great, I love the freedom and flexibility! No boss looking over my shoulder! I can set my own schedule!

Not so fast! I ask my perennial question: when did a company ever decide to do something that was in your best interest, as opposed to theirs?

I think there are a few things missing here, and surprise, they can cost you (not the company).

Cost of space

If the employer isn’t providing space for you to work, guess who is? YOU. You’re not going to be able to work on your dining room table forever, so that means you need to find somewhere relatively quiet to work on a daily basis. That might be a challenge in many big-city apartments. This is a definite disadvantage if you can’t afford more space, have a partner who also works at home, or have kids (even when school reopens) who are home for any portion of the workday.

You might be able to deduct part of the cost on your taxes (see this article) but you’re on the hook upfront.

Cost of utilities

Do you turn the thermostat down at home when you’re at work? Turn off the lights? Flush the toilet? Your heating and air conditioning, water usage, and electricity are all going to go up when you work from home. If you’re lucky enough to have employer-provided food or coffee, that’s on you now. In fairness, you’ll save on commuting costs (and lose any employer provided subsidy for that).

Cost of equipment and tech support

Maybe your employer will provide a computer and cell phone right now, although those types of benefits have a way of disappearing over time. How about a printer? Mine went kaput a few weeks ago and it was nearly impossible to order a new one—all the affordable ones were cleaned out. A modem and maybe better internet service? Have you noticed a huge slowdown when more than one person in your home is on the internet at the same time?

I’ve always been extremely envious of people who, when their laptop starts acting up, just bring it into the IT department and exchange it for a new one. Or can get their IT person to come fix whatever is acting up on the desktop. Guess who does it when you work from home? Hope you’re good at it, because my guess is that’s going to be remote, too.

Work expands to fit the time available

I often tell potential freelancers that indeed they will be freer—but also, free to starve. Many people who work from home find that they are working more hours, not less. Yup, you might start at 10 am, but the time spent chatting with other co-workers (unless you never need a break) is gone, and what’s to prevent you from working all evening? In the stone age, most workers were off the hook when they went off the clock. I know that has changed, but I don’t see it as a positive trend that now your boss knows where to find you, and they’re also thinking your time is flexible, which means to them that you’re available 24/7. After all, now there are no off-hours.

As many newly self-employed people find out, controlling interruptions is a learned skill in itself. Now, your mom knows you’re at home. Every organization that needs volunteers, every classroom that needs assistance, every errand that no one else wants to do—well, you have flexible time now, don’t you?

Finally, big brother will probably find a way to watch you. After all, insurance companies have already promoted lower rates if you’ll let them install software on your car to monitor your driving. I’ve already seen articles on software being developed to allow your boss to monitor your time and productivity at home.

Harder for employees to organize

Divide and conquer. Employers know it will be very hard for employees to come together to unionize, and even if they do it through (the company’s) Zoom meetings, there’s a record of whom and when. One of the most important ways employees find out they’re being screwed is through casual conversation that allows them to find out who is earning what—much harder from home, and harder to establish that your work is comparable to someone else’s. Which makes it harder to ask for a raise or get promoted—out of sight, out of mind.

Good luck on getting Human Resources involved in any issue. Because they’ve never seen you. And they’re working from home, too.

Remember when companies told you that the new 401ks would offer you great tax benefits and allow you to invest however you wanted, rather than that stodgy old pension that guaranteed you lifetime retirement income? How’s that working out? Well, it saved corporations a ton of money, shifted all the risk of investing to you, and in many cases allowed the employer to quietly reduce any match over time, so their costs became even lower. Then, they shifted the costs of administering the plan to you, while increasingly restricting your investment choice since “most employees don’t understand investments anyway”. But of course, you’re to blame if you don’t have enough for retirement. Yeah, that freedom is great.

Social isolation

We’re learning a lot about that right now, aren’t we? Maybe the boss is a pain and your co-workers drive you crazy, but surely you have a few friendships there. You’re all alone at home. There’s no break, and very little real-life human contact. Even worse, people who are in a disruptive or abusive situation now have no outlet, no break to get away from it all to focus on something else. Norms break down (self-employed people always report how difficult it is to get “to work” on time), and the perspective you can get from comparing yourself to others disappears. Plus, it’s just plain lonely.

Easier to get rid of you

It’s hard to see how personal loyalties can hold any sway over management decisions. You’re just a disembodied voice on the line. In fact, one unit ought to be pretty interchangeable with another, so why not just replace you with somebody off-shore who speaks fairly good English?

“Freedom” always costs you something. And it’s pretty clear that some people are going to go willingly to the slaughter, as long as the feedlot is made to seem pretty tasty.

How you’re like Jeff Bezos

Posted on May 4, 2020May 4, 2020 by Danielle

But maybe not in a good way. Every third Facebook post or so mentions that ole’ Jeff should give away his billions and that would fix everything. I used to hear this about the Catholic Church, but Bezos is become the new favorite target. Why shouldn’t he—after all, Bill Gates and Warren Buffett give away buckets.

Here’s where you come in. Do you have a nice house? Decent car? Relatively recent wardrobe? Stash of wine, beer, booze, weed? Most of us (reading a personal finance blog) can answer yes to at least some of those. So, let’s say you’re now out of work. Don’t know how that happened. Can you pay the bills with any of that? Write a check off your house (without refinancing)? Pay the utilities with a 24-pack of craft brew? Cash out your 401k with no penalty, no tax, and not losing the employer match? Just how much are you giving to charity?

Truthfully, I don’t know any insider details about Jeff Bezos’ money. But I do know the difference between assets and income. Assets are wealth, and add to your net worth, but they may or may not produce spending money for you.

You can be a little old lady in a paid-off $2 million dollar house (an asset), but be scraping by on Social Security (income) if you don’t have any other income-producing assets like bonds, dividend paying stocks, or stocks you can sell. You would have a high net worth but very little ability to spend.

As far as I can determine, post-divorce Bezos owns about 11% of Amazon’s $1.175 trillion, so we’re not feeling too sorry for him. He also owns the Washington Post and, my guess, one or two shares in other companies. However, like your wine collection, Bezos has to sell Amazon to get money out of that wealth, which he does. He can’t just dump them whenever he feels the need for a $100 billion or so in chump change, because an insider making huge sales is a pretty good way to tank the company. Amazon doesn’t pay any dividends (Microsoft does) so selling stock is his source of income from the company. Sure, they pay him $81k in salary (kind of a joke), but the rest comes from stock grants, some of which he apparently sells each quarter. The market expects those sales, so no big impact, but liquidating and giving away half his wealth would raise an eyebrow or 10,000 on Wall Street.

By the way, it’s somewhat the same with the Catholic Church—an awful lot of the wealth of the Church is in real estate, structures, art works and artifacts, etc. Many of these are not easily sold, although some (real estate) can produce income. Let’s say, for example, you have a grand piano and a house, you have the mini-version of assets that don’t produce income (unless sold). If it’s your mom’s Steinway or your kid’s harp, it might be very difficult for you to countenance turning that to cash.

Bill Gates and Warren Buffett have pledged to give away huge portions of their fortunes, but not all at once and mostly through their foundations. Bezos could certainly do the same, as well as vastly improve treatment of workers. But here’s something overlooked: a publicly traded company has a duty to maximize return to shareholders (of which you are probably one, if you have a 401k). A company is supposed to be run as frugally as possible in order to return the most to its investors.

Business practices can and do change when workers organize themselves in such a way that management must respond to their demands or lose even MORE money than that response would cost—and why most companies fight unionization tooth and nail, until strikes, vandalism, pilferage, etc. start costing more than meeting workers demands. It’s ridiculous to assume management will take care of you or is benevolent: when publicly traded, they have a duty to get you as cheaply as possible.

Another agent for change is government regulation—when those regulations impose costs of doing business that the company can’t evade, and that (hopefully) are imposed on all businesses in the industry evenly. Regulatory agencies such as OSHA, the Consumer Protection Bureau, FINRA, and the EEOC can and sometimes used to strike fear (and produce change) in the hearts of employers.

Finally, the way to get money out of the hands of the company (and CEO, and investors, which also means you if you invest in a 401k) is taxation. Sure, companies howl about this and saber rattle about going somewhere else (which can also be addressed by regulation), but western European corporations still seem able to operate even when taxed.

So if you think Jeff Bezos should be compelled to provide better working conditions, support health care, or re-distribute wealth to his workers and the society that enables his success, appealing to his personal good heart (I don’t know if he has one or not), or trying to shame him in public isn’t the way to go. Why should it be an option? Why should a very few people have the opportunity to amass that level of wealth, then be lauded as heroes if they’re magnanimous enough to give some fraction of it back to charities which mirror their own priorities?

What we should be advocating for is evenly applied government regulation, taxation, and strong partnerships with unionization. These actions might make a company less profitable in the short run, but provide for a healthier, better educated, more fairly treated workforce with a viable safety net not dependent on the largess, or lack thereof, of any smart rich person.