Sheep in field

Working from home is great, right?

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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.

Pigs feeding

How you’re like Jeff Bezos

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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.

Very surprised dog

Get off the ledge: financial planning in a crisis

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It just won’t do any good—no matter what action you can think of, it’s already too late. You couldn’t see it coming, nor could you act fast enough to stop anything. As Dorothy Parker said, you may as well live.

In my more-than-a-decade of telling people they need an emergency fund, never did I think everyone would need an emergency fund at the same time. But such are the times we are living in. And if you have that emergency fund, you now have the freedom to pat yourself on the back and do absolutely nothing.  The working person’s emergency fund should carry you through an interruption in pay checks, even for a significant amount of time. Since you’re going to be at home, you probably won’t be putting a lot of discretionary money into restaurants, air travel, etc. No, this isn’t the happiest news, but adaptability is one of the secrets to a satisfied life.

The retired person’s emergency fund should be larger—2 years. Call it the bucket strategy if you wish, but that cash should carry you into a recovery. Maybe the market won’t be back to where it was, but it’s extremely likely that it will be better than it’s been for the last few weeks. Sure, some things that are passed up never come back—especially services. We might schedule them again, but the missed time is probably gone. On the other hand, no one’s shoes, or tv, or car lasts forever. Eventually consumer demand will swing back up.

I’ve been invested for at least 40 years now, and I’ve seen numerous times where pundits thought the world was coming to an end. Other things I’ve heard way more than once:

  • This time it’s different (Only in the specific details, not in the fact of a downturn or reaction to it)
  • I want to sell everything, wait for the market to bottom, then jump back in (How will you know?)
  • It may never come back (Well, then prices will go down since we’re all in the same boat)
  • I need a much more conservative portfolio (too late on that one)

And in about a year or two…

  • Gosh, I wish I would have bought when the market was down
  • I stayed in cash but then everything took off and I missed it

When the market is high, no one wants to take profits because things could go higher. When it’s down, no one wants to buy because things could go lower. So, it’s never a good time.

No matter what you regret, you can never redo the past. All you can do is learn from it, with honest assessment and perhaps revision. Maybe you’d forgotten what it felt like in 2007-2009, when the S&P dropped to 676—it closed at 2,386 today). Maybe you were too young then to have any money. Maybe you’ve found out that in fact you are far more risk averse than you expected, and when things get boring again, you may want to adjust your portfolio. In the event that you are indeed flush with cash, and can take the risk, there are bargains to be had.

The correct portfolio has the correct balance FOR YOU. If you find you are having heart palpitations, either it wasn’t right for you or you need to get off the screens and go for a walk. Your dog is waiting for you.