Category Archives: General Financial Planning

Financial choices in a weird job market

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I keep hearing how the job market is at full employment, yet I’ve written before how insecure most younger workers seem to feel in their jobs. But yet again a few days ago someone commented to me, “Oh yeah, in (XXX industry) they’re just begging for people”. Well, “they” may be begging but I can tell them why they can’t fill the positions:

  1. The location is horrible: oil rig, frozen tundra, windowless cubicle, crazy hours, or crime infested neighborhood with a perilous journey to get there. So, basically, they’re not paying enough to make the risk worthwhile (as with any other investment).
  2. There’s a completely unrealistic set of requirements. Either the employer is requesting more education and/or experience than the job could conceivably require, or their requirements are so specific and demanding that two people in the world have those qualifications, and they’re not paying enough to attract them, or to encourage anyone else to invest in such specific training.
  3. Employers are thinking of the old days, when you could work your way through college. Millennials have heavy debt burdens—they’ve financed their careers long term. Requiring a masters’ degree in an urban area and offering $50,000 a year is so unrealistic as to be almost breathtaking. Couple that with the gig economy of “staffing companies” who offer no retirement benefits, no health insurance, and minimal vacation and sick days (and no paid holidays or overtime for working those or weekends—it’s all coming out of your “personal days) and, well, they’re not paying enough. Interestingly, staffing companies and recruiters often think they’re offering a higher hourly rate and I’m sorry to say that some people are dumb enough to fall for that. But if you calculate the value of benefits, cost of health insurance, value of paid time off, etc. you are almost certainly being screwed—because when did an employer ever have your best interests at heart?

 

Under capitalism, the market should be responding to these shortages by raising wages, right? Right. Instead, they’re offloading all responsibility for workers and directing ever more in the CEO’s pocket. We need someone creating an equally strong pressure (such as unions, government regulation, and new legislation controlling egregious corporate behavior). Will this plunge the value of companies and non-profits to operate? No, I don’t think so—just cost the 1% their ability to take everything. And great, offload responsibilities for workers–but then let’s put corporate taxes in place that fund government provision of those services.

 

It’s particularly troubling in areas that are critical to health, well-being, and education. These fields are supposedly “desperate” for trained people, yet many trained people can’t readily find jobs. I know of one situation where someone was being interviewed for a position at a fragile-medical rehab center. Although the candidate had absolutely no experience in the field, they offered a job after a 20-minute interview, if said candidate would accept an outrageously low salary, no extra compensation for weekends or holidays, high cost employee paid health insurance, no training, no mentorship, yadda-yadda.   They were obviously desperate for a warm body to fill the slot. But if you landed in the place after being in ICU, would you want to be treated by that new hire? And why was that job going begging? Because they’re not paying enough.

 

I’ve been amused lately by the practice of employers not disclosing the salary range for a position, and I’ve actually seen millennials comment that it would be “impolite” to ask that when being interviewed (either by phone or being asked to take time to interview in person).  Seriously? Why would you not ask—because you might offend an employer by being interested in working for money? As Samuel Johnson said, Nobody but a blockhead ever wrote except for money.

 

And why would an employer be offended by an applicant asking about the salary range, especially so as not to waste anyone’s time? Because they know they’re not paying enough. And for them, your time is free.

So go ahead, tell me why I’m wrong (politely, please). I’m open to changing my perspective.

Ukulele

What I learned at Ukulele Camp that applies to finances

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I’m pretty die-hard about DIYing everything I can. Yes, I know there’s a lot of argument that you should pay someone to do things while you’re out earning more per hour at something else, but I don’t buy it entirely. First of all, most of us spend plenty of time scrolling Facebook, binge-watching Netflix, and staring into the refrigerator. None of that is billable time.

There are a lot of projects that just require brute force and minimum skills—I’ll paint my bedroom over a weekend before I pay someone $800 to do it. However, I draw the line at danger (painting the trim on my second floor from a loooong ladder), back-breaking difficulty or heavy hauling (digging post holes and installing a fence), or things that I’m not confident about learning from YouTube (installing a new kitchen faucet and drain).

I’ve had quite a few music lessons over the past, um, decades, so I have been pretty convinced that I could teach myself to play ukulele and guitar from the huge number of books, YouTubes, and online courses available. And, they’ve worked pretty well. Feeling somewhat confident, I went to a few jam sessions at the Old Town School, where I discovered I had miles to go before I cheep. I definitely needed some real-time instruction.

This weekend we trucked up to Midwest Uke Camp in Olivet, Michigan. I came home, not only reinvigorated about playing, but about the place of music in life in general—playing, performing, singing, dancing. With all the grinding away, I had lost sight of the pure joy of it all. And since November, 2016, I think I’ve lost sight of some of the joy available in life. As so many blues masters knew, no one can take music away from you.

But, like everything else I do, I did see some parallels between the very delightful Uke Camp experience and our financial life:

  • When there are a lot of choices, you can’t swoop up everything.

For some time slots, there were 3 or 4 classes I wanted to take. I tried to find out who was a good teacher (all of them!) or offered something particularly appealing. No matter how much you wish, you can’t take more than one—and you probably can’t afford to hook on to every good investment. Go with what you can, given what time and knowledge you have available.

  • It’s not possible to make the optimum choice every time.

There was one class where, maybe, I could have chosen better. The teacher’s style just wasn’t right for me, although his music, omg… But that doesn’t ruin the whole selection, nor the other seven or eight choices I made. Similarly, for every given number of choices (investments) you make, some will not turn out as well as you expect. And some will perform far better—who knew I loved Django Reinhardt gypsy jazz? You have to look at the total experience (performance), incorporate what you learned, and try to do better next time, where you will make mistakes again. Improvement is not perfectly linear, but it should lurch in the right direction.

  • In person makes a difference.

I adore self-study. I can make all kinds of mistakes and make them LOUD, and no one will hear me, except for my dog. When she sees me grab the uke, she immediately asks to go out.

Nevertheless, there’s a lot to be gained from the personal interaction with a good teacher. They can correct subtle mistakes in real time, come up with a trick that solves your individual problem, and there’s the serendipitous addition of techniques and information they just happen to think of that’s not in their books or videos. A good teacher always knows more than they’re putting in print. That’s the chief benefit—the individualization. Sure, you can learn a lot about playing (and financial planning) from a pre-fab program, but at some point, you need it to apply to you, particularly. I think online lessons, websites, asset allocation programs, and all that jazz are great, but everyone has some unique challenges. In fact, if you come to the professional already having a good background, you can probably get more benefit from the one-on-one.

The interaction with other people can often give you new insights and ease your mind about how you compare. It’s oddly comforting to see other people struggling or making and recovering from mistakes. I’d love to see more opportunity for people to be part of investment clubs.

  • Seize the opportunities when offered

The best teachers may not be back. The event probably will not go on forever. It can be hard to find fiduciary, fee-only advice. The crowd was mainly older than 50 and so many said they wished they’d done it, younger. I hear it all the time about financial planning, too. Don’t put it off—neither playing an instrument nor making a financial plan are as difficult as they seem in your imagination.

Health care stethescope

That other retirement account: Financial planning for HSAs

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Health Savings Accounts (HSAs) may be the best deal out there, if you can get it. All of us like to beat the tax man, right? HSAs are what’s known as triple tax free: you get a deduction when you put money into the account, the account grows tax free, and as long as you make withdrawals for allowable health care expenses (pretty easy to do), you don’t pay any tax on that either. They’re like a traditional IRA or 401k going in, and a Roth coming out.
But like many good things, there are a few problems and things to watch out for:
1) I’ve probably repeated this for the millionth time now, but you don’t have to pay yourself back for the medical expenses in the year you spent the money. You can accumulate the receipts (and carefully file them so you can find them) and withdraw them in any year, as in when you actually retire. You’ll have to be able to pay your deductible and out of pocket costs out of pocket, but if these are fairly low, you can keep the HSA invested.
2) As with every financial account, watch the fees. Some accounts ding you heavily if you don’t keep a minimum balance. Some charge you a monthly fee. Some employers will pay fees while you’re employed with them, but if you leave they stop paying the fees and the account starts getting bites out of it. If this is the case, you can rollover your HSA into a servicer with different (hopefully, better) rules.
3) It doesn’t do you any good to park it in a savings account paying half a percent. In this case, woohoo it’s growing tax free. But the growth is infinitesimal. You want an HSA that allows you to transfer the bulk to a brokerage, or at least invest in mutual funds. Even if you still work for the same employer as when you deposited the funds, you can rollover the account (or most of it) to a provider of your own choosing. Be sure you carefully check fees and options at your current account, and at the one you are thinking of opening.
4) If you are working with an investment advisor, you may want to consider whether the HSA should be invested as part of your overall portfolio strategy. If it’s going to be untapped for years, it should be managed to build wealth.

Once you’re retired, it’s probably a good idea not to hoard that HSA. If you leave it to your spouse, it becomes their HSA. But for any other heir, it’s a lump sum distribution that they will have to pay taxes on.

So, how do you use it up? Well, of course you can submit those hoarded medical expenses you’ve saved. You can also use it to pay premiums for long term care insurance, premiums for Medicare Part B and Part D (drug), vision and dental care not covered by Medicare supplement insurance, and any copays and deductibles. You cannot use it to pay supplemental or Medigap premiums.

Since these accounts do not usually grow extremely large, it seems to me that it would be pretty easy to use it up during a normal retirement. It’s a nice way to build up a war chest for unexpected medical expenses that crash retirement budgets. Too bad I can’t use it for veterinary bills.