Sheep in field

Working from home is great, right?

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.

Pete Seeger

You Need a Union

Pete Seeger

Click on the picture to hear Pete Seeger.

In perhaps the best era for the American worker, unions may have reached their peak power during the Harry Truman era. That’s about the same time the drumbeat against them began. I’m not sure how much of this was true, or how much of it was partially true but encouraged and enhanced by corporate PR that has always wanted to eliminate or disregard assertions of worker power. But let’s look at why you probably haven’t wanted to be associated with a union.

  1. They’re corrupt. There have certainly been headline incidents of union heads enriching themselves and pilfering funds. Right up there with corporate heads and government officials enriching themselves and pilfering funds. A more educated and involved membership could help to watch over such fancy accounting.
  2. They’re only for working class grunts. Yeah, that’s what they’d like you to believe. Because if you’re white collar, maybe telling you you’re elite will allow employers to compel you to work without a lunch hour, work at night, work on the weekends…work at their beck and call, because, well, you’re on a salary.
  3. They’re adversarial and only care about the welfare of their members, not the rest of society. This has been going on at least since World War II. Employees being treated fairly don’t have to be adversaries, and member ship groups (including lobbying groups, non-government organizations, and non-profit advocacy organizations…and members of Congress) exist to be strong advocates for their constituents.
  4. They’re racists. Groups that feel threatened will always try to exclude others who might be threatening, especially when there’s a small pie to be doled out. On the other hand, when unions have substantial minority membership, then they’re “only” for that minority. I don’t agree with either stance, and think that it’s in the self-interest of unions to have a large, diverse, and active membership.
  5. They’re selfish in their negotiations. This complaint mainly seems to be based on envy—unions have been able to negotiate better working hours, better vacations, better health insurance and far better pensions than most workers get—in fact, that’s a reason for them to exist. But the real question should be, why doesn’t every worker get these benefits? I used to think, for example, that teachers got outrageous pensions. Now I question why everyone doesn’t get a livable retirement pension.

If you still hate unions, I invite you to watch two movies and get back to me. The first is Germinal, starring Gerard Depardieu. The second is the newer movie, American Factory.  The reason people eventually turn to unions is because they are so exploited and endangered, with little or no recourse, that their only choice is to risk everything.

Nearly everyone I speak with in the healthcare field could use a union. More and more healthcare is driven by gig work (with no benefits), outrageous productivity requirements (aka a virtual assembly line where the belt is continually speeded up), expectations that you will work through lunch and take more home, and fire-at-will if the professional tries to complain about the impossibility of delivering quality patient care. I’m not as familiar with other industries, but I do hear stories. Gig work is a huge step in screwing the worker. The employer has managed to shed the last vestige of responsibility for the worker—hire and pay only when they can make money off the worker, no overhead in providing facilities or equipment, the worker responsible for providing transportation, no benefits (unemployment, days off, health insurance, disability) and, the first to go, no retirement. Getting rid of pensions (the backbone of the WWII generation’s retirement), was only the first step. But hey, you’re free to work flexible hours, and provide your own home for a work site. And gee, we’ll pay you a little bit more than the going wage, so you’ll get snookered into thinking it’s a better deal. (See my post, here, on calculating that.)

Unions need to find a way to organize workers from different employers, different from the model they’ve used historically. They can call themselves professional associations for all I care, but if they walk like a union, quack like a union, and negotiate like a union, they’re a union. As the strong unions in the Scandinavian countries have demonstrated, unions can be partners in advancing the interests of all concerned, including employers, who can benefit by more satisfied, productive workers.

Oh, and one more suggestion. Go watch Metropolis. You might not think it’s science fiction any more.

Window offering salary loans

Should you pay off your loan or save?

Yes.

Oh, but you wanted to know, which first? It’s a question that virtually every client asks me, but the answer is (as with so many things) it depends. So, I’m going to suggest you work through this checklist.

You should always pay off the minimum required payment on your loan. If you don’t do that, you’re in a world of hurt and that’s a topic for another time. But I’m going to assume that you can scrape up at least a little more than that and you’re wondering where you should put it. BTW, I’m going to be thinking mostly of education loans, but this advice also applies to credit cards and home mortgages.

  • Do you have an emergency fund?

Without an emergency fund, you’ll never get out of debt. We don’t know what the emergency will be, but we know that they come up fairly regularly. See my post here for more discussion. No emergency fund, no extra loan payoff.

While I like to see an emergency fund of 3-6 months necessary expenses (including loan payments!), it can take people just starting out a couple of years to build to that level. A $1,000 emergency fund is barely survival (one vet bill or car accident deductible can easily wipe that out.) Once you have at least $3-$5,000 in your emergency fund, you can begin to consider other possibilities, but I can’t advise going whole hog until the fund equals at least your health insurance deductible + out of pocket max + rent, utilities, and loan payment for however long it might take you to find a new job.

  • Are you contributing enough to your employer’s retirement fund to get the match?

If your employer matches your contribution, that’s a 100% return on your money up to the amount of the match, e.g., if you contribute 1.5% and they match it at 1.5%. If you contribute 3% and they match 1.5%, that’s a 50% return. (We could keep going—you contribute my recommended minimum of 10%, they match at 3%–30% return). No legit credit card or high interest loan is going to charge you 30% interest. Plus, you get an additional return on this investment and maybe a tax deduction, although I recommend you go with a Roth option if you have it.

Before paying extra on any loans, you should contribute anything you can scrape up until you at least get the full match.

  • Are you saving enough for retirement?

This is actually a different question than the one above. You need to be saving 10% of your income toward retirement, and more if you didn’t start until your mid-30s or later. Until you can put away at least 10%, in most cases I recommend you focus on retirement savings rather than early loan payment.

  • What’s the interest rate on the loan compared to your investment return?

As a rule of thumb, I use 5% as a basic cut point. If you’re a dummy and keep all your money in a savings account, you’re earning .5%-2%, so take it and pay off the loan. But let’s say you have a pretty good investment (maybe, quality mutual funds) and you’re earning an annualized rate of 6-8%.

What’s the interest rate on your loans? Credit cards at 22%? Pay them off as soon as you can. I still recommend that you contribute to the retirement plan first, but maybe only for the minimum match until you get rid of the high interest payments.

Student loans at 6-7.75%? As soon as you’re contributing at least 10% to retirement savings, start attacking these loans. They’re as high or higher than you’re going to earn from investments. Even if your employer only matches at 1.5% and you’re contributing 10%, you’re making 15% immediately + investment gain. However, I can wrap my mind around going after these once you’ve secured the minimum match. It’s not a numbers answer, it’s what will make you feel better.

Student loans at 3.25-4%? I wouldn’t rush to pay these off before term. You’d be better off saving more, even if it isn’t in a retirement account—a quality balanced or target date fund should produce better returns. However, if you have managed to accrue an emergency fund of 6 months fixed expenses, a “goals” fund for whatever your goals are (kid’s college, house down payment, etc.) and you just really want to be debt free, then you should do what will make you feel better. These are pretty far down the totem pole, however.

Mortgage? Mortgage interest rates are really low right now, so in most cases there’s no financial reason to pay them off rather than investing any excess money. There are a couple of exceptions: let’s say you have a big bonus or sudden inheritance, and your family might qualify for college financial aid. You might be better off paying off or paying down the mortgage since the value of the house isn’t counted on the FAFSA (it is on the CSS-Profile), whereas an investment account will be counted as available for paying.  The second situation is retirement: most people I talk to feel better when they own their home outright at retirement, since it’s probably the biggest monthly outlay. Just be sure you  have enough for unexpected repairs before you clean out cash to pay off the mortgage. You don’t want to be back borrowing on a line of credit at a higher rate.

As with all things financial, your mileage may vary. There are a lot of moving parts to consider when contemplating loans, and achieving the right balance isn’t the same for everyone. But that’s why people talk to a financial advisor, no?