Voices of reason in a world gone mad

The New York Times had a really great article in the Real Estate section this weekend about four new homeowners who each found that plugging the leaks in their budgets gave them the wherewithal to buy property in New York City.

I'm not going to summarize the article; you can read it for yourself. What really hit home for me was a quote from one of the new homeowners, who stated If you want to own a place, you have to do everything to own a place and everything else comes second.

Yup. This might not be the case everywhere, but for middle-income people in New York, it certainly rings true.

For many people, it's difficult to recognize the importance of viewing income as a pool of limited resources and prioritizing spending accordingly; wanting to have it all and have it all right now is a major cause of the consumer debt problem in the United States. (I'm not counting situations like catastrophic illness or business failure; while those situations can and often do result in heavy credit card debt, I don't consider them in the same category as reckless consumerism.)

With all the doom and gloom in the media about the low national savings rate and implosion in the sub-prime mortgage market, it makes me genuinely happy to read about people who set lofty goals and, through hard work and willingness to make tough decisions, succeeded.

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Dilemma

PF community, I need your help.

I have a very good friend who is having a big birthday next month. It's been suggested that we do something really special for her, and I'm all for that. The idea that's been proposed and accepted with wild enthusiasm by everyone else is a formal dinner cruise. There's no firm cost estimate yet, but I'm hearing $130 to $150 per person.

My budget is already tight; this gives me the heebie-jeebies. I've proposed a few less expensive alternatives, but everyone else wants to do the dinner cruise.

What do I do? Go along with it and make that be my entertainment for the month? Or do I bow out and be (or at least feel like) a bad friend?

Your input would be greatly appreciated.

ETA: Never mind. I think I've figured it out.

This is a once-in-a-really-long time celebration, and I know it would mean a lot to my friend. I need to keep my priorities in perspective and suck this one up.

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House porn

Once every couple of months, the New York Times publishes a magazine-format supplement called Homes. There are a few fluffy articles that I never read, but the vast majority of the magazine is ads from various real estate agencies with photos and descriptions of properties for sale. Some of the items that caught my eye in this issue were:

CPW Luxury Home
Exclusive. Triple mint duplex with 2 terrances. Grand LR/Park view, FDR, huge EIK, library, study, playroom, 5 BR 4 bath, 2 powder rooms, 2 w/d's. F/S DM Condo. $18.5M.

Beautiful House 1st Offer
Exceptional 18', story fam TH w/priv South garden, Hi ceil, orig arch details, bay window, 4 fps, 4-5 BR's, 4.5 bths. Excellent cond. Asks $5.2M.

Great Bones
This spectacular 10 rm duplex on Park Avenue in the 70's has unique architecture, 3-4 BR's & 2 bths upstairs. Double-sized 60 foot LR w/4 sets of French doors/Juliet balconies & fplc _ elegant DR, EIK w/laundry rm & 2 staff rms w/bath. It looks & feels like a house. $6.25M.

The pictures of these places are unbelievable. They are so far out of my price range that I can't imagine them ever being affordable, but I drool and fantasize over the magazine anyway. It makes me want something I don't have.

That's what makes it house porn.

In reality, I have nothing to complain about. I live in a one-bedroom apartment in a 1916 building in a gorgeous neighborhood, and my apartment was gut-renovated with a great deal of style and innovation by the previous owner (an architect) before I got my grubby paws on it. I have a dishwasher and a washer and dryer, and in the middle income New York real estate market, that's instant street cred. My place is small (577 square feet), but I don't have a lot of stuff so it doesn't feel small to me.

That is, until I read house porn.

It's taking a little longer than usual for the effects of house porn to wear off this time, so I thought I'd take a few minutes to remind myself of all the great reasons why living small is fairly awesome:

1. Lower property tax
Less space = lower property tax and that means more money in my pocket. That one's a no-brainer.

2. Lower maintenance
In the co-op world, that means that my monthly maintenance fee is affordable. I've seen what maintenance is for two-bedroom apartments in my building, and on my salary it would be tough to swing that and a bigger mortgage.

3. It's greener
By that, I mean that it uses fewer lightbulbs, less heat, less air conditioning in the summer, and less energy overall. That's good both for Ma Nature and for my utility bills.

4. It's good discipline for not accumulating excess crap
It's either me in my space or lots of stuff in my space. Open space is way better than lots of stuff.

5. It's easy to clean
One hour on a normal day, two tops if I do things like empty and clean the refrigerator or scrub the kitchen floor.

6. It fosters creativity
Not having a lot of stuff means coming up with creative workarounds for things I don't have. It also means coming up with inventive storage solutions.

7. It's consistent with my value system
I like the concept of enough. There's a great saying that goes enough is as good as a feast, which basically means that there's great benefit in having sufficent _________ (fill in the blank), but once that point is reached, there's less to no additional benefit gained from having more. The economic term for this is diminishing marginal utility. Having a big apartment would be fun for a while, but between the costs of maintenance and taxes and the effort of keeping it presentable, it would get tiresome pretty quickly. Having a small apartment may not be perfect, but it's enough and I never get tired of what I do have.

Although housing trends in recent years have resulted in bigger and bigger McMansions stuffed onto tiny lots, the fallout from the end of the housing bubble means that a great many people are upside down, owing more money on a monstrosity than it would sell for today. I have a feeling that between the fallout from the housing bubble and the soaring costs of utilities for these big houses, the era of the McMansion is over, at least for now. Instead, my hunch is that smaller houses and apartments are going to be in huge demand once people scared out of the water start venturing back into real estate.

Don't know about you, but if you look at it in ecological and environmental terms alone, I think that's a generally good thing for all of us.

Small is beautiful.

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Money and your mate

Madame X has a really interesting post up today about online dating, wealth and managing one's image while looking for a date online. You can read her post here.

It got me thinking about the qualities that people look for in a mate. The variation here is as vast as anything I can comprehend; to each his own, viva la difference, good luck with all that. Speaking strictly for myself and physical attraction factors aside, I'm highly attracted to intelligence, a good sense of humor, and financial acumen.

None of this, I realize, is earth-shattering. Go onto Match.com and in seconds you'll find a bazillion people with the same or similar criteria.

My experience with attraction is that it's partly innate based on how I'm wired, but it's also influenced by experience. The last person I dated before I met my now ex-husband was a personal trainer, dancer, and occasional model. Women actually turned around to stare at him on the street. We went out five or six times; dancing was a lot of fun because at that time, I had had five years of dance lessons and was pretty good. Having studied dance professionally, he was a man in a million who can lead so well that a woman doesn't have to be much of a dancer to be able to follow. That part was fun; the arm candy element was also really exciting. As it turned out, though, having a conversation with the man was like talking to the frickin' Berlin wall.

Not surprisingly, that fizzled fast. Intelligence and critical thinking skills became much more important to me after that.

When I met my ex-husband, he lived in England. Being English, I suppose that made sense. He was very bright but undisciplined: he was an expert in anything that interested him and not much bothered about the rest.

Personal finance did not interest him.

We fell in love quickly and before too long, he landed a job in the US and we moved in together. He tried to become enthusiastic about personal finance because it was so important to me, but having never saved a cent in his life, he found it difficult and constraining. We were together for four years in total (married only fifteen months) and although we had periods of great happiness, money and spending were a constant battle. I wasn't concerned that he'd summarily quit working and decide to live off of me, but if I hadn't kept an close eye on the cash inflow and burn rate and negotiated limits that would allow us to fund our 401(k)'s and IRA's, and save for a home of our own, his spending would have put us in deep, deep trouble. (After we were married, I learned that it was just as well that he left the UK when he did: his credit was completely trashed and he had a drunk driving conviction on his record. Apparently neither of these was important enough to mention before we got married.)

After the dust finally cleared from the divorce, I decided that having a good head for personal finance is non-negotiable in a relationship.

As far as I'm concerned, financial acumen is not necessarily the same thing as wealth. In other words, I don't care about a man's income. I do care that he can live within it, whatever it is, and put a decent percentage of it away. This isn't because I believe in the very old-fashioned notion that men should be the primary breadwinners, or that men should be prepared to ante up for dates. That's not it at all. On the contrary, given how hard I've worked and lived below my means to accomplish the financial goals I've set for myself, I know good and damned well that I wouldn't be happy with someone without a similar sense of accountability and responsibility, along with one eye focused firmly on the future and eventual retirement. For better or for worse, that's just how I am.

How about you? How do money and mating mix in your world?

ETA: Is anyone using IE6 (don't laugh) suddenly getting JavaScript errors? I think blogger's messing with how embedded JavaScript is being interpreted, so I'm taking the expanding/collapsing links out in this post and going forward until it's sorted.

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Still no title bar. Okay. This one was going to be called "Marching hand in hand."

The insurance issue that FMLurker is going through with his or her mom has made me think about the importance of staying healthy while getting older quite a lot over the last couple of days. Today, I received a very timely Associated Press article in the mail from my mom about newly discovered links between heart disease and kidney disease.

The article noted that although the exact mechanism remains unclear, kidney disease has been found to be a primary causal factor in accelerating the rate of heart disease well before the kidneys have sustained major irreversible damage, and not just among the elderly: the double whammy happens to younger people as well. It was also noted that it also works the other way around as well: heart disease triggers the onset of kidney disease.

In addition, although the numbers of people with end-stage kidney failure are on the rise (Why? Is better treatment helping people live longer, or are more people developing kidney disease than in past years? It's not clear), people with both heart and kidney disease tend to get taken out by heart failure long before the kidneys have reached end-stage failure.

Conclusions researchers have drawn from the evidence to date suggest that heart patients should be monitored for kidney function on an ongoing basis. In addition, anyone with kidney risk factors (kidney disease is hereditary, but it's also linked to diabetes and high blood pressure) should get familiar with their GFR or glomerular filtration rate, which is the rate at which kidneys filter blood, and monitor it for change over time. Finally, kidney disease should be treated much more aggressively than is standard in medicine today, in hopes of preventing heart disease from occurring.

Unfortunately, I'm closer to these issues than I'd like to be. My dad's kidneys function at 15% and he has advanced congestive heart disease. Just to keep things interesting, he's also developed an inoperable abdominal aneurysm. We've been lucky on the insurance front, though, much luckier than FMLurker's mom.

You know what they say: an ounce of prevention is worth a pound of cure. When there's no cure, prevention is priceless.

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Um, okay. I can't seem to edit the Title field for new posts anymore. This one is supposed to be called "The perils of aging."

Every once in a while, I come across something that completely chaps my ass. Here's a good example of what I mean by that.

Let's take a closer look, shall we?

If you take a few minutes to read the article, you'll note that it's about elderly investors being duped into buying highly inappropriate investments by shady "advisors" with qualifications that pretty much came out of a Captain Crunch box. According to the article, insurance companies in particular are relying on these underqualified sales monkeys, whose worthless certificates identify them as "certified elder planning specialists" and the like, to use fear as a driver to lure the elderly into buying a variety of questionable investments, particularly deferred annuities.

Okay, what are deferred annuities and why are they inappropriate for many of the elderly?

You probably know that an annuity is an investment in which a certain amount of money paid up front guarantees the purchaser an income for a period that can vary from a fixed number of years to the end of the purchaser's life. Annuities that start right away can be a good investment for the elderly under many circumstances. In contrast, a deferred annuity requires payment up front but postpones the income payout for a certain number of years. Deferred annuities are an okay strategy for wealthy elderly people who want to transfer their savings to heirs without a big kick in the butt from taxes. For senior citizens who rely on their savings to live, however, this type of investment is disastrous.

Deferred annuities carry a huge profit margin for the people who sell them. Not surprisingly, so-called senior citizen specialist advisors are aggressively and often not very truthfully marketing deferred annuities, and an increasing number of cases where purchases of deferred annuities have pushed elderly investors to the brink of financial disaster are coming to light.

Increased regulation against deceptive annuity sales is emerging in some states. In addition, some insurance companies are cracking down on deceptive sales on their own, probably in reaction to the negative press fallout. In many states, however, caveat emptor prevails.

While I strongly believe that people are responsible for their own financial decisions and need to take ownership of their choices, I have a hard time applying this exact same standard to senior citizens. Many (if not most) senior citizens fall prey to at least some loss of judgment and faculties as they grow older. Isolation can compound even nascent decline. Add those factors to many senior citizens' strong desire and motivation to maintain independence, and you've got a situation that is potentially problematic in a whole variety of areas.

With parents in their early eighties and hellbent on staying independent, my sibling and I deal with this on an ongoing basis. It's really hard to know where to draw the boundaries: they're mature adults and it's important to respect their decisions. At the same time, if there's clear evidence of poor judgment, we have to be ready to be protective for their own well-being. We were fortunate that they decided on their own to move into a retirement community; knowing that they no longer have to deal with maintaining a house and a yard is an enormous relief. The system we've evolved to help look after them without being offensive is to maintain regular contact with them and each other. For us, that means my sibling visits them every second or third weekend. I live across the country, and I've worked out a deal with my employer so that I can spend a week out West every eight to ten weeks plus go there without advance notice in a medical crisis situation. We don't really discuss it with them, but we keep an eye on their food and water intake, their general health and specific conditions, and make sure they're staying on top of paying bills and cashing checks properly. My sibling and I also talk with each other privately a lot to share observations about their demeanor and behavior, and to make sure we're in synch about what they're discussing with each of us. I don't know that there's anything else we can do as long as things don't deteriorate any further.

It seems to me that the key to protecting senior citizens from unscrupulous predators and helping them maintain a high quality of life is to stay in touch and involved with their lives on an ongoing basis. It's easier said than done, but whenever that job is over, I personally don't think I could live with knowing that I didn't do my best to keep my parents' golden years golden and free.

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just because you ask doesn't mean I'm going to tell

Here's a conversation I had tonight while spending $4.95 on candles at Crate and Barrel:

*********************************************
Sales dude ringing up purchase: Okay, what's your phone number?

Me: Why do you need my phone number?

Sales dude: Corporate says we need it. Area code 212?

Me: Why? What are you going to do with it?

Sales dude: It's just so they can call you with specials and look up your address and send you catalogs.

Me: I don't want catalogs, I definitely don't want people calling me, and I'm not giving you my phone number. [I think I had what has been called THE LOOK at that point. Apparently it's quite scary.]

Sales dude: Oh, well, actually that's just optional. You don't really have to give it.

Me: Good, because I'm not.
*********************************************
Just because someone asks for a piece of innocuous-sounding information doesn't mean you have to give it. Spending five bucks on candles does not mean that I'm entering some sort of unique and personal relationship with Crate and Barrel, and I'm not going to open the door for them and all of their related companies to send me junk mail and try to pry money out of my hands. I just wanted the candles that were on special, and I was quite willing to walk away if the sales dude forced the issue.

Your privacy's your privacy and if you don't guard it, no one will.

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Darwin is in your office

I found out last night that a very close friend in real life knows about and reads this blog regularly.

So, um, hi there.

I managed to out myself through a stupid but honest mistake some months ago. Being the tactful guy he is, friend chose not to say anything but rather to wait for me to tell him myself. In the meantime he's been perusing this interwebby from time to time.

Wow. One of the things we talked about at the New York PF BlogCon last week was who in our real lives knows about our blogs. I said at that time that no one in real life knows about this thing and that's why I feel fairly safe about throwing some numbers out there, although I haven't had nearly enough to drink while posting to publish my net worth.

Will knowing that someone whose opinion I really value reads this blog change what I share?

Don't know yet.

Anyway. Onto the main topic.

I've been thinking about the nature of economic competition lately. Competition isn't a necessary part of a market economy (and by market economy, I mean the free, unregulated exchange of goods and services), but scarcity of resources coupled with free exchange fuels competition. Competition forces producers to be flexible and responsive to change in the Darwinian sense: the species most able to adapt have the greatest likelihood of survival. Competition also forces increased efficiency and productivity in the name of cutting costs, and that leads to better quality and lower prices for consumers.

I've seen the results of competition in my own neighborhood recently: we don't have much in the way of grocery stores, but there is one really nice market that has an abundance of choice and low prices relative to other grocery stores nearby. A few weeks ago, another similarly-styled market opened up three blocks away. The new market (Market #2) actually has a long history in the neighborhood: several years ago, the building that housed it was torn down to create a new high-rise for faculty housing at one of the nearby universities. Market #1 moved in to fill the gap left by Market #2 and did so very successfully.

The high-rise is finally completed, and Market #2 moved back in and began an all-out price war. Since then, the two markets are going head to head on produce prices in particular, and the end result is that prices have dropped by 1/3 to 1/2 of what they were when Market #1 was flying solo. I also noticed that Market #1 has drastically cut its staffing, and every time I've been at either store someone has been outside snapping photos of prices, presumably to go back to the other store and update signage to match or undersell.

I hope both markets have the resources to keep up the fight for a while because I'm making out like a bandit. Once one of the markets goes under (because it's a fight to the death at the moment), prices at the other one are going to skyrocket.

That's the nature of competition.

So okay, I'm directly benefiting from competition in this arena. Unfortunately, for the country as a whole, competition means that we're getting our collective butts kicked in some areas. Information technology is a great example: on the whole, programmers in India and China do what American programmers do equally well and for a whole lot less money. That's led to a huge bleed-out in the US economy as technology jobs move offshore.

I bet the people yelling for employment protectionism are largely the same people that appreciate getting cheaper groceries.

Protectionism isn't the answer here, in my opinion; on the contrary, the money used for corporate tax breaks and other incentives for keeping jobs at home would be better directed towards education. Job flight is going to continue until the US can shore up its educational system to make home-grown programmers better skilled than foreign ones and thereby worth more to employers; band-aids aren't going to solve the fundamental factors that make offshoring desirable in the first place.

As the job outsourcing phenomenon has matured, however, a variable that was largely unconsidered at first is starting to take on increasing importance. In general, there appears to be a growing realization that culture itself has an intrisnic value in terms of dollars and cents. My own experience with cultural differences encountered in sending jobs offshore has been that programmers in India will do exactly what I tell them to do. Great, right? Not really. Most programmers I've worked with in the US (note: I didn't say necessarily American programmers; I'm talking about people from anywhere who are comfortable with American culture and American ways of doing business) have no compunction about telling me when what I'm asking for is stupid and there's a better way to accomplish what I need. That's an ROI in that response that is often hard to calculate, but don't think for a minute that it doesn't translate into potential gained efficiency and long-term cost savings.

So okay, outsourcing jobs offshore isn't necessarily all it's cracked up to be all the time. The rate of successful outsourcing is still higher than the rate of failure, and protectionism is a panacea rather than a long-term solution. Over the long term, American employees in a growing number of sectors have to respond by taking Darwinism to heart on a very personal level. Darwin said it best himself:

It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change

More than ever, it's important to be flexible, change-oriented, and willing and able to look ahead to see the writing on the wall and respond accordingly. For those willing to look beyond the obvious, adversity breeds opportunity.

Happy Independence Day, y'all.

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one more down

Another month, another mortgage payment gone. Sixteen left (but who's counting, right?).

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