Ask Uncle Bill

Nothing Concentrates Like A Hanging

Sorry to be out of pocket for the last day or so but my deadline on my book is Saturday.  Actually want to get it done tomorrow to leave time for any last minute blow-ups.  So I am concentrated.

If you ever want to write a book, don't.

It is too much work, worry and way too much time spending time with yourself.

If you get the urge to write a book and want to fight it, don't write something bad.  A lot of book publishers make a lot of money printing bad stuff.

If for some reason you do want to write a book, get disciplined.  That really hurts.  Sit down and write.  It's called Get Your Butt In The Chair.

And if you get writers block, blow past it.  Right something even if you think it stinks.  Reading it later you may not be able to spot the stinky part. 

Or if you get writers block, talk and write it down.  Charles Dickens, upon encountering writers block, would imagine a parrot on his shoulder.  He would then write down whatever the parrot said and what he said back.  Try it.  It works.

Enough.  Will be back soon.

Update on Pensions

Got this in response to the pension post.

" have to agree. My father worked for a large corporation who had the reputation of laying middle-aged people off when they got close to being vested--so the pension was worthless. Long after he left, people started filing age discrimination lawsuits about it.

Just recently, I was talking to someone who worked at K-Mart for many years. She and a group of other workers were given the choice of retiring and taking their pensions, or going down to part-time. Amongst her group, the monthly pensions ranged from $15 to less than $100. $15 a month? That's a slap in the face!"

I am not cynical enough to believe that no firm has an obligation to its employees and that employees have no loyalty to their employers.  But it is a matter of degrees.  The company always has a right to fire you and you always have the right to quit.  In a perfect world, neither would happen but, of course, our world is less than perfect.   

Your company is evaluating you every day.  Just don't freak out over it.  At the ceremony where my son got his Air Force navigator wings a general was giving them advice on how to handle their future assignments.  He said don't worry about reviews because, as Patton said, you are under review every day.  Once you get over that hurdle, life becomes a bit easier.  Annual reviews are no fun, especially if you are unprepared.  One boss of mine got caught with his objectives down one year.  Since then he kept his objective taped to his desk where he saw them every day.   So what does this have to do with pensions?  Everything.  If you truly feel and document that you have done a good job then you have fulfilled your obligation to your employer.

If your employer does things like fire people when they come near a pension, your company is not fulfilling its obligation to you.  And if it is doing things like that, it is doing other bad things and eventually they will be caught, go out of business or both.  But eventually is a long time.  If you really work for an unethical, dishonest company, start your job search-NOW.

How about the K-Mart pensions?  Not good but not surprising.  They certainly reneged on their obligations to their employees.  They also reneged on a lot of other obligations because they went bankrupt.  Check out your company's health on a regular basis.  Financial results up or down?  Management great or a bunch of morons?  (Be objective here.)  If the company offers a pension it is probably an old company and old companies often have problems.  Figure out what they are and see if things are turning around or turning south.

Finally, only you can make decisions for you.  If you get fired, or retired, or your pension bounces--well, stuff happens.  Scream and yell and cry for an hour.  Kick the dog.  Then do something.  Take control of your life as miserable as it may seem right now. 

Actually the process should not begin there.  It should happen every day.  Evaluate your career, your company and your pension or 401(k) daily.  Make a plan for the contingency of getting canned.  It doesn't mean jump necessarily.  It does mean you have a plan.  Having a plan when something happens means you are one step ahead of everybody else.  Because again, only you can make decisions for you.

Pensions--The Not So Good Old Days

I'm starting to see in a lot of magzine articles and on-line e zines writers bemoaning the death of the "traditional" pension.  First a word on the "Good Old Days."  They weren't.  We just tend to look backwards and filter out all the bad stuff and pine for the simpler times.  Times like World War II, the Cold War, Vietnam and Charles Manson.  Plus looking back at he good old days is a sure sign of advancing senility.

Back to pensions.  The writers tend to dwell on the positives like a guaranteed check every month resulting in a steady stream of income.  Everything is easy with the money direct deposited at your local bank.  No fuss, no bother. 

Not really because 1) the money isn't guaranteed.  It is a benefit, not a right.  Or your company can go out of business and you are screwed.  Well, not totally but the responsibility goes to some government agency that is going to cut the benefit.

2)  Most pensions are not tied to inflation.  Some are but mostly in the public areas like teaching, municipal workers, and the post office.  Inflation will eat you up if you are not a mail carrier.

3)  The pension will be a percentage of your last several years salary at the company.  Percentages vary but let's assume 60% which is pretty rich but will work.  So you are 30 and have a pension.  Fast forward to age 65 and you will get 60% of your salary--the salary you made 30 years ago.  Might pay the phone bill.

4)  Pensions were based on your staying with the company.  Like a long time.  Try ten years.  When I first started out, my company gave a pension after you had been there ten years.  I left at nine and a half.  Before I left I went to friend (later became CFO) and asked his opinion if I should stay to qualify for the pension.  He said the present value of the pension in 30 years was ZERO.  And he was right.  I left.

5)  If you left before you were vested you got nothing.  In fact, vesting used to be called cliff vesting.  Leave one day before the vesting period and your pension goes over the cliff.

6)  Because pensions are not portable.  Your new company could care less how long you toiled at the old company.

So much for the good old days.

So what is a girl to do?  Easy.  Find a company with a 401(k) with a great match, like $2 to $1, and plow every nickel you can into that plan.  Invest in index funds and sit back. 

The future isn't guaranteed, obviously, but if the market does what it has done for the last 100 years you will have a lot of cash.  More than the pension. 

So watch out for the good old days.

Job Wanted Ads

Seem to be on a kick about getting jobs and saw this http://www.careerjournal.com/jobhunting/usingnet/20060620-needleman.html?cjpos=home_whatsnew_major?cjpartner=mktw on the net.

The article is about job seekers putting ads on Craigslist or other sites looking for a job.  Not a bad approach and here are the pros and cons.

Pro 1--They carry the message you want.  I guess so, you wrote it.

Pro 2--They can be anonymous.  Don't see the advantage in that.

Pro 3--They ususally can be updated easily.

That's all the pros.  Not great but they don't cost much, if anything, so why not?  Wonder why they didn't put that down as a pro.

Now the cons.

Con 1--They may be seen by relatively few recruiters and hiring managers.  Well, it only takes one.

Con 2--They usually take a shotgun approach.  Shotguns work a lot of the time.

Con 3--They may seem desperate to some recruiters.  Most job seekers are desperate.  Why not just admit it?  Plus, most recruiters want to recruit people that already have jobs to switch jobs.  People out of jobs, looking for jobs are somewhat damaged goods to recruiters.  Kind of don't call us, we'll call you type of thing.

Con 4--They may attract junk mail.  What doesn't?

That's it.  Not a great approach but every little thing helps.  This approach should just be a small part of the overall campaign.  The rest should be

-Check everything.  That means the want ads on line, Monster.com and any other job site.  Also, don't limit yourself to those categories.  Ok, maybe you aren't a nurse but you may find a job under advertising, finance, management, executive.  Look at everything. 

-Interview.  Doesn't matter what the job is.  An interview is practice.  The more you practice, the better you get.

-Network.  Hate that word but do it.  Network also doesn't just mean with people.  Network with the Chamber of Commerce that breaks down into company categories that breaks down into individual companies.

-Mail order.  You don't hear this one very often anymore.  Find 100 companies in the town where you want to work and live.  Find the department you want to work in.  Find the manager that runs that department.  Write 100 letters, stuff in a 100 resumes and mail them.  Traditional mail order response is 3% so you may get 3 responses.  You may get none.  But I know this works because a guy I know did it with our company and ended up fifteen years later as CFO.  Not bad.

-Protest.  If all else fails walk down the street with a sign.  I know a guy, decorated Vietnam Marine, that did it.  It works as well.

Doubt if you have to go that far but a job hunt is just that--a hunt.  Use shotguns, pistols, hand grenades.  Something will work.

McMansions Causing Some Indigestion

Another pretty good article at http://www.realestatejournal.com/buysell/markettrends/20060619-fletcher.html?rejpartner=mktw

Kind of long and not exactly to the point so here is the short answer---LOCATION, LOCATION, LOCATION. 

Their is one common denominator in the article--the houses going down in value are newer, on small lots, and surrounded by houses that look pretty much alike.  I said newer, not new.  Most are in the five to ten year old range and probably need some updating.  The question for buyers becomes Why buy a ten year old, slightly dated house when I can get a brand new one for just a little more?

Good question. 

So what is somebody, like you perhaps,  to do when looking at that first purchase of a home.  Well, you can buy a brand new house in a development that is really expensive and will look dated in a few years.  Or you can buy one of those dated homes and get a slightly less expensive deal in a neighborhood that may be showing its age.  You cannot buy one of those really expensive homes in a really expensive development because you can't afford it.  But here is what you should do.

Go to a really neat, old established neighborhood and find a loser.  Don't risk your money and your mortgage on a new development or a new old development, if you know what I mean.  Find the established neighborhood in your town with the really good school system that has been there since your parents were teenagers. 

Then go find your victim.  Shouldn't be hard.  Go to a realtor and ask to see the house that has been on the market the longest.  The seller either has a really bad house, is getting divorced, is dead, or is overpriced.  Figure out if you want to live there, figure out how much it will take to make it livable, figure out what you can afford and then make a low ball offer. 

It works and you will make a lot of money when you sell it.  Or you will live it in for 20 plus years and still make a lot of money.  In The Millionaire Next Door  the authors note that 97% of millionares are homeowners and half, yes half, have lived in the same house for more than 20 years. 

The moral is buy right the first time.  For a case study see Category 9-Buying A House For 30% Off. 

You On The Web

Hadn't thought of this but Jared Flesher at Wall Street Journal Online did.  For some reason I didn't realize that recruiters and potential employers might take five minutes and Google you, the applicant, before making an offer.  Didn' t think of it but you might not either.  You should.

Hit this for the whole article http://www.careerjournal.com/jobhunting/usingnet/20060112-flesher.html?cjpartner=mktw   Here are some highpoints.

Google yourself first.  Find out what is out there.  Flesher recommends contacting the site's owner if you see something you don't like and asking them to remove it.  Good luck.  If they refuse, don't even contact the search engine.  They don't have time or the authority to remove something.

Clean up Facebook.  Or I guess, now, MySpace.  Something funny to friends will probably look stupid to an employer or a headhunter so do some heavy edits.

Bury your dirt.  Not sure how to do this but sounds like you pump up the good stuff by setting up a bunch of links.  The bad stuff gets outnumbered and overwhelmed by the good stuff.  That's the idea, I think, but will leave it up to you to figure it out.

Find out what people are saying about you.  Flesher mentions a site, Pubsub.com, that will alert you when you come up in a blog or anything else.  Have to look into that.

Anyway, a good article on one more thing that can cost you a job.  Check it out.

Fifteen Ways to Leave Your...Money

This poppped up on Finance.Yahoo.  15 ways to live more cheaply.

OK, let's check 'em out.

1)  Shop sparingly.  Seems the author, somebody named Vicki Robin, had a revelation that people go to the mall and buy things they don't need.  Wow.  So make a list and don't buy what is not on the list.  Or don't go to the mall.  That is probably possible for you but not some 13 year old freak that goes there to meet equally freaky girls.  Shop on the internet and stay away from malls in general.  They are truly depressing places.

2)  Give creatively.  Gifts are expensive and do add up.  She says to donate as a gift.  I like that one, my nieces and nephews don't.

3)  Get groceries for the long haul.  This is the Sam's Club approach to eating.  Buy bulk and bulk up.  When hungry, grab one of those twenty cans of tuna in the cupboard and try not to think about mercury poisoning.  And pay with cash. 

4)  Avoid debit cards.  Huh?  One of the authors says it makes "cash available".  What?  Go over on a debit card and your bank will let you know real fast that there is no cash available.  Debit cards are the best tool for financial planning ever.  Use them for everything and you can track your cash.  You can't do that if you take out $500 in cash from the bank and then spend it on who knows what. 

5)  Clip coupons.  Tried this once, waste of time.  I just can't eat that many boxes of Duncan Hines brownies.  The stuff I use doesn't come with coupons.

6)  Curb long distance bills.  Use phone cards.  Why do that?  Most people I talk to have cell phones with unlimited calling.  Just call them and tell them to call you back.  I mean some things just aren't that hard.

7)  Donate things and get a tax deduction.  This works only if you itemize which makes no sense to me.  You have Bill Clinton to thank for that stupid rule.  But donate anyway.  It will make you feel better.

8)  Keep yourself entertained by having a pot luck dinner or volunteering to be an usher at the opera.  Please, this is really getting bad.

9)  Go to the libary.  Here is one I agree with.  Go to the libary and get out fast.  The homeless have all the best seats.

10).  Drive a car you can afford.  Which means don't buy that Prius because you will never make up the overpricing with gas savings.  Unless you just want to drive a sign that  says "I care for the environment."  If you really want to save money, buy a 15 year old Chevy truck, fix a few things and drive it for ten years.

11)  Take in a tenant.  They can't be serious.  Nobody does that except college students sharing an apartment.  This is written like put an ad in the paper, interview the applicant for five minutes, and let the guy live in your basement.  I don't think so.

12)  Let your credit card pay you.  Pay off your card every month and use the points for miles or golf clubs.  Gosh, why didn't I think of that?

13)  Share expenses.  Carpool.  Try making that work.  Unless you have the exact work schedule as your car pooler buddy, this one will drive you crazy. 

14)  Conserve energy.  Again, why didn't I think of that?  Don't leave the refrigerator door open or run the air conditioner with the windows open.

15)  Exercise for free.  Drop the health club and take a hike.  But what single person ever met someone hiking?

That's it.  No wait, one more.  Skip the latte.  I love it.  Knew they couldn't leave that old chestnut out. 

I hate to be cynical but these articles drive me to distraction.  Take a look at Category 3-Budget Is Not A Four Letter Word for a slightly more humane approach.

Gambling On New Orleans--Or Any Rental Property

Saw this article, Gambling On New Orleans, with the subtitle Buying real estate in the storm-ravaged city takes guts, but it could be a very smart move.  Maybe, but real estate investing is not as easy as it looks on TV or in the magazines.

The article had the usual example of an investor.  Ok, a loan officer for Countrywide Financial living in Valencia, California.  He bought four four flood ravaged properties in February.  One is ready to rent.

Lesson 1-California is a long way from New Orleans so he is not managing the properties directly.  Since people don't work for free he is paying someone to manage his investment.  Figure 10% of the rent to a management group.

Lesson 2-He bought in February and just getting around to renting one now.  Not four, one.  So he has paid out or borrowed money for five months to get the properties and start rehabbing.  Say average cost, including rehab, of $150,000 times four times the cost of a thirty year mortgage at 9% (banks charge more for rental properties) resulting in monthly payment of $4,827.  $4,827 with no cash coming in.

Here are the numbers on the one duplex unit ready to rent out.

Cost $110,000

Rehab  $40,000

Rent $2,400 (33% more than pre-Katrina)  Stop here--Lesson 3.  This is probably the max he can, or will get,  as there will surely be more house building, assuming New Orleans doesn't wash out to sea, and the supply will grow.  A basic rule of finance is more supply the lower the price.  Plus the population of New Orleans has dropped by a third.  You read right, a third.  But let us assume rent of $2,400 a month or $28,800 a year. 

Net Rent, according to the investor, will be $21,000 a year.  Assumes he will pay only $7,800 a year on taxes, expenses, repair, and management fees.  Maybe but I doubt it.  Lesson 4--expenses are always higher than expected.  Plus, he is not budgeting for time not rented.  Units always take longer than expected to rent.  Or to rent to people that will pay the rent and not destroy the property.

Return on Investment is 14% calculated as Net Rent of $21,000 divided by investment of $150,000.

Sounds great.  BUT where is the financing cost?  Lesson 5-Say he borrowed the whole amount of $150,000 at 9% for 30 years.  He would be paying $14,483 in mortgage costs so his CASH FLOW is now reduced to $6,517.  The rapidly shrinking rent.

(An interesting financial quirk just happened here.  His ROI if infinite in this example.  Since we make the assumption that he borrowed the whole amount his investment is zero for analysis purposes.  The value of the house offsets the bank loan leaving no investment and thus no ROI.  BUT his cash flow is cut in half.  Actually more than half.)

But, you say, maybe he had the cash and paid cash so his cash flow is not cut in half.  Lesson 7-Ok, I'll give you that one but by paying cash, he has lost the opportunity to invest in other assets and thus has incurred an opportunity cost.  The return on the lost opportunity has to be deducted from the the return on the house.

We're getting a bit far afield here but the real lesson is that real estate is not as easy as it appears.  Fortunes have been made, and lost, in real estate.  The real lesson is that real estate is hard work and takes some pretty hefty up-front expenses.  Do your homework.

There is one caveat-the guy is from California.  God must look out for Californians and real estate.  I don't know how they do it but they seem to make money no matter what.  If you are not from California, work even harder.

The Secret To Stock Market Success-Do Nothing

Well, not exactly.  First you have to do something by setting up your 401(k) regular contributions or Roth IRA or regular IRA contributions.  That simple, but necessary, process is all explained in Category 12--Investments, All You Need To Know.

Then just sit back and let it ride.  Then you get one of those gut wrenching market shakeouts like we have had over the last couple of weeks and you really get sick.  Because if only I had taken the money out in April and switched to a money market and then when the market starts back up I will flip out of the money market, back into stocks, tech this time, and I will make a fortune and be able to retire in six .... 

You get the picture.  Oh, if we could only time the market.  Some investors say they can.  Maybe but if they do they are probably pros doing it 60 hours a week.  For someone in your position with a long time horizon I don't think it is possible or necessary.

I don't think it is possible because you are doing other things like getting started in a career, thinking about where you want to live in the long run, can you afford a house, are you going to get married, have kids...and on and on.

Secondly, you don't have enough money to worry about.  If you have been contributing to your 401(k) or IRA and have only been working a couple of years, you have $10,000 max.  Unless you inherited a bunch of money in which case you have a fianancial planner so go yell at him or her.  If you are just an ordinary young person, you could hit every move just right and not have all that much more money in the bank.

So do nothing.  Here is how I did it---when the market is going up, I say great, will probably go further so better stay in.  When it goes down a lot I figure that it is too late to get out now, might as well just watch it go to zero and apply to Wal Mart.  Maybe I can work my way up to greeter. 

Then the market comes back.  Maybe not overnight but after awhile. 

So get your allocation and stick with it.  If it doesn't work in the long run, there is always Wal Mart.  But the market does work in the long run.  And ignore John Maynard Keynes.  He said we are all dead in the long run.  But some of us are closer to dead than others.  You are a long ways away.   

If You Are Miserable, Do Something About It

Lots of people are miserable.  Miserable in their jobs or where they live or in their relationships.  Been there.  I was stuck on a El train in Chicago in January decades ago, looked up and saw a sign that said this was the 36th day below freezing.  And it was way below freezing--like sub zero for 20 of those days.  If the doors hadn't been locked, I would have jumped.  I vowed then and there that if I ever got out of Chicago I would never complain about heat again.  After twenty plus years in Texas, I have had plenty of opportunities to break that vow.  But I haven't because I never want to be that cold again. 

But I didn't get out of Chicago right away.  We were there for three more long years while I worked trying to get out of the place.  Three years seems to be the magic number as a friend of mine said Always Be Doing Something Today that will get you where you want to be in Three Years.  Because good things don't happen overnight.  So start planning.

Do An Assessment

If you are moping around miserable, find out why.  If it is your job, assess what you like and don't like.  You can't just quit every job every time something goes wrong so you have to find out the major problem and somehow fix it or learn to live with it.  If a job change is required, go slowly.  After all, you have three years to fix it.  If the problem is a significant other, good luck.  Fix it or start over.  If it is living in New York or Akron or wherever, find someplace you would rather live.  Finally, assess your family situation.  If you are caring for 10 aunts and uncles, you can't pick up and leave.  But you have three years, remember.

Knowledge Is Power

Learn about your problem.  Don't reinvent the wheel.  Somebody, actually a lot of people, have gone through what you are going through.  Find out what they did by going to the libary, google the problem or find somebody that broke out and solved your problem.  I actually prefer the libary because it is quiet.

Go There

If you hate where you are, go where you will think you will be happy.  Maybe you will find that it is not perfect and the old place suddenly looks pretty good.  Subscribe to the local newspaper to get an insiders view of the place.  You will also learn the good and bad of the place.

If there is a place you think you want to work or a profession that appeals to you, go there and see the place in action.  Meet the people that work there.  Find out if the place is all it's cracked up to be.  I worked in one of those Best Places To Work Places for ten years.  Most of the people there were miserable.

Work To Live, Don't Live To Work

Somewhere along the line we got foisted upon us this passion stuff.  Your work has to be your passion.  Not really.  You work to get money to pay the bills.  Use your off hours to pursue your 'passion' and someday your 'passion' just may pay the bills.  View your work life as guerilla warfare--use their money to obtain your goals.

Nothing Is Going To Be Perfect

We all have an idealized view of what life should be like.  There are always going to be bumps in the road.  But a lot of things are less perfect than others so work to control your life rather than feeling like you are out of control.