The Employee/Employer Relationship

I've been thinking a lot about this issue lately, for a number of reasons.

I'll start off with a story about a friend of mine who I'll call Karen. She has someone who comes in and cleans her apartment every week. Let's call the cleaning lady Tracy. Karen first hired Tracy about 15 years ago. At the time, she only had Tracy come every other week. As is typical for this kind of situation in New York, Karen paid Tracy in cash. Over the years, Karen raised Tracy's pay a few times, and when Tracy lost some of her other clients, Karen started having her come in every week so she'd have more work. Tracy has rarely missed a week due to being sick, but when she has, Karen pays her anyway. Karen also gives her a Christmas bonus every year. Tracy takes a couple of weeks off every year, which Karen doesn't pay her for, but if Karen is going to be away and doesn't need Tracy to come, she still pays her for the weeks she's canceled.

So is this a mutually beneficial, fair relationship? Tracy offered to do the work on her own terms, and I don't think anyone would describe Karen's treatment of her as in any way exploitative or mean. Of course there's a tax evasion issue-- as you might be assuming, Tracy wanted to be paid cash because she wasn't a citizen-- at first. But now she is a US citizen and could presumably get another job where she and her employer would have to pay taxes. She's already past the age when most people want to retire, and Karen is wondering what to do about it if Tracy does want to stop working-- she's never paid any Social Security taxes for Tracy, so it's unclear what, if anything, Tracy would be able to collect. Tracy's children might or might not be able to help look after her. Karen is thinking about whether she should give Tracy some sort of pension, out of a sense of what's right and also just because she and Tracy have an affectionate relationship and she genuinely cares about what happens to her. That's more than can be said for a lot of people you read about who feel they have to economize by cutting the hours for the hired help just because their mutual funds are down.

Do you think most people feel this sense of responsibility towards those whom they employ? Is this kind of arrangement between two individuals a fair way to decide terms of employment, or should the government always be involved in setting the rules and collecting taxes and providing benefits? Should there always be an obligation to take care of an long-serving employee after the employment has ended?

The other thing that's had me pondering these issues is the TV series Downton Abbey, which everyone seems to be talking about lately. Thanks to streaming Season 1 from Netflix, I can count myself among the fans! It's set at a point when the sun is starting to set on the British empire and the old ways of life for the aristocracy are starting to change. But amongst the servants on this big estate, you have a variety of attitudes towards their situation and the people who employ them. There's a rigid class system, but there's also a sense that master and servant consider each other family, at least in some ways. Of course, sometimes this turns into the masters telling the servants what's best for them, which usually involves their continuing to be servants-- it's a paternalistic relationship where the servants have no real dignity or autonomy or choice.

And then there's what's going on in the US in current times. Some politicians are trying to make laws against collective bargaining, more and more people have to work as "independent contractors" rather than as actual employees of corporations, pensions are underfunded, and some benefit packages have been so aggressively negotiated as to be unsustainable. People are yelling "get a job!" at Occupy Wall Street protesters one minute, and saying Obama doesn't deserve re-election because of astronomical unemployment numbers the next.

If there's anything I take away from all this, it's that ideally, we'd all work for ourselves... but that just isn't possible. How can we best maintain our dignity as equals when some of us have to work for the rest of us? How can people without much power be protected from those who do have power? Would most employers actually treat people fairly if they weren't forced to? What are the best ways for government to be involved? We live in a complicated world, and wishful thinking won't make it any simpler.

And to come back to Karen and Tracy, what would you do? Would you refuse to pay someone cash under the table, employ only legal workers and pay all the taxes so they could collect Social Security? Or would you pay someone cash and just figure they knew benefits were never going to be part of the deal? Or would you feel obligated to help take care of someone who'd worked for you after they'd retired?

Happy Holidays!

My goodness, it's been a busy month. So much for my good intentions of posting at least once a week! I can't say I've had any exciting financial news to report. Here's some off-the-cuff items!

At Thanksgiving, I got one final check for a couple hundred dollars that was the final settlement of my great-aunt's estate.

I've been finding that my cash balance in Pocket Money /Quicken is often way off, by several dollars or more. I'm still pretty good about tracking every penny of my spending so this is starting to make me paranoid. Is there a bug in the program? Is someone stealing money out of my wallet? It's weird.

My year end net worth goal of $600k just isn't going to happen. I'm still saving a good portion of my earnings, but the stock market has been so up and down this year.

I've done all my holiday gift shopping and probably have spent a bit less than usual, though I haven't totaled everything up just yet. I gave small gifts to a few people in the office. I bought my niece and nephew each a sweater, two books, and some wacky wax stuff you can make little sculptures with. My sister and I will give our mom an iPhone for Xmas. I'm not giving my extended family any gifts as I won't see them this year. Sweetie and I are taking a little trip over the holidays that is basically our present to each other. Though of course there have also been veiled mentions of "a few other little things" that have my all anxious about how little those other things are compared to the other little things I bought! But I guess holiday gifts are no fun if you take ALL the surprise element out of it!

Best wishes to all of you and your families for a happy, healthy New Year!

Is There a Point to Being Frugal and Trying to Save?

A commenter left this question on my last post, and I thought it was worth answering separately:

Can I ask you a question, in regards to some long term investments?

I recently did some calculations and the results are very much frustrating, to be brutally honest.
Have a look yourself - they are all published.

If you invest $ 40, 000 a year over 35 years, at modest inflation rate of 2% and administration fee of 1-2% you need stock market to perform at 4% just to preserve value of your money and higher to gain anything.

This means that you are only preserving money you are investing at a very high risk. So it is just plain wisdom - is there a point to be frugal and try to save, if you ended up loosing money?

Feeding financial industry and no living your life in full?

I definitely understand the concern about feeding the financial industry, which seems more and more rigged in favor of the rich and well-connected. And yes, investing has risk. You could look at the scenario this person describes and say "well, historically, the stock market has performed better than 4% on average during many periods," and you could also observe that it has performed much worse during other periods.

But here's my analysis:
If you save and invest $40,000 a year over 35 years and the market totally tanks beyond all expectations and inflation skyrockets and you trust a Bernie Madoff, you could end up with ZERO.

But if you DON'T save and invest $40,000 a year over 35 years and instead spend all that money on "living your life in full," you will DEFINITELY end up with ZERO.

Of course, "ZERO" is your cash balance and doesn't factor in comfort and pleasure and memories. As always, I advocate a balanced approach between using some of your money to enhance your life now, and saving some to enhance it later. If your definition of living your life in full depends on spending every penny you earn, maybe you should stop and think about all the rewarding, memorable things in life that are free. Those are things you'll still cherish 35 years later, more than all the stuff you spent money on.

And I know keeping that balance is never as simple as it sounds-- I've spent money on traveling, and 35 years from now I think I'll be glad I have those memories and not be wishing I hadn't spent the money. I'd hate to be 80 years old and have regrets about not having spent a few thousand dollars to go somewhere I'd always wanted to go. But I'd have even more regrets if I was 80 years old and homeless because I'd blown all my money when I was young. None of us can avoid making choices that we might regret later, but when it comes to saving money, I think it's pretty clear which way you should hedge your bets.

Net Worth July-October 2011

Another belated net worth update. (I was trying to post updates on NetworthIQ but the site doesn't seem to be working and their security certificate is expired. What's up over there?)

Anyway, it's been an interesting few months-- some big ups and downs in my investment accounts. Mostly downs, unfortunately! After hitting a high of $591,390 back at the end of April, the stock market has been very cruel to me. I had a nice recovery in October, but I'm still down quite a bit from where I was.


Not much else of interest to report, other than moving a few thousand dollars from cash into mutual funds and some more I-Bonds at Treasury Direct. My credit card balance is in about the range it usually is, so no unusual levels of spending (and as always, I'm paying it in full every month). I've already maxed out my 401k deductions for the year, so any further changes in the retirement accounts will be due to investment gains and losses alone. At some point in the next few months I'll probably pay some extra principal on my mortgage and increase the home equity amount.

Stay tuned for a long overdue update on my spending and budget categories. Onward and upward!

Just Bought Some I-Bonds

Jim at Bargaineering has a great post explaining why now is a good time to buy some Series I Bonds. It reminded me I hadn't bought any bonds in several years, and hadn't even checked how much interest I'd earned in quite a long time. So I went through the lengthy log-in process at Treasury Direct (it's set up to be extremely secure, with various access codes and security questions required), and was pleased to see I had over $140 more interest than I had the last time I checked, and I also moved $5,000 out of a couple of savings accounts to purchase additional bonds, bringing my purchases up to $8,000 in online-only bonds, and a $1,000 paper bond sitting in my fireproof box at home. The total value of these is currently $10,196.80 with the interest I've earned. I think I may start buying these a bit more aggressively, as I'm sitting on too much cash earning almost zero interest. I now have bonds that are old enough to redeem without penalty, so I could access the money if I needed it. Earning over 3%, and even more for the next few months, is very attractive right now!
If you haven't bought bonds before, check out TreasuryDirect.gov for more info.

Net Worth Jan-June 2011

I've been very bad about keeping up with my monthly updates, but here's some summary numbers I ran a while back looking at net worth shifts for the first half of this year:


I moved some cash into my investment account in March, which explains cash going down so much that month. (Though cash went down by less than investments went up because I also received my bonus that month.) My credit card balance is fairly consistent most months, except in March-- not sure what happened then, I don't remember being particularly frugal that month! (Just as a reminder, I do pay my credit card in full every month, but I count whatever's outstanding at the end of the month as a liability.) My overall net worth rose nicely over the 6 months, but you can see that May and June were tough, due to the stock market.
I'll be posting another update soon to bring things up to date for the 3rd quarter. It's not going to be pretty, I'm afraid. Back in April I was thinking I could hit $600k by the end of this year, but the market has been crazy and I don't think I'll even be close...

New Productivity Features in iPhone OS5: Email Flags and Reminders

In the almost 15 years since I've started using electronic devices to manage my life, there's one thing I've wished for: the ability to read and FLAG emails and synchronize that with Outlook.
Flagging emails, and sorting my inbox so they remain at the top, is my number one tip for staying organized at work and making sure things I have to do don't slip through the cracks. But when I first had Palm Pilots, I either couldn't sync my email, or they didn't have a flagging option. I have had Blackberries issued by my employer, but until the most recent one, flags weren't supported-- and I really hate the Blackberry screen, so I've avoided using it since I got an iPhone. But the iPhone email app isn't that great, and didn't show flags at all... until now!
I just upgraded to iOS5 on my iPhone 3GS, and now the flags synchronize perfectly with Outlook! I can read my email on the go and not have to mark it as "unread" if I want to remind myself to follow up when I am back at my desk. Unfortunately, the iPhone email app still lacks a lot of features I'd love, like being able to filter the view to only unread messages, or sort the inbox so flags are at the top.

The other feature I'd been looking forward to in iOS5 was the "Reminders" app. I've used other 3rd party To-Do list apps-- Toodledo is pretty good, but the problem with that was that syncing to Outlook was always a bit dodgy (and the app I used is no longer even supported)-- and that was when I was able to actually install the needed desktop program on my work computer. When I was upgraded to a new computer, the IT department totally locked down our ability to install any non-approved programs, so I completely lost my Outlook syncing.

But now that I've got iOS5 and Reminders, the problem is solved! After upgrading, Reminders was automatically added to the apps syncing with my Exchange account, and the first time I opened the app, my tasks were there and syncing worked perfectly in both directions. Unfortunately, there are a couple of major features missing again! First of all, my tasks are not sorted in any order I can figure out in the iPhone app list view-- they aren't by date created, they aren't alphabetical, they're just totally random. There are no options to determine your preferred sorting method. You can sue the date view to see tasks due on a particular date, but you can't see more than one day at a time, so that seems pretty useless.

The other issue is that I can create multiple task lists on the iPhone, and all the tasks in those lists will sync with Outlook-- but on Outlook all the lists are merged. There is no way to map your Outlook task categories to your Reminders lists. So much for my idea of going back to having multiple task lists on Outlook for Business, Personal, Grocery List, etc. Yes, I can have these lists on my phone, and I can recategorize tasks on the desktop, but it will be annoying to have to maintain this somewhat manually instead of having it automatically sync.
I have yet to come across any other reviews that address these issues, but I can't believe I'd be the only one to want these features, so here's hoping they add them later! I won't hold my breath, though. But I can at least loop this back to the topic of money by pointing out that these kinds of productivity aids help me manage my job and hopefully get ahead in my career and make more money... and the iOS5 upgrade was FREE!

Does anyone else have any good iPhone productivity tips?