Young Gay Marriage, and Finances

A few Sundays ago, there was an article in the New York Times magazine about young gay male couples who are getting married in Massachusetts. Of course I honed in on this quote:

It was a blustery weekday morning in February when I tagged along with Marc and Vassili to pick up their marriage license at City Hall. Marc pulled the couple’s Honda Accord to a stop at a red light in the city’s South End neighborhood. Vassili sat in the passenger seat, sipping an ice coffee.
“We really wanted a BMW,” Marc explained, but they settled on the Honda as an exercise in premarriage fiscal responsibility. “It seemed like the right thing to do.”
“We did a budget the other day,” Vassili said. “That was really scary.”
“We definitely need to reel in our spending,” Marc told me. “We need to stop going out so often. I mean, we’re getting married today! We can’t be acting like little kids, running around and spending money everywhere.”

Regardless of the genders of the people involved, and regardless of the age at which you choose to tie the knot, finances always seem to be a big part of this important life event! But I found it interesting, in this case, that the couple saw their marriage as the reason to change their spending habits. They weren't planning any kind of expensive ceremony, but they had both been living with their parents and needed money to rent their own apartment. I guess a milestone like marriage is a reason to stop and think about these things, but there's no reason not to do it while you're still single! And not to sound all judgmental here, but I'd personally think it would make for a stronger marriage to have both parties begin it from a more financially stable position in life. True love waits!

Life and Death and Money at the Kentucky Derby

I couldn't help noticed this bit of an editorial in today's Times:

There are, of course, owners and trainers who love thoroughbreds for themselves and for their ability to perform on the racetrack, which is a reasonable test of sound breeding. But the real race increasingly seems to be to capitalize on a horse’s success — to move a horse through its career as quickly as possible. The sums involved are immense, so much so that the horses seem more like financial vehicles than animals with an existence of their own. The life of the money comes to seem just as important as the life of the horse.

It's certainly sad to think that greed was could have been responsible for Eight Belles' death.

I Loro Portafoglios Apertos

I'm probably butchering that, but it's roughly Italian for "Their Open Wallets."

Apparently the Italian tax ministry posted on its website the name, address, reported income and tax paid of every Italian citizen, neatly organized by city. It's already been taken down, which is unfortunate-- I don't think any Italians responded to my call for salary revelations!

Today in the News

Oooh, it's a good day for finance related news today:
People are cutting back their spending, even in Europe.
Meanwhile, politicians are using taxpayer money to guzzle gas.
Despite inflation, there are still stores where every item of clothing costs less than $10.
Fewer immigrants are sending money back home.
And there's an editorial on why a temporary gas tax cut is a bad idea.

But enough about the world, what about ME!?!?!
My last 5 financial transactions were:
$3.35 on breakfast (cash)
$4.42 on lunch yesterday (cash)
$3.35 on breakfast yesterday (cash)
$23.18 on Chinese takeout for dinner the last two nights (credit card)
$31.19 to ConEd (e-payment from checking account)

Okay, maybe the world is more interesting.

$150

That's how much the new governor of New York gave to charity last year, according to his tax return. And it was just $150 worth of stuff donated to the Salvation Army, not cash. Governor David Patterson and his wife had income of $269,815 last year, so that is a tiny fraction of a percent of their earnings. As this New York Times article points out, this doesn't necessarily mean he didn't make any donations, it just means he didn't declare them on his tax return to get the deduction. So if we're going to go all judgmental on him, he's either a miser or he's stupid! (Or, less likely, he has some very noble ideas about voluntarily paying extra taxes.) Here's what a few people had to say about it:

Alitha Martinez, a comic book artist who lives in Manhattan, gave several hundred dollars’ worth of clothing that her 6-year-old son had outgrown to neighborhood charities last year. She also took a $1,000 tax deduction for donating an old Macintosh computer. And she occasionally sells her artwork and gives the proceeds to the Hero Fund, which provides scholarships to children of military personnel....

“That’s the equivalent of, ‘Let them eat cake,’ ” Ms. Martinez said [about Governor Patterson] as she went to mail her own return at the main post office near Pennsylvania Station on Tuesday morning. “That’s not cool.”

***

Jennifer Fiore, 39, would not say what she does for a living, but she did say she took a deduction on her 2007 return of about $1,000 for donations of clothing that went to benefit breast cancer research, as well as furniture and electronics that were picked up by a group that helps Vietnam veterans.

“It’s almost an insult,” she said of the Patersons’ $150. “It’s not like he doesn’t have enough to give away.”

***

“It’s up to an individual and someone’s conscience,” said Matthew Kelty, 38, who works at the New School and gave money last year to groups that included the Human Rights Campaign, the Gay Men’s Health Crisis, CARE and Save the Children.

Still, he said, Mr. Paterson’s tax return made him wonder about the new governor’s character.

“It’s interesting that someone who we put our trust in doesn’t seem to care,” he said.

Just hit the "charity" category in the sidebar and you'll see how this same topic has become an issue for me, when some commenters felt I did not donate a large enough percentage of my income. Of course, giving is always a very personal decision: there is no "right" amount to give and people have different reasons for giving or not giving that may or may not seem valid to others. But just to put things in perspective, the Times article had this graphic about average deductions for charitable donations broken down by income range.




I'll save you the trouble of calculating how much the average giving amount is as a percentage of the average income:

$5,000,000	$10,000,000	$297,627	4.0%
$2,000,000	$5,000,000	$115,463	3.3%
$1,500,000	$2,000,000	$62,046	3.5%
$1,000,000	$1,500,000	$41,192	3.3%
$500,000	$1,000,000	$20,858	2.8%
$200,000	$500,000	$8,528	2.4%
$100,000	$200,000	$4,081	2.7%
$75,000	$100,000	$2,945	3.4%
$60,000	$75,000	$2,625	3.9%
$50,000	$60,000	$2,408	4.4%
$40,000	$50,000	$2,207	4.9%
$30,000	$40,000	$2,101	6.0%
$20,000	$30,000	$1,973	7.9%

I didn't find these percentages all that surprising. At the higher end of the income scale, people's basic needs and even luxuries are easily taken care of, so they can afford to donate to charity. At the lower end of the income scale, there is a certain dollar threshold below which people don't want to fall, but of course it is a larger percentage of their income. (Also, maybe they're more tempted to fudge it for the IRS because they desperately need the bigger tax refund.)
Then you have the people in between: Governor Patterson's income range has the lowest percentage for giving. People in these in between levels are the ones who are supposedly "wealthy," or maybe upper-middle-class, or just middle-class in places like New York City where the cost of living is so high. They're anxious about paying for all the expensive things they think they're supposed to have, they're buying homes and having kids and trying to save for retirement: they feel squeezed, and charity is getting squeezed out.
Of course, I should be saying "we," as my adjusted gross income of around $87,000 puts me in the lower range of this group and my charitable giving has so far been even less than these averages. But at least I coughed up more than $150!

The Latest (Late) Links

An Explanation of the Credit Crisis

Raise your hand if you don’t quite understand this whole financial crisis.

It has been going on for seven months now, and many people probably feel as if they should understand it. But they don’t, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn’t afford, and now they are falling behind on their mortgages.

But the overwhelming majority of homeowners are doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression?

Teachers Can Make $125,000

“The money, as funny as this may sound, is not about the money,” he says. “The money is a signifier. Because money, in our culture, is a signifier of how jobs are valued, and right now schools are telling teachers that they are not valued. The great and talented people who go into teaching are incentive-ized in every possible way to leave the classroom for jobs in administration or jobs outside of schools altogether. What we are trying to do is reverse those incentives. We want the best teachers to keep on teaching, to be challenged and valued.”

Tuition Breaks at Harvard Law

For years, prosecutors, public defenders and lawyers in traditionally low-paying areas of the law have argued that financial pressures were pushing graduates toward corporate law and away from the kind of careers that they would pursue in the absence of tens of thousands of dollars in student loans.

“The debt loads that people are coming out of law schools with are now in six figures,” said Joshua Marquis, the district attorney in Clatsop County, Ore., and vice president of the National District Attorneys Association. “When the debt load is that great, I have had a lot of applicants who’ve said, ‘I’d like to take the job, but I really can’t afford it.’ ”

The Money of Color

... as in skin color.

I read the text of Barack Obama's speech on race-- I thought he did a great job confronting a difficult topic. I couldn't help noting, of course, that one of the main things he cites as dividing the races, as well as one of the main things that can unite them, is, basically, money.

Legalized discrimination - where blacks were prevented, often through violence, from owning property, or loans were not granted to African-American business owners, or black homeowners could not access FHA mortgages, or blacks were excluded from unions, or the police force, or fire departments – meant that black families could not amass any meaningful wealth to bequeath to future generations. That history helps explain the wealth and income gap between black and white, and the concentrated pockets of poverty that persists in so many of today’s urban and rural communities.

***

Most working- and middle-class white Americans don’t feel that they have been particularly privileged by their race. Their experience is the immigrant experience – as far as they’re concerned, no one’s handed them anything, they’ve built it from scratch. They’ve worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor. They are anxious about their futures, and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game, in which your dreams come at my expense.

***

Just as black anger often proved counterproductive, so have these white resentments distracted attention from the real culprits of the middle class squeeze – a corporate culture rife with inside dealing, questionable accounting practices, and short-term greed; a Washington dominated by lobbyists and special interests; economic policies that favor the few over the many. And yet, to wish away the resentments of white Americans, to label them as misguided or even racist, without recognizing they are grounded in legitimate concerns – this too widens the racial divide, and blocks the path to understanding.

***

But I have asserted a firm conviction – a conviction rooted in my faith in God and my faith in the American people – that working together we can move beyond some of our old racial wounds, and that in fact we have no choice if we are to continue on the path of a more perfect union.
For the African-American community, that path means embracing the burdens of our past without becoming victims of our past. It means continuing to insist on a full measure of justice in every aspect of American life. But it also means binding our particular grievances – for better health care, and better schools, and better jobs - to the larger aspirations of all Americans -- the white woman struggling to break the glass ceiling, the white man who's been laid off, the immigrant trying to feed his family.

I'm glad he talked about these things so clearly. So often, I think people politely (or not) sweep issues of race under the rug and want to pretend we're all totally past it. I don't often blog about this issue but when I touched on it in one of my early posts, "What Color is Your Millionaire," there were some fairly heated comments. Somewhat later, I was interviewed and talked a little bit about the controversy that post generated. That part of the interview-- which included a comment along the lines of "I didn't say the author of The Millionaire Next Door was a racist, I just said he was ignoring the issue of race in a disingenuous way, and the statistics supporting his message make it absurd"-- was completely edited out, and as far as I could tell it was the only part that was edited out! Whoa, guess that got a little too divisive and controversial!

So I'm glad a politician has managed to frankly acknowledge that we have a legacy of an uneven playing field, and that we need to work together on the common economic goals and aspirations that unite us.

[In case anyone's wondering, this isn't meant as a "run out and vote for Obama" pitch. I am still undecided as to who our best future president would be. Also, though my family is ethnically mixed, my experience is that of a white person.]

Crazy Days

These are interesting times to be trying to blog about personal finance. It's just one thing after another in the news, from high-priced hookers to the rapid implosion of major financial firms. The stock market is all over the place, the government is trying to bribe people to go shopping, and who knows what kind of bailout they'll cook up for mortgages.

I am not enough of an economic genius to even begin to comment on most of these things. (Though it's tempting to try to tackle the expensive hooker issue.) Like most people, I suppose, I feel like a small boat on really choppy seas, wondering how best to reach the shore. How do we cope with all this? If we're having an unprecedented kind of economic turmoil, do all the old rules apply? Do I still keep plowing money into my usual blend of investments, which is heavily weighted towards stocks? It's so depressing to see your hard-earned contributions completely negated by market losses for several months in a row. Meanwhile, for safer investments, interest rates are dropping, so they don't help much either. Fortunately I think my job is fairly secure, but what if it wasn't? I know a few people who have lost jobs recently and most of them haven't landed anywhere yet. It's scary to think what could lie ahead, and how easily most people's savings could evaporate.

Then you have today's New York Times, which has a special section on "Wealth and Personal Finance." Lots of helpful stuff here: how to set up trust funds that will give your children just enough so that they don't become lazy leeches. How to manage when your wealth is spread out into lots of different accounts. How to start investing in hedge funds once you've made your millions. And tips on figuring out what kind of servants you might need and where to hire them.

Great timing, NYT! I'm sure all those Bear Stearns employees will be gobbling this info right up!

Recent News

Here's a few quick links from the NY Times that caught my eye-- as usual, it takes me forever to get around to posting these!

Easy Come, Easy Go for Idealistic Heirs

Income and Happiness: An Imperfect Link

Expectations Lose to Reality of Sports Scholarships

Welcome Newsweek Readers!

Welcome to everyone who found this site through Eve Conant's Newsweek article "A Penny Saved is a Penny Spent," about why the 30-something generation has trouble being frugal. Thank you to Eve for mentioning me!

If you're here for the first time, here's a quick introduction:

My name is Madame X and I'm obsessed with money... but not in a yucky super-materialistic kind of way! This is the personal finance blog where you're as likely to read about a dominatrix as a dividend; where salaries, spreadsheets, studio apartments, and salad dressing coexist with coupons, karaoke, career advice, and condoms. I quote James Brown songs as often as possible. And no post is ever off-topic.

I still can't believe over 400,000 people have visited this site, but here's what a few of them have said about it:
"a wicked sense of humor"-- Business Week
"Madame X is a bad sista"-- SingleMa
"one of the ur-texts of this genre"-- Bluebird
"you must be psychotic"-- Anonymous
"Will you marry me (If you're hot)?" -- Anonymous

Check out the "Rules" and "Favorite Posts" in the right-hand sidebar for more highlights. If you'd like to keep track of my posts in a reader such as Bloglines or MyYahoo, you can subscribe to my feed.

I have a great time writing this blog and I hope you enjoy reading it. Thanks for stopping by!

Links I Liked, and a Question from a Reader

I keep finding draft posts that are starting to get a little dusty! Here are some semi-recent posts I liked:

• Mighty Bargain Hunter: Seven pairs of easily confused money terms
• How Did You Get Interested in Personal Finance?
• How to Get Money Back from Airborne
• So Long ITunes, Or, How I Diversified My Music Expenditures

As for the question from a reader, Kav122 wants to know what I think of Real Housewives of New York City:

I watched this program on Bravo last night and I was just wondering your take on it. Do you feel that this is an accurate representation of the upper crust of NYC or do you think that these are shallow shells of women, that show nothing of how real rich NYers act?

I've never seen the show, but I read this NY Times review, and basically thought "yechh!" Yes, I am sure there are people like this, in NYC and all over the country. I have definitely encountered people who would seem to fit this stereotype. It's actually the sort of stereotype that city dwellers are more likely to assign to housewives from Long Island or New Jersey, but that doesn't mean they're not in Manhattan too. Plenty of Upper East Side housewives are probably watching the show, or reading the review, and thinking they would never look so tacky, or be so tacky as to describe themselves as "a sexy mom," but I'm sure they are no less materialistic and spoiled and attention-seeking in their own ways. As with anything in this world, there are all kinds of people and stereotypes are only the tip of the iceberg. Plenty of rich people enjoy their money in quieter, low-key lifestyles-- but that doesn't make juicy television!

More Recent News: Cost of Prison, Expensive Placebos, and Payments for Good Grades

More recent news items of interest, all from the New York Times:

1 in 100 U.S. Adults Behind Bars, New Study Says

Nationwide, the prison population grew by 25,000 last year, bringing it to almost 1.6 million. Another 723,000 people are in local jails. The number of American adults is about 230 million, meaning that one in every 99.1 adults is behind bars.
....

Now, with fewer resources available, the report said, “prison costs are blowing a hole in state budgets.” On average, states spend almost 7 percent on their budgets on corrections, trailing only healthcare, education and transportation.

In 2007, according to the National Association of State Budgeting Officers, states spent $44 billion in tax dollars on corrections. That is up from $10.6 billion in 1987, a 127 increase once adjusted for inflation. With money from bonds and the federal government included, total state spending on corrections last year was $49 billion. By 2011, the report said, states are on track to spend an additional $25 billion.

It cost an average of $23,876 dollars to imprison someone in 2005, the most recent year for which data were available. But state spending varies widely, from $45,000 a year in Rhode Island to $13,000 in Louisiana.

The cost of medical care is growing by 10 percent annually, the report said, and will accelerate as the prison population ages.

More Expensive Placebos Bring More Relief

The investigators had 82 men and women rate the pain caused by electric shocks applied to their wrist, before and after taking a pill. Half the participants had read that the pill, described as a newly approved prescription pain reliever, was regularly priced at $2.50 per dose. The other half read that it had been discounted to 10 cents. In fact, both were dummy pills.

The pills had a strong placebo effect in both groups. But 85 percent of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills. The investigators corrected for each person’s individual level of pain tolerance.

“It’s a great finding,” said Guy H. Montgomery, an associate professor of cancer prevention at the Mount Sinai School of Medicine who was not involved in the research. “Their manipulation of price affected expectancies of drug benefit, and pain is the ultimate mind-body phenomenon.”

Next Question: Can Students Be Paid to Excel?

The fourth graders squirmed in their seats, waiting for their prizes. In a few minutes, they would learn how much money they had earned for their scores on recent reading and math exams. Some would receive nearly $50 for acing the standardized tests, a small fortune for many at this school, P.S. 188 on the Lower East Side of Manhattan.

At Junior High School 123 in the Bronx, Jerome Johnson, a seventh-grade math student, also received cash awards.

When the rewards were handed out, Jazmin Roman was eager to celebrate her $39.72. She whispered to her friend Abigail Ortega, “How much did you get?” Abigail mouthed a barely audible answer: $36.87. Edgar Berlanga pumped his fist in the air to celebrate his $34.50.

The children were unaware that their teacher, Ruth Lopez, also stood to gain financially from their achievement. If students show marked improvement on state tests during the school year, each teacher at Public School 188 could receive a bonus of as much as $3,000.

School districts nationwide have seized on the idea that a key to improving schools is to pay for performance, whether through bonuses for teachers and principals, or rewards like cash prizes for students. New York City, with the largest public school system in the country, is in the forefront of this movement, with more than 200 schools experimenting with one incentive or another. In more than a dozen schools, students, teachers and principals are all eligible for extra money, based on students’ performance on standardized tests.

How Would You Act if You Won $270 Million in the Lottery?

This morning, I had a rare opportunity to watch the Today Show. They interviewed the couple from Georgia who just won a jackpot of $270 million. I'm sure they were not people who were accustomed to being interviewed on national television, but it still kind of cracked me up that they were so completely unemotional about their big win. The wife slightly cracked a smile a few times, but the husband was so expressionless and unexcited. I know everyone's different, but I can't imagine acting that way if I won a huge jackpot that would change my life like that! I'd be nervous on TV too, but I wouldn't be able to wipe the smile off my face!

This Week's News

Here's a few New York Times articles that caught my eye this week:

Investment advice from Yale's portfolio manager: Keep It Simple, Says Yale’s Top Investor

What should an individual investor do?

Don’t try anything fancy. Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals. That is the advice of David F. Swensen, who has run the Yale endowment since 1988, relying on a complex strategy that includes investments in hedge funds and other esoteric vehicles. The endowment earned 28 percent in its last fiscal year, which ended June 30, beating all other endowments. It finished the year with $22.5 billion....

For most individual investors, he said, copying the strategies of institutions like Yale is virtually impossible: big investors have access to fund managers and arcane strategies that are beyond the reach of most people....

So he advocates another approach, which he outlined in the book “Unconventional Success: A Fundamental Approach to Personal Investment” (Free Press, 2005). He proposes a portfolio of 30 percent domestic stocks, 15 percent foreign stocks, and 5 percent emerging-market stocks, as well as 20 percent in real estate and 15 percent each in Treasury bonds and Treasury inflation-protected securities, or TIPS.

The real estate investment can be made through real estate index funds. Though the real estate market has declined and your portfolio is below its target allocation to it, he said, don’t try to time the market. Go ahead and rebalance because no one really knows where the market’s bottom is.

A peek at the financial life of Sandra Boynton, creator of greeting cards galore: The Power of Whimsy

As an entrepreneur, Ms. Boynton maintains a firm grasp on market realities and her finances, but she says she has succeeded by refusing to make money her main objective. Instead, she says, she has focused on the creative process, her artistic autonomy, her relationships and how she uses her time.

“I don’t do things differently to be different; I do what works for me,” she says. “To me, the commodity that we consistently overvalue is money, and what we undervalue is our precious and irreplaceable time. Though, of course, to the extent that money can save you time or make it easier to accomplish things, it’s a wonderful thing....”

When Ms. Boynton was 14, a local newspaper printed drawings from an exhibit of her school artwork. She used the $40 she earned from her first published work to invest in two shares of AT&T — though she mistakenly thought she was buying shares of I.B.M. She still has the stock but has no clue how much it is worth.

Stocks held a special glamour for her: Her grandfather worked at a silver company, rising from the mailroom to the vice president’s perch. “Family legend has it that the company offered penny-a-share stock to employees, and he bought as much as he could afford,” she says. “And he became a wealthy man. That stock eventually put most of his 17 grandchildren through college....”

In 1974, Ms. Boynton met Phil Friedmann, a partner in Recycled Paper Greetings, a greeting card company based in Chicago, at a stationery trade show. After Mr. Friedmann and his business partner, Mike Keiser, saw Ms. Boynton’s work, they asked her to start making cards for their company.

They wanted to pay her a flat rate. Though she was only 21 and unknown, Ms. Boynton, who had learned a lesson or two from her father’s other careers as a writer and publisher, demanded royalties.

“We quickly relented,” Mr. Keiser recalls of the royalty negotiations. It was a shrewd move on his part, too. He says that over about a decade — from the mid-1970s to the mid-1980s — revenue at Recycled Paper went from $1 million to $100 million, largely because of the popularity of Boynton cards. Ms. Boynton has made 4,000 different cards for Recycled Paper, including the still popular “Hippo Birdies 2 Ewes” birthday card.

By Mr. Keiser’s rough estimate, Ms. Boynton has sold around a half-billion cards, which, he says, makes her one of the best-selling card creators of all time.

Artists on the move in NYC, for reasons of money, of course: Moving Soon to an Apartment Near You

Having lived in more than 30 apartments in 20 years — three of them in the last six months — [Brooke] Berman is skilled at making herself comfortable almost anywhere very quickly.

“I can make anything home,” says Ruth, Ms. Berman’s proxy and the central character in her latest play, “Hunting and Gathering,” presented by Primary Stages through March 1. “A couple of books, a scented candle in a tin, some fresh flowers, and we’re good....”

Living on money from the odd grant, temp jobs and teaching positions, she is emblematic of her Gypsy tribe — theater people are the original urban nomads — and a vivid example of the increasingly precarious domestic life of an artist trying to live in New York.

Rent for a studio or a one-bedroom in the East Village, for example, has more than doubled in 10 years, said Douglas Hochlerin, a broker with Bond New York, a firm specializing in Manhattan rentals. Last year, when the rent on Ms. Berman’s Mott Street one-bedroom, where she had lived for three years, rose to $1,550 from $1,350, she gave up her lease, beginning another bout of itinerancy, as she described it.

“It’s all about money,” Ms. Berman said cheerfully. “It’s not like I have a penchant for the transient life.”

According to Emily Morse, the director of artistic development at New Dramatists, “two major things have changed as far as this city is concerned: the real estate market and the fact that very little money is going directly to artists.”

She continued: “You used to be able to work a 20-hour week, pay the rent on your tiny studio, and still write your plays. That’s no longer possible.”

And finally, from today's paper:

Rescues for Homeowners in Debt Weighed:

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

Go On a Savings Spree:

Why not ... try to stimulate investment by all Americans? The simplest approach would be to seed universal mutual fund accounts for low-income Americans. The best way to do this would be through a so-called refundable tax credit deposited directly into a special investment account for each taxpayer. In future years, the government could contribute an additional 50 cents for every dollar the taxpayer deposited into this account. Think of it as a universal 401(k), but one that could be used not only for retirement but also for things like a down payment on a house, college expenses or unexpected health costs.

Don't Rerun That '70s Show!

Jimmy Carter’s overall economic record was much better than most people realize — the average economic growth rate under his administration was 3.4 percent per year, slightly higher than the growth rate under Ronald Reagan and far better than growth under either Bush.

Reagan famously asked Americans whether they were better off than they had been four years ago; the answer, actually, was yes — most families had higher real income in 1980 than they did in 1976.

But the good economic news came in the Carter administration’s early years, while its final year was marked by rising unemployment and soaring inflation, largely caused by a surge in oil prices.

And once again we have a weakening economy coupled with rising inflation, again thanks in large part to a surge in oil prices.

The Cost of Marriage

I've often posted about the cost of relationships. Aren't you glad we Americans don't live in a country where there truly is a real, enforced cost to relationships? Check out this NY Times article about marriage in Egypt. Ok, it's not like there is officially a cost to have a relationship there, but in many cultures, particularly Islamic ones, it's just not acceptable to have a relationship outside of marriage. And if you want to get married, here's what it's going to cost you:


And this is in a country where a college graduate could have a job making $100 a month:

In the village of Shamandeel, not far from Zagazig, it took Walid Faragallah six years after graduating with a degree in psychology to find a job in a factory, and his pay was less than $50 a month. That is an average period of waiting — and average pay — for new entries in the job market. Mr. Faragallah kept that job for a year, and recently found another factory job for $108 a month, two hours from his home.

There was a similar story on NPR's This American Life, about matchmakers (listen here):

Miriam and her husband were development workers in Afghanistan. They'd had a whirlwind romance themselves, so when they heard that their driver was in love, but didn't have enough money to propose to the girl, they made a grand romantic gesture: they gave him $10,000 to pay for the dowry and the wedding. It was a move they probably should have known wouldn't work out so well.

Fortunately our society is a lot more flexible about these things! We may face peer pressure to have fancy weddings, but we can always just go to city hall and skip the ceremony, not to mention the fact that there is very little stigma nowadays to having relationships outside the traditional definition of marriage. Keep this all in mind the next time you're griping about having to buy a bridesmaid's dress you'll never wear again!

Women and Aging: Expensive No Matter What!

Here's another article I enjoyed from last Thursday's Times:

Nice Résumé. Have You Considered Botox?

We women just can't get a break sometimes. According to this article, if you let yourself age naturally, it will cost you money because you'll be passed over for jobs. If you combat aging with surgery, lotions, injections, etc., that will cost you money too! You can also spend $25.99 (or $14.29 at Amazon) on this book by Charla Krupp called "How Not to Look Old:"

The book is the latest makeover title to treat the aging of one’s exterior as a disease whose symptoms are to be fought to the death or, at least, mightily camouflaged. But the book offers a serious rationale for such vigilant attempts at age control, arguing that trying to pass for younger is not so much a matter of sexual allure as of job security.

“Looking hip is not just about vanity anymore, it’s critical to every woman’s personal and financial survival,” according to the book jacket.

Promoted recently on Oprah Winfrey’s show and “Today,” the book clearly speaks to the fears of professional obsolescence and economic vulnerability among women over 40, at whom it is aimed. “How Not to Look Old” made its debut on the New York Times best-seller list last week at No. 8 in the advice and how-to category.

Ok, on a gut level, this is nothing new to most people, but the article mentions a study that puts it in concrete terms:

In one study on hiring practices, for example, a graduate student at the Massachusetts Institute of Technology applied to entry-level jobs in Boston and St. Petersburg, Fla., by sending out 4,000 résumés as a female job applicant; the résumés varied the year of high school graduation, which dated the job seeker as being from 35 to 62.
The study, published in 2005 by the Center for Retirement Research at Boston College, found that younger women were 40 percent more likely to receive an offer of a job interview than women over 50; a woman over 50 in Boston would have to send in 27 résumés just to get one job interview, where a younger woman would have to send in only 19, the study said.
“Seeming young can definitely help your economic status, and that pays the rent,” said Joanna N. Lahey, the author of the study, who is now an assistant professor of public policy at Texas A & M.

Given that the jobs applied to were "entry level," the age discrimination might have involved a fear that the older applicant would be more likely to want more money or not stay in the job very long. Also, the study doesn't prove anything one way or the other about how LOOKING old affects your employability since the candidates were judged on their resume and the age it implied, not their face-to-face appearance. Who knows, maybe a thin, attractive and well-dressed older woman with grey hair and a few wrinkles would be more frequently offered a job than a younger woman who was un-stylish, overweight, and ugly.
But also, you have to remember how this plays out with men: older men are just more likely to be considered "attractive" than older women, and even if they aren't considered particularly "attractive" it doesn't seem to be as big a detriment to their careers. Look at all the major political figures we see in the news lately: there's no accounting for tastes, but Mitt Romney, Barack Obama, John Edwards-- all those guys would be generally seen as "attractive," I'm sure. John McCain? Rudy Giuliani? Dennis Kucinich? Mike Huckabee (at any weight)? Now you're talking about guys who are not that cute. But what about the women who are national figures? Nancy Pelosi? Condoleezza Rice? Maybe not everyone would agree, but I would say they are much higher on the attractiveness scale, and Hillary Clinton looks pretty good these days, even if she is never going to be considered a great beauty and has been the butt of way too much criticism over her earlier fashion mistakes. It's not like attractiveness is 100% necessary to succeed in politics, but something tells me that if we ever have a woman president, she will be well above average in terms of her appearance!

The article acknowledges the notion that it might be politically uncorrect, to say the least, to play along with any of our society's prejudices about appearance instead of working to change them:

Many people would shun a book if it were titled “How Not to Look Jewish” or “How Not to Look Gay” because to cater to discrimination is to capitulate to it. But the success of “How Not to Look Old” indicates that popular culture is willing to buy into ageism as an acceptable form of prejudice, even against oneself.

Even women who would probably identify themselves as feminists put a value on appearance and youthfulness, while trying to say it shouldn't be a basis for discrimination:

[Faye] Wattleton, 64, described people’s outward aging and their decisions to ameliorate it as personal choices that others should not judge.

“Being a person who has had plastic surgery and goes to the gym five days a week to work my muscles up so they don’t look atrophied as a 6o-year-old, I don’t disparage people who want to maintain their appearance,” said Ms. Wattleton, a former director of Planned Parenthood. “But what I don’t want is a society that tells me I have to.”

Ms. Krupp argues that economic pressures require most women to adopt age-management techniques. As her book puts it: we cannot afford to let ourselves go!

“What are we going to do if we have to enter the work force at a ripe old age?” Ms. Krupp said last week. “Out of necessity, you can disguise the age you are by looking younger, hipper and fresher.”

She added that Americans of one class, religion or ethnicity have often tried on other identities if they appeared to confer some professional or economic advantage.

“There was a book on how not to look Jewish,” Ms. Krupp said. “It was called ‘The Preppy Handbook’ and it was a best seller.”

Yeow! Of course that book would not have been a best seller under a more blatant title...

But back to the age thing, frankly, I think there is a lot more to this issue than wanting to be employed, or how society discriminates. We all want to look young and feel young so we can believe we are that much further away from dying! And perhaps, further away from having to start tapping into our retirement accounts...

Making Choices: Time vs. Money

Here's a story I enjoyed from last Thursday's New York Times. I think Thursday has always been my favorite day of the week for the Times: it used to be when they had the big Circuits section, there's always something fun in the Styles section, and the crossword puzzle starts to get interesting! And I often like Lisa Belkin's "Life's Work" column. This one is about how law firms are starting to become more flexible about the work/life balance, and realize that they might have an easier time competing for the best people if they acknowledge that the lifestyle of a typical big-firm lawyer kind of sucks! According to the article, lawyers at big firms are expected to bill about 42 hours a week, which means actually putting in more than 60 hours of time in the office. But now some firms are starting to allow people to choose other options, which basically mean choosing to earn less money in exchange for having a life.
Deborah Epstein Henry founded a consulting firm called Flex-Time Lawyers and proposes these work time options, under a program called FACTS:

FACTS is an acronym. Under Ms. Henry’s proposal, work time can be: Fixed (allowing lawyers to choose less high-profile work for more predictable schedules), or Annualized (intense bursts of high-adrenaline work followed by relative lulls); Core (with blocks mapped out for work and for commitments like meeting children at the bus); Targeted (an agreed-upon goal of hours, set annually, customized for each worker, with compensation adjusted accordingly); and Shared (exactly as it sounds).

As a single, childless person, I am not driven by some of the needs that would make people consider earning less money. My current job offers a pretty good balance of pay vs. a relatively sane lifestyle, and I wouldn't want to make any less money. I'd rather earn more money, but I wouldn't really want to have to work much harder for it! But if I was a lawyer and had to deal with working 60 hours a week as a baseline, and if I was making, say, $300,000 a year, then I think I would totally love the idea of working 40 hours a week for $200,000. (I'm just guessing at the salary range here, assuming someone my age would have over 10 years at a firm. Perhaps it's actually higher given that lawyers at these big firms are making over $150,000 their first year!)

Would you choose time over money, if your employer offered that option? How much money would you have to be making to consider trading some of it away for a less hectic work schedule? Which is worth more to you, money or time?

In the Mag

A reader emailed me to see what I thought of this week's issue of TimeOutNY, in particular the article titled "401ks Are For Suckers." I have to say that I totally agreed with everything the author said, and I decided to immediately put a stop to all my contributions and cash out my account. Then I am going to spend the money "gorging myself on expensive cheese in Paris and snorting hard drugs off the backs of go-go boys in Berlin," because the author of this article made it sound so enticing. Oh yeah, she also mentioned the fact that she'd be "on the dole at 65, eating cat food out of a rusty hubcap," which I think I'll have to try as well.

Ok, hopefully you've figured out by now that I'm kidding! I thought the article was very silly. Her reasons for not doing a 401k are that, basically, she can't afford it now, she'd rather live for the moment, the matching contributions from her employer aren't guaranteed to happen, it's all a conspiracy on the part of highly compensated employees, and that the 401k was invented by those chuckleheads who are our government so it must therefore be bad. I'm sure no one who is reading this site needs me to help them rip these arguments to shreds! It was so extremely silly that I thought she might be doing an ironic devil's advocate kind of thing, but I'm not even sure she really was!

The rest of the issue featured other items on the theme of money, including these tidbits:
-- the risks and rewards of potential NYC money-making ideas, like investing in art, or financing theater productions
-- how to make money as a prostitute (women can earn $200-300 per hour, gay men $100 and up)
-- how to chat up drunk Wall Street guys for financial advice (if you're young, female and cute)
-- how to save money using various scams to sneak into the movies, return gifts in exchange for cash or gift cards, and flip concert tickets on craigslist.

If none of that is your cup of tea, check out the latest issue of Consumer Reports, which features a cover story on financial mistakes that could cost you $1 million, as well as some other articles on retirement. Their take on the 401k: it's not for suckers. I agree.

Losing a Job, Moving in with Mom

Here's a sad article from the Times: Blue-Collar Jobs Disappear, Taking Families’ Way of Life Along

After 30 years at a factory making truck parts, Jeffrey Evans was earning $14.55 an hour in what he called “one of the better-paying jobs in the area.”

Wearing a Harley-Davidson cap, a bittersweet reminder of crushed dreams, he recently described how astonished and betrayed he felt when the plant was shut down in August after a labor dispute. Despite sporadic construction work, Mr. Evans has seen his income reduced by half.

So he was astonished yet again to find himself, at age 49, selling off his cherished Harley and most of his apartment furniture and moving in with his mother.

Middle-aged men moving in with parents, wives taking two jobs, veteran workers taking overnight shifts at half their former pay, families moving West — these are signs of the turmoil and stresses emerging in the little towns and backwoods mobile homes of southeast Ohio, where dozens of factories and several coal mines have closed over the last decade, and small businesses are giving way to big-box retailers and fast-food outlets.

Things like this just kill me. People need jobs. It doesn't matter what kind of work you do-- as long as you can support your basic needs on the wages, you have some dignity. I know people say our economy is transitioning from being based on manufacturing to service industry jobs, but I suspect that really doesn't work for a lot of people... not that I personally know what to do about it...

Does Green Go With Crimson? Financial Aid at Harvard

Harvard to Aid Students High in Middle Class

College costs aren't usually a big topic on this blog: my own student loans are a distant memory, and I won't be having any children whose education will wipe out my savings. Still, this NY Times story caught my eye.
I remember hearing a while ago that Harvard had changed their financial aid package so that anyone whose family made less than $40,000 did not have to pay for their education, other than having to make a small contribution via work-study. The income level for the free ride has since been raised to $60,000.
Now Harvard has announced expanded financial assistance for families at higher income levels as well. There is nothing in the article that spells out exactly how much aid is available to different income levels, but families with household incomes between $120,000 and $180,000 will get more aid than they have in the past. They will generally only be expected to put 10% of their income towards the child's education, and home equity will not be a factor in aid decisions.
Given that the average cost of a year at Harvard is now about $45,600, this kind of financial aid makes a huge difference for a lot of students, and other top schools are expected to begin offering similar levels of assistance. Some people might think that a family with an income of $180,000 doesn't "need" financial aid-- some might not, but of course other factors come into play, such as the number of college-age children, etc. And some people think college students should have to suck it up and pay for their own education and just go wherever they can afford. But I think what Harvard is doing is great.
When you go to a school like Harvard (and someone will probably say there is no place else "like Harvard" but for the sake of argument, let's just say that $10 billion or so more in endowment funds than your nearest rival doesn't make that big a difference), your educational experience is about a lot more than just your classes and dorm life. The resources of the university pay for so many activities and networking opportunities that go beyond that. Students who have to spend too much time working on a campus job, or who can't afford the additional costs involved in these extracurricular activities are really missing out on a big part of the whole package. This ends up meaning that students from wealthy families are the ones benefiting from that part of the university's spending, even if they aren't actually getting financial aid. What Harvard is doing should help even the playing field somewhat.
The article made me think back to my own college years at an expensive Ivy League school (which may or may not have been Harvard. Wouldn't want to narrow things down here!)
I think my father was making around $50,000 when I was applying for financial aid in the mid-80s, and if I remember correctly my yearly college costs ended up being around $20,000 on average over the 4 years. Most schools where I was accepted didn't give us a penny (except for my "safety school," a state university where I could have gotten so many scholarships I practically would have made a profit). The one I ended up attending gave me $1,200 in outright grants the first year, but nothing the next 3 years. To pay the bills, my father dug into savings and took out a second mortgage. I took out some loans myself, and worked on campus in my sophomore through senior years, as well as throughout the summers. I never considered any internships or summer programs because I didn't think we could afford it.
If you do some inflation math to convert everything into today's dollars, it seems outrageous that my father was expected to pay 100% of about $35,000 in costs, on a $90,000 salary. If I was going to Harvard today, he'd pay about $9,000 out of $45,000 in costs*. Sigh. Yet another reason to wish I was a lot younger!

*I'm assuming by "household income" they mean gross income including salary and investment income, before taxes, but I have no idea if this is