An Avatar's Open Wallet

Here's an interesting concept: spending virtual dollars to live an online live that is much more luxurious than your real one: No Budget, No Boundaries: It’s the Real You

It may be raining pink slips, and some people may be hard-pressed to make the rent, much less splash out on a pagoda-shoulder jacket from Balmain, but Vixie Rayna is hardly feeling the pinch. Not a month goes by in which she isn’t spending as much as $50,000 on housing, furniture or her special weakness: multistrap platform sandals, tricked out in feathers and beads.

Recession or no, Ms. Rayna isn’t reining in her fantasies, or her expenditures — at least not in the virtual world. In a simulated universe like There.com, IMVU.com or Second Life.com, the granddaddy of avatar-driven social networking sites, Ms. Rayna, an avatar on Second Life, and her free-spending cohort can quaff Champagne, teleport to private islands and splurge on luxury brands that are the cyber equivalent of Prada waders or a Rolex watch. Real-world consumers may have snapped shut their wallets. But in these lavishly appointed realms it is still 2007, and conspicuous consumption is all the rage.

All this is not to say that online spending is purely virtual: people spend real money on this, albeit not as much as these things would cost in real life:

In most virtual worlds, memberships are free, but players trade real money for virtual currencies, used to buy products, save up in an account or eventually redeem for real money. About 70,000 Therebucks on There.com, or 10,000 Lindens in Second Life, each about $40, can buy a choice of simulated wares, from several pairs of thigh-high boots to a plot of land. What’s more, as Mr. Wilson pointed out: “Everything fits; things don’t wear out. The virtual world represents a different value proposition.”

In their day-to-day lives, shoppers like Mandy Cocke, Vixie Rayna’s real-life alter ego, have sharply trimmed their spending. When times were flush, Ms. Cocke, a nurse in Virginia, parted with as much as $1,000 a month on designer shoes and clothing. Lately, though, “pretty much every possible expense makes me ask, ‘Do I really need this?’ ” she said.

But online, their acquisitive lust rages unabated, fueling a robust economy driven mostly by avatar-to-avatar transactions estimated at between $1 billion and $2 billion a year in real dollars. Second Life, the most successful and most familiar of such sites, does not disclose retail revenues. But it reported a 94 percent surge in its overall economy in this year’s second quarter over the same period a year ago.

I've never tried out Second Life and don't really have any desire to, but this has made me very curious about it! What fascinates me is that if these online avatar worlds are booming exactly when the rest of the economy is tanking, it has to be because people need to spend less money in order to buy an equal or greater feeling of spending money! Some people just enjoy the idea of spending money and having stuff, even if it's totally imaginary. They'd rather spend $50 a month on the equivalent of $20,000 worth of virtual clothes than $50 worth of real clothes. Personally, I don't get this, especially with clothing-- to me, half the pleasure of good quality, expensive clothes is how they feel against your skin, not just how they look. If you're just seeing something in pixels, the whole concept of a high-end brand vs. a knockoff is totally meaningless.

Readers, I'd love to hear comments from you if you've tried this-- how much money are you willing to spend on an online avatar as opposed to your real self?

Coping with a Pay Cut

A poignant article from the Times: Still on the Job, But at Half the Pay.

The dark blue captain’s hat, with its golden oak-leaf clusters, sits atop a bookcase in Bryan Lawlor’s home, out of reach of the children. The uniform their father wears still displays the four stripes of a commercial airline captain, but the hat stays home. The rules forbid that extra display of authority, now that Mr. Lawlor has been downgraded to first officer. He is now in the co-pilot’s seat in the 50-seat commuter jets he flies, not for any failure in skill. He wears his captain’s stripes, he explains, to make that point. But with air travel down, his employer cut costs by downgrading 130 captains, those with the lowest seniority, to first officers, automatically cutting the wage of each by roughly 50 percent — to $34,000 in Mr. Lawlor’s case.

But here's some bits that disturbed me:

“I don’t want to be a 50-year-old pilot earning $40,000 a year,” he said, adding that his wife does not want to be married to a pilot with so little earning power.

That seems a bit harsh, don't you think? From the rest of the article, the wife doesn't really seem to be taking that view-- she's worried about their loss of income but she also gives her husband kudos for helping out more around the house when he's working less. They're stressed out, as anyone would be, but it's not sounding like she's ready to divorce him if he doesn't get a raise.

Another quote that bothered me:

Bryan and Tracy Lawlor, who is also 34, have hidden their straitened circumstances from their four young children, mainly at his insistence. But as their savings dwindle, Christmas, a key indicator in the Lawlor family, will mean fewer presents this year. The Lawlors have made a practice of piling on toys and new clothes for their children at Christmas, buying relatively less the rest of the year. That will make a cutback noticeable this holiday season, and the parents are concerned that their children will begin to realize why.

“You don’t want to see disappointment on their faces; that makes me feel horrible,” Mr. Lawlor said. “You can be the best pilot in the airline and make the best landings, and in their eyes, I am not going to be as important as I was.”

I don't mean to criticize this guy-- he's in a tough spot, one that I can't claim to have been in myself. I do know how much fun it can be to give my niece and nephew presents, and I can imagine how my heart would sink if they seemed disappointed. But it's just sad that he seems to place all his self-esteem in his earning power and ability to shower his children with presents. I hope he doesn't really think his kids and his wife only respect and love him because of his rank and salary.

My Life in Transactions

The other night I had dinner with an old friend I'll call "Ace." We were really close back in college, then grew apart for a few years, but reconnected a few years ago and now have a great long distance friendship. Fortunately she comes to New York on business sometimes, and we always have a great time whenever we hang out.

This time, we had dinner at a restaurant in Chelsea. As a side note, it's just amazing how many businesses are turning over in this economy. The first restaurant I wanted to go to had closed. The second restaurant I wanted to go to had closed. But fortunately, its space had been taken over by the third restaurant I wanted to go to, which had moved and expanded.

After finishing dinner, we lingered for a while as Ace sipped a $16 glass of single-malt scotch. I'm usually glad that I do not enjoy such things given the expense, but this time I took a sip and kind of liked it-- uh oh! Anyway, the check came and we all started trying to figure out the bill. Sweetie, who was with us, wanted to use a credit card, as did I. Ace wanted to pay cash, so this led to a bit of befuddled calculating as we tried to figure out how to split the bill on the two credit cards and split Ace's cash, which involved making change, etc. Afterwards, I of course whipped out my Treo and entered the cash received into Quicken. Sweetie made some sort of "oh, there she goes" remark and Ace laughed and asked what I was doing. As I explained my extreme cash tracking habits, she grabbed my Treo and started looking at it.

First Ace was just amused at her own inability to figure out my Treo-- she kept swiping her finger across the screen as if it were an iPhone. But once I showed her how to scroll down, she started making fun of all my cash transactions! Here's some of her remarks:

Whoa, you need to spend less on food! Breakfast, breakfast, breakfast, lunch, lunch, lunch. And were you drunk when you entered some of these?? "HOok?!?!" What's up with that? You have a breakfast problem and a capitalization problem! Wait, you really were drunk, look at this one! "BEer!!" And "HOse thing??" I don't even want to know! Haircut $100, wow, I can't believe you spend that much, but they used to be a band... "Amanda-- French," hmm, who's Amanda French and what are you paying her for? Sweetie, did you know about this? And let's see, Girl Scout Cookies $4... oh, and here's another one where you were drunk, "DUpe keys," ooh, was that so Amanda French can get in? And earrings $4.31? What the hell kind of cheap shit earrings did you buy for $4.31? And windshield fluid, what? You don't even have a car, you must have been drinking it when you made all those typos...

It seemed to go on like that forever. It was just hilarious hearing her spin all these crazy tales about my life out of my misinterpreted cash spending! I'm just glad she didn't figure out how to switch to viewing my credit card transactions!
Have you ever showed your spending records to anyone? Did you ever think about how your life would look to someone who saw them?

More on Unemployment Benefits

After writing last week's post about unemployment benefits by state, I checked in with Mortimer to get his take on the subject, as he is still collecting unemployment himself. Here's what he had to say:

Benefits don't change at all based on single/family. It varies by state, so if you work in NJ you get more $ than NY and Mass gives even more $ than NJ (close to $600 per week I believe). Then most states calculate based on your last salary -- I think it's some sort of time frame involved like how much you made over the last 3 quarters. Most folks will get the maximum unless you are making like 30K or less. Max now is $405 plus the feds are adding $25 (not sure how long the $25 lasts). So single person making 200K and a family of 7 making 50K will get the same $405.

Not sure if there is a fair way to do it re families -- they would have to look at household income because you could be a family of 7 with another income in the house. Too complicated. NYS needs to up what it is paying -- they haven't done that in a number of years. They aren't even making inflation adjustments.

And while we're on the topic, there was an article this past weekend about unemployment benefits running out for a lot of people:
Prolonged Aid to Unemployed is Running Out

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

That's pretty scary. There may be some signs of light at the end of the economic tunnel, but stats like that don't bode well. If your job is gone and your savings are gone and you lose your umemployment benefits, what's left? Here's a few examples cited by the article:

Ms. Lampley, 40, who is married with three children, lost her job as a human resources officer in January 2008 and had been receiving $351 a week, which covered the groceries and gas. Even so, she and her husband, who still has work as a machinist, were sinking into debt. Now, still poorer, she feels devastated because they cannot buy their son a laptop to take to college and she cannot give her 9-year-old son money for the movies.

In Ohio, where unemployment is 11.1 percent, Cathy Nixon, 39, a mother of four teenagers from Lorain, has been out of work for much of the time since June 2007, and her benefits — $313 a week — run out in September. Ms. Nixon is already fighting foreclosure and said she feared that when the benefits end, “we’ll be homeless.” She was unable to afford summer camp and baseball activities for her children, despite scrimping on basics.

Raymond Crouse of Columbus operated heavy construction machinery but has found no work since 2007. Mr. Crouse is 72 and receives Social Security but said that was not enough to live on. The $190 a month he has received in unemployment benefits enabled him and his wife to hang on to the house they bought 15 years ago, he said. But with the benefits ending next month, he fears that they will not keep up.

The comments on the article get into quite a debate over some of these quotes, such as whether or not it's trivial to worry about getting a laptop for your child to take to college, or giving a kid money to go to the movies. (A lot of colleges require students to have a laptop these days. But while it sucks to have to deny a child little things they want, saying no to a movie might be a good lesson in reality.)
What if this situation goes on for many years? What do we now take for granted that we'll have to give up? Will we see more extended families living together under one roof? At some point, will our whole definition of middle class life change?

Bargain Betty

I was thinking the other day about a friend of mine from college, who we sometimes jokingly called Bargain Betty. She came from a very frugal family, and never seems to have felt any need to rebel against that aspect of her upbringing, as some might. She sometimes thought her parents went a bit too far, as in buying the rotten fruit from the mark-down shelf at the supermarket, but otherwise she kept up with all their frugal habits and still does as of the last time I saw her.
It's interesting to look back on it now-- when I was in college, most of my friends were from middle-class families and paying for school was significant, and in some cases a huge burden. None of us had money to burn, but we still had trouble being as frugal as Bargain Betty. I particularly remember that she used very rough generic tissues, while I insisted on the softer Kleenex or Scotties brands. And she always ate whatever food was on her plate, while the rest of us felt free to leave behind any part of our ample buffet meals that didn't please us.
Here's a funny detail: this was back in the days when women wore pantyhose much more frequently. Bargain Betty mentioned that she wore "Rock Bottom Pantyhose," which I'd never heard of. It turned out that Rock Bottom was a discount drugstore chain, but I thought it was someone's clever tagline for some kind of figure-shaping control-top. You know, like rock-hard... bottom, rock bottom... ok, whatever, but it was funny at the time!

Anyway, I always suspected it back then, and the years have borne it out thus far: Bargain Betty will probably retire a lot richer than the rest of us. She put herself through grad school, and helped put her husband through business school. They bought a house in the suburbs where they could send their kids to a good public school. They've had the same car forever and still seem to use a lot of the furniture they've had from their first apartment . Whenever I've eaten dinner at her house, all the leftovers are saved or sent home with the guests. Bargain Betty doesn't worry much about fashion and always buys classic clothes on sale for work. She's not into jewelry or manicures or dying her hair. Her one extravagance was hiring a nanny to take care of the kids before they were in school, since she and her husband both work full-time. And I'm sure she has great discipline about saving and investing, as she once asked me, with a look of concern, whether I was making sure to take advantage of my 401k. Compared to Bargain Betty, I am a raving spendthrift!

It's funny, I suppose all of us have someone in our lives who makes us feel like we could do just a little bit better. That we could try a little bit harder to be as disciplined as they are. And despite loving the person, there's this tension: we wonder if they slightly disapproves of us, and we want them not to disapprove, even as we might also sometimes want to tell them to lighten up and have more fun! For me, I think Bargain Betty may always be that person...

Is Eye Candy Always Expensive?

This post from The World of Wealth reminded me of something I'd been trying to write about a few months ago. First, an excerpt from MEG's post:

It's been over a month since I joined my new upscale gym, and I have never looked back!

It costs over $130 a month (compared to the $44 a month I used to pay for a regular gym), but I have not had even a twinge of buyer's remorse.....

Going to the gym makes me feel strong, healthy, and energetic, but this one in particular - like any upscale spa or designer boutique - also makes me feel pampered, composed, and worthy.

Also, there is plenty of good eye-candy!

That last line was the kicker for me (emphasis mine). The post I'd been working on several months ago was inspired by two lunches I had at places near my office, one being a typical NYC pizza joint, and the other an upscale, expensive, gourmet Italian cafe. I never got very far writing it, but the tentative title was "Where Do the Beautiful People Eat Lunch," because it seemed to me that the more expensive the lunch spot, the more attractive the clientele was, which seems to have been MEG's observation about gyms as well. Are expensive places really frequented by cuter customers? How might that work in terms of cause and effect, or mere correlation?

There's some logic to thinking people are more likely to be attractive if they can afford upscale lunches and gyms-- money can't create good looks, but it can certainly help enhance an otherwise average appearance. People of a higher socio-economic status are also more likely to be healthier and less overweight, which can improve one's looks. And in the case of restaurants, people who eat pizza for lunch every day might indeed be less healthy than those consuming organic salads from the gourmet place.

Then there's the question of who can afford the more expensive places: I'm sure I've read of plenty of studies showing that attractive people are more likely to be hired for jobs, and paid better. I can't cite any of those studies now, but I think this is something most of us would instinctively believe is true, whether or not it should be!

And there are psychological reasons-- if people value the things that differentiate upscale places from their less expensive counterparts, they are also more likely to prioritize appearance and wear the sorts of clothes or jewelry that might be judged fashionable or attractive by others. And from the perspective of the beholder, perhaps we are predisposed to find people more attractive because we think they have money.

Of course, all of this is very subjective-- everyone has different definitions of what is attractive in the first place. If your aesthetic tends more towards artsy thrift-store skinny-hipster chic, you might not find much eye candy at any gym, at least not in the weight room!

Where do you find your eye candy? Does it have anything to do with money?

What, Me Worry?

I've been blogging for almost 4 years now--during that time, I've not always been the most productive blogger, but I've gone through phases where I was full of ideas and I have well over 100 draft posts in various stages of completion, some dating back to the first month I started this site. Below is a post I wrote in January 2006. I'm not sure why I never published it. At the time, I'd just signed a contract on an unfinished new-construction condo priced at over $300,000. My salary was $82,000. My net worth was about $256,000. It was definitely a turning point in my life, and I was thinking about the idea of worry:

Everyone worries about money, right? Well, yes and no. There are different kinds of worry. Poor people worry about money, for obvious reasons. Rich people also worry about money, in different ways. And so does almost everyone in between.
I'm trying to think back (without actually reading everything) about how much of this blog has been me "worrying" about money. I've talked about my concerns about retirement, I've anguished over what kind of home I could afford to buy, I've obsessed over saving money, interest rates, the stock market, and picking up change. But over these past 7 months or so, and even over the past few years, I have never really worried about money. I've had some anxious moments when I had a little cash flow crisis, and even one when my wallet was stolen in a foreign country and I temporarily had hardly any cash, but under all that, I have had a sense of security.

Why this blithe lack of concern? It's simple: I've had cash in the bank, and I've known, as well as it's possible to know, that my expenses were under control. Of course I sometimes wondered what I'd do if my home burned down or something, but hey, I have insurance. If I lost my job? Hey, I have a lot of contacts in my industry and a lot to offer as an employee. Sure, nothing in life is guaranteed, but beyond protecting yourself to a reasonable level, why lose sleep over it?

But the other day, I realized that I was worried about money in a way I haven't been in a really long time, if ever. I keep looking at bank balances, adding them up, and trying to make sure I haven't made some horrible mistake. I am pretty sure I will be fine, but there is this edge of uncertainty that makes me nervous. Quite a lot of my net worth has been in cash. I've already taken a big chunk out of that with the 10% deposit on my condo. Soon, I'll be paying another 10%, and a slew of closing costs including various taxes and attorney fees. And I'm doing all of this on my own, with no help, no safety net.

I have enough money for all these things right now, if I count my stock and mutual fund holdings. And I'll have a little more money over the coming months as I get my tax refunds and bonus, hopefully. And then I will have some bonds and CDs that I could cash in case of an emergency. According to my trusty spreadsheets, I will have at least 5 months worth of living expenses on hand after I close on my new place. But at first very little of it will be liquid.

I know I've been sort of spoiled-- this is nothing compared to the way I would feel if I had a lot of debt and had lost my job, etc. But I can't help it-- it makes me a little nervous to have comparatively little cash, especially since I know I'll be entering a phase where I won't have as much of a positive cash flow each month. If I don't have any expensive disasters and keep getting at least small raises at my job, I should be ok, but I won't have the same feeling of security for a few years to come. But still, I am trying not to lose any sleep over it!

OK, fast forward to 3 1/2 years later. There's been a housing bust and a massive stock market crash and unemployment is close to 10%, all part of an economic crisis unrivaled by anything since the Great Depression. Has my attitude towards worrying changed?

Fundamentally, no. Global crises aside, my life went on: I bought the condo without it being a total disaster and I love living there. I got a promotion and a couple of raises and bonuses. I even splurged on a big vacation, which is another long-overdue post in draft form! I kept contributing to my retirement funds and got my cash flow back under control after all the new home expenses. My net worth took a big dip, but it's still quite a bit higher than it was in January 2006.
I am not a blind optimist: I think a false sense of security is dangerous, and I certainly don't mean to sound smug. But I still feel like I am relatively well-positioned to live the way I want to live, or to make adjustments as needed in order to get by in a crisis. "Worry" is a flexible word-- if you read it as meaning "taking care of" or "thinking ahead about" my finances, then yes, I worry. But otherwise, I'm still sleeping pretty well. It's a good feeling, and one I hope I can hold onto for many years to come.

Overheard at BookExpo

As usual, I attended Book Expo America this past weekend. I didn't have a chance to do much scouting for new personal finance books, but I did manage to score a free copy of Chris Anderson's new book, appropriately titled "Free: The Future of a Radical Price."

The most interesting money-related moment of the show for me actually occurred in the bathroom. There was a very friendly attendant working there who was chatting with all of us waiting in line. Here's what she was saying while I was there, more or less:

I'm working here from 7 AM to 7 at night. No, I don't mind at all. I have another job too!
I go home after this job, I sleep for 2 hours, then I get up and go to my other job, cleaning offices at night. It's ok-- hey, my kids are all grown and out of the house.
I thank God that I have even one job in this economy. Nowadays, I laugh to see all these rich people who are scared! I see it in their faces, they're scared.
And to think, I used to feel intimidated by rich people. That's why they build all those tall buildings, so they can sit in them and look down on everybody...

Contrast this to another conversation I overheard, between two well-dressed young women who worked for publishers.They had obviously just run into each other after not seeing each other for a while:

Woman A: Hey, we have to get together! We still haven't done our Brooklyn thing!
Woman B: I know, I know! But I'm really broke again.
A: And I'm really busy...
B: Well, we have to find a time. Around the 15th of the month is a good time for me.
A: Ok, we'll find a time...

I guess Woman B was scheduling her social activities around payday. It's just fascinating how different people can be in their attitudes towards money and time!

A Sad Tale, with Violins (Really)

Read this article, from the New York Times: At an Age for Music and Dreams, Real Life Intrudes

Her name is Tiffany Clay and she is 18, with light brown hair tied in a ponytail and large eyes that always seem at the edge of tears. She has been on her own, more or less, since she was 16, and the violin in her delicate hands was bought for $175 on eBay by her music teacher.

She is a complicated young woman, says that teacher, and a gifted musician. Consistently at or near the very top of her class. Should be going to a top college, on scholarship. Should be, but won’t be, because she feels a need to make money more than music.

Ms. Clay is a child of her age and place, worried about being laid off, uninterested in and maybe even afraid of imagining a life beyond central Ohio. Newark is what she knows: a pleasant, bifurcated city of 45,000, where concerns about unemployment temper the pride in local public art, and where affluence and poverty sit side-by-side in the classroom.

She once explored the idea of going away to college to become a music teacher. But it just didn’t seem practical: spending four years studying the theory of music, which doesn’t interest her, while here in Newark, the school system is constantly adapting to real and threatened cuts.

Music programs always seem among the first to go, she says. No job security in Tchaikovsky.

So she is maintaining high grades, playing in the orchestra, working 35 hours a week as a Sonic Drive-In carhop, paying $345 a month for the small apartment she shares with an unemployed boyfriend — and planning to study nursing for two years at a technical college in Newark.

“Everybody gets sick,” she says, plotting her future.

Many people will read this and think this girl has had to grow up way too fast. It's a shame her family has fallen apart and can't support her, and that she has a talent she can't pursue further. She's missed out on truly having a childhood, that wonderful time that should be full of dreams and hope, and free of the pressures and responsibilities that come with being an adult.

But others will think it's the story of a tough, resourceful kid who is doing exactly the right thing, and that more young people should be just like her. She's not all starry-eyed about becoming a violinist, a profession where there's probably a-million-to-one odds of being able to make a living. She's not some spoiled kid whose parents will be supporting her for a decade because she's chasing a dream that doesn't pay. She has taken a cold, hard, realistic look at her life and is doing what someone in her situation needs to do to get by, without any pretension that she's "better than that," or that following a calling to make music full-time is somehow her only destiny.

The comments on the article touch on both sides of the argument, and bring up some very interesting points. I find myself somewhat torn between the two views described above. Either way, I think everyone can agree that Tiffany Clay is a very impressive young woman, no matter what she decides to do next.

What do you think?

Respect for Money

One theme that emerged in the comments on my "Money Neurosis of the Week" post was that waiting for change of even one penny indicates that you have respect for your money. From the comments:

... he credits that respectful approach to money as one of the reasons he is wealthy...

... the penny probably doesn't matter much... but the stewardship attitude pays off on a larger scale because it affects every part of your life...

I think this is very true and very important. It's an idea I've gotten at a little in previous posts-- sometimes a penny is not just a penny, it's symbolic of your larger relationship to money.

It's easy to make fun of frugality-- it can seem absurd to worry about saving tiny amounts of money that even when you total up their effect over the course of the year, do not represent a large portion of your total budget. Sometimes people want to ignore trying to save pennies, preferring to instead focus on earning more dollars. But the two should not be mutually exclusive, and in some ways, saving pennies may be more important-- it's all about attitude.

Money is a powerful thing. We can do so much with it when we have it, and a lack of it can be so devastating. Most of us also spend a huge amount of our time working hard to get it! We all spend a good portion of our lives using money, and worrying about money. Even those who are born independently wealthy aren't immune to this.

If money is so important and so woven into our lives, we should respect it. Respecting your money means respecting yourself, your time, and the loved ones who may depend on you, or help you in hard times. It means respecting the freedom money can give you, and the power money can give you to help others. If I pick up a penny off the street, it's not about needing that particular penny-- it's about trying to value all money for what it can achieve. It's about remembering that I am not above having to be concerned about money.

You could take this too far-- this doesn't mean we should worship money, or see money as the only important thing in life. And it doesn't mean money can never be spent on frivolous pleasures. But by saving a few pennies, we can "practice" a mindful, respectful attitude towards taking care of our money, and hopefully it will help us take care of our dollars just as well!

What does respecting your money mean to you?

New Mindsets for a New Economy: "Rectitude Chic"

In last weekend's Wall Street Journal, there was a column by Peggy Noonan called "Rectitude Chic." Here's a couple of paragraphs that got me thinking:

For a generation we've been tapping on plastic keyboards, entering data into databases, inventing financial instruments that are abstract, complex and unconnected to any seeable reality. Fortunes were made in the ether, almost no one knows how; there's a sense that this was perhaps part of the problem. Workers tapped on keyboards and produced work they cannot see, touch or necessarily admire. They'd like to make their country better, and stronger, in a way they can see....

There's something else going on, a new or renewed sense of national shame. Or communal responsibility. Or a sense of reckoning. Whatever it is it's a reaction to the excesses of the O's, a reaction against the ways of those who caused the mess on Wall Street and Main Street. It is a reassertion that there actually are rules, and that it is embarrassing to break them in a way so colorfully damaging and destructive to everyone else.

Do you think this is true? Do you feel like people are thinking differently about large scale issues these days, and questioning things in different ways? Perhaps people other than the editorial writers of the WSJ might have been more inclined to have that sense of national shame before now, but have these undercurrents now boiled over?

Origins of Family Money

How would you feel if your family had some money from somewhat dishonest origins?
I was talking to a friend about her family background-- it's a fascinating story. One of her ancestors invented some sort of patent medicine and made a fairly large amount of money selling it before such things became frowned upon. Later generations of the family made a living in more legitimate ways, but certainly with the help of that ancestor's money.
Another branch of the family also had some money, but in this case, they were immigrants to the US who started a business that is still run by family members today, though not a branch that my friend is directly related to. There was a bit of a power struggle in the family, and my friend's branch was forced out, and possibly not paid their fair share of the company's value.
We got to talking about this because of a shared interest in genealogy. My friend's mother was very interested in learning more about her family background, but seemed a bit ashamed that there may have been some scandal in her family's past having to do with her ancestor selling fake medicine. But they dug up a lot of information about how active he was in his church and social and charitable activities, which made her feel a bit better about it. Nonetheless, she'd lived most of her life kind of turning away from a background of privilege, doing a lot of volunteer work and living very frugally. Her own children were brought up knowing they had a very small trust fund left by their grandparents, but other than that, they lived a normal, comfortable but not luxurious, upper middle class life. Their college educations were paid for, but other than that they had no handouts.
Money passed down in families can have all sorts of strange effects-- people can feel burdened by it, especially if they have qualms about its origins. Have you ever found yourself in that situation, or known someone else who has?

Monetary Mental Health

An interesting article from yesterday's New York Times, about the rise of "financial therapy."

The two women, a global celebrity and a Wisconsin divorcee trying to climb out from under a pile of bills, sought help in the budding field of financial therapy, where budget planning meets psychological counseling. They even went to a kind of money rehab, where, in six days of group therapy they dug deep into the roots of what psychologists call “money disorders,” the slew of unhealthy and self-destructive behaviors that are not as extreme as pathological gambling, kleptomania or compulsive shopping, but nevertheless afflict large numbers of people.

While it is difficult to pinpoint the number of patients or practitioners, experts in psychology and financial planning say the number of professionals offering to treat money disorders has multiplied in the last few years.

Although there are many self-help books on how to become rich, the fields of psychology and financial planning have been slow to link money and emotion. And money is still a great cultural taboo that is rarely discussed openly in this country, experts say.

The article brings up the rather disturbing potential for financial planning and therapy being provided jointly, which does seem a bit weird. But in general, I think it's a good thing-- if going to a therapist is what it takes to get people to confront these issues, more power to them. Of course there are plenty of online support groups they could join for free: like this site and my entire blogroll!

Hipsters and Money

Quite a few months ago, TimeOutNY had an issue whose theme was "The Hipster Must Die." Of course this title was somewhat tongue-in-cheek, as they'd probably be killing off half their subscriber base, but it got me thinking about the financial aspects of hipsterdom.

First of all, it's a little unclear exactly what a Hipster IS these days. The various elements involved might include being involved in art or music or literature, wearing thrift store clothes, riding a certain type of bike, and generally adopting an attitude of being counter-cultural, or anti-Yuppie. The Hipster embraces a kind of anti-cool cool, and celebrates a certain degree of nerdiness.

New York is full of these types. It's as if the Statue of Liberty were beckoning to them, saying "Give me your tired, your poor, and those who were always being given wedgies in middle school." The supposed non-conformism of Hipsters is kind of a joke here, because they all look the same-- tight skinny jeans, extreme pallor, hats that are otherwise worn only by elderly Puerto Rican men, and retro-geeky sneakers.

(See, I am over it because I am old enough to have seriously wanted those same sneakers as an upscale, aspirational, non-ironic fashion item in the 1980s.)

Some of these elements of hipsterdom are closely associated with money.

For instance, Hipsters tend to like to buy clothes in thrift shops and say they are broke, unlike all those suit-wearing Wall Street types who are getting paid to be conformists. How many Hipsters really are broke? Do Hipsters drink Pabst Blue Ribbon and other cheap beers in cans because they can't afford Belvedere martinis? Or just because it looks cooler to get a bucket of PBRs? Hipsters used to move to Williamsburg because it was cheap. Then Williamsburg started to fill up with yuppies, so the Hipsters had to move on to Greenpoint and Bushwick and who knows where next. Again, is it really the money, or do Hipsters just prefer to have people reply "Where? Is that safe?" when they say where they live? I've already blogged about the tendency of Hipsters to ride the one-gear, no-brakes bikes known as "fixies." These bikes look simple, but they're not cheap: try $800 and up. For a bike with no brakes. In New York City. Smart, huh?

But despite this embrace of at least the appearance of poverty, Hipsters have become a target market, at least in New York. Perhaps recognizing that some of these people actually have trust funds, a savvy real estate company started offering "Home-Buying for Hipsters" seminars at bars in Williamsburg. Great derision followed at real estate sites such as Brownstoner and Curbed, including this gem of a comment:

once you buy a home, you are no longer a hipster. you're a mortgage holding wiener like the rest of us.

What say you, readers? Which would you rather be, a hipster or a mortgage-holding wiener?

Income and Identity

When I did my taxes earlier this year, for the first time I got to put down a new occupation as the source of some of my income: "Writer."
Ok, it probably should have been the 2nd time I did this, but I had so little ad income in 2006, I forgot to even include it. Oops! Given that I'm donating the blog proceeds to charities anyway, I'm not going to lose any sleep over it, and hope the IRS won't either! But this year, even though it still wasn't a ton of money, I remembered to declare my blogging income, and felt rather proud of myself when my accountant said she'd list "writer" as a job on my return. (And of course she immediately started thinking which expenses to use to offset that income-- internet access, for one.)

It's not like I'm doing this blog for money, but somehow it's kind of neat to feel like I can call myself a writer. I've always felt weird labeling myself an "artist" or a "writer," as opposed to "someone who likes to draw and paint sometimes" or "someone who keeps a journal and has done a few writing workshops but would be too embarrassed to ever consider actually trying to publish something." I've always felt like a dabbler, not someone who "really" did these things, and certainly not someone who could be considered to do them professionally.

It's weird: I know someone who defines herself as a writer and devotes a lot of time to it. She's published a book of poetry and probably made less money from it than I've made from this blog. Of course, there is a difference between being paid for one's writing, and being paid to attract eyeballs to advertisements, and last I heard no one was trying to advertise payday loans in the back of poetry books. But still, even if some of the content here is just links and brief commentary, I have done a lot of writing over the last almost 3 years, and a lot of people have read it. That it has made some money provides a certain validation, but I'd feel good about it even if it hadn't brought in a penny.

The really weird thing is that the only way I've been able to do this is to write anonymously. Sometimes the "real me" wants to say "hey, lookit, I'm getting paid to be a writer" but I can't!

Money Lit

Here's a quote from Vikram Seth's A Suitable Boy-- I'm only about a quarter of the way into this 1500 page doorstop, but it's wonderful! The book has been compared to the novels of Dickens and Austen, but set in India, and I'm really enjoying it. This passage describes a young middle-class couple, who are constantly going out on the town with their friends for long evenings of elegant food and drink and dancing:

Meenakshi and Arun were not really able to afford this-- Billy Irani had independent means-- but it seemed intolerable that they, for whom this kind of life was so obviously intended, should be deprived of it by a mere lack of funds.

We all have this idea that we're intended for a certain kind of life, don't we? And we tend to spend accordingly!

Notes from a Business Trip

This past weekend, I attended the BookExpo convention in Los Angeles. You can see from this post what the show like a couple of years ago. This year, I didn't have a chance to scour the whole show for financial books, but of course money was still on my mind!

The first aspect of my trip that got me thinking was the route my car service driver took to JFK airport. From the areas of Brooklyn I've lived in, drivers usually opt for routes that are a bit circuitous but consist of major highways-- it's almost as if you have to go from 6 o'clock to 12 o'clock and you have the choice of going around the edge, clockwise or counter clockwise. But this time, my driver took a route along a lot of small local roads for the shortest possible trip straight through the middle of the clock. We hit lots of traffic lights and got stuck behind trucks, but I'm not sure it was a bad choice in the end. He might have avoided traffic jams on the highways, but more importantly, he probably saved on gas.
Car service drivers usually have to get as many jobs as they can, as quickly as they can, to make it worth the cost of renting or owning their car. But with higher gas prices, has the balance shifted? Would they rather take the route that conserves fuel even if it takes a bit longer?

On the long flight, I managed to do a lot of reading, including a couple of articles from the NY Times and the Wall Street Journal.

Of note in the NY Times was an article noting that while prices for many things are increasing, clothing is getting cheaper, at least for mainstream brands.

The Journal had an article about the Sex and the City effect on women's career wear. The ultimate verdict is that the kind of fashions the show espouses are more likely to look trashy than status-y in an office. Most high-ranking female executives favor a much more conservative style of dress, with nice details in the cut of a collar, or a swanky scarf or necklace jazzing up the look. I also had to note a mention of a "$3,000 Swarovski-crystal encrusted handbag shaped like the Eiffel tower." Forget professional vs. trashy, that just sounds hideous.

The Journal also had an interview with the CEO of Coach: "Coach Targets China-- And Queens."
The handbag retailer is planning to expand in China, targeting the emerging middle class, since their prices are lower than most European luxury brands. Meanwhile, they plan to open 200 stores in the U.S. over the next several years, bringing the total to 500. This means they will be branching beyond the locations traditionally thought of as high-end retail destinations. In the New York area, they'll be opening in Staten Island and Queens. Here's a few quotes:

"By convincing American women they need to buy several $300 handbags a year, Coach, Inc. has helped shape the "accessible luxury" retail category, producing $2.6 billion in fiscal 2007 sales."

CEO Lew Frankfort: "A lot of my team said, 'Queens? How can you do that?' But our target consumer shops in those stores. We aren't going to advertise it on our marquee: Staten Island, Queens, Tokyo, and Hong Kong... In the first six months, 30% to 50% of our consumers are first-time users. So we are able to attract, in those instances, candidly, a more aspirational consumer."

WSJ: How do you retain the very elite, New York, Madison Avenue customer?
Frankfort: She doesn't go to Queens Center. She doesn't know about it.....

Wow, can we just translate that? "Dear Middle-Class Coach Customer: Having one of our bags makes you look really high-class. Dear High-Class Coach Customer: We only sell to people who are as special as you, not just any old middle-class slob. Dear Coach Stockholders: We are going to sell a gazillion handbags to every woman on the planet."


And finally, at the airport on my way back, I faced a HUGE line for check-in. Those little electronic kiosks haven't helped a bit: now you just have to line up for those instead of for a person, and I had to check a bag so I wouldn't have to ditch my expensive hair product! But outside, the line for curbside check-in was practically non-existent, no doubt due to the new $2 fee. Many people just don't want to pay this fee. Others end up confusing it with the tips that were customarily given to the skycaps anyway, leading to those guys getting stiffed. Anyway, I decided it was worth it not to wait in line and forked over the $2 fee, plus a $2 tip. Funny how a few dollars can sometimes make a big difference!

The Economics of Teeth

I've always felt that preventive dental care is a good investment. Easy for me to say because I have good dental insurance, but even when I was uninsured for a period of time, I still got regular cleanings because I knew that more serious dental problems would cost a lot more, not to mention cause me pain.
Then there's the cosmetic aspect: according to the Freakonomics blog at the NY Times, having nice-looking teeth may help you earn more money (just as anything that makes you more attractive may help you earn more money.)

I was thinking about this issue recently because of a friend of mine, whose teeth are quite stained. She goes to the dentist regularly and has considered evening out and lightening the coloring of her teeth via some sort of coating or veneer, but she doesn't want to do it because it would cost "thousands of dollars." (It didn't sound like potential pain was a factor.) This is a woman who is particular about her appearance, and spends plenty of money on clothes and jewelry, and I'm sure she wouldn't be going broke just from one big dental bill.
In my opinion, people (at least Americans) are much more likely to notice a flawed smile than an expensive watch or a good pair of shoes. So if you care about your appearance enough to spend thousands of dollars on it, why wouldn't you spend money on your teeth before spending it on clothes or accessories?

What would you do? Are there certain appearance-related things you're more willing to spend money on than others? Do you see it as an investment in your career, and if so, do you think some investments in your appearance pay off better than others?

What's Up with the Middle Class?

There seem to be two different angles on what it means to be middle class these days.

On the one hand, there is a sense that middle class people are greedy and spoiled. The middle class has its eye on the upper class, and wants all the luxuries that used to be seen as just for rich people. Everyone is trying to keep up with the Joneses, with bigger houses and fancier cars and clothes than the middle class used to have. They are better off than they've ever been but they can't appreciate it because they are greedy for more.

Then there is the sense that the middle class is squeezed. Today's middle class is worse off than their parents-- college and healthcare costs have skyrocketed, good jobs with benefits are more difficult to find and it's harder to make any real progress towards financial security and a comfortable retirement. For some examples of the changes a median family has faced from 1970 to today, check out Jonathan's post about a lecture called "The Coming Collapse of the Middle Class." The middle class is seen as being the segment of our society that needs the most help right now.

Who are the middle class anyway? When politicians talk about taxes, at least in the last few years, they tend to define the middle class as anyone making up to $200,000 or so a year. But only about 2% of households, I believe, make over that amount. It seems a bit too broad to define middle class as 96% of the population, excluding only the 2% who are the most wealthy and the 2% who are poorest. And actually there is a much larger percentage of the population who live at poverty level or below, usually about 12-15%. And the poverty level is defined as an income of just over $10,000 for a single person, $13,690 for 2 people, and only $20,650 for 4 people. That leaves an awful lot of people in the range of incomes between $20,000 and $200,000 to be considered middle class.

So maybe what many of us think of as "middle" is not truly in the middle? Rather than having an "upper middle class," maybe we have a "middle upper class?"

But money is not the only thing that determines class. You can still view the special report that the NY Times did a couple of years ago called Class Matters, whose interactive tools try to measure the way income, education and occupation all factor into social class. Is what we think of as middle class more about a certain set of values, like sending your children to college or owning a home or working in a white-collar job, or taking a vacation every year?

How do you define the middle class? Do you consider yourself middle class? Do you think the middle class is better off or worse off than 20 years ago?

Wine & Money

An article in today's Dining section of the Times talks about whether enjoyment of wine is affected by outside factors such as the circumstances in which you drink it, or knowing how much it cost.

The researchers scanned the brains of 21 volunteer wine novices as they administered tiny tastes of wine, measuring sensations in the medial orbitofrontal cortex, the part of the brain where flavor responses apparently register. The subjects were told only the price of the wines. Without their knowledge, they tasted one wine twice, and were given two different prices for that wine. Invariably they preferred the one they thought was more expensive.

“Forget those blurbs about bouquets, body and berries,” one newspaper account crowed. “A meticulous new study found that the more people think a wine cost, the more they like it. And the less they think it cost, the less they like it.”

Big surprise. Sommeliers all over know that the hardest wine to sell in a restaurant is the cheapest bottle on the list. “Yeah, clients don’t want to be embarrassed in front of a date, so they don’t order the cheapest wines,” said Fred Dexheimer, the wine director of the BLT restaurant group. The fact is, the correlation between price and quality is so powerful that it affects not just our perception of wine but of all consumer goods.

Studies like this seem to come up every so often, so this is no big surprise. But what these studies have never taken into account, as far as I know, is the subjects' attitudes towards money. I think that a frugal-minded personal finance blogger might be more likely to enjoy a cheap wine just because it's cheap. I know I can be this way-- sometimes I probably like things just because I am so happy I got a bargain when buying them. Someone who really values saving money might not enjoy an expensive wine just because they want to believe that a cheap one is just as good.
On the other hand, someone who is very focused on attaining wealth and luxury goods and projecting a certain image of their financial status might be more likely to enjoy an expensive wine, because they believe expensive things should be better, and because they want to feel like their hard-earned money is buying them the kind of rewards they deserve. After all, if expensive things aren't better, there's no value to being rich, right?

Obviously, the answer is for some researchers to set up a study comparing the wine tastes of personal finance bloggers to those of the rest of the population at large. I hereby volunteer to be your first guinea pig!