Why I continue to work

I have been asked on numerous occasions when I am going to retire; other times people are surprised that I work after all I am 62 and I use an electric scooter because I can't walk. I am married and my husband works and brings in a good salary. Why not retire?

Back in 1987 my husband lost his job. We had to sell our beautiful home with a pool and spa for exactly what we owed on it losing every penny of equity we had built up over the previous 12 years. We lived on severance and savings for the following year while I finished my Pharmacy degree and my husband began his training for a new career. I supported us for the following 2 years while he finished. He was without work for 3 years total. Now fast forward to 2007--husband is able to keep his job only by transferring to a totally new department. I have watched several mass downsizings at my own place of employment. So if there is one thing I have learned for sure over the years is that no job is secure and that has never been so true as it is today. So why do I work? So that if one of us loses their job, we still have an income and health insurance.

I can stretch a dollar as far as anyone but frankly there is a level of income below which it is exceedingly difficult to live even a modest life. Then there is the whole health insurance debacle; I have health problems and need to see doctors. I cannot imagine how much stress it is to be sick and not know how your are going to pay for health care.

The new financial reality is no joke and it is not optional. If you have a job, keep it, upgrade your skills, and (you know what I am going to say next, don't you) pay off all debts and get an emergency fund in place yesterday.

Finally, the last reason I keep working is that I want to die like Daniel Schorr--fully engaged with the world and doing work that I think is important until the end of my days.

Debt is a problem

Personal debt and government debt is a world wide problem. Here is an interesting interactive from The Economist:


http://www.economist.com/blogs/buttonwood/2010/06/indebtedness_after_financial_crisis

Take a look at the Britain's overall debt as a percent of GDP or Japan's government debt or Switzerland's personal debt levels. Wow, we aren't the only ones who have gone crazy!

I have been reading recently about Britain's recently presented budget which essentially cuts 25% and greatly increases taxes (including a VAT of 20%). Hmm, paying more and getting less; wonder how that's going to play at the local pub?

So far Texas has been able to get by with no personal income tax and only 8.25% sales tax. Of course, there are property taxes which for us have been stable for the past few years.

25 Questions

This is the best summary that I have read recently as to why I have continued to assert that the recession is far from over:
http://www.businessinsider.com/questions-to-ask-anyone-who-is-delusional-enough-to-believe-that-this-economic-recovery-is-real-2010-5#in-what-universe-is-an-economy-with-3968-million-americans-on-food-stamps-considered-to-be-a-healthy-recovering-economy-1

IMHO, the tough times are just beginning. As I have said on numerous posts, do what you can to maintain at least one income stream and more than one if you can, get out of debt with gazelle intensity, and do everything you can to maintain your health.

I. O. U. by John Lanchester

Subtitled Why Everyone Owes Everyone and No One Can Pay. If you are interested in the recent global recession, this is a very readable book in very understandable language. I am interested in economics in general and have done quite a bit of reading about the recession and haven't found anything that is both as comprehensive and as understandable as this book.

In Lanchester's opinion the four basic causes of the global recession were:
1. Climate--the post-Cold War victory party of free-market capitalism
2. Problem--the subprime mortgages
3. Mistake--the mathematical models of risk
4. Failure--of regulation

Each of these areas are discussed in some detail and along the way he explains how the banking system works and what a Credit Default Swap is and a myriad of other interesting details.

My only criticism is that he is short on solutions. He says it is bad and not going to get a lot better any time soon and that's about it. There are a few legislative suggestions and why they probably won't be implemented. What I would have liked would be some concrete suggestions as to what someone could do to get out of this mess and prevent a repeat of it but none were forthcoming. We're going to be paying for a long, long, long time.

Flight 253-- An analogy for the future

http://www.nytimes.com/2009/12/27/us/27plane.html?_r=1&ref=us

By now we've all read about the passengers and crew on the Northwest Airlines flight who took charge of their own survival by subduing a terrorist who was trying to set fire to explosives shortly before landing in Detroit. I think that this is analogous to what we all must do to survive and live in the coming turbulent economic times. We must take charge of our own lives. Too many people are waiting for something--for a government rescue or program, for the jobs to come back, to get an inheritance, to win the lottery. Folks, it's not going to happen. Governments at all levels--local, state, and federal--are going to be taking more and providing less, not the other way around. The jobs that have disappeared are not coming back especially if those jobs were making or doing something that can be made or done more cheaply elsewhere. As for the inheritance or lottery, well, don't hold your breath.

We must be responsible for making our own future. How? If you've read this blog before, there's nothing new:
1. Manage your finances--make a budget, live on less than you earn, pay off all debt, save for the inevitable rainy day.
2. Do everything possible to maintain your own health--stop smoking, stop eating junk, turn the television off and go for a walk.
3. Learn how to do someithing--cooking, sewing, quilting, gardening--no one is born knowing how to do any of this--so learn how.

Whether we realize it or not, we are all on our own personal Flight 253 and we must take charge of our own lives.

Recession

I think the Great Recession will come to be thought of as the Great Divide. The people who were economically able to survive the recession will come out on one side and those who did not will come out on the other side. And I don't think that there will be much chance for those who went under to pull themselves to the survivors side. There's just so much damage that has occurred--houses and equity gone, savings and retirement accounts gone, jobs that paid well and had benefits/health insurance gone, marriages and relationships damaged, and health ruined. There will be recovery for some but IMHO most of those damaged by the Great Recession will have a devil of a time climbing back out.

I am part of the problem (tee hee)

I read the other day that part of the reason credit is so tight is that banks are undercapitalized. They are required to have a certain amount of reserve capital for the amount of money they can loan out. They are undercaptialized because their assets have taken a huge hit from the decline in housing prices and from people like me who are paying their houses off early. Yea!! I think it is about time people shed off their shackles to the banks and live free!!

What Happens When the Newness Wears Off?

The news reports that the recession is over. Maybe it is, my 403b account is up and we are all still employed. The latest figures show that only 11,000 more jobs were lost in November. All good news. My thoughts though are not so rosy. There have been millions of jobs lost during the recession and IMHO, those jobs are not coming back. This means that the people who lost jobs will have a hard time finding new employment and what employment they do find will be at lower wages.

Right now everyone is aware of the need for frugality and that in order to save, one must spend less than one makes. You could even say that frugality is chic these days. But at some point this newness will wear off and the reality of a lower standard of living will set it. It won't be a pleasant realization that you really don't have the money to do the things you once did or have the things you once had, that in all probability you will never have them again and that your children aren't likely to fare any better either.

I think that once the novelty wears off, there will be an awful lot of weeping and wailing going on. There will be a lot of political finger pointing and blaming and not much of it based in reality. The definition of middle class will change and more people will have a lot less. What will make this such a difficult time is that reality will not match expectations for a lot of people. I just hope that we can get through this period with minimum civil, political, and international unrest. These are real possibilities IMHO.

My Own Middle Class Survival Strategies

Morrison at http://alldoorsconsidered.blogspot.com/ has a thoughtful post up about the increasing pressure on the American Middle Class and ways to maintain a middle class life. No longer can one just coast along and expect to maintain a middle class lifestyle. The pressures toward downward mobility are just too strong. Morrison's post got me to thinking What are my strategies for economic survival??

Here are my 7 strategies for middle class survival:

1. Don't retire. You may have to change to a less physically demanding type work or work fewer hours but do not cut off your source of income.

2. Get out of debt. I like Dave Ramsey's baby step approach but there are many other debt reduction plans. Stop borrowing/charging now. Embrace creative frugality.

3. Do everything you can possibly do to maintain your family's physical and mental health. Diet, exercise, and attitude.

4. Learn useful skills. No one is born knowing how to do these so get in there and learn:
How to cook
How to sew and mend
Gardening

5. Combining households--Saves money and keeps away loneliness.

6. Develop community ties--church, gardening society, local businesses.

7. Be prepared to take care of yourself in an emergency or natural disaster. Food, water, medication, fuel.

If we do these things and the economy continues to worsen, we have a chance; if the economy improves, we've lost nothing and gained much.

Thought for the day:

Dig a well before you are thirsty. Chinese proverb

This is how an economic recovery looks???

(This is a replacement for the post that I accidentally deleted when I meant to edit it.)

* In July 247,000 Americans lost their jobs.

*July was the 19th month in a row of net job losses.

*Since the start of 2008, 6.7 million jobs have been lost.

*A record 5 million people have been unemployed for more than 6 months.

*The unemployed have been jobless for an average 25.1 weeks, a 61-year high.

I don't know whether to feel sorry for these people or not.

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/03/AR2009080303043.html?sub=AR

They are in a really difficult situation but I wonder about some of the choices they have made. They seem to have money for beer, cigarettes, and lottery tickets. And I wonder what kind of choices they will make it the future to get themselves out of the bad situation. Sitting around feeling sorry for yourself isn't a good plan for improving your situation. I see them setting a very bad example for the two children.
Maybe I am being uncharitable. After all, I had the blessing of growing up with parents who worked hard, were frugal, and took care of themselves financially.

Numbers

467,000 people lost their jobs in the single month of June. The unemployment rate is 9.5% which means that almost 1 out of every 10 workers in America is unemployed. I keep hearing that the economy is getting better but how can that be if more and more people are unemployed and lose their ability to purchase goods and services??

$38,211 left to pay on the mortgage. I won't relax until the mortgage is paid off, a year of expenses is in the bank, and the new vehicle fund is complete. Let's just pray we all stay well and fully employed.

100+ The temperature this week has been 100 degrees or more all week and more heat is expected. It was like this in 1980 when the heat started the first of June and never let up all summer. The grass is parched and brown with only the areas around the trees and beds aroun the house green wherre JMM has faithfully watered. I keep the thermostat up at 80 and fans going to keep reasonably cool but I am certainly not looking forward to the electricity bill.

Thought for the Day:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

Ernest Hemingway (1898-1961) American Writer.

Ben Bernanke sez

the financial rules need an overhaul. Well now, who would ever have guessed?? Excuse me, but that's a given. How far along are you and your minions on writing these new rules? Care to share what these new regs might be? Any ideas? ARRGGGHHH!!!

Whole lotta chutzpah goin' on...

From what I understand we are just now getting a list of the wrecked companies that were insured by AIG and to whom AIG has been funneling the bailout money. It seems incredible to me that AIG had not been required to furnish that information in the first place. According to the list in the NYT, most of the companies receiving bailout money from AIG are also receiving direct bailout money. Talk about double dipping!
While on the subject of double dipping, the same people who brought us Countrywide Mortgage Co. with the ensuing sub prime debacle are now buying up their own now taxpayer subsidized toxic assets. Just incredible!
Disgusting. The whole sorry mess is just disgusting.

Coping with Economic Free Fall

How am I coping with the economic freefall that we are in? Physically, I am cleaning and cooking and sewing and quilting. We are gardening and I am learning home canning. We are paying off our one remaining debt—our mortgage and building up our emergency fund from $6,000 to $7,000. That is what we are actively doing. Emotionally/mentally I am dealing with it by consciously limiting the time that I listen to the neverending bad news and listening to beautiful music instead. Also, I am consciously focusing on gratitude for my many blessings. That is how I am dealing with it--how are you coping?

On the work scene

We had a meeting at work yesterday for all pharmacists. The economic slowdown is beginning to show itself at our hospital. We have had a hiring freeze for several months and have lost 2 pharmacists in that time. Our schedules are being changed to try to provide adequate coverage with less staff. I'm not looking forward to a rotating schedule so I will see if I can find someone to trade with so that I can keep working straight evenings. It is unavoidable that I will have to work a rotating weekend schedule. In all honesty though, I don't mind the weekends as it is nice to have some days off during the week. The main thing is that I still have a job. If the economy doesn't pick up by the end of the year, I wouldn't be surprised at all if JMM is laid off; if we can manage to both stay employed until the house is paid off, we can live on one salary for as long as necessary. Interesting times these are.

Thought for the day:

It is good to have an end to journey toward; but it is the journey that matters in the end. - Ursula K. LeGuin

Talk about sending mixed signals

On the one hand, we are told that Americans are reckless consumers who spend every nickel and dime they have (and then some) and castigating us for not having nearly enough savings. But then you pick up the next article which is pitching a tizzy fit that the credit markets are frozen and we're all going to Hades because we're not buying cars or houses or racking up student loans. I know that businesses need credit for inventory and expansion but I'm not so sure we need so much personal credit. As for me, this less debt I have, the better I like it.

Thought for the day:

If I really grasped the reality of how brief life is what would I do differently?

The Economy...again

Last month saw the loss of 598,000 more jobs. The official unemployment rate is 7.6% but if you add in those who are in part-time work because they are unable to find full-time work, the rate goes up to 13%. So far we are all fully employed. However, if these increases continue, the chances increase that one of us could lose our job because of the ripple effect. We could manage on one salary but it would take over 1/2 of that salary to pay the mortgage leaving very little for irregular expenses such as car repairs or pet expenses. So I continue to hold my breath while pouring money into paying off the mortgage and increasing our emergency fund.

If we do manage to remain employed, I have been thinking about goals for 2010:
1. $12,000 for yearly house expenses which include property taxes, homeowners insurance, and POA fees.
2. $20,000 new vehicle fund
3. Increase the emergency fund by another $1,000
4. I continue to debate with myself about food storage but it is a possibility.
5. I want to resume the CD ladder that I began several years ago and I want to resume 403b contributions.
These goals are achieveable only if we remain healthy and fully employed.

Another Weekend Financial Rape

The administration's financial wizards decided it would be best to plunder the national treasury to the benefit of their friends at Citi Group over the weekend and present it Monday as a accomplished feat. I'd say Unbelievable but unfortunately it is completely believeable.

On a personal note, in order not to be worried, upset, and depressed all the time, I am limiting the amount of time I listen to the news. I am spending more time on domestic issues--cooking, quilting, reading things that are uplifting, loving family, and being thankful for my blessings.

The Economy and the Bailouts

The talk about the economy is unrelentingly bleak. We have seen our 403b accounts shrink by 1/2 for JMM and 1/3 for me. Mine has been somewhat protected in that 1/2 of mine is in an annuity which guaranteed a 3% return this year. The annuity is invested in ING Stable Value which is good unless it goes under. Other than the 403b losses, we are really doing just fine. We all have jobs. JMM, FM, and TSM. None of us are in immediate peril of losing our jobs. We are all in good health and able to work. This time next year the house will be paid off and we will have no debt. If we remain in good health and employed, we will have time to pay cash for new vehicles and build a CD ladder of $20,000 each month before we retire at 66. Three things are of utmost importance: 1.) Do everything we can do to remain employed. 2.) Stay absolutely focused on the financial plan. 3.) Do everything possible to remain in good health.