MONEY 71 - REAL LIFE

THIS IS MY 71^ST BLOG ON UNDERSTANDING MONEY TOOLS

It has been some time since I have applied myself to writing a blog; so needed to create something. Let’s talk about “real life”.

In this blog we are going to try to address a few things about life that I think may help in the long run, or I wouldn’t be wasting my time.  Some of this may be repetitive but that is good, and re-enforcing. And, of course, it is subjective to my thinking.

To be successful you need to work on yourself, your image, your usage of time and more.  Probably the most important skill you can develop is good communication. Life tempo is important. Recently, I thought of a good analogy to life tempo. Imagine yourself driving on the expressway.  You are driving slowly at 50 miles per hour and the speed limit is 65 miles per hour. Cars are whizzing by, you don’t feel in control at all, and you aren’t. It is scary. Let’s speed the car up to 70 miles per hour in the speed limit of 65 miles per hour. You feel better, more in control, perhaps navigating traffic comfortably. Life and work is the same. Best not to be the tortoise or the hare, but take control when you can.  If you are taking the “backseat” on most things and being pushed around, stop, reflect, do something about what is happening in your life.  Take control over your life, as difficult as it may seem.

Next, let’s talk about working for big corporations. If large corporations were human beings they’d have IQ’s of 40!  First, these companies are managed mostly by people who should never manage people, and you will find out many of these managers have the position because of a situation by chance or luck. If you are a nice, good person you must realize most companies could care less about you. Everyone is doing a functional job for bottom line and stockholders. You are expendable! In light of this moral and ethical conflict, use the company to serve your purposes, as they are going to use you. Few people ever make it up the corporate ladder or to top management. What can you do to circumvent this at a younger work age?  Well, let’s draw parallels again. When I was young someone wisely told me it was okay to go out for one or two team sports, however concentrate on individual sports like skiing, tennis, golf, fishing, and many more. Once you graduate from high school or college the team sport goes away unless you are one of the lucky few who can become a professional athlete. Relating this illustration to the corporate world, try to specialize like an accountant,  lawyer or technician being trained beyond schooling in the practical world knowing that you probably will stay for “x” number of years and then go out independently on your own. If you stay you will become a corporate slave and that is exactly where the company wants you. Who has the “controls”?

Another reason to remain as individually independent as possible is that Americans are comatose in regard to the health of the US economy, corporate America and world economy. We are doing everything we can to stay out of deflation and resultant recessions. In 2015 our first quarter was negative GDP as most know, then miraculously numbers occurred in second quarter that we were positive GDP. Most of this growth came from public sector spending our tax dollars, not private sector spending. Two quarters in a row of negative GDP equates to recession. When you have the health of this country held together with advertising from websites and social sites like Facebook, we are in trouble! That produces nothing meaningful for this country.  It is a social service, not a tangible product that we can export. There is an expression used by some of the popular novelists that comes to mind, “hope for the best, prepare for the worst”! Words of wisdom.

Here is another lesson in life to be aware of.  Let’s say you take a long-term approach working for a major corporation and the company promises you health care and a nice pension. Most companies don’t offer pensions these days, but they may contribute to stock plans. They most likely will offer a 401-K Plan.  Here is a reality check. If you work for the US government your retirement plan may be fairly solid.  The next level is county or city. Let’s look at facts. We could pick cities in California, Midwest or East Coast. Let’s take Chicago. You hear Chicago has about 8 million in population. The actual City of Chicago has about 2.5 million people. Their pension plans per capita are in worse financial shape than the City of Detroit was when it declared bankruptcy! The City sales tax is 10.25%, real estate taxes are some of the highest in the country. Where are they going to get the money to fund current pensions?  They aren’t; default, bankruptcy, restructure. There are few options. No so easy an out, the courts may not permit bankruptcy.

The managers of pension plans have not been realistic in recent years. Pension plans run approximately a 40-60% balance between bonds and stocks. For years they expected an 8% return. Well, bond yields have dropped to next to nothing and the managers are not realizing returns of 8%, big problem.

Let’s take the corporate world. I have mentioned in past blogs that at one time in my work life I was senior vice-president of a trust company that had accounts in all 50 states. In my little domain of corporate pensions, we analyzed company pensions, and then managed money. We weren’t after the big fish, the big banks got those pensions, but we wanted numbers on a lot of small companies, we were after the perch and bluegills.  This was back in the late 1980’s and we found time and time again that pensions were under-funded or the company had taken the money from the pension trusts and re-placed the money with an IOU or company stock. Now, if you work for any of the above, do you think you will see money for your pension or promised health benefits?  No one knows for sure. Prime example is from my home city of Milwaukee; yes the beer city. Big beer companies like Schlitz, Miller and Pabst.  Pabst Brewery was purchased by a private family many years ago.  After a few years of ownership they declared the company bankrupt. Bottom line here is that the family stripped the assets from the company including the money in pension trusts.  The trusts are to have certain “non-alienation” language so that the robber barons can’t steal from the trusts, however most pension trusts are set up with the language that the trusts and payments to retired workers shall remain in place as long as the company is financially solvent. No one ever told the retired employees, many in poor health, about this little caveat. Well, class action lawsuits were brought forth by employees and they lost in court. Don’t end up in a similar situation! Be independent as you can and create your own future.

If you have been reading my blogs you know how much I love and trust banks and Wall Street. They are both extractors of money from society. They will name it as service providers, but the expression that comes to mind is “get real”!

All the la la ads on TV about planning for your wonderful retirement are in the same category. The name of this blog is “real life” so here goes on planning. Yes, you need to plan financially the best you can. Sometimes the “tail wags the dog”. You think you have the controls and then whamo! Let’s see some of the disruptions to those beautiful plans. For me it was buying my first home when I was about 24 years old, there goes the savings and stock accounts.  Then, you most likely will marry, have children, and children are expensive. If you have children they probably will want to go to college and that is very expensive. Then, you are lucky if you don’t have any health issues or have employment set-backs. How about a divorce tossed in? About 50% of the people who marry go through at least one divorce.

Even with national health many drugs and health issues are not covered, or to a minimal degree. There is a reason that the US ranks about 37^th in the world in health care according to the World Health Organization.  Profits go to the health and drug industry with insurance companies coming in third. The most expensive in the world.

How about the investments we make?  Every 5 years or so there should be a correction in the bond and stock markets. Regarding bonds remember that if interest rates go down the market value of bonds goes up, however if interest rates go up, the market value of bonds will go down.  There goes your planned investment strategy. Will the Federal Reserve Raise interest rates this year or 2016?

You better have a comfortable nest egg by the time you are 45 years old. It is pretty tough saving money when salaries haven’t risen now in over 15 years.  If you are with a major corporation at age 45-50 human resource’s department will look at increased liabilities because of your age and level of salary. It is discrimination, it is against the law, but all companies do it and try to get you to leave the company. Some define it as early retirement. I’ve seen some really dirty tricks to get people to leave. They don’t want to pay unemployment compensation, of course! They don’t want to be sued.  Also, fairness depends on the state you reside in, some are better than others.  Some are “right to work” states and employers can do pretty much what they want, the employee is second tier.  I would say most people have at least three financially stressing, difficult times in their lives, many lose all their money and need to start over. You are not worse as a person for this! Bottom line, stay as independent as you can and not rely on government or corporate America.  Let’s hope America wakes up and things get better. Remember “hope for the best, but prepare for the worst”!