Carnival of Wealth, We’ve Never Wanted To Punch Anyone This Badly Edition

 

"It expresses myself and I think everyone else can wear it, so I wear it as well," said the boy who can still be saved with military school

“It expresses myself and I think everyone else can wear it, so I wear it as well,” said the boy who can still be saved with military school

 

Yes, he’s a minor, but that would make it all the more satisfying. Skyler (and there’s another reason) Davis got suspended for toting a purse to school, and between him and the reporters who wrote the story it apparently bears mentioning that the purse in question is a Vera Bradley®. The principal told him to remove it, Skyler refused, and then his indulging mother came to his defense instead of strangling him with the purse strap. She even invoked that word that’s now being used to categorize everything from name-calling to shunning:

Skyler is only 13 years old. He’s just a child. And if this isn’t bullying, I don’t know what is.

No, you dopey broad, it’s called discipline, something that’s clearly lacking in the Davis household. Check that: the Willis household. As a rule, a disproportionate number of society’s problems (starting with insolence, and moving to the petty crimes that we’re willing to bet are in Skyler’s future) are perpetrated by people who grow up in homes where everyone has a different last name. Skyler is a Davis, his mother is a Willis, his brother is a Haight. And the brother’s name is Dakota:

He gets kicked out for a purse? That doesn’t make sense. It’s not right.

Ms. Willis (we’re going to go out on a limb and guess she’s not married) deserves to be suspended from something for her horrendous choice of names.

Football players of Anderson County Senior-Junior School, where are you in a situation like this? Why has no one shoved anyone into a locker yet?

Parents, beat your children. For the greater good. They’ve certainly done something wrong, you just don’t know what it is. Onto the Carnival:

How deliciously appropriate. Jason at Hull Financial Planning asks how you plan to get around in your dotage if you haven’t reproduced. Ms. Willis will have Skyler and Dakota to take care of her, assuming at least one of them is out of prison at any given time. But what about you, if you’re childless? Jason has the answer, or at least a few suggestions.

Harry Campbell at The 4-Hour Workday is finding out that most jobs are their own punishment. Took him long enough. Fortunately, he’s discovered the wisdom of passive income (and of having a doctor for a wife.) Comes with a twist ending.

PKamp3 at DQYDJ.net returns with a challenge to Betteridge’s Law of Headlines. The 1st in a series, this post discusses whether an efficient market can even exist, or is just a construct for human understanding, much like a Euclidean line. What Nobel laureates haven’t yet figured out, and how you can potentially use it to your advantage.

Though he’s still 4 years and 11 months or so removed from effectual retirement, Dividend Growth Investor continues to espouse the wisdom of relying on dividends for one’s passive income. A method that doesn’t require you to grovel at a boss’s feet, make conspicuous displays of your commitment to the company, or constantly keep your résumé updated. Most importantly, you need a strategy. One germane to your life station, but a strategy nonetheless.

Even though he has plenty of kids to take care of him years down the line, Justin at Root of Good puts his present efforts toward retirement planning. He also explains in one succinct sentence why budgeting is often more trouble than it’s worth:

I never put together a budget while working.  We were naturally frugal and always managed to save half our paychecks or more.

If you’re naturally frugal, a budget is probably going to be redundant. If you’re naturally profligate, you’re not going to stick to a budget anyway. And you’re probably not going to be reading this site, either. So stop committing to absurd goals (“I’m going to save 80% of my income for retirement!”) Either do it, or don’t. If that makes no sense, read our book. Oh, and buy it, too.

Paula Pant at Afford Anything, in her usual brilliant way, explains what true rebellion is. If you think that drinking to excess, listening to Pitchfork-approved music, or going to school with a Vera Bradley purse makes you exceptional and proves your uniqueness credentials, you’re an idiot. If you want to rebel against something, rebel against the notion that our lives are confined by spending beyond our means, spending a fixed number of hours a day doing something we hate so that someone else can profit off us, and sitting on our growing posteriors while limiting our physical capabilities. Get your growing butt out of debt as fast as possible, the faster to develop other sources of income with. Stop complaining. Live instead of being lived.

Ward Carson of The Happy 401(k) is a CERTIFIED FINANCIAL PLANNER™, and uses capitals to emphasize the point. This week, he writes about how ladies should save for retirement. Ward’s writing is about as dry as the Atacama Desert (Did we use that metaphor before? Probably somewhere in the archives), but he makes some valid points about how women not only live longer than men but make less money. The former is due to biology, the latter is more of a comment on how few men gravitate toward jobs in child care and library sciences.

Finally, new submitter Tim McAleenan at The Conservative Income Investor has that rare post that needs no summary because its title is perfect on its own: How to Create a Circle of Poverty and Die Broke.

Thanks for coming, as always. New posts every Wednesday and Friday (weather permitting), new CoW every Monday, Anti-Tips daily, etc. You’ve been warned.

 

Don’t You Want To Protect Your Family?

"This is the accelerated benefits rider, this is the waiver of premium clause, and over here we have OH GOD JUST KILL ME NOW"

“This is the accelerated benefits rider, this is the waiver of premium clause, and over here we have OH GOD JUST KILL ME NOW”

 

Now that we’ve gotten Wednesday’s cash grab out of the way, a question that’s puzzled us for years:

How the hell do life insurance agents make money? This ties into one of our Supreme Commandments of Personal Finance (we can’t say “10” because the number changes, and besides it’s probably closer to 3):

Always look at each transaction from the other party’s perspective.

If you’re buying, what does the seller stand to gain from this? Is he (it’s a guy in this example) making enough on the sale to vacation in the Bahamas for a month? Or is he working for The Man, and merely avoiding getting fired for another pay period by getting you to buy a country club membership? In other words, how much wiggle room does he have?

Conversely, how much will the buyer benefit from what you’re selling? Obviously, you’re not going to keep a tally for every single transaction in your life, or you’d never do anything else. Your purchase of a 99¢ Big Gulp® at the 7-Eleven is not a staring contest between Southland Corporation’s predatory pricing and your hard bargaining. But be pragmatic. A) Don’t leave money on the table, and 2) Know when to walk away from a deal, because there will almost always be another one.

Back to our mystery. With no bipedal dependents, we at CYC Headquarters are long past anyone trying to convince us that life insurance is a good investment. But tens of millions of other people do spend money on life insurance, and are convinced that doing so is the only thing preventing their offspring from ending up in an orphanage, in a poorhouse, as a stowaway on a merchant ship, or as part of some other Dickensian relic.

We went to MetLife’s website, plugging in the numbers for a 40-year old male in “great” health (the level between “excellent” and “good”) who doesn’t suck on those filthy disgusting cancer darts. The site prompted us to select a state of residnecy, so we chose the nation’s most populous. A million-dollar, 20-year term policy for a Californian costs $106 a month. The agent gets, say, 15% of that. So, $16. For maybe a couple of hours’ work. Of course, selling life insurance policies isn’t quite like selling Girl Scout (or for our Canadian friends, Girl Guide) cookies: the standard inclination is not to buy, and to avoid the salesperson if possible. Assume a generous lead conversion rate of 10%, and your typical life insurance agent appears to be working for far less than minimum wage. At least recyclable soda can collectors can show up to their daily grind in something significantly more casual than Western business attire.

Except our commission estimates were miles off. A professional connection of ours explains that the scale is anything but uniform. In fact, it goes more like this: 75% in the 1st year, 10% in the 2nd, then 0. Clearly, the agency can afford to be so generous to the agent on the front end because at any given time, only 5% of 20-year policies are in their 1st year. (We used math for that.) Still, average it out over the life of the policy, and the commission structure still seems pretty skinflinty. On the other hand, front-loading it saves all but the lowest-performing rookie agents from starving to death.

A declining commission schedule means that the pressure to sell is never not there. Residuals and royalties are for musicians, not for insurance agents. The idea of selling a policy and enjoying its commission in perpetuity, or at least for the life of the policy, doesn’t exist. While other industries (Wall Street, the military) can afford to bring as many unproven recruits in as possible, allowing for plenty of attrition while a small fraction of those recruits make a long career out of it, life insurance don’t play that way. Hiring fresh college graduates no longer makes economic sense. Rather, the trend is toward hiring established, middle-aged financial professionals with impressive client lists and a penchant for estate planning. Which is probably better for all concerned.

All in all, hawking life insurance still sounds to us like a stupendously difficult way to make a living. Add that to the list of real jobs that we’d rather die than do. Not that anyone reading this was necessarily contemplating becoming an insurance salesperson, but at least we have a better grasp of how an occupation that seemingly makes no financial sense, does. To some extent. Our formula for building wealth remains unaltered: the more sources of passive income you have, the less you’ll have to rely on your own ability to perform the mundane. Monthly rent checks and quarterly dividends beat monthly pittance commissions, at least in our admittedly biased world.