Financial Retard of the Fortnight

May 2, 2012

 

This isn't the subject of today's post. This is a guy with the same name, who got nailed on weapons charges and whom the good folks at BustedMugshots.com went to the trouble of photographing.

…In which we’re so incensed by a news story that someone else wrote, we have no choice but to comment on it.

 

Most financial truths are obvious: spend less than you earn, don’t waste your money, note where it’s going, economize where you can, et al. Those truths are so obvious that we barely mention them on this site. Let the other, less imaginative sites handle that.

 

We’re more interested in unconventional, even iconoclastic truths. There’s one that comes up time and again, that’s so important we’re thinking of putting it right up there with our mantra, Buy Assets, Sell Liabilities. 

 

On balance, higher education doesn’t pay off.

 

You don’t need our declaration to make it official. Think about your own life and those of those who surround you. The English literature graduate pouring coffee. The M.A. in philosophy who’s making $30,000 as a research assistant. The criminal justice major who can’t make ends meet selling real estate, which doesn’t even require a university education.

 

Most worthwhile jobs don’t. Some do, of course. But for every research physicist or medical dosimetrist who spent good money studying the hard sciences, there are multiple people who spent comparable money studying something less challenging and with less demand in the marketplace.

 

Oh, here we go again. Don’t you understand that education has an importance beyond dollars and cents?

 

Okay, then why isn’t it free?

 

It’s free in Australia.

 

No, it’s funded by taxpayers in Australia. Let’s rephrase the question: Why don’t college professors work pro bono, if it’s only about enriching young minds?

For the latest example of someone putting his faith in the wrong place, meet the grossly overeducated Andrew Slocum. He’s a junior high school librarian. Last year, at the age of 36, the married father of a 4-year-old spent $10,000 on an “advanced teaching certificate”. Whatever its other merits, this piece of paper qualified him for an annual $3000 raise; in the same way that having a penis qualifies him to be an Army Ranger. The certificate didn’t guarantee him anything.

An advanced teaching certificate is not to be confused with, say, a bachelor’s degree in corporate finance. The latter is a requisite for a career that the degreeholder wouldn’t otherwise be able to enter. The former allowed Mr. Slocum to do the same job he always did, with a possible salary increase simply for holding the piece of paper itself. The certificate had, and has, zero intrinsic value.

Unless you count the $10,000 it cost.

(Without the increase Mr. Slocum was hoping for), he reckons his family would be losing $60,000 over the course of their careers.

Only in academia can a $10,000 investment pay -6 times itself and still have people defending it.

Mr. Slocum has spent his entire adult life in schools, which is of course where he spent his entire pre-adult life. Education for its own sake is the ultimate comfort zone. “I’ve endured 16 years in a classroom. Now that I can go anywhere I want, I think I’ll…spend my life in a classroom.” Mr. Slocum had it out at a school board meeting.

He talked of his sacrifices: vacations, hard-earned cash and perhaps the most valuable — time with family and friends.

Oh, you whiny little princess.
Another fundamental truth: life, especially your financial life, is about results, not effort. Who’s a bigger net contributor: the guy who spends 80 hours a week digging postholes in the hot sun and then filling them up, or the woman who spends 4 seconds unlocking the doors to Target every morning so people can buy what they need?

 

All of it was for naught, Slocum said. Although he received his education raise this school year per the district contract, Slocum said he’s been wary about spending any of it. Instead, he’s been saving it, just in case he’d have to give it back.

Slocum is still saddled with $25,000 in student loan debt from his undergraduate and master’s degrees.

 

You really can’t make this stuff up. Multiply Mr. Slocum’s case by tens of millions, and you’ll have a better idea of where North American society is headed.

 

He earned the undergraduate and master’s degrees more than a decade ago, and is still carrying a balance equal to 5 months’ salary. 5 years ago, he decided to reproduce, because having a child you can’t afford is a great way to get back on track.

 

Again, poor and struggling people are poor largely because they choose to be. Mortgaging your future to cough up $10,000 for an enhancement in your education that might pay off is a retarded bet. Especially when you’ve already flushed $25,000+ down an education hole that’s got you in the position where you are today.

 

Somewhere within a couple blocks of Mr. Slocum’s house is a long-haul truck driver who makes comparable money and doesn’t have that educational albatross around his neck. One (more expensive) neighborhood over is a low-voltage electrician who tangibly improves people’s lives, and who instead of spending $10,000 on a useless certificate, spent it on a down payment for a second house. Which he now rents out for more than the mortgage payment, uses as a tax deduction, and passively finances his vacations with.

 

Mrs. Slocum, a $38,652-a-year teacher, encapsulates her family’s dilemma far better than we could:

 

“(The school board is) basically penalizing us for pursuing higher education. What kind of message does that send to the kids?”

 

Oh, that’s a rhetorical question? We answered it above. In bold.

 

“This is the first time I’ve felt embarrassed to be a teacher because I have to beg for the salary I deserve,” (Mr. Slocum) said, addressing School Board members.

News flash: whether you’re a butcher, drilling rig supervisor, baker, librarian, or candlestick maker, you don’t deserve a damn thing. A smart person would know that. An educated person wouldn’t necessarily.

Coda:  The story mentions that to secure the $10,000, Mr. Slocum had to raid his son’s college fund. That might be the best thing that could happen to that kid.

Filed Under: Bad Examples, Education Tagged With: , , , ,

Now Trent Hamm’s Just Daring Us To Name Him Financial Retard of the Month

April 27, 2012

There’s GOLD in them there textile fibers!

 

By far our favorite punching bag here at Control Your Cash is Trent Hamm, the hyperfrugal crazy person who runs The Simple Dollar. 14 times a week, he writes about compulsive, creepy, maniacal methods for shaving undetectable amounts off your expenses. Meanwhile he writes next to nothing about how to increase your revenue, which is swell because we don’t need the competition.

In previous posts he’s recommended bypassing the toothpaste aisle at the drugstore so you can collect the ingredients to make your own inferior version, and also told female readers that they should never spend more than $3 on a swimsuit. When a commenter pointed out that $3 swimsuits don’t exist, Trent helpfully suggested that women swim in their underwear. Yet people still continue to read this corn-fed monster of impracticality, and not always for the undeniable comedic value. That he has any audience at all is testament to the axiom that stupidity begets stupidity. Also, people = sheep.

By the way, Trent Hamm didn’t suggest homemade toothpaste brewing as a fun craft project for the kids on a night when the TV and the internet are down. He suggests it as a legitimate way to save money. And dozens of his devotees cyber-chime in to nod their empty heads.

One of his latest money-saving tips is so bizarre, so utterly immersed in minutiae, so microscopically unhelpful, that we had to let it sink in for a few weeks before choosing the right way to poke fun at it. Here, we’ll let Trent take it away:

Several months ago, I was curious about how much heat was lost when I opened up the oven to inspect a dish cooking in there. I put an oven thermometer in the oven, waited until the dish I was cooking was almost finished (a casserole cooking at 400º), then opened the oven door for about ten seconds to inspect it.

During those ten seconds, the thermometer dropped almost 20º. When I closed the door, the temperature slowly returned to 400º, but during that period, the oven had to put in some extra work to return that heat.

How much? It’s really difficult to exactly calculate that without a meter running specifically for the oven. My best estimate, using a lot of math and thermodynamics, is that you lose about 2¢ worth of energy every time you open the oven door.

My solution? I turn on the oven light when I’m cooking anything in the oven. That way, I just lean over and check what I’m cooking without opening the oven door. 

 

Where to start? With his discovery of the oven light? It’s not quite the game-changer that Leif Ericsson landing in the New World was, but it’s close.

 

How about that! Those forward-thinking engineers in the appliance industry researched the problem and put a light, a source of illumination, INSIDE the oven. Combined with a glass window that sits between the interior of the oven and the outside world, that means you can look at your food as it’s cooking.
Trent? You know we’ve sent men to the moon and back, right? That was 43 years ago.
Now that we’ve made fun of his stunning appreciation for the glaringly obvious, let’s not forget Mr. Hamm’s bread-and-butter: the cheapness that would put Hetty Green to shame.
It costs 2¢ to open the oven door. Even if you’re opening the oven door for no better reason than to warm up the kitchen a little…well, you don’t need us to tell you that 2¢ isn’t going to bankrupt anyone who can afford an oven, electricity, and food. We wonder how long it took him to calculate the 2¢ figure, and whether he could have spent that time earning money instead.
Throughout your life, how many times have you opened an oven to check on a dish before it was ready? Does 100 sound about right? If you have, that’s 2 WHOLE DOLLARS you figuratively flushed down the drain. You could have used that money to buy several servings of Trent Hamm’s homemade laundry detergent. Instead, you just tossed it away like it grows on trees. Nice going, you wasteful pig.
Nor does Mr. Hamm show his “math and thermodynamics”, presumably because he thinks the rest of us will flee at the sight of an equation or two. Then again, given his readers’ intelligence, that presumption might be the most rational thought Trent Hamm has ever had.
But wait. Light bulbs don’t power themselves. So where’s he getting the money to turn the oven light on with? 
The light bulb uses less than a cent of energy per hour of use …”
Well, that’s a relief. Measuring the difference between the two, you can replace your daily regimen of oven-opening with one of light-keeping-on and be on your way to economic self-sufficiency in no time.
Mr. Hamm isn’t just taking his obsession over minute amounts of money to its nadir, he could be indirectly responsible for the deaths of millions. Why, he’s openly encouraging his readers to die of trichinosis: 

If your recipe says “Preheat the oven to 400º” and then later says “Bake for 30 minutes,” don’t preheat the oven at all. Instead, put your food in the oven, then set the temperature to 400º. Then, add about half of the preheat time to the cooking time. Why? When you open a preheated oven to put in your dish, it’s no different than opening the oven to check the food near the end of the cooking time. You lose that 2¢.

(Italics and boldfacing ours.)

“Damn it, don’t you people understand? Those 2¢ increments are valuable! You wasteful reprobates probably keep your toasters plugged in when you’re not using them, too.”*

And if that doesn’t beat all, this will. Here’s another excerpt from The Simple Dollar archives, from February 26, 2009:

There’s also a group of what I would call “frugality extremists.” These are the Ziploc bag washers, the people who will gladly invest quite a bit of time to save a dollar or two. I find these people and their ideas interesting, but not necessarily applicable to my life.

Got that, everyone? Washing a Ziploc bag is going over the line, but calculating that it costs 2¢ every time you open your oven door to check on what you’re cooking is completely normal. Trent Hamm, you’re magical. Since we have to pick a Retard of the Month 12 times a year (a calculation which required lots of math, not so much thermodynamics), promise us you’ll never change.

*Of course, he’s written about this too. 

Filed Under: Bad Examples, Financial Retard of the Month Tagged With: , , , , ,

Think locally. Act locally.

April 20, 2012

 

Nothing meaningful happens in Davos. (Except, it seems, the kick-ass Friday night costume party.)

(No, this isn’t a call to eschew big corporations for mom-and-pop shops. You don’t know us very well, do you?)

“If you spend 15 minutes a year studying the economy, that’s 10 minutes too much.”

-Peter Lynch

 

Three above-the-fold headlines from this week’s financial news:

 

Spain might default on its debt, requiring yet another bailout from the European Union, which would threaten the stability of the euro and perhaps result in the reinstatement of the peseta.

 

New Jersey’s ex-governor Jon Corzine can’t explain why someone transferred money out of customer accounts in the final days of MF Global, the firm he ran for a year and a half before it fell into a bankruptcy of historic proportions and he quit.

 

Retail sales increased .8% in March. So for every dollar you spent in February, you spent a dollar and 4/5 of a penny in March. (Of course the population also increased over that month, while inflation increased too, meaning that your spending is close to unchanged in real dollars.)

 

What does any of that mean to you? Nothing.

 

Just like most of the non-financial headlines (“Amanda Bynes Gets DUI”, “Scientists Find Connection Between Diet, Weight”, “Some Chick Casts Aspersions on Ann Romney”), the financial headlines are there largely to take up space. Legitimately important financial items – this county to increase its sales tax rate, this state to float bonds it won’t be able to cover – get buried because they’re even more mundane than the stuff that makes it to the headlines.

 

Look at those above examples. The first one’s crucial only if you’re Spanish, Andorran, or Gibraltarian. The second one is intriguing because it involves a semi-famous politician who first derived fame for being rich. The third one is obligatory, like the weather. The Department of Commerce releases the data, the financial media feels obligated to report them. It doesn’t matter if the data are meaningful or mundane. That .8 could have been almost anything – .7, -.2, 0 – and the toner-stained wretches who write the copy would have reported it with the same austerity and import.

 

The point of all this is that you first need to take care of your own business. Granted, that’s harder to do when the government confiscates more of your money and spends future generations’ inheritances to buy shiny new toys, but look at what you can control:

 

  • What you spend your money on
  • What you finance
  • Where you invest
  • What seemingly obligatory roadblocks you throw in your own path, just because society recommends them and you’re a sheep
  • Where you choose to live, to the extent that each jurisdiction has different tax policies and different costs of living.

 

Say it again. Take care of your own business. The corollary to that is to let other people do the same thing. If everyone followed this easy directive, the world would be something approaching perfect.

 

Complaining about financial events beyond your control is worse than pointless, it’s counterproductive. At least some economically meaningless activities have a non-economic benefit. For instance, this NBA game we’re watching right now has little impact on us. It features two unremarkable teams counting down the days to an early summer vacation (Detroit and Minnesota). We don’t know any of the 24 players personally. We’re not breaking down the game film because we have to play one team or the other next week. No, we’re just enjoying the artistry and the competition, and wondering if Greg Monroe should have spent another year in college.

 

So yeah, watching a basketball game has some purpose. Reading (and by extension, fretting over) the financial headlines has no purpose. It’s just a way to cause yourself irrational hope, or possible pain and discomfort.

 

Which isn’t to say that you should never read the financial news. Especially if you’re new to this. If anything, just being immersed in the environment will give you greater proficiency in the jargon. It’s like learning Italian by moving to Naples and listening to other people talk. The content of the dialogue is less important than the form. By reading the financial news you’ll be exposed to some concepts and phrasing that you wouldn’t otherwise have. Once you get good at this, you can separate the worthwhile news from the worthless.

 

(Note: it’s almost all worthless, which means it’s just like any other compendium of information. Google’s stated purpose is to organize and make available the world’s information, which is laudable, but how much of it do you actually use? Significantly less than 1%, of course.)

 

In conclusion: The micro > the macro. The greatest determinant of your financial health, present and future, isn’t the Spanish Public Treasury. Nor is it an odd-looking man who flushed hundreds of millions of customers’ deposits down a toilet. Nor is it the miniscule increase in the money your neighbors spent last month. Your financial health is dictated by you more than it is anyone else.

 

(And if that’s not a commercial for The Greatest Personal Finance Book Ever Written, nothing is.)

This article is featured in:

**The Carnival of Financial Camaraderie #31-Lend a Helping Hand**

 

Filed Under: Bad Examples, Book Promotion Tagged With:
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