Saturday, January 31, 2009

The Job Trap

The Job Trap

Most of us need to have jobs in order to survive. A few lucky people are born into the world with inherited wealth, or perhaps they win the lottery. But the rest of us need to eke out a living.

For most of us, this means working for someone else. And this is not a bad thing in and of itself. Con artists and fraudsters love to prey upon the working man who has dreams of "being his own boss" or "running his own business" but in reality, very few of us are equipped to deal with self-employment.

I have discovered, after nearly 15 years, that running your own business is not an easy thing to do. Moreover, most people, who cannot even balance their own checkbook or manage their own finances, are ill-equipped to deal with the day-to-day issues involved in running a successful business. In addition, most of us do not have the necessary people skills to run a business. And by this, I don't mean "being nice" to people. When you run a business, you end up seeing the seedy side of human nature - employees who steal, customers who do not pay, people who are disingenuous and lazy. The trick to running a business is to be able to deal firmly with such people, while at the same time, coming across as Mr. Nice Guy. It ain't easy, and most of us are ill-equipped for it.

I would like to say that you see the good side of human nature as well, but in this country, we are trained from birth to want a job, expect a job, and hate our job all at once. Very few people really enjoy their jobs and appreciate their jobs. Usually, within a few weeks, days, or even hours of getting a job, the average worker falls into the "Job Trap" both emotionally and financially.

This is a shame, too, as this trap leads directly to depression, and also can severely damage your financial situation.

What do I mean by the "Job Trap?" It is two parts, actually. The first is the emotional component, and the second is the financial.

1. The Emotional Job Trap - Hating your Job

I have touched on aspects of this first part of the Job Trap in other posts. In the many jobs I have had over the years, I have found the greatest difficulty I have encountered is the attitude of the co-workers and my own inability to avoid getting drawn into their world of gripes, complaints, and depression.

Usually, when I get a job somewhere, it is exciting to show up the first day. The pay seems good (more than I was making before) and the work interesting and exciting. Within the first few days - sometimes the first few hours or minutes, some grizzled "old hand" will stop in my office, lab, or workspace, and then bend my ear for an hour about how I am being underpaid and overworked, and how rotten everything is. See my articles "They're BAITING you!" and "Emotional Vampires" for more on this sort of odious behavior.

The problem is, this sort of conversation ends up taking hours of your time. In many organizations, such activities can spread to many employees and take up half the day, easily. For some reason, everyone likes to be drawn into a "bitching session". However, the result of these sessions is rarelyanything constructive, and most participants end up depressed and angry - and feeling bad about themselves for wasting so much of the company's time.

Topics for such discussion range from "The CEO is an overpaid jerk", to "they can't run anything right around here", to "our new product is junk", to "the boss is sleeping with his secretary", to whatever else. As you can imagine, such attitudes leave one devastated, and hardly willing to put in extra effort for an organization that is viewed as substandard.

As a result, many workers end up taking out their frustrations by stealing from work, vandalizing or sabotaging the facilities, or making goofing-off into a full-time avocation. If they can get paid for not working, they argue, they are "getting even" with a corrupt system. Unfortunately, this latter habit is particularly damaging to the psyche and spirit of the individual and group. The goof-off finds that the days tend to drag on forever (doing nothing makes time stand still, try it sometime) and often starts up these sort of conversations as a means of frittering his time away (and that of others). Seeing everyone else working hard only makes him feel more depressed and worthless.

The other problem with the goof-off is that he makes the other employees angry, as they view him as goldbricking, while they are forced to work. As a result, one goof-off can destroy the morale of a dozen people or more.

Unfortunately, modern corporations and organizations are often very poorly managed. Management is cowed and afraid of taking decisive action with regard to employees, for fear of reprisal and lawsuits (the types of employees who run down the company and goof-off, steal, or vandalize are also the most likely to file frivolous lawsuits). As a result, the only way employees are let go is when the company "downsizes" or lays off people - which is often done either by seniority, or by some far-away accountant who is only reading job titles and salaries in making his decisions. In such scenarios, the goof-off often ends up keeping his job.

How do you avoid these sort of emotional job traps? It is not easy to do, as everyone wants to get along with their co-workers and be "part of the gang". It is a scenario we've all had to deal with since high school. You can study hard and get along with the teachers, and be labeled a "nerd" by the "cool kids" and be socially ostracized, or you can play hooky and try to "fit in" and damage your school career.

The upshot of the high school experience, of course, is that the "cool" kids all went on to unskilled labor or sales jobs after high school, while the ostracized "nerds" ended up as highly paid professionals - or should have, anyway, if they did not let the emotional traumas of social interaction destroy their psyche.

Just as in high school, at work it is not easy going against the grain of the group norm. For some jobs, such as assembly-line, hourly, unskilled, or semi-skilled jobs, you can't get away from your co-workers and the peer pressure. Since there is little hope for advancement, trying to do your job effectively does nothing to advance you personally, but subjects you to derision from co-workers. Maintaining good emotional health in such an environment is difficult, at best. During my years in the factory, I would see decent people who were hourly workers "beaten down" by their co-workers in this way. If they tried to do a good job and have a positive outlook on life, they were attacked (sometimes even physically) by others who wanted to "bring them back down" to their level.

I am not sure what advice to give here, other than to say to keep your own counsel about your job, and try not to make it obvious that you are enjoying your work and working effectively. Inept management often exasperates such situations by trying to reward productivity with meaningless and valueless plaques and awards (since by union rules, they are often prohibited from advancing an employee with more pay). Such rewards and incentives only serve to target the recipient for further abuse.

Of course, finding a different job is also another alternative. However, for many people, this is not an option, and a good-paying job with benefits is something you don't want to walk away from.

For salary employees and the like, the scenario can be similar, with the added problem that there may be competition between employees to "get ahead" at the expense of others. In some companies, this quest for advancement is almost laughable. For example, in the Government sector, the most money you can make, even as a manager, is far less than what one could make at an outside law firm. And yet, there are those who would stab their Mother in the back for a grade or step promotion, or a chance for a slightly larger office.

Again, it is difficult to deal with such things and there are no easy solutions. A daily work job is something you have to deal with for most of the waking hours of the day. If you have a co-worker who is trying to "start something" on a daily basis, it can make your life difficult. The most successful people I have seen tend to keep to themselves and do their work and not worry about what others are doing. Keeping your door closed and limiting contact with others to specific meetings can help reduce the tendency to get sucked into the "social" aspect of a workplace environment.

There will always be the office employee who spends his time trying to work the "political" aspect of the system, thinking that his chances of getting a promotion are enhanced, not by performance, but by befriending the boss. In most cases, the boss, if he/she is effective, sees right through these sort of charades.

If not, the best alternative sometimes is to keep your eye out for a lateral transfer within the company, or perhaps to a job with a different company.

However, that is not always an easy solution. Changing jobs often can make your resume look odd, and eventually, make you unemployable. It is hard advice to take, but sometimes the best solution is to grin and bear it - or ignore it. Office Politics are probably as old as the pyramids. Getting caught up in them is never useful or productive to your own life. Ignore them, if you can.

2. The Financial Job Trap -Living from Paycheck to Paycheck

The second trap that employees fall into is the financial trap. A steady paycheck is a good thing, but it tends to force people into thinking about money as a stream of cash flow that comes in every week, rather than as capital that should be carefully managed and spent. Since the employee spends most of their waking hours working, they have little time to contemplate how to invest their money properly and become wealthy on their own accord.

The cash-flow mindset leads to a lot of bad spending habits and decisions. The present housing bubble is a perfect example. In many urban areas, people go looking for housing. When they do, they tend to look at the cost of housing, not in terms of sales price, but in monthly mortgage payments.

If the buyer says "I can afford $3000 a month in mortgage payments" then he tends not to look at things like interest rate, sales price, insurance, and taxes. All he thinks about is the monthly cost.

As a result, if the price of housing drops in his area, he will find himself "upside down" in his house and wonder why he can't sell it. And if that toxic ARM resets, he'll discover that the monthly rate is no longer affordable.

On the other hand, if you look at overall housing prices over time, and see a 20-30% increase in a year, you might be more inclined to think that the market is overheated, particularly when the cost of housing far exceeds its value in terms of rental income or even construction cost.

Car buying and leasing is another area with the employee gets into trouble. They think to themselves "I can afford $500 a month for my car" and they go into a dealer with that in mind (often following an ad with that price touted). The salesman figures out how much you are comfortable spending a month, either by asking you outright, or inferring as much from your inquiries. Then he sells you as little car as he can for the highest price he can manage. If all you look at is the monthly payment, you may not see that you are being ripped off in terms of purchase price or interest rate.

Leasing deals are particularly prone to this effect. The purchase price of the vehicle and the residual value, as well as the effective interest rate (so-called Cost of Money, or COM) are often buried in the documents, despite Federal and State laws mandating such figures be prominently displayed. If you do notice them, the salesman might say something like, "well, those are just nominal figures, as you are not really buying the car".

But the truth is, you are in fact buying the car (trying telling the leasing company to pay the insurance and taxes on the car sometime - you do own it from those perspectives). A lease is just an agreement to sell it back to the dealer at a later date.

And as I have noted before, buying or leasing brand new cars is about the most expensive way to drive a car - by paying for that first 20% depreciation the first year of ownership. The salary slave sees only monthly payment, not overall cost, because he has been trained, by his steady paycheck, only to see money as something that passes through his hands, not something that he owns (see my article "Owning Money").

Credit cards are another area where the salary slave falls down. Since they tend to look at the "monthly bill" rather than the overall amount due, they fail to see how much they are squandering every year on excessive interest charges. They can make the monthly payment on their present salary - that is all that matters to them.

Buying things "on time" becomes the norm to the salary slave, as they never have enough cash to purchase anything outright - but they have the cash FLOW of a steady paycheck. So they spend 50-100% more on items than they should, just so they can pay them off in tiny little chunks.

As a result, the salary slave ends up not saving, but spending. It is not uncommon to hear the refrain "we are living paycheck to paycheck" from the salary slave - even when they are making over $100,000 a year! Many do not fully fund their 401(k) plans, while at the same time squandering tens of thousands (or even hundreds of thousands) of dollars on cars and jet skis and plasma-screen TV's. They cannot "afford" to put money into their retirement plan, because they need $168 a month for the Jet Ski payment. Maybe next year!

One advantage of being self-employed is that you immediately see the fallacy of such thinking. Since your paychecks may be few and far between, you realize quickly that you cannot take on regular monthly obligations such as car payments and the like. You quickly realize that the overall cost of a transaction is far more important than keeping the monthly cash flow to a certain level. For what the salary slave spends leasing a car for three years, the entrepreneur can OWN the same car outright for a decade. That difference in overall cost is, quite literally, money in the bank.

As an entrepreneur, you realize at the end of the tax year that you can pay the IRS an additional $5,000 in taxes, or put another $10,000 into your 401(k) or SEP plan. The choice for the entrepreneur is simple - pay yourself a dollar before giving the IRS 50 cents. But the salary slave sees only an additional "deduction" on his weekly paycheck, and not the added refund at the end of the year (adjusting your withholding can often compensate for this, but most do not even know how this works).

So how do you survive the financial aspect of the Job Trap? Like the emotional one, it helps to stop taking your cues from your co-workers. Just because everyone else at the company buys a new car every three years does not mean it is a sound financial decision. Stop basing your financial decisions based on what everyone else is doing. Think for yourself and act accordingly.

The point of working at a "Job" should be to ACCUMULATE money, not SPEND it. Yet in so many factories and offices, we see employees passively spending every last nickel they make. When the jobs go away (usually due to low productivity because everyone does nothing but sit around and bitch all day) the workers have nothing to show for years of hard work than a mountain of depreciated and worn-out consumer goods.

If you can THINK like an entrepreneur, you might be able to avoid the job trap. Fully participate in your company's 401(k), even if it means driving a second-hand car for 10 years. The goal here is to accumulate wealth, not impress co-workers with what kind of car you drive (why, pray tell, is selecting a car something to be proud of, anyway?). Putting aside after-tax money is also key - whether it be into something as simple as savings bonds, life insurance, stocks, a CD, or whatever. Even paying down your mortgage balance is a better idea than buying junk "on time" and squandering your wealth in interest payments.

There is no need to "live paycheck to paycheck" in most jobs. The idea that you have to "have things" and spend every last dime living a lifestyle that measures up to your monthly income is flawed. Live on less, save more, be wealthy.

And it's a funny thing, too. If you have money in the bank - if you are truly wealthy, then you really don't "need" your job anymore. As a result, when you go to work, you go because you like the job, and you can ignore the nonsense that goes on in the office or in the plant. Since you don't need the work, you can approach it from a different angle.

For example, many retirees go back to work, not because they need the money, but because the want something to do, and want a little extra cash. Oftentimes, these are the happiest employees in the company. They don't need the money or the job. So they don't care whether Joe and Suzy are sleeping together and they don't care what some slug's opinion of management is. They are just here to work and get a check and go home, with no emotional attachment to the place long-term. And often, they are the most effective workers, as well, as they are not caught up in all the nonsense that most workers fall victim to.

So in a way, getting out of the financial Job Trap can also get you our of the emotional Job Trap as well.