The PET Trap

I love my greyhound, who is a wonderful, loving pet.  But realize that even a small dog or cat will cost hundreds of dollars a year in vet bills, pet food, and pet medications.  If you are on a strict budget, think hard before getting a pet.  And watch out for pet hoarding - if you have four, five, or six pets, perhaps you need to step back a bit and think about where this is going - and whether you have a mental health problem.

I love pets, don't get me wrong. So in a way, I hate to write this next post. However, many folks fall into the Pet Trap, and it can be an expensive trap at that. Think carefully before you start acquiring pets. As in my "Hobbies Run Amok!" article, pets can go from being an inexpensive hobby to a financial nightmare in a hurry.

Logically, one does not "need" a pet, of course. Pets don't provide food, clothing, or shelter. For many of us, pets fill in an emotional need that is as real as our physical needs. However, for some, pets become an obsession that takes over their lives.

Before taking on a pet, assess the real costs involved, both in terms of immediate and long-term cost, as well as the opportunity cost. Purchasing a pet is often an inexpensive transaction. Since so many are discarded (usually because their owners cannot afford them - a lesson right there) you can inexpensively acquire a dog or cat at your local shelter. Paying large sums of money for a "designer" breed is, to me, a horrible waste of money, when in many shelters, these breeds are available for free.

In addition, by purchasing a pet from a store or breeder, you are adding to the animal population problem - by encouraging people to breed pets for sale. Many breeding operations are little more than "puppy mills" where dogs or cats are cranked out to satisfy the current whims for accessory animals (when fashions change, these animals end up at the shelter). As a result, many of the "popular" breeds are inbred and prone to expensive and heartbreaking genetic disorders, which can add significantly to the cost of owning a pet.

But the question of designer animals brings up another point: What is your real reason for adopting the animal in the first place? If the color, size, and type of the animal is more important than its character and nature, then are you buying a pet as an expensive show-off accessory, or because you want a companion? It is an ugly question, but in most instances, the answers are equally as ugly.

The sad fact remains that many folks obtain pets for reasons other than the desire to have a pet. They want a show-off dog to impress other people with, or to impress people at the local kennel club. The idea that living beings can be a hobby is, to some folks, somewhat perverse.

The same is true of the rural Bubba (on urban dweller) who buys a large, aggressive dog and chains him to a tree in the front yard. He wants a dog that will "impress" others with its ferocity - in an attempt to bolster his own status and perhaps cover up some personal insecurities. If you are buying a dog to impress people with its breeding, you are no better than the person who buys a pit bull to frighten people.

There are some folks who buy aggressive dogs as a form of security - to protect their family. And believe it or not, there is an industry of folks who breed and train security dogs and then sell them for very high prices. These dogs are trained to be kind to children, but also to rip the throat out of anyone coming over the fence. I guess for some folks, such security measures might be necessary. But for the bulk of us, who struggle to pay the monthly bills, the prospect of a home invasion is pretty dim (and the pickings for a home invader pretty slim!).

Regardless of whether you pay $5000 for a show puppy or the $250 adoption fee at the shelter, the initial buy-in is only part of the overall cost. Veterinarian bills will run about $200 to $500 a year for a dog or cat, for basic shots, flea prevention, heart worm prevention, and the occasional illness or injury. Vet bills can skyrocket, as we shall see below.

Dogs and cats can go through a surprising amount of food, and animal food is not cheap. Our greyhound probably eats up $50 to $100 of kibble, canned food, and treats a month. Over the 10-15 year lifespan of a dog, this can amount to thousands of dollars. For cats, add in the cost of litter on the other end of the transaction as well.

Accessories, such as collars, food bowls, litter boxes, leashes, blankets, beds, clothing, and toys can also run into the hundreds if not thousands of dollars over the lifetime of the animal. And these things are not cheap, either. People will spend surprisingly large amounts of money on pets and the pet industry knows this.

If you ever have to leave home, boarding your pets can be as expensive as staying in a cheap motel. Most veterinarians charge $50 to $100 a day or more. Most boarding places charge at least $15 to $50 a day. If you want to take a two-week vacation to Mexico, the cost of boarding your pets may exceed the airfare.

Thus, for a typical medium-sized dog, which may live to be 10-14 years, you could easily spend $10,000 or more in initial purchase price, veterinarian bills, food, accessories, boarding and the like. Considering that a typical automobile should last the same amount of time, buying even one dog is about the same cost as having a second car. If you can't afford a second car, think long and hard before getting a dog or cat.

A special note on horses: A lot of folks obtain horses as pets. These are hugely expensive compared to cats or dogs. Buying a horse often costs as much as a car, and the upkeep can easily exceed that of an automobile (this is one reason cars replaced horses as a means of transportation). And horses live a long time, too. I have a friend who bought a horse, and discovered he could not ride it, as it had a bad back. Because of that, he cannot sell the horse, as no one will buy it. His wife refuses to have the horse put down. He pays monthly boarding fees and annual vet fees and hopes the horse doesn't live too long. They haven't seen the horse in years. Explain to me what the point of that was, again? Poor fellow will have to work an additional 5-10 years to make up for the loss in his 401(k). Think long and hard before buying a horse. If you do not own the land on which to keep the horse, chances are, it will be a very, very expensive proposition.

Another special note on exotic animals: Some other folks like to obtain exotic animals (snakes, ferrets, rare birds, etc.) as pets. Usually this is to impress other people or for other, not so nice reasons (watching snakes eat mice or kittens, for example, I kid you not). In many cases, these animals end up at shelters once the novelty aspect has worn off.

Now of course, there are ways to minimize pet ownership costs, and I highly recommend them. Veterinarians are scandalous when it comes to billing. Most vets charge more per hour than most human doctors do, and that isn't right. It does pay to shop around for routine services such as vaccinations, flea and tick treatments, and the like.

Recently, while on a trip, I realized our dog's rabies vaccination had expired.   A current certificate was required to stay in a Florida park.   I used our GPS to find a local vet, and hit "call" which made the call through the bluetooth on my $100-a-year GoPhone (sometimes this technology shit actually works).   I found a local vet that would do the shot for $35 (for a three-year certificate - likely the last my dog will need).   The technician, not the vet, did the shot, and as a result, I avoided the $80 "office visit" fee they normally charge.   The same was recently true for a Bordetellla shot ($25) and a heartworm test ($20) - both performed by a low-cost animal hospital, by a technician, not a veternarian.

My old Vet would have charged $80 or more for an "office visit" for each shot - a scandalous amount of money to feel the dog's glands and to weigh her.

It is possible that we over-medicate our pets as well.  I had a cat live to 20 years old. I took him to the vet for his rabies shots and the like and the vet said "If I give your cat these shots, it will probably kill him". I asked about whether this would mean my cat would spread rabies or feline distemper or whatever. She just smiled and said, "This cat is so old and spends all its time indoors, what is it going to catch?" At that point, I started to wonder if the whole vet thing was a financial racket.

At least that vet was pretty honest about it. My previous vet ran a lucrative practice in a wealth suburb of Washington DC. He had several expensive cars - Mercedes, Porsche, BMW, etc. and each one had a license plate with his initials and a number on it (indicating how many cars he had). When I saw a Porsche with "XYZ 10" on it, I realized I was giving him (or the Porsche dealer) too much money. He charged $70 for each office visit, plus $100 for each shot (feline distemper, rabies, etc. etc. plus testing for "feline leukemia", heart worm, etc.). Three cats, you do the math.

Like anything else, pricing is all over the board, and there are considerable savings to be had.  The most expensive vets charge three to five times as much (if not more) than the least expensive.   And the level of care is about the same.

The reality is, the vet business is big business, and we treat our animals for more diseases that we treat ourselves. The rationale is very simple. As pet owners, we feel responsible for the care and health of our animals. When they become sick, it breaks our heart, and we feel helpless. We'd do ANYTHING to see fluffy purr again. And unscrupulous vets know this.

I've seen heartbroken old women spend thousands (if not tens of thousands) of dollars on chemotherapy for a 15-year-old cat. The cat dies anyway, of course. They only live to about 15-20 years, at best. But an unscrupulous vet will suggest to the owner that it is their duty to spend enormous amounts of money trying to heal a sick animal, when the best course of action is probably euthanasia.

Which brings us to the sticky part. Whenever you buy a pet, be it a kitten, dog, or goldfish, chances are, you will outlive the pet. Each pet comes with it, the unpleasant and heart-wrenching experience of having to have it 'put down' later on or to see it suffer. Animals age quickly, and in the time it takes to pay off a car loan, that young puppy has turned into a middle-aged and arthritic old dog. Making the decision when it is appropriate to put a dog or cat down is difficult. Again, as the steward of this life entrusted to your care, you want to see the animal live as long as possible. But often, animals reach an age where they can no longer function. In the wild, they would be killed by other animals or die of exposure or starvation. As pets, it is up to use to decide, and it is not a pleasant decision to make.

While I love my dog, living with a dog does limit your lifestyle choices. In the US, we are somewhat dog-phobic in public places, so often you have to leave your dog at home. In Europe, you can take your dog to a restaurant in many places. In America, only some outdoor restaurants allow pets, and even then, some patrons will complain if the pets are unruly. To some extent, this is a self-fulfilling prophesy. If your pet is with you constantly, chances are, it is well trained and obedient and calm. However, pets left at home alone for long periods of time tend to develop behavior problems and thus be inappropriate for public spaces.

When planning any activity, you have to plan for the pet. Will the pet stay home or come? If they come, then you need to take a car the pet can fit comfortably into. If you plan on going into places where pets are not allowed, you cannot leave the pet in the car, if it is a hot day. It does limit your freedom. If you are contemplating getting a pet, consider this aspect carefully. If you are used to picking up on a moment's notice and flying to Cancun, things will change once you have a pet.

Now some folks take the pet thing too far. Like hoarding disorder, pet ownership can become psychological problem in some cases.  Newspapers are full of stories about old ladies found with 50 cats in their home, many starved to death or dying, or some in the freezer (??) and the whole house filled with cat waste. Or they may have a similar number of dogs - or even horses. Most of these stories have unhappy endings. The animals have to be put down, and the crazy old lady has to go into a home. In some instances, they clear out all the animals, only to come back a year later and find the house filled yet again. It is very sad.

But for every crazy lady living in cat waste, there are probably five people who have large numbers of pets who are well fed and cared for. Every neighborhood has a "crazy cat lady" who has a dozen cats or more. A friend of mine fell into this mold. She had several cats, and once it became known she had cats, everyone in the community started dumping litters of unwanted kittens on her doorstep. She became the "crazy cat lady" not by choice, but by public acclaim. Finally, she had to put her foot down, as the cost was driving her to the poorhouse. She took the unwanted litters to the humane society, as much as it pained her, and also chased away "cat dumpers" from her property when she could.

Another friend has a collection of eight dogs and eighteen cats, along with other animals. What started out with one dog, quickly morphed into a major problem. How this happens is anyone's guess, but I suspect it is related to hoarding disorder - the desire to accumulate things, even if they have no intrinsic value or cost the hoarder money (my friend has a hoarding problem as well). While the animals are well cared for, the cost is rather staggering, even with all the money-saving tips they have tried. They found a local vet who gives them a bulk discount, and they administer a lot of their own immunizations and drugs themselves. However, having that many pets can be problematic.

As a greyhound owner, I get to meet other greyhound owners at various meets and events. Some folks have two, three or more dogs, which is quite a challenge. But others go even further. I met one lady, in her late 70's who had seven greyhounds! No matter how you slice it, that is a lot of dogs for an elderly person to take care of.

For example, if you lose your job (a distinct prospect in this day and age) how will you take care of your pets? Sadly, shelters are being flooded with animals from people who say they "cannot afford" their pets or who have been evicted from their homes and cannot find an apartment or home that accepts pets. For my friend with the 8 dogs and 18 cats, it has created a problem for them in that they cannot move anywhere. No landlord will accept that many animals, and most houses they have found to buy or rent are too close to busy highways and other dangers for the animals. Then animals live a long time, so suddenly they are stuck in a position of having to stay where they are, as the pets have basically locked them in.

Having a pet thus has an opportunity cost. If you get a new job in a new city, you have to find a new home, often renting, and this means you have to find a place that allows pets. If you are young, it pays to be mobile and have freedom of movement. And yet many young people chose to get large dogs, which limits their freedom of movement. Believe it or not, I've met young people who have turned down lucrative job offers, because they felt that could not move to a big city and find a place to accept their pet, and also be able to work long hours and leave the pet home alone.

And in that regard, owning a pet as a young person is particularly problematic. When I was in college, a friend of mine's cat had a litter of kittens. Typical of an irresponsible college student, he failed to get the pet spayed. So now he had a litter of "cute" kittens to get rid of. They thought it was "cool" to have a pregnant cat and watch the kittens be born, but once they arrived in the world, it became clear that the cute kittens would quickly become a nuisance - that is unless they wanted to have eight cats as pets.

Foolishly, I let them talk me into adopting one. Having a cat when you are in college is never a good idea. Trying to find an apartment that allows them is hard. Sneaking them into the dorm is difficult, too. Constantly moving is hard on the animal, who prefers to stay in one place. Not surprisingly, the cat ran away during a move, and was never seen again. I still have nightmares about that cat.

Multiply that experience by about a million, and you'll have an idea of what the pet population problem in the US is like. Visit your local animal shelter sometime and see how many animals are dumped there. Animals that were indifferently bred by folks who had no common sense or thought as to what would happen once the animals were born.

For that reason, if you decide to get a pet, have it neutered or spayed immediately. It is not "cool" to leave the animals intact and let them breed uncontrollably. And breed they will, as that is how nature works. I have some other friends who thought they should leave their dogs "intact" so "the dog could enjoy a sex life". The intentionally let the dog breed with another friend's dog (who was also not neutered, for the same stupid reason). The resulting litter of mutts was "cool" they thought, until it became time to find homes for them. As you might expect, they asked us to take on one of the puppies (no, thanks) and as you might expect, they ended up keeping more than one.

I was angry at them for bringing five more dogs into the world for the only purpose of briefly amusing themselves. While they are otherwise nice people, they are horribly irresponsible in many respect. Dogs live a good long time. Creating life so that your dog can get laid is, to me, pretty lame. Spay and neuter your pets, please. The world doesn't need another litter of mutts or kittens.

A final note on pets has to do with age. As I noted earlier, in most instances, you will easily outlive your pets. A cat may live to be 20, tops, and a dog maybe 15. So if you buy a pet, you will probably outlive it. However, for older folks, this may not be the case. If you are 60, 70, or even 80 years old, a pet may outlive you. Moreover, as your health and abilities decline with age, you may find caring for a pet beyond your capabilities.

I had a parent, over 80, once say that they were thinking of getting a puppy. This was the same parent who had our family cats put down once I left for college, as they were a "nuisance." A rambunctious puppy is hard to handle at age 30, much less at 80. Once the dog gets larger, if not trained, it could knock you down and break your hip. But worst of all, the dog will likely outlive its owner, which means arrangements must be made to care for the dog when the owner inevitably dies or has to go to assisted living (nursing homes generally do not allow pets).

Yet, oddly enough, the elderly are consistent pet owners. Small yappy dogs appear to be most popular with the over-60 set, as these dogs will lie in your lap for hours, sort of as an infant substitute. For seniors living on a fixed income (i.e., Social Security), the cost of a pet should be carefully taken into consideration.

Of course, it is perfectly understandable why seniors are pet owners - for the same reason we all get pets. A pet can be a companion and help stave off loneliness and provide emotional support. Daily walking of a dog can be the only exercise a senior gets. One suggestion I would have, if you are elderly and thinking of getting a pet, is to consider adopting a adult pet from the shelter. Such animals are generally already house trained (and trained in general) and thus will be less likely to pee on your rug or eat your couch. And also, since they may already be 5-10 years old, they may be less likely to outlive you. There are a large number of such pets readily available for adoption, simply because many elderly pet owners pass away and leave pets behind.

A word about Greyhounds: We adopted a retired racing greyhound, and I have to say they are great pets. They come to you as an adult, so you don't have to deal with the whole puppy and training thing. No chewed furniture, no messes on the rugs, and a dog that knows how to walk on a leash better than its owners know how to walk it. They also sleep all day long and thus are fairly low maintenance. However, they do want to be with you at all times, and they are very emotional animals. A Greyhound left alone for long periods of time can become psychotic. If you are not home for 10-12 hours a day, consider whether getting any pet at all makes any sense.

A word about "Puppies": Many folks want "puppies" and that is fine and all, but consider carefully before buying a puppy. Puppies are "cute" but they often turn into less-cute adult dogs. Children are attracted to puppies for all the wrong reasons. For example, one friend of mine had an 8-year-old son. They had a dog (a very nice dog at that) that was grown. Their neighbor adopted a golden retriever puppy, which needless to say was as cute as a button. My friend's 8-year-old said "Mom, can't WE get a puppy as well?" oblivious to the fact that his own dog was laying at his feet.

Now you may say the kid was a brat, and that may be true. But his direct emotional reactions (unfiltered) at least were honest. He was jealous that his friend has a "oh so cutesy-wootsy" puppy, while he was stuck with a smelly old dog. Of course, an 8-year-old can't reason as well as an adult (or can they?) and realize that puppy-hood lasts only a few months at best. Perhaps someday, they will genetically engineer a dog that remains a puppy for 15 years and then keels over dead. If they do, it will sell like hotcakes.

The sad fact is, even adults fall for the while "ooooh!, Puppies! Cuuuuute!" thing, and often will adopt (or worse yet, buy) a puppy, thinking in the back of their minds, that it will always remain small, soft, fluffy, and lovable. But a Labrador Retriever puppy quickly grows up into a large, wiry-furred, stinky and flatulent animal, which may not be as cuddly as a puppy. At that point, it ends up being ignored and neglected, which is sort of sad.

Again, don't get me wrong, pets are a fine thing. Just go into it with your eyes open. Make sure you have $10,000 to spend on a dog before you get one (because over a decade, that's what it will cost). Consider your own motives carefully, and make sure you will be happy with an adult dog before you impulsively buy a puppy. Look to your local shelter for an adult dog. Rescued adult dogs are often very grateful and graceful companions, and cost less to own.

And if you are living "from month to month" or living on Social Security, ask yourself if you can afford $50 to $100 a month in pet costs, before you acquire a pet.  You don't want to add to the shelter population of abandoned animals when you realize you cannot afford to care for the animal - or when it outlives you.

Good Luck!

UPDATE:  This posting on Reddit analyzes the cost of having a "bearded dragon" reptile as a pet.   The parents realized that over a decade, it could cost $10,000 or more, for an exotic pet that their child would likely lose interest in long before its lifespan was over.   That is perhaps another aspect of pets - be aware they may live a very, very long time, and when the kids lose interest in the puppy (when it grows up and isn't as cute) you still have to care for it.  

My parents had cats, and when I went away to college, my Dad secretly had them euthanized.  This was after two incidents when the cats "ran away" and then showed back up months later covered in dirt and burdocks.  I suspect my Dad put them in the car and drove them miles away and released them.   He's dead now.

What was interesting about the posting was the expected response - emotional thinkers shouting down his financial analysis and calling him a rotten parent for not getting a lizard for his kid - when the kid didn't even ask for it.   Others chastised him for "putting a price on pets!" but fail to realize that pets do indeed have a price, and if you can't afford a pet, why get one?

Sadly, the poor seem to accumulate pets they can ill-afford, which is another stupid poor-people trick.  They complain about being broke all the time, but did you see my new 'tat and lizard?

We loved our cats and our dogs.   We could afford them (sort of), but overall, we spend tends of thousands of dollars over their lifetimes on food, vet bills, boarding, and other expenses.   It is only late in life, now that we have no pets, did I realize how much we spent on pets!

Think carefully before getting a pet.  If more people did this, the shelters would be less full.

GREED and FEAR

Many stock market analysts often quote the old adage that what drives the market is GREED and FEAR. People buy into rising stocks because they are GREEDY and then sell them when they tank, based on the FEAR they will go lower. In this manner, many folks are tempted to BUY HIGH and SELL LOW, often defeating their own investment plans.


The concept of GREED and FEAR can be applied to other finanical transactions as well. As we shall see, FEAR and GREED cause many people to forego even the smallest risks (FEAR) in exchange for a false sense of security (GREED).


The basic premise is this: Most folks let EMOTIONS (GREED and FEAR) dictate their purchases, investments, and other financial matters and usually this results in disasterous consequences. Smart investors use logic, calculation, and cold hard facts to make decisions, and usually come out ahead. And some of this logic is understanding that others are making their decisions based on emotions. Breaking free of economic dependency starts when you take emotions out of your finanical equations.

1. Car Transactions: GREED and FEAR at its worst.

Buying a car brings out the worst aspects of FEAR and GREED in people. Buying a car is usually based on GREED, period. People think about how cool they will look driving their new wheels around. Oh sure, no one will admit to this, but everyone does it, and car salesmen pick up on it. Cars are sold on emotions, primarily, and if the salesman can appeal to your emotional GREED, they can sell you anything.


GREED also manifests itself in this idea that somehow you can get a super-bargain on a car. It seems everyone is convinced they got a "great deal" or can put one over on a car salesman. It rarely happens, if ever. But no one wants to admit they are a poor negotiator, or that the deck is not stacked in their favor. Getting out the "bargain" mindset is important if you want to strike a reasonable deal.

Car salesmen even try to use FEAR to consumate transactions. "You know, they didn't make many in this color, and another fellow was looking at it today," I've heard them say. The reality is, cars come off an assembly line every few minutes - there is little or nothing to fear about "the one that got away". Similarly pressure to "act now" to avoid losing a good deal, rebate, or special sale pricing is another FEAR tactic to force people to buy. There is no logical reason that a car price should increase substantially after some arbitrary cutoff date.


FEAR manifests itself in the form of reliance on extended warranties, buying from dealers, or buying new cars. For example, a friend of mine recently went to buy a car. As I always preach, I advised them to find a late model used car from an individual who babied it. They resisted this suggestion very forcefully. They argued that buying a car from a used car dealer was a "safer" transaction, as the car dealer would "stand behind the sale". Of course, the car was still under factory warranty, and the only "standing behind" the dealer would do is the same thing they would do for a similar (under warranty) car purchased from a 3rd party.


Extended warrantiees are another example of FEAR at work. Many folks are convinced (and salesmen are sure to play on this) that their car will suddenly and mysteriously require tens of thousands of dollars in repairs, bankrupting them. They will be forced, yes, forced, to spend $10,000 repairing their old clunker and end up in the poorhouse.


As I have noted before, once a car repair exceeds the value of the car, the car is junked. You cannot be "forced" to spend more than the car is worth, repairing it. Facotry warranties are very long now, and most items that will fail, fail under such warranties. Spending $2000 or more on the premise that you "might" have a repair for the next few years, is often a waste of money - particularly on a car worth less every year. You are better off putting that money in the bank and saving it for actual repairs than gambling with an extended warranty. And as I have noted before, many 3rd party extended warranties are basically worthless and the companies often go bankrupt.


FEAR also manifests itself in trade-ins. Suprisingly, many folks are convinced they will be "stuck" with a car they can never, ever sell, and thus will dump a perfectly good car in trade for a pittance. It takes only a few minutes to list a car on Craigslist, and it takes only common sense to consumate a transaction without difficulty. But many folks are convinced they will "never sell that old clunker" and as a result, dump it to the first person to call (usually a used car dealer) or trade it in at a fraction of its value (dealers often "inflate trades" to make customers feel better, but they tack on the cost of the inflated trade on the price of the car).




2. The Real Estate Meltdown: Classic GREED and FEAR at work.


Many folks are wondering "what happened" to the Real Estate market in the last decade. How did everyone get snookered in to paying too much for Real Estate and then losing it all when the market collapsed. Most folks want to blame someone else for the problem - the banks, the predatory lenders, the government, Wall Street, whoever. But no one wants to think that THEY might be part of the problem.


GREED caused people to "invest" in houses, thinking that the market would always go up and they would always make a lot of money. So people who never invested in Real Estate before (nd had no real experience) bought homes, convinced that they were going to make money because "everyone else is". The reality, of course is that proper Real Estate investing is a fairly cautious and calculated game, where the profits are often made in the margins, and close attention to detail is important. You cannot buy and flip and make money consistently, unless you pay close attention.


FEAR lead people to stay in the market or get into it because "If I don't buy NOW, I'll be priced out of the market forever!" The spector of being a perpetual renter and never, ever having the chance to own a home lead some folks to overpay. But the reality is, if it is cheaper to RENT than to OWN, then by all means, RENT. It is a sure sign the market is overpriced and that prices will soon come down.


FEAR also lead people to do stupid things like get into bidding wars with other buyers over houses, based on the FEAR that they would never be able to buy a home.


GREED made many more buy homes they could not afford, using dubious financial instruments to finance. They wanted granite countertops and two-story foyers, and to heck with what it costs down the road. The urge to show off trumped common sense.


FEAR is now rampant in the business and causing people to make more mistakes. There are very good bargains in the housing sector now, but folks are shying away out of FEAR. This is driving prices down further as a result. The calm, collected and analytical investors are snapping up the good deals. The emotional investors are cowering in the corner in the fetal position and hoping it all goes away soon.


FEAR is also causing some folks to "walk away" from homes where the value has dropped. Now, granted, for some folks who let emotions sucker them into buying overpriced homes on dodgy loans, walking away or a short sale IS the most rational thing they can do. But others who are perhaps only slightly "underwater" are panicking and dumping properties "before the prices go any lower".


As an exaple of this last phenomenon, I purchased a home at forecloser for $95,000 during the last meltdown. The owner owed $140,000 on the home and since prices had dropped to about $110,000 or so, he was convinced he was "upside down" on the loan and would never recover. But the loan money he took out he had used to add an addition to the property and remodel the kitchen. And the market would recover that value within a few years, if he sat tight. And recover it did, with the values reaching over $200,000 within a few years. He "walked away" from a sure deal because his short-term (6-12 month) outloook was bad. FEAR at work.


3. GREED and FEAR in the Stock Market

As noted above, the phrase "Greed and Fear" originated in the stock market. Many smaller investors get into a stock based on GREED - they see the stock going UP, UP, UP and want to "get in on a good deal". They hang on too long out of GREED - they want to make more and think the stock will keep going up. They refuse to sell because they FEAR missing out on huge profits. The stock then tanks, and out of FEAR they will lose it all, the sell for less than they bought. Many a portfolio has been reducted to tatters this way.

GREED and FEAR also act in the stock market to enable con games. Day traders buy seminar tapes out of GREED - they think they can make easy money on the computer a few hours a day. Most lose their shirts in this legalized form of gambling. Ponzi schemes such as the now-infamous Madoff scheme were based on GREED (a chance to make big money) and the FEAR they would be "left out" of the investment pool.

Both EMOTIONS blind people to the realities of the market. While big killings do occur, in most cases, the average investor is better off hoping for a resonable return on investment over time. The big swings in stock prices are hard to predict and for the amateur investor, nearly impossible.

It is the amateur investors that drive up stock prices beyond reasonable rates - and generate huge profits for other investors.

The best way to avoid this GREED and FEAR cycle with stocks is to buy good stocks with reasonable returns and hang onto them over time. Trying to make a killing in the short term means only that you will be killed. And for many older folks, stocks are probably a bad bet anyway - they would be better off getting into government bonds and money market accounts as retirement approaches. Sexy? No, of course not. But secure.


4. GREED and FEAR in everyday transactions

In everyday purchases, GREED and FEAR come into play as well. When in a store, it is temping to impulse purchase items you don't really need. Flashy items, attractively priced, play to our GREED for THINGS. Similarly, low sale prices or "Buy One, Get One Free (BOGO)" play upon both the GREED to get a good deal and the FEAR that one would "miss out" on a good deal if you don't buy now!

With regard to BOGO's, bear in mind that in most States, you are not required to buy both items to get the same price. If you buy one of the items, you get it at half price. So just because it says "Buy One, Get One Free" on boxes of cereal, it doesn't mean you HAVE to buy both boxes. It has been proven that in most cases, people up their consumption in response to increased purchases. One way to reduce consumption is to buy less.

While the "great BOGO deal" might not be there next week, trust me that some similar product will be offered at a discount when you return to the store. Note also that many stores resort to these eye-catching displays to boost sales and traffic. You are really making no bargain when you pay more for everthing else in your cart, and get only a few bargains in the BOGO bins. Our local Publix plays this game. The BOGOs are good deals, the rest of their prices and selection are dismal.

* * * * *

These are just a few examples of where FEAR and GREED have caused people grief. There are many other areas in your life, I am sure, where you can find these two largely useless emotions ruining things. Taking emotions out of finanical equations is the key to making sound financial decisions. Remove GREED and FEAR from your decisions and you'll find it much easier to make financial progress.

Organizations - Helping YOU or THEMSELVES?

Charity begins at home, for some CEOs of charity organizations.

A few years ago, there was a scandal at the United Way national office in Alexandria, Virginia. The head of the organization, which helps the various regional organizations, was spending company money on a young woman, trips on the Concorde, and also taking limousines to work every day. He was getting paid $390,000 on top of that.

If you lived or worked in Old Town, Alexandria, none of this was much of a surprise. I drove by their shiny new office building every day on the way to work, and saw the limousines parked out front. Charity begins at home, I guess.

The fellow was eventually tried and convicted. His defense was that he was suffering from "brain shrinkage". One day, on the way to work, I saw him and his lawyers walking outside the courthouse, tailed by news people. As I drove by, I shouted out the window at him, "Rot in Hell, you Mother@$#%$&*!".

It made me feel better anyway. Stealing from Charity. That has to be a new low.

I had spent many hours at GM, UTC, and other places, doing United Way fundraising and had contributed to many campaigns myself through payroll deduction. The idea that people were getting rich and living the high life off my charitable contributions was sickening.

And yet, most organizations tend to take on a life of their own, and oftentimes, their own survival and internal perks trump the stated goals of the organizations. Before you join or contribute to a "worthy cause", consider carefully how your money will be spent. Oftentimes, what you think the money is being spent on is not what you might want.

I am not talking about the fake charity groups out there, either. These are well known cons - the folks who pretend to be charities and come up with names that sound like other charities, but spend most of the contribution money on "overhead" (salaries for management). No, even "legitimate" organizations can be a total waste of your time and effort. Choose wisely.

It was not unusual that the United Way national headquarters was located in Alexandria, Virginia. Alexandria is home to a number of political and other organizations, mostly for the convenience of access to Washington DC (lobbying). The Potato Chip and Snack Food Association is one of my favorites. The American Helicopter Association is headquartered there. The list goes on and on. There is even an Association of Associations, I kid you not.

Many of these are industry groups. But others are more grass-roots oriented. Membership-based groups, such as the NRA (located nearby in Virginia) for example, obtain dues from individual members (and the industry) and then lobbies Congress. Its has counterparts, Handgun Control, Inc. (and the Brady Center). Often there are multitudes of organizations to serve the same (or similar) political causes.

Should you join such organizations? Go door-to-door volunteering for them? It is your choice. One thing than dampens my enthusiasm for such organizations is seeing how they are run. Most have professional staffs, which are paid enormous sums of money. We're talking six-figure sums here. These highly paid staffers are often only interested in their own career advancement, or as we saw in the United Way example, getting all the perks they could get out of the job. For a "worthy cause" shouldn't people be working for less?

Worse yet, since many of these organizations are top heavy with management, they feel they need to "do things" - often to the detriment of the organization or cause. National Public Radio, for example, decided to fire Bob Edwards from its Morning Edition show. Highly paid program directors decided, without much thought, that getting rid of "the old guy" would somehow attract younger listeners. I decided right then and there that this was an organization that really didn't need my money anymore (Perhaps, in hindsight, Edwards came across as too conservative and even-handed, as an "old school" journalist. NPR has since abandoned any pretense of neutrality in delivering the news).

Your opinion, of course, may be different. However, I don't think that NPR or my local public radio station is really going to go off the air if I don't buy a tote bag during their fund drive. What it will mean, of course, is that they might not be able to pay as much for programming, and hence drop salaries for some of the folks running the place. But given the number of paid "sponsorships" (advertisements) on this "non-commercial" radio chain, I really doubt they are about to go under. So it is really necessary, or even desirable for me to send them $50 every year? I don't think so (and they never did send me that tote bag, either!).

The American Bar Association is another organization that I am ambivalent about. While they do provide some benefits for members (low-cost life insurance, for example) much of the money paid in dues goes to political lobbying or causes that you may or may not agree with. And the dues can be rather staggering as well.

United Way is another example. They collect money from individuals and then distribute it to everything from Catholic Charities to Boy Scouts, USA, to Planned Parenthood. Some on the Left are not happy that money is going to Catholic Charities (anti-abortion) or Boy Scouts (perceived as anti-Gay). Some on the Right are not happy that money is going to Planned Parenthood. In these polarizing times, even giving to charity is fraught with peril. The reason, however is clear: most charities do have a political agenda (even a soup kitchen) and thus giving to one charity is often an endorsement of one line of political thought.

The ABA example illustrates, however that there are some organizations which provide benefits, such as life insurance, to your advantage. The Good Sam Club, which is the premiere RV (Recreational Vehicle) organization, provides a monthly magazine, a discount on park stays (at participating parks), and publishes a nationwide campground directory - in addition to representing the RV'ing public (and industry) to government. In return for your dues (or membership) you at least get something in return, even if it is marketing-linked. The American Automobile Association (AAA) is another good example. For $40 a year, you get maps, a magazine, free towing, and a lobbying group representing your interests.

Other organizations, however, may not be at first what they seem. Many folks used to give money to PETA (People for the Ethical Treatment of Animals). Why not? Who doesn't want animals treated better? But many controversies surrounding this group show that it is not what it first appears to be. PETA euthanizes the majority of the animals it takes in, and actually criticizes "no kill" shelters. The lobbying arm of the organization has taken increasingly bizarre stands on issues and is prone to stupid publicity stunts which do little to advance the cause of the group and arguably do more harm in making it appear to be silly and superficial. One has to wonder if an organization that asks the town of Fishkill, NY to rename itself or to call for fish to be renamed "Sea Kittens" has way too much time and money on its hands.

And in some instances, some organizations amount to little more than shakedown artists. They may accuse a corporation of bad practices and trying to create protests and bad publicity for certain companies. For example, some environmental group may get you all riled up (see my article "They're BAITING You!") that a fast-food chain is destroying the rainforest (not actually true, of course). You go out and wave your sign in a protest march, put a bumper sticker on your car, and get your friends to boycott the chain. Later on, you'll be chagrined to find out that in return for an "environmental pledge" from the company (and a nice donation to the environmental group), the protest has been dropped. Tony Soprano could not do a better version of the shakedown. Did you really "change the world" or were you merely a pawn in someone's financial game?

This is not, of course, to suggest that all these groups are corrupt and vile. However, most do take on a life of their own. And most do not need your money, your energy, or your time. If you are for gun control, VOTE for the candidate who supports it. If you are AGAINST, then vote for the candidate against. Trust me when I say this counts far more than your NRA or Handgun Control, Inc. dues.

The NRA, for example, has increasingly resorted to bizarre rhetoric and demands over the years, even after its initial demands were met. Since outlawing handguns didn't appear to be much of a threat anymore, they moved on to legalizing automatic weapons (and have largely succeeded), armor-piercing ammunition, and whatever else is on the horizon. For an organization originally devised as an hunting group, this seems like quite a tangent. But if there is no THREAT to the constituency, there can be no NEED for the organization. So anything and everything has to be characterized as a dire situation.

The Gay Rights movement has fallen into a similar trap. By and large, the U.S. is one of the most tolerant countries in the world today with regard to the rights of Gays. But Gay rights groups are pushing again and again for "Gay Marriage", in spite of opinion polls which show no support for such a change to our laws (even among Gays, the issue is hardly a burning one). Again, the organizations need issues, just as we need air to breath. No one raises money by saying "Gee, things are pretty swell!". Both the Left AND the Right raise tons of money over the "threat" for and against Gay marriage. One almost wonders if they are working in cahoots.

How can you tell if an Organization has gone off the deep end? Or the President of the Organization just needs to make another Mercedes payment? Here are some clues:

• There is a power struggle at some time for control or consolidation of the organization.
• The head of the organization takes home an obscene amount of money.
• The organization takes "donations" from the corporations it criticizes.
• The organization spends lavish amounts on advertising and publicity stunts.
• The organization lobbies for further and further demands, after the initial demands are met.
• There is a splinter organization of former members of the primary organization.
• The organization uses dramatic propaganda techniques to try to convince you that you are "threatened" by some other organization, group, or government entity.
• The organization has a huge management team of highly paid professionals.
• The organization has a huge office complex and other infrastructure.
• The organization has a private jet.
• The head of the organization has a limousine and driver.

These are just some indicia to look at. Granted, you might not be able to evaluate all of them personally. But the next time some "worthy cause" approaches you and claims they "need" your money, think first about whether you might need it more. Charity does begin at home.

LAID OFF! How to Prepare for the Inevitable

There are even odds that at one time or another in your life, you will be laid off.   How do you prepare for this?

NOTE:  I recently found this article on my hard drive. I had written it several years ago, during the dot.com downturn. I think it is still relevant today. --RPB

LAID OFF – HOW TO PREPARE FOR THE INEVITABLE

What to do to prepare for being RIF’ed, downsized, fired, or let go.

The year was 1981, which to a lot of folks seems like an eternity ago.  It might even have been before you were born.  But to me, it seems like yesterday.  My Father, who had for years carefully and patiently climbed the corporate ladder, had just been let go from his job as Vice President of a small automotive parts company.  He was 58 years old, and he never really worked again after that.

He was a bit in shock. He had hoped to work for at least a decade or more before retiring.  To top it off, he had one son still in college, and another (me) just starting. My college fund quickly became his retirement fund. It was probably the best thing that ever happened to me, as it was a great learning experience and I worked my way through school.

However, not much has changed in the last 27 years.  Layoffs, "RIFs" (Reduction in Force), downsizing, or just plain firing still goes on.  Often it isn’t fair or logical.  And oftentimes, the subjects of the layoff never see it coming, even when they plainly should have.

I’m not sure I can give you advice that will immediately put you back on your feet. However, maybe the following suggestions will help you avoid this problem next time, or make sure there is no next time.

I. "I never saw it coming!"

A pathetically large percentage of people act surprised when they are laid off, when in reality, they should have expected to be laid off sooner or later. If you have your ear to the ground and have an understanding of how businesses are run, you should know exactly when the layoff is coming – and leave first.

Take my Dad. In the late 1970’s business was bad, to say the least. While people moan and groan about "the great depression" I think the inflationary recession of the 1970’s was probably the second-worst economic event of the last century. Jobs were scarce, prices were high, and lots of factories were closing.

My Father’s factory was old and obsolete. Much of the machinery dated from World War II. A strong Union was stifling production and driving wages ever higher. They simply could not compete with their larger U.S. competitors, much less the challenges from overseas.

Today, the factory is closed and has been bulldozed into the ground. It doesn’t take a genius to have seen that coming.

Compounding this was the internal politics of the place. The company was a small, family-owned business. My Father got along well with the elderly owner, who was President of the company. However, the son, who was a competing V.P. of another division, simply hated my Father.

For reasons that elude me (and even my Father) today, my Dad never did the math on this and see the inevitable outcome. Once the owner of the company died, control would pass to the son. The son would have little use for my Father at that point.

And that is exactly what happened. Once the owner died, my Dad found himself out on the street. And in that era, not many companies were willing to hire a 55-year-old manager of a failing parts company. In fact, not many people were hiring period!

The moral of this story is that you should not blind yourself to the obvious. As an employee, you need to keep your ear to the ground with regard to the productivity of the company, your personal productivity, and office politics.

II. Company Productivity

It seems almost comical to hear some of the stories from former ENRON employees, bemoaning their fate when the company went down. They told stories about how working at ENRON was "the best job they ever had" as they could arrive late, leave early, do little work, and still be paid outrageous salaries, given huge benefits, and taken on numerous corporate junkets and the like.

People are all too willing to believe you can get something-for-nothing, and these ENRON employees are a perfect example of this. If your job seems too easy, and you think you are being paid an obscene amount, chances are, you’re right!

If the business plan of the company makes no sense, and the company is losing money or does not appear to be self-supporting, maybe it is time to look for the EXIT sign.

A similar phenomenon occurred in the mid-1990’s with the so-called "dot com" bubble. Hundreds, if not thousands of companies were being formed, based upon little more than an idea and some venture capital. People were saying all sorts of things back then, which in the cold light of the new Century, are clearly nonsense.

"You have to have a good ‘burn rate’", one fellow told me, referring to the rate at which the company was wasting its venture capital. "Profits are a thing of the past", said another, "under the new paradigm, profits mean nothing!". Of course, all of this was just silly talk. Most of these "dot com" companies are gone now. The one’s that survived made "old fashioned" profits just like any other company.

If you work for a company that spouts similar nonsense, start planning your exit now, rather than wait for the inevitable. You are far better off finding a new job while you are still employed than to wait until they turn the lights out and ask you to clean out your desk.

Employers are not impressed by an employee who is so passive that they wait for the inevitable. If you are to be a go-getter, get while the getting is good.

Note also that if you work for a company that can’t explain to you how they make money in 10 words or less, I’d head for the door as well. During the 1990’s I met with quite a few clients who tried to explain their business plan to me in terms of a "new paradigm", "sea change", or the like. Needless to say, I asked them for money up-front.

III. Personal Productivity

This is a tricky topic for two reasons. First, no one wants to think (honestly) about whether they really are an asset to the company or not. Second, as we shall see below, oftentimes layoffs have NOTHING to do with your productivity. Oddly enough, the most productive people are often the one’s RIF’ed or let go.

But it still is an area worth exploring. If you are coming in late, leaving early, and constantly missing your productivity goals, chances are, you might find yourself in the cross-hairs for a layoff. In some instances, department heads are given the option of who they want to RIF from their organization, and if you come across as the slacker, expect to be shown the door.

If this really is the case, take some time to figure out why it is that your productivity is so low. Chances are, it is your subconscious telling you that you are not happy in your work. There is nothing wrong with this, and nothing wrong with you. But it can be a good time to reflect on what it is you really want to do. Oftentimes a layoff or RIF can be a liberating experience, as people are unchained from jobs they really hated anyway.

People often stay on at hated jobs for the strangest reasons. They feel they "need" the job for the money (not true) or out of obligation to family or parents. My Father used to tell me that he hated getting up in the morning to go to work, but did it because "he had to" to support our family. In reality, as I learned, you don’t need a lot of money to support a family – at least not extravagantly. But we will discuss this further below.

Conversely, if you are indeed an asset to the company, don’t be shy about telling people about it. If your program saved the company a million bucks, be sure everyone knows it, without coming across as beating your own drum…too much. As we will see below, politics is probably one of the biggest issues affecting who gets laid off and who stays. If you don’t take credit for your own successes – or worse yet, let someone else take credit – you can expect to find yourself pounding the pavement eventually.

IV. Politics

As I noted above, the main reason my Dad got laid off was politics. The new boss was his former co-equal, and he never liked my Dad when they were co-workers. Now that he was in charge, his first order of business was to put my Dad on the street. Again, how Pop never saw this coming completely eludes me.

You can be the most productive worker in the place and still get laid off if you have no friends higher-up. If you are not any good at playing the political game, this can be problematic.

I was never very good at politics, and in fact, tend to piss people off. My Dad and I are cut from the same cloth, there. It is probably a good thing I am self-employed. I always naively assumed that my superior performance would be sufficient to keep me on board, and for the most part it did. I also realized that in order to stay employed, not only do you have to look good to your boss, but you also want to make sure you make your boss look good – to his boss.

One of the most suicidal things any employee can do is to embarrass his boss in front of his superiors. This does not necessarily mean some social gaffe (although these certainly count) but can be a function of productivity or quality of work.

For example, at the Patent Office, we Examiners were pretty much left alone. So long as we made our productivity goals, we were assured of continued employment. Our bosses (the Supervisory Patent Examiner, or SPE) were rated on the overall Art Unit productivity, along with a number of "hit list" items. Each month, a report was prepared for the Group Director listing those Art Units that had outstanding actions over 60 days old, or other delinquent items.

As an Examiner, if you wanted to curry favor with your SPE, you had to make sure that you name did not appear on any of these "hit lists" on the Group Director’s desk. And it didn’t hurt if your productivity was at least 5-10% over your quota. If you followed these simple guidelines, chances are, your SPE would pretty much leave you alone.

So the basic rule of Office Politics is this: Make your boss look good to his boss, and chances are, you’ll look good to your boss.

There are, of course, always those employees who try to glad-hand their bosses – thinking that they can succeed based upon the old school tie, fraternity network, or some other non-performance indicia. This only works so far, though. My experience has been that the schmoozers and glad-handers succeed only for a little while. When push comes to shove, it is often performance that matter.

V. Pricing Yourself Out of the Market

One problem for older employees (and this probably included my Dad) is that over time, you keep getting pay increases, which are often higher than inflation. After 10, 20, or 30 years, you may be making two or three times as much as the new guy in your department.

Business managers can do math. If you can hire two "newbies" for less money that what you are making, chances are they will. They will get more work out of two employees for less money. And younger employees are going to cost less in terms of health insurance.

For older employees, this can be a frightening prospect. Unfortunately, the Supreme Court has ruled that it is not considered age discrimination to fire an older employee and replace them with a younger one, just to save money. So if you think you can sue to prevent such a firing, think again.

The thing that older employees need to bear in mind is that retirement at age 65 might not be in the cards. You need to prepare NOW for retirement (more about this later) and be prepared to retire early. You also need to keep your ear to the ground (see above) and ask yourself (honestly) if your services are really worth what you are being paid.

Many older workers when laid off eventually find other work – but at much lower salaries. These lower salaries reflect the real market value for their services. This is a harsh assessment, I know, but it is true.

In the past, Unions often protected older workers and their large pay increases, from being laid off. The old Rule in a Union shop, was "last hired, first fired", meaning that older workers (and their higher salaries) were immune from layoffs.

However, economics cannot be denied for long. In the airline industry, for example, new airlines with younger employees, newer planes, and no unfunded pension liabilities are operating at less than half the cost of the older carriers. While Union Rules may prevent the older carriers from laying off employees, basic economics is "laying off" entire airlines – or forcing pay cuts to Union members.

Relying upon some Union extortion scheme to keep your job in place might work – or it might not – or it might not work for long. What we are seeing in the marketplace right now is a long overdue economic correction as laborers who were not a cost-effective asset to their companies are given the heave-ho in mass quantities. Had their wages been reasonable to begin with, we might not have seen this correction.

VI. The RIF Process – It Isn’t Fair.

Understanding the layoff or RIF process is a useful thing to know. The process is rarely "fair" and oftentimes the most productive and valuable employees get laid off, while the slackers remain. Corporations typically are inefficient operations, so this is often the case.

RIF decisions might be made at the corporate level, often by people with no direct contact with the organization involved. The motivation to cut costs might be based upon dire financial conditions. But oftentimes, they are made merely to boost the stock price. Wall Street reacts favorably to cost-cutting.

And oftentimes, it is someone in the CFO’s office who decides who to cut and who gets to stay. Older, higher paid employees are often the first to go. The decision as to who stays and who goes is often out of your boss’s hands. You may have been fired by a computer.

So don’t take the process PERSONALLY. Many people waste valuable time and energy trying to figure out what it is they did wrong, or vainly arguing about how the system was unfair to them. Neither process will help in landing a new job or moving forward with your life.

Again, if you’ve had your ear to the ground and monitored your company’s financials, you might have been able to see this coming. If you are an older employee drawing a heavy paycheck, you might find yourself the first to go.

When I worked for a major Air Conditioning company, we had a periodic RIF that took out one of my favorite Engineers. He was a kindly older man with years of experience and high productivity. He also was fairly well paid. His competition in another lab was a younger fellow with no formal training who kept all the test room schematics in his head. His work was often substandard and slipshod.

To an accountant at the main Office, however, it appeared we had two Engineers on duty with the same job description. Why two? From their perspective, one should be let go, and the one they chose was the older, more highly paid Engineer.

I thought this was unfair and short-sighted, of course. But over the years, I’ve seen this same decision repeated over and over again. I don’t expect the system to change much in the future. And trying to change the system is fruitless and does little to advance your personal goals.

VII. Avoiding the RIF

The first thing you can do to advance your own personal goals is to take steps to avoid the RIF or layoff in the first place. Oftentimes this means leaving your company before the inevitable happens.

The old saying is true: The best time to look for a job is when you already have one. If you are already employed, you come across as more confident to the employers you interview with. In addition, since you already have a job, they will have to pay you more in order to entice you away from your existing job. It is a win-win situation for you.

If you wait until you are laid off, your resume is marked for life. Periods of unemployment between jobs are always a red flag for many employers. If you are unemployed and looking for a job, employers can sense your desperation, and its stink is a turnoff. And employers are not going to offer top dollar to someone who desperately needs a job.

Despite this basic common sense, most people don’t bother looking for a job until they are fired or laid off. As noted above, if you have your ear to the ground, and understand the politics and your situation with a company, you’ll know when it is time to look for a new job.

This may depend more upon "gut instinct" than anything else, but here’s a few indicia I’ve used to know when it is time to hit the lifeboats:

1. Do you get along with your boss? This is an easy question to answer, but many people don’t want to think about it. If your relationship with your boss is one of bitter acrimony, start job hunting.

2. How is the company doing? Do you read the quarterly reports? Is the company profitable? Are profits increasing or decreasing? Is your division an asset or a drain to the company?

3. How’s the market doing? Are your company’s products and services in demand or slackening? Is there competition from new low-cost competitors or overseas companies? What is the long-term forecast?

4. Is your company merging or being taken over? Mergers and takeovers are usually followed by layoffs. When consolidating two companies, the primary reasoning is to reduce overhead by consolidating departments. While it may take 2 or 3 years for the accounting departments to be merged, it will eventually happen, and the number of people needed will shrink.

5. Are you happy at your work? This is the big one. If you dislike your work, chances are it shows in your productivity and quality – and in your political connections at work. No one wants to work with a "sad sack" and you might be the first in line for departure.

VIII. Preparing for the RIF.

Getting laid off is not something that happens to "other people". Chances are, in this economy, it will eventually happen to you. Eventually you will likely price yourself out of the labor market for your services, and you will be let go long before you are prepared for retirement. Like my Dad, you might find yourself retiring a decade or more before you are ready to.

This is such a bad thing? I think not.

The key is to prepare for an inevitable early retirement, and then hope it doesn’t happen. Very few people do this, and the results can be staggering.

If you’ve been laid off and are young enough to get another job, great (see below). But don’t kid yourself that this next job is a guarantee of anything. You might want to take some steps to change your life dramatically.

Many "salary slaves" get into some very bad financial habits. It is not hard to see why. With a 9-5 job, you have to get up early, shave, put on a tie, fight traffic, spend 8-10 hours in a boring office, and then fight traffic all the way back home. By the time you get home, you are beat!

There is little time left in the day to contemplate one’s finances, balance the checkbook, or make sound financial decisions. If both husband and wife work, this also usually means lots of meals ordered out – with some pretty staggering bills as a result.

The Salaryman also tends to do another very, very bad thing, economically, and that is to view the monthly paycheck as something to be divided up, like a pie, amongst various monthly payments. Your typical salary slave will lease a new car, thinking "I can afford that from my monthly payment" when in reality it is a horribly bad financial decision.

I’ve had friends who made very bad financial decisions and when they were laid off, found themselves bankrupt. Without that steady stream of income, the leased car gets towed away, the over-mortgaged house is foreclosed upon, and the minimum payments on the maxed-out credit cards aren’t made.

If this describes your finances, you need to change many things, and fast. The whole point of working at a "job" is to BUILD wealth, not to SPEND it. SPENDING MONEY IS NOT WEALTH. Wealth is the money you ACCUMULATE, not money you spend on toys and gadgets.

It is not easy to make this transition, but well worth it. Here are just a few suggestions:

1. Max out your contribution to your IRA, 401(k), or other retirement plan. If your employer offers a retirement plan, put the MAXIMUM amount into it allowed by law, not the minimum. If you are not maxing out your retirement account, something is drastically wrong.

2. Cut all subscription services: Cable TV, Cell Phones, TIVO, Satellite Radio, and the like all cost "small" amounts of money individually, but when added up, can run into hundreds of dollars a month. I know some friends who are not very wealthy, but spend over $150 per month on Cable TV. In addition to being a total waste of your life, this is a total waste of your money. You’ll be surprised to learn that people actually lived, and lived quite well, long before the invention of these modern "conveniences". If you can’t cut all of these services, consider trimming at least 50% of them from your budget (or reducing service levels). I have basic cable and no cell phone, and my life is quite fine, thank you (and probably more interesting than the fellow who has all the cable channels).

3. Buy a car and keep it. The most economical way to buy a car is to buy a late model used car with low milage, secondhand. Try to find one from the original owner (perhaps some poor slob who got laid off!) with all the service records, garage kept, and in great shape. If you don’t do your own car work, find a good independent mechanic and spend the money to keep the car in top shape. A well-made car should easily last 10 years or more, which should be about the time you start thinking of buying another one. The biggest waste of money I see the average salary slave make is to lease a new car every 2-3 years. This is the most costly way to own a car, and for the amount of money involved, you don’t end up owning anything. People will try to justify leasing by arguing that it saves on repair costs. But a well maintained car requires quite little in repairs. And the repair costs are going to be far less than lease and insurance payments.

4. Stop buying "STUFF": The average suburban salary slave has a two car garage, but never parks his cars in there. Why? Because it is chock full of CRAP. Americans are addicted to buying. I have several friends who have filled their houses with junk and live like paupers on six-figure incomes. How does this happen? Consumerism has run wild in America, and we are encouraged to buy more and more useless things that we really don’t need. Many of these things are small items, which seem like inexpensive and thus inconsequential purchases that can be easily put on a credit card. However, what ends up happening, once the consumer gets home, is that this junk never gets used (or used properly) and thus ends up in the garage, basement, or spare bedroom. Big offenders here include weight lifting or exercise equipment, small appliances, and clothes. If you are fat and out of shape, walking a mile a day and eating less will correct the problem – for free. Spending hundreds of dollars on a treadmill or some low-fat cooker (so you can eat your way to slimness) is foolhardy. Similarly, "going shopping" to malls and stores without having any specific NEED for any new merchandise is one sure way to max out those credit cards and fill your home with junk.

5. Have a Garage Sale: In that vein, one way to correct this problem is to get rid of junk. Have a garage sale, or sell off your junk on eBay. I have a garage sale (or participate in a neighbor’s) at least twice a year. Things that lie about your house are of no use to you and clutter your life. Get rid of them. If you haven’t used something in 6 months and have no bona fide intent to use it in the next 6 months, SELL IT. This applies especially to big-ticket items like hobby cars, motorcycles, RV’s, boats, jet skis, and the like. People hang onto JUNK out of pride. Sell it now while you can still get something for it.

6. SAVE for big-ticket items: Americans love their mini-mansions, but most of them are completely unfurnished. Why? I already gave the answer above. People can "afford" small junky things but can’t afford big-ticket items like quality furniture. As a result, they fill their mini-mansions with cartons of junk, but not the quality furniture you’d expect in large homes. Rather than spend lots and lots of money on small junky appliances and clothes, save your cash for good quality furniture. Avoid going further into debt by buying cheap, flashy furniture at those stores that advertise all the time on TV.

7. Have a SAVINGS PLAN: In addition to your retirement plan, you should take steps to build up reserves of after-tax cash. If you can start saving, you can afford to pay CASH for a good secondhand car, or that Stickley sofa you’ve always wanted. If you spend all your money on credit card payments, you’ll be stuck buying junk all your life and paying top dollar for it. There are many, many ways to accumulate cash. Have money deducted from your paycheck for the payroll savings plan (also available online to deduct from your checking account). Have money automatically deducted from your checking account every month to buy stocks, bonds, or go into a money market. Squirrel away cash into accounts that are not easy to get at. I put $100 a month into a Credit Unit account in Maryland. I have to drive 40 minutes if I want to withdraw cash from there, so it acts as a disincentive to spending. This is a great and painless way to build up wealth over a period of time. Don’t get discouraged when you don’t see results right away! I know myself all too well. If there is cash in the checking account, I spend it. So I try to put money into as many accounts (stocks, bonds, etc.) as possible so that I don’t see that big balance in the checking account, tempting me to spend, spend, spend!

IX. LIFESTYLE CHANGES

A layoff can be a great time to evaluate your lifestyle. I think for my Dad, it was a time he realized he was spending a lot of money on foolish things, like impressing other people, rather than saving money for himself. That Country Club membership is awfully expensive when you consider how much it costs to play golf on a public course. As human beings, we all seek status, and it is a normal thing. However, fighting that urge can be a very useful tool!

I drive older BMWs, which are also a hobby of mine (if you can use a hobby to save or make money, this is a good thing, as we shall see below!). Some of my salary friends will look down at me because I drive a 10-year-old car, while they are leasing a new car every 2-3 years. But I have managed to accumulate well over $1million in Real Estate equity over the years and over $500,000 in savings. My friends are barely making their payments on their leased cars, and often have pitifully small amounts in savings. So who really has the most status? If you view status as a matter of who has the most shiny objects, I guess they do. But don’t confuse status with real wealth. All my cars are "paid for".

As I noted above, many people stay at jobs they hate because they feel obligated. "If I quit my job, how will I make payments on the Chevette?" People do the silliest things! Staying at a job you hate, so that you can pay credit card bills, house payments, and car payments is a ludicrous proposition. You can drive a secondhand car, live in a smaller house, and buy less "stuff" and still be happy – even happier!

And even family obligations need not be onerous. Many folks are convinced that in order to be a good parent, they must spend inordinate sums of money on child accessories. I am not sure where this comes from! Other than clothing and perhaps a car seat, a child really does not "need" a lot. As a child from an earlier generation, I was quite happy with hand-me-downs, and although I certainly enjoyed fancy toys, I never really "needed" them. Moreover, my parents did not lavish the money on me back then that the average parent does on their children today. I like to think I turned out all right.

One area in particular seems to be an obsession with the middle class. "I have to put my kid through college, and that will cost thousands of dollars per year!" Well if this is so, you have even more reasons to stop spending money on junk and wasting it on cable TV. Unfortunately, what most modern parents do is to put a second or third mortgage on their home in order to put Junior through college. This, to me, is a big waste of money.

College expenses are rising at two to three times the rate of inflation. Why? Because they can. College is seen as the ticket to a continued middle-class existence. Readily available student loans, along with second mortgages make money readily available for school, and thus parents (and students) more willing to spend.

Oftentimes, the child attending school has no idea what he wants to study or why. College becomes little more than an excuse to party – and all that tuition money often goes to waste. I speak from experience here! My brother went to Party-U and did little more than drugs for four years, wasting nearly $60,000 of my father’s money. When my turn came, the well was pretty dry!

This was the best thing that could have happened to me. I ended up WORKING my way though college. Sure it took over 14 years, but I studied what interested me and moreover what I thought would be useful to me. I ended up with a degree in Electrical Engineering and a Law Degree. Useful stuff, not fluff.

There was little time for partying. I recall one of my classmates tempting me to skip class and drink beer and play pool. I told him "no thanks". I had just paid my tuition bill and realized that each class I attended cost me over $150 per hour. I went to all the classes, sat in front, took notes, and asked questions. As a Student-CONSUMER, I wanted to make sure I was getting the most education for my tuition dollar.

And in this regard, many schools, even prestigious ones, fall alarmingly short.

Working at a crappy job so your kid can go get drunk in college is a really bad idea. Instead of doing that, why not sit down with your children and work out a different plan? If you child doesn’t know what they want to study, consider sending them to a State School for the first year or two and then transferring to that expensive "name" school once they decide what it is they want to do. And a student should definitely WORK at a job – not only during the summer, but while they are in school – preferable in a field related to their study. Your son or daughter needs to learn the work ethic early, and understand that what they are leaning in school has real application. Otherwise, you are just throwing money down the drain.

I am firmly convinced that working is the best thing for a human being. If your child learns the work ethic early, I believe they will have less emotional and psychological problems down the road. Schizophrenia, Depression, Drug Abuse, and other emotional ailments often attach to fairly middle class and even wealthy young people in the early college years. I believe this is due in part to their having so much wealth without having to work for it. Their brains cannot handle the disassociation. Let junior WORK for a living – it will be the best thing for him (or her).

Financial Prudence amounts to much more than just a good bottom line for you, too. If you have your spending habits under control, are saving money, and have no major cash-flow requirements (car leases, etc.) you can really do something INTERESTING with your life. You are free to explore options other than a "paycheck" such as self-employment. Moreover, as you are not desperately tied to your job, you will have more self-confidence in your work and work better. Many marriages fall apart over finances. Moreover, financial problems contribute to depression as well as alcohol and drug abuse problems (which in turn cause more financial stress!).

Financial independence means you are your "own man". Periodically, corporations are rocked with scandals where employees do unethical things or fail to report unethical behavior. The reasoning given is always the same: The employee is afraid of being "fired". Because they were worried about their Chevette payments, they let their boss release toxic gas into an elementary school. I have no sympathy for folks who so desperately have to hang onto their jobs that they will stoop to anything. Being your "own man" makes work more enjoyable, simply because you don’t need it.

X. TURN A HOBBY INTO CASH!

Many folks waste huge amounts of money on hobbies, and then complain about being broke. Again, in our consumer economy, people (especially insecure white males, aged 15-35) are encouraged to buy "stuff" as though owning things will impress others. Here’s a clue: owning stuff takes no talent whatsoever. Buying a new Harley does not make you an "enthusiast," it only makes you an owner. Anyone can own things – it is not a very exclusive club. Anyone with a checkbook and a W-2 can join.

If you must have hobbies (and we all do!) try to use your hobby to save money or even make money. Not only is it possible, it is much more of a challenge and can be quite gratifying.

I am quite handy with my hands, and I like to work on things. While I am not a master carpenter or mechanic, I can get by. I enjoy working on cars, and I’ve used this to save quite a lot of money on car repairs. I’ve used my carpentry skills to make literally hundreds of thousands of dollars in Real Estate.

Most folks do quite the opposite! For example, when it comes to cars, many handy folks will spend thousands of dollars junking up a perfectly good car with "aftermarket" accessories, and then let the basic maintenance go to hell. Sure, an oil change is not as "sexy" as some bolt-on "upgrade". But a D-I-Y oil change can save you a few bucks, while the unnecessary "upgrade" (few are true improvements over stock) will simply max out your credit card further.

The same is true for home improvement. Most home improvements add little, if anything, to the value of a home. It is a good idea to maintain your home, and when the time comes, replace your kitchen and bath. But tearing out a perfectly good 5-year-old kitchen because it looks "dated" is not necessarily a good return on your investment. It is possible to remodel yourself into the poor house. Think carefully before spending too much on trying to make a 2-bedroom rambler into a mansion. It may be a better proposition just to buy a fancier house, if that’s really what you NEED.

I’ve taken all that time and energy and put it into investment Real Estate. Since I have no car payments and low overhead (not buying "junk" every weekend at the Mall), I have the time, credit line, and money to buy properties and fix them up. This can be where you can make real money! Bankers won’t loan you money for that foreclosure property if you are maxed out on car lease payments.

I’ve seen others try to "invest" in Real Estate by buying "nice" properties and then paying someone else to fix them up. It is very hard to make money this way! A nice house is already worth what it is worth. Putting more money into it will not make it worth a lot more, and chances are, you’ll pay more for the renovations than you’ll get out.

My personal residence is pretty modest. Most of my friends, when they started making more money, went out and bought "status" houses with 7 bedrooms and 5 baths. Of course, they can’t afford to furnish these monsters. Moreover, when it comes time to sell, they linger on the market longer, and don’t appreciate as fast. Think carefully before you invest in such a white elephant. While it might impress your more shallow friends, wouldn’t it be nicer to have THREE smaller homes, with two of them generating rental income?

Of course, a lot of other hobbies can’t generate a profit for you or save you much money. But you can, at least, keep them in line. I’ve seen a lot of friends spend tons of money on hobbies, only to find themselves broke and less satisfied that when they were still wanting rather than having.

For example, when I was in my 20’s, a friend of mine had an old ski boat. He was quite a water-skier and even though his boat was old and tired, he went out every day and skied. He was quite good. When his Father died, he foolishly spent his inheritance on a new ski boat – his "dream" boat that he had been longing for. Well, although it was a nice boat, it was not as nice as he had dreamed about. And since it was so new and shiny, he was afraid to let anyone else drive it. He stopped skiing entirely and spent all his time waxing that boat.

That was about 20 years ago. I am sure the boat long ago went to the junkyard. Can you imagine how much that inheritance would be worth if he had invested it? And how much more fun we would have had if he had kept that old boat (or bought another used one)?

With any hobby, avoid the temptation to spend more and more so you can impress the other hobbyists as having the "ultimate" car, boat, RV, orchid, cat, stamp, coin, or whatever. It has been my experience that in any hobby group, the fellow (or gal) who is known as the "#1" hobbyist is often the most shallow and sad person. Don’t be like that.

Hobbies can quickly get out of control. A friend of mine has a hobby of purebred cats. These cats can cost thousands of dollars to buy, and because of their inbred lineage, run up thousands of dollars in vet bills. What started out as a reasonable hobby of two cats quickly escalated to four, then more. She still wants to get even more cats, and it is really starting to get out of hand. I have a friend who has a similar problem with large dogs. Everything in moderation!

XI. SO you’ve been laid off – what now?

If you are still relatively young (under 40) there is a strong chance you can still find a new job in the same field at a comparable salary. However, if you are older, you may have to explore alternative careers, take a salary cut, or both.

The steps needed to take in job hunting are well known are will not be repeated here.

The main thing to do if you’ve been laid off, is to use this as an opportunity to change your life, not just your job. Payoff that debt, get spending in control, and turn your hobbies in to profits. Chances are, you’ll reach this point again in life, and you’ll want to be prepared.

If you have enough money saved up, you can retire early and comfortably. If your overhead and expenses are low, you can afford to change careers or take a salary cut. You might be forced to do all of these things, anyway. It is better to have choices than to have them thrust upon you.

XII. My story.

After seeing what happened to my Dad, I was certain that I did not want the same fate to befall me. My Dad made out all right. He had some money socked away (my college fund), and came into a small inheritance. But I think he envisioned having a little more money that he has now when he retired.

I’ve never really been "laid off" from a job as a result. I’ve quit on a number of occasions. In every case, it turns out that I quit before the place went under. I think I try to keep my eyes open and see what is going in a business and figure out if I really belong there. Many of the companies or departments or firms I quit ended up being closed, downsized, or merged shortly thereafter. Friends would tell me at the time I was a fool for leaving, only to call me later and marvel at my foresight.

I opened my own practice back in 1994. While it may not be as "profitable" as some salary job, I don’t have to worry about being "let go" from the company. And layoffs can and do happen to Attorneys – even Patent Attorneys!

I saw this personally at one law firm I was working at. One long-time Associate has worked for the firm for nearly 10 years. He was a hard worker, and was paid pretty highly. Unfortunately, he had no client base of his own, and none of the Partners were really friends of his (Politics, again!). After 10 years, his name came up for Partnership. No one at the table wanted to make him partner, as they could easily hire 2 or 3 young Associates for the salary he was drawing. Since he had no clients of his own, he could be let go with no consequences to the business.

I liked the guy and felt bad for him, and he was a little bitter about the whole deal. He found work with another firm, and that lasted for about 10 years as well, until that firm decided to close that office and lay everyone off. I hope he learned from the first time!

Needless to say, this story told me a LOT about what to expect about firm life. Since I knew that the chances of me befriending a partner were slim, I figured out early-on that law firm life was not for me. The real icing on the cake was when I went to work for another firm (one that I thought would allow me to work in peace!). They sent out a memo informing all Associates that we would not likely EVER be made partner. Moreover, it became quite clear to me that my religion would prevent me from ever advancing in that firm. The writing was on the wall, and I read it. Many of my friends stayed on, only to be let go later.

In the 15 years I have been in practice, I’ve seen a lot of layoffs at the companies I do work for. It is always heartbreaking for me to see one of my inventors leave, and oftentimes, I have to ask them for signatures on Patent documents even after they have left the company. Sometimes, they get a little upset. I can understand this. But since I represent the company, I have to do my job. And moreover, I see the patterns outlined above repeated many, many times.

Many of these laid-off Engineers should have seen the layoffs coming – but like a deer in the middle of the road, they sat paralyzed until the inevitable occurred. And many of these Engineers would try to impress me with their fancy new cars and gadgets – spending all of their hard-earned cash and borrowing more just to have some illusory "lifestyle". While I sympathize with their plight, after a while, you just want to shake them and say "wake up!"

There are no old Engineers, period. Go to any corporation or engineering firm and start looking for white hair. You aren’t going to find it. And this has been the history of Engineering. Layoffs are common. Projects end, and there is no demand for engineering work. You should expect to be laid off, so stop spending that money before you make it!