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Personal Finance

Unemployment for Christmas?

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Rumor has it that a big announcement is coming down: along about mid-October, the PtB (Powers that Be) will announce that everyone in my job classification is to be laid off. That’s a lot of layoffs, even for a gigantic learning factory whose student body is larger than the entire populations of most of the state’s counties.

The jobs in question are so poorly paid that all Our Beloved Leader would have to do is cut the six-figure salaries of his trophy hires by 5% to make up the part of the payroll that goes to the likes of us.

The rulebook that governs the university’s operation specifies that employees in this category have to be given 90 days notice of nonrenewal or dismissal. Conveniently, if O.B.L. makes this announcement on October 15, our time will be up on the last day of the semester, December 15. This will keep the donkeys in harness until they finish their current round of plow-dragging.

I’ve already found a job to apply for: $15,000 a year less than I’m earning, but at least it’s an income, and the place is only about five or ten minutes from my house. Truth to tell, I could cheerfully forego 15 grand to be free of the hideous commute to lovely downtown Tempe. Last night the freeway was gridlocked; plodding home across the surface streets into the glare of the setting sun took well over an hour. Besides, GDU will owe me $17,500 in tax-free severance pay, to be doled out over three years. A third of that sum added to the proposed new net annual pay will add up to a larger net than I’m now taking home.

Plus the coveted new employer pays ALL your health insurance, AND it offers a “cafeteria plan” that gives you an extra $600 to put toward three pay-it-yourself plans…one of which is a flex plan. So in other words, if you want the flex plan, you don’t have to pay for it out of your regular salary. And, interestingly, instead of automatically taking 7% out of your salary (and matching it) for a 403(b), this outfit offers a simple IRA for which 3% is deducted…leaving you with dollars to put into your own Roth IRA.

So, weirdly, even though the gross pay is lower, the net may be about the same or even higher, with or without the extra income from GDU’s good-bye gift.

It remains to be seen whether this rumor is true. This evening at the Arizona Book Publishing Association shindig, we sat at the same table with a GDU colleague who was privileged to attend our Dean’s meeting with the chairs. She reported that Her Deanship announced, as she had promised to do, that our office is seeking a new client journal.

If our dean’s boss is about to can me, which will shut our office down, why is she telling the world we’ll take on new work? A very limited number of possibilities present themselves:

  • She hasn’t been told about the plan.
  • She is pretending not to have been told about the plan.
  • She doesn’t know what my job classification is.
  • They don’t plan to include me among the cannees.

None of those scenarios is out of the realm of possibility. In fact, they’re ranged in order from most likely to least likely.

WhatEVER.

Next week I’m meeting with my financial adviser to figure out how I can survive if I don’t get another job. This weekend I will fill out a job application, update the résumé, and write a cover letter, to be shipped off to the proposed new employer on Monday. And I will finish editing a freelance client’s copy, earning another $500 this month. The Copyeditor’s Desk is attracting a surprising number of clients—tonight I believe we may have picked up two or three more—and the truth is that we may manage to develop this business well enough so that neither of us will have to work for the university. Or for anyone else, besides ourselves.

The Continuing Saga…

1.Unemployment for Christmas?
2.Does any of this have meaning for individuals?
3.Rumors start to fly
4.On the trail of the elusive job
5.Beating the layoff stress
6. How low can I go?

The least important bill

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Plonkee, spinning off a Simple Dollar post, contemplates her most and least important billsand asks, “If you order your bills from most important to least important, could you get rid of the one on the bottom of the list?”

Interesting exercise! After thinking about it, here’s what I’ve come up with. Some items tie for various places, because they’re of equal importance (or lack thereof). Some are automatically engorged from my paycheck, so I have no immediate choice in the matter.

From least to most important:

11.

newspapers, magazines
clothing
misc. junk
I can do without these, at least for a while. I have enough clothing to last for a year or more; none of us needs junk; and while I would miss my magazines and the newspaper, they’re strictly luxury items.
10.
yard man
Though I couldn’t begin to do all the yardwork around this house by myself, the world would not end if it were let go for several months. The yard is xeriscaped, so it won’t soon be waist-high in weeds. And besides, so many houses in my neighborhood are showing signs of blight, a neglected yard would not be noticed.
9.
whole life insurance policy
This policy is 30 years old. If I default on the payments now, the insurance part will go away, but I still can collect about $23,500 in cash value.
8.
long-term care insurance
This policy bets that I will need nursing care before I die. While that probably is so, if I quit paying the policy remains in force to a limited extent, and so it would still defray nursing-home costs to some extent. Given a choice between a long-term bet and groceries, I’ll take groceries.
7.

dental insurance
house repairs
homeowner’s insurance
My teeth are pretty good and require only routine care. At least temporarily, I’d be willing to do without the dental insurance. However, the cost is only about eight bucks a month, and so things would have to be very extreme for me to forego it.
House repairs are more urgent than yard care. Matters that have to do with safety or livability would need attention. But things like paint or a cracked window could be neglected without much harm.
Carrying homeowner’s insurance is tantamount to buying air. You make a bet that something bad will happen and that when it does you can’t afford to pay repairs out of pocket. While that may come to pass, people who don’t live in the path of natural disasters rarely experience catastrophic property loss. I probably could forego the home insurance for a time.
6.
gasoline
In a city where all amenities, including grocery stores, are miles apart, a car is an important tool. However, my age gets me a senior citizen pass on the buses to the tune of 50 cents a ride, and so in theory I could, if forced to it, commute to work, shopping, and doctors on our weak excuse for public transit. This would be extremely difficult and time-consuming, and I’d give up other things first.
5.
groceries
You’ve gotta eat. But you don’t gotta eat quite as high off the hog as I do. Food is my one consistent self-indulgence. With no risk to my health, I could cut my bill in half by eating cheaper food; foregoing wine, beer, and good coffee; and cooking frugally.
4.

car registration
property tax
Now we’re in the realm of costs that can’t be ignored. If I don’t pay my car registration, the state will rescind my registration and my car insurance will be canceled. It’s against the law in Arizona to drive without insurance or without registration. If I got in an accident before the police caught me, levied huge fines, and confiscated my car, I would be hugely liable.
Nonpayment of county property tax results in confiscation of the property and eviction from your home.
3.

electric
gas
water
phone
In our climate, you can’t get by during the summer without power. A person my age would die of heat exhaustion in 115-degree heat. Water also is crucial to survival here.

2.

second mortgage
The Renovation Loan is actually a 30-year fixed-rate second mortgage on my house. Although payments are small, if I default, my house could be confiscated. This needs to be paid.

1.

health insurance
In America, you can’t get health care without insurance. Well…you can, but a) it’s not easy; b) you won’t get it when you need it; and c) it won’t be adequate. You don’t want to gamble with this one.
So, could I get rid of my least important bill? No problem! I could probably dispense with my three least important bills (items 9 through 11) without much distress. About the time you arrive at level 7, things start to get ambiguous. The top five items are indispensable. What, then, would be my minimum level of expense if I stayed in my house and maintained my job?
If I dispense with my car and ride the bus everywhere, the monthly nonfood bills would be as follows:

$175/month: property tax
$225: electric
$ 24: natural gas
$120: water
$ 87: phone
$170: second mortgage
$ 26: health insurance
$ 30: bus rides, approx.
$857
Phoenix being a city whose designers noted everything that Los Angeles got wrong and then deliberately did that, living here with no car is not very practical. Keeping my nine-year-old car would make the rock-bottom monthly tab, before groceries, look like this:

$ 241/month: car insurance, property tax
$ 225: electric
$ 24: natural gas
$ 120: water
$ 87: phone
$ 170: second mortgage
$ 26: health insurance
$ 200:gasoline
$1093
But this assumes I would keep my job and that my employer maintains its extremely cheap EPO health plan. Obviously, I would not be in straits that required me to cut routine expenses unless I were unemployed. In that case, my health insurance would rise to about $500 a month, for a truncated monthly outlay of $1,593, almost twice my current routine monthly costs. Or a mere $1,357, without the car’s fuel bill.
Whoa! In other words, unemployment—the only circumstance that would require me to prioritize my expenses with an eye to lopping off the least crucial ones—could force me to cut the most important item on my list. Now there’s a thought!

FDIC Runs Low: Credit unions unaffected

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The other day Finance Junkie picked up on an AP article to the effect that the FDIC is running low on funds. This creepy little gem of news is not as drastic as it sounds at first blush: the agency still has $45.2 billion dollars on hand, plus it has a $30 billion line of credit with the Treasury. But the fact that 117 banks with assets of $78 billion were struggling in the second quarter isn’t reassuring.

One of my RAs heard this news, too, and wondered if she should take her savings out of the bank. I advised her not to do so, but suggested if she was really worried, she could move her money to the credit union, which has a branch on the campus and which accepts students in the state university system. Credit unions are federally insured, too, but by a different entity, the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC, the NCUSIF insures your deposits in a single institution up to a maximum of $100,000, andit also covers an IRA held at a credit union up to $250,000.

A friend who works as a loan officer at the Arizona State Credit Union had this to say:

I know there is a lot of uncertainty regarding banks right now. However, I have not heard of any concerns regarding the FDIC and their ability to insure funds. The credit union has been fortunate that we are not dealing with the issues and concerns that the banks are having right now. We are solid. As you may remember, we just started really bringing on mortgage products about 3 years ago and we never did any loans that were interest only ARMS, stated income or any of the other “high risk” exotic mortgages that have caused this meltdown.

Unless things get a lot worse, your money’s safe in the bank. And if it’s not…well, then we’ve got bigger things to worry about.

Financial Advisor to Investor: Don’t panic!

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Below, an exchange that started with an update from my financial advisor.

Beloved youngish partner of Financial Dudes, LLC, to Funny about Money:

To enhance our ability to remain patient with respect to our long-term investment strategy, we raised the cash level in your portfolio again, by trimming allocations to specific securities.

In addition, we initiated the process to upgrade the quality of our client’s money market holdings to a U.S. Treasury based money market to avoid the turmoil swirling around some money market funds. If you were not in a U.S. Treasury money fund, you will see some activity in your affected accounts in the next day or so.

There certainly has been a tremendous amount of news to digest lately, and we are navigating these markets with your long-term goals in mind. We have seen, and likely will continue to see, short-term volatility in the value of many investments that we hold.

If you have any questions or concerns, simply give us a call.

Funny to BYPoFD:

Thanks, John–

I have about ten or twelve grand in Vanguard’s Prime Money Market fund. VG is claiming it’s not invested in Lehman or related unhappy sites, & so I’m guessing it’s OK to leave the money there… Would you advise moving that money to a different fund? Or into a credit union money market, which just now earns a grand 1.88 percent?

best, –vh

BYPoFDto Funny:

We just moved it to be on the safe side and don’t think there will be any issues with the money market. We will move it back at some point. I wouldn’t really fret the Vanguard money market as they are normally on the conservative side and I don’t think there will be any issues.

Funny toBYPoFD:

Good. I’d pretty much reached the same conclusion.

Doesn’t appear to be much safety anywhere in the current storm, eh?

BYPoFD to Funny:

Not really. Even putting it under your mattress you run the risk of someone stealing it. Eventually we will work through all the problem companies and the ones that survive will be the big winners like in the early 90’s. This seems to be happening with BofA.

The long and the short of it:

Don’t dive out of your money market fund. Especially if it’s with Vanguard. Stay the course.

Money market drops below a dollar a share

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Here’s a little gem in today’s International Herald-Tribune: the Primary Fund, part of one of the largest and oldest money market funds around, has dropped its share value to 97 cents.

Now a loss of three cents a share isn’t going to break any of us up in business. But…well, heck. Dunno about you, my friends, but being the cheapskate that I am, I don’t want to see even three pennies go away. I have a fair amount sitting in Vanguard’s Prime Money Market, cash saved to pay off the Renovation Loan and to double as an emergency fund. Since it’s not invested in stocks or bonds, it could just as easily lay fallow in the credit union as at Vanguard. At the credit union, it’s insured.

So I called Vanguard this afternoon, where I learned I was far from the first to harry the call center employees with fussy questions about their money market funds. The young woman I reached assured me that “Vanguard is very confident” (uhm…is this a statement with meaning?) and that its money market funds are not invested in any instruments presently known to be at risk.

O.K.

I guess.

Path of least resistance is to leave the money at Vanguard. Path of medium resistance is to write a check on the fund and pay down the Renovation Loan by ten or eleven grand (and maybe plant some vegetables in the backyard to cover for the proposed emergency). Path of most resistance is to move everything over to the credit union, whose arcane rules assign a different return to each of the half-dozen different accounts it offers and so will require some figuring out.

Hmmm… Bogle, can your successors be trusted? Probably. It’s at least a strong maybe.

Do I want to pay off that loan right this minute? Nope. With the economy melting down around us, I want cash.

Am I making a larger pittance on cash savings at Vanguard than at the credit union? Yes. But only if Vanguard’s Prime Money Market Fund never breaks the dollar.

Looks to me like the path of most resistance could be the best way to go: identify the best-paying CU account (money market: 1.88%; CD: 2.23% for 3 months to 3.92% for 5 years; savings: 5% up to $1,000 and .75% over $1,000) and move the money over there.

Good grief. Just look at the complexity of those options. Makes me not want to think about it! Gut instinct, though, suggests I’d make a little less at the CU but sleep better with savings insured up to $100,000. The wee dividends don’t matter, but that deposit insurance sure does.

Scary times

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Well, we all had quite the adventure yesterday. I woke up an hour ago—12:30 in the morning local time—wondering if I should move all my investments into the money market. Nothing like the dead of night to ramp up the panic factor.

In fact, though, I see that Vanguard lost all of $738.13 against many tens of thousands of dollars, and so I’m feeling a little saner.

Don’t have up-to-the-minute data on how the big IRA (a different fund) that Stern and Reimer manage is doing, but in past slumps Stern has worked the occasional small miracle. Checking the current holdings, I see he dumped Morgan Stanley and AIG a while back…and interestingly, we own Bank of America. How does that man know? He’s bought my son’s employer, so I guess he doesn’t expect that outfit to crash in flames soon. A fair amount of oil: Occidental, Exxon, and Conoco Phillips. And…hmmm…he’s moved a ton of money into cash reserves. Yipe!

At any rate, I guess I won’t be going broke soon. Later, maybe, but not today.