Friday, April 18, 2014

Figures Don't Lie, but...

Last time I was enthusiastic about a sign of better discipline among Americans, that 84% of those receiving income tax refunds planned to use them to pay down debt according to a Bankrate article.  Although I hate to put a damper on such good news, I may have to rethink my position and should surely have been a little more careful.

Since this is the week of the tax deadline, other articles and statistics also appeared along the same lines.  From the USA Today/Gannett on Friday (April 11), the chart shown here tells a different story.  About 58% intend to pay down debt or save the refund.  This is more than half, but quite a bit less than the 84% from Bankrate.  This information looks reliable with references listed as: Internal Revenue Service; H&R Block; Tax Foundation; Tax Policy Center; Bankrate.com; Giving USA; Center on Budget and Policy Priorities; Pew Charitable Trusts.


A few days later on April 15, another small box ran in the USA Today with this information based on a Capital One Bank survey of over 1000 people.  Now only 40% intend to save a majority of it and 42% show up as spenders.  What’s up with all these discrepancies?
The lesson for me and for all of us is one I covered way back in October 2011.  Surveys and polls cannot be totally trusted.  Even if they have an adequate sample size and the professional pollsters have gone to great lengths to ensure a representative sample, other problems may still arise.  When self-reporting, people are not always honest.  Sometimes they want to impress the questioners, as it could be in this case, or even shock them, as may be the case with drug polls of teenagers.  Even when they are trying to make every effort to be honest, the wording of the polling question can influence people – choice of words or introductory phrases can imply the intention of the question.  The order in which the survey presents the questions can develop a mood or a pattern.  Outside events or experiences also can influence the mood or opinion of the survey subjects, for example, opposition to gun ownership peaks shortly after a highly publicized shooting incident.

I’m glad many people are making responsible decisions about the use of their tax refunds, but in retrospect, I’m really not sure if it’s a majority or not.

Monday, April 14, 2014

Good Tax Refund Advice


During tax return season we are bombarded with ads about good ideas for spending our tax refunds.  We are encouraged to spend on cars, vacations, appliances and furniture.  Because many of the companies that sponsor these ads run them on network television, it’s a little surprising to find wise, helpful advice on the CBS website.

Here they list seven smart ways to use the refund:  Pay down credit card debt (or college loans); Start an emergency fund (target: 6 months of income); Increase 401(k) donation; Pay down the principle on a mortgage; Deposit it in a Health Savings Account (HSA); Start a college savings plan for children; or make a home improvement that pays for itself. (Note:  Very few home improvements actually do).  Only the last one represents spending and that is spending with an expected payback.  The rest are ways to put yourself in better financial shape and surprisingly “84 percent of Americans receiving refunds intend to pay down debt,” as this Bankrate article indicates.

A minor problem with the Bankrate report is that they refer to the refund as a “windfall,” which it really is not.  It is your money, over-paid to the government and held by them at zero interest.  People would have been better off using it to make a larger credit card payment in the first place.  According to the figures given they could have saved nearly $500 (based on 17% of the $3,034 average refund).  Nevertheless, it’s not too late to save that money this year by using the refund and possibly adjusting the W-4 to free up money today to continue to pay down the debt instead of letting the government hold it for a year.

With so many temptations to spend the “windfall” this tendency by a large majority of those receiving refunds to do the right thing rather than the easy or pleasurable thing represents a strong showing in the discipline dimension.

Friday, April 11, 2014

Life, Liberty and ...Cell Phones?


I was struck by a lengthy USA today article about the long-term unemployed, those who have been looking for work for six months or more.  It is really a tragedy that unemployment has stayed so high for so long with barely enough new jobs to support population growth and many older workers shunted aside.  The number of long-term unemployed has increased 5-fold over the past decade, causing financial and psychological hardship.

The article presents three examples, presumably to elicit empathy and compassion by showing real people dealing with this crisis.  They quote their expert:  “It’s usually a shock followed by a slow downward spiral to a lower standard of living and a radically changed life.”  Unfortunately, the examples given include several instances of poor decisions and seem to indicate that expectations have been set to where Americans have redefined the concepts of sacrifices and rights.

The first couple lost both their jobs and a total $75,000 income.  They lived for 2 years on unemployment and gifts from relatives.  Since then they have gotten by on Social Security disability, food stamps, federal assistance for utility bills and another program that pays most of the mortgage on a three-bedroom duplex.   But they kept their cable TV and “our home” and “our cars” – that’s right cars, plural, with associated maintenance, insurance, registration, etc.

Next is a 46-year-old with an MBA from Chicago, out of work for five years.  After a couple of years he had “exhausted his jobless benefits, and his inheritance was dwindling.”  State aid to pay the mortgage on his high-rise condominium has expired and he lives on his savings.  He got a part time job and “ditched his landline phone and diversions such as two-week cruises and going to the theater.”  He admits turning down training to become a nurse based on his MBA degree – unclear whether that was out of pride or not wanting to see his degree wasted.

Finally, a Florida man, now 60, lost his $97,000 job in 2008 when the company shut down.  Since then he has applied for other jobs and tried consulting.  He lived for two years on unemployment insurance and his savings.  “He’s downsized his lifestyle, dropping a country club membership, forgoing health insurance for now and limiting his penchant for $150-plus dinners-for-two to a monthly indulgence.”  He has pretty much dropped the job search, figuring he can live off savings and Social Security (beginning in 2 years).  He spends much of his time on the beach, reading books and boogie boarding.

So the new American Bill of Rights seems to include:  cable TV, a house, two cars, and a cell phone (“ditched his landline”); and it’s a sacrifice when we are forced to give up cruises, trips to the theater, frequent luxury dinners, and country club memberships!  We can live off government programs and charity while we reorient to the new lifestyle as we continue to be picky about career training even after five years of unemployment.  Remember, these examples are offered as representing typical cases, ordinary situations that we are supposed to empathize with.

In a little more than a decade Americans have faced shocking events that should have moved us to adjust our perspective, emphasizing the importance of core values and downplaying the pursuit of material possessions, readjusting our expectations about what is necessary and what we “deserve.”  Terrorist attacks of 9/11, the bursting of the housing bubble and the subsequent Great Recession, this long-term unemployment issue, and loss of lives in the Middle East should have been a wake-up call, a reminder about reality, a warning against complacency.  The message seems to have been lost even on many who have been directly affected.

Monday, April 7, 2014

Kids and Parents


In the past few months several articles have highlighted problems that occur from inadequate levels of parental responsibility.

The first, from Fox News, blames parents for obesity risk in their children.  The emphasis of this study is on infant care.  “Obesity-linked feeding habits included exclusive use of formula (45 percent of participants), introducing solid foods before 4 months of age (12 percent), putting infants to bed with their bottles (43 percent), feeding their infants when they cried (20 percent), and propping bottles up instead of holding them by hand (23 percent).”  They also mention that using television as a distraction or babysitter may lead to obesity in later life.

Related to the television comment above is this item with the controversial headline, “Science doesn't lie - modern mothers are lazier.”  It refers to a study by the Mayo clinic comparing energy expenditures over the past 45 years.  The findings were that “physical activity, defined as cleaning the house, cooking, child care and exercise, declined by about 11 hours a week from 1965 to 2010. However, sedentary behavior, like sitting in a car or looking at TV or a computer screen, increased by seven hours in women with older children, and almost six hours in those moms struggling with urchins under 5.”  Also surprisingly, physical activity dropped more for unemployed than employed mothers.  Fast foods, laborsaving devices and the boom in electronics are suspected culprits, all of which can lead to obesity problems for both parents and their children.  Just because the survey asked mothers, I see no reason not to broaden the focus to fathers as well.  When you see families walking down the street it is usually obvious that the children share the same values, habits and diets as both parents.

Finally, this very interesting Forbes article explains how “parents are failing our children today — coddling and crippling them — and keeping them from becoming leaders they are destined to be.”  It lists seven detrimental behaviors that are likely a reaction to the previous generation’s emphasis on planning for the future and saving money for retirement and emergencies.  This generation of parents “live for today” and “embrace the moment,” feeling they deserve it, protecting children against current dangers without regard for the future.  What follows from this perspective includes credit card debt, siding with the child against the teacher, various degrees of "affluenza" and padded playgrounds.

Some of this may be related to ignorance, not knowing any better; few parent instruction manuals are available.  On the other hand, notice how society and the media promote such behavior.  Coddling parents are seen as caring.  Young children using the latest electronics are seen as cute and “with it.”  Having material possessions is seen as a status symbol.  Yet the children who are overfed, underfed, unprepared for kindergarten, can't afford college,  or just plain spoiled are characterized not as a parental failure, but as a national crisis resulting in many government programs that relieve the parents of their primary responsibility.  

Friday, April 4, 2014

Chain Pharmacies and Your Health


About a month ago CVS announced a change in policy.  They intend to totally end the sale of tobacco products in their stores by October.  “The company’s move was yet another sign of its metamorphosis into becoming more of a health care provider than a largely retail business.”  Is that so?

Perhaps they should also take a look at the rest of their products.  According to their website they sell literally hundreds of dietary supplements, but these are not considered healthy by many medical professionals including the Mayo Clinic and Johns Hopkins.  The experts know that they are unregulated, can conflict with prescription medications and with each other, and that many are ineffective.

Just as one example, when a man asked Johns Hopkins to advise him on the use of many supplements including “zinc, pyridoxine HCL, vitamin A, vitamin D, vitamin E, pumpkin seed concentrate, flaxseed oil, and soy” to treat his medical condition, he got the following answer.  “Have you ever stopped to think about what you might be doing to your health, or whether you are taking unnecessary risks? If you have a family, have you considered the consequences of your actions for them? None of the substances you mention is regulated by the FDA (Federal Drug Administration), and the formulations can vary from one manufacturer to another, so you can never be sure that what you're taking is really the same substance that others are writing or talking about.”

As I have mentioned several times in the past, some supplements are merely a waste of money while others pose real dangers.  (Even the ones with proven benefits are better when taken in food than by pill.)  Some people, though, prefer to get their medical advice from friends, family and social media.  As long as the popular opinion is on their side, CVS doesn’t seem to care about these issues.  They will change policy as a marketing move, figuring that in the long run they will make up the loss of tobacco sales by building a reputation of concern for your health, but given all the facts, I have to question their sincerity.