Author Archives: Money Reasons

About Money Reasons

A offbeat personal finance blogger that comes from the tech world.

Why Increasing Minimum Wage By Doubling it to $15 Is Harmful For The US

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The current Federal Minimum Wage is $7.25, but there is a “doubling” proposal by various group and media channels that are interested in increase it to $15.  Personally, I think that is a very bad idea, and below are the top reasons why:

Why Doubling the Minimum Wage is a bad idea

  1. Small Employers and small companies starting out will be squashed.  Companies, much like human are born small with a small footprint.  Over time they grow and become larger, at that point they can afford to spend more money because they have more financial leverage to do so.  In fact, as they grow, they make more money by purchasing more skilled labor in the process.  In the recent past, I’ve thought about starting a small business, but I would had a hard time making the finances work because of all types of cost, including human labor.  If minimum wage is increased to over double the current rate, there is no way I could start a business with employees, which leads me to the next point.
  2. Human labor becomes too expensive with wild increases, especially in the United States.  Companies would offshore or automate everything as much as possible and continuously, just to survive.  This isn’t a matter of companies being spiteful, it’s because they couldn’t compete in the market place with such a high US labor cost.  This is basic economics that most people don’t understand because they haven’t ever read economic theory or even had a business where they hire human to work for them.  When the average US worker is paid around $20 in US dollars, and the average Chinese works is paid less than $2 in US dollar, I think making the US less competitive by raising the minimum wage by double seems like a bad choice for US employment.  We all know that the average wage would increase by at least 50% if not doubling itself.  Making the US much, much less competitive in the proverbial “global” marketplace.  Old economist think we still operate in a vacuum, but we don’t.  Now our competition is the guy next door, and the guy next continent over.
  3. Minimum wage is wage minimum, not average wage…  Increasing minimum wage to “average wage” makes it hard for young people to become employed because they are too expensive to train or hire.  I’ve been brainstorming this, and perhaps it makes sense to have different minimum wages based on age and living circumstances.  I’m still playing around with this idea and I might expand upon it in a later idea in a separate post.
  4. Increasing the minimum wage to double the current rate will have an inflationary effect, and at the same time reduce employment.  If I were a small employer, I’d have to increase the price of the product or service that I sell to the public by a big jump, in some case by double and at the same time I would automate and do as much as I could as possible so I could have a viable business.  The sad thing is that the unemployment might not even show the decline in employment because unemployment isn’t the total number of people unemployed.  if you stop looking for employment, you are no longer counted in the employment number… bad statistics, bad… sort of… lol

 

 

Flat-World

Okay those are the main thoughtsI wanted to convey.  I believe in what I typed above and without the intent of trying to sensationalize this communication, which is so common in the media anymore.  Think of it from a consumption standpoint,  Would you still buy milk if it cost $7.00 a gallon instead of $3.00 a gallon (I know, my math seems weird until you realize that there are more costs with a doubling of the minimum wage than just the actual minimum wage itself)…

From an economic standpoint, increase the minimum wage by double would be a bad move and I’m sure it won’t pass Congress.  Sadly certain News media channels will jump all over that story, trying to portray the Congress (and in particular the Republicans) are the bad guys, but in reality they are just protecting you by keeping the country from going into a massive decline and a steep rise in unemployment or underemployment (know that we know the number is not entirely accurate).  The media channels know this, but the sensationalism of the story brings eyeballs to their channel or site.  Kind of sad that a story becomes first than the accurate depiction as to what could happen in the country.  I wonder if the media will ever right itself, or will they just keep pimping themselves out by dishing untrue dirt for profits?

Please share your thought either way if you’d like,

Don

Proof That Buy and Hold Still Makes Sense

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After the shock and hit from “The Great Recession”, everybody and their cousins came out and said that the “buy and hold” strategy doesn’t work and the days of 9 to 10% annual returns were over.

So, I decided to come to the defense of the buy and hold strategy once again.  Back in one of my earlier articles called, “Is Buy And Hold Investing Dead“, I stated that I was basically going to stay the course and not deviate much from that philosophy.  As a result, I’m happy to say that my Annualized Return is above 9% again (9.3% to be exact).  While this number is not quite as great as if it were 10% or slightly higher, I’m still pretty satisfied that it has jumped back up to a normal level.

It’s true, Warren Buffett is definitely not quaking in his boots (I this he averages over 20% annualized), my 401k return is still a decent enough to be satisfied with it.  In other articles I mentioned that I wanted to rebalance my portfolio more, but alas I haven’t…

So the chart below is pretty much a Buy and Hold strategy, along with the added benefit of a dollar cost averaging element in place too.  While the bull market has been running for quite a while now, I still feel confident enough to say that the basics of a buy and hold strategy has worked well enough for me personally.

BuyAndHold2014

Not much more to say, the picture above says it all up to this point.  Tomorrow, who knows…

Thanks,

Don

Can You Really Negotiate Rent Prices

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You might be wondering can you really negotiate rent prices

A landlord has the right to increase your rental rate once your lease expires. At that point, you will, of course, have had a heads up of this happening. So should you sit around and just accept it or move out? No, you should try to negotiate your rent. Negotiation can be done based on monetary value as well as time saving factors. The worse that can happen is your landlord says no.

Review Your Good Tenancy with Them

Talk to your landlord about how much you appreciate your living situation. You are a good tenant, and it is worth their while to keep you there. You pay your rent on time, the place is in tip-top condition, you’re helpful to your neighbors, and are friendly to all passersby’s. Your landlord has never had any problems out of you, so why increase your rent making it unfavorable to you, which may force you to move?

Pay Up Early

Another rent negotiation strategy is to pay your rent early. Think like a landlord for a moment. There is nothing better than receiving their rent on time, except receiving it early! The earlier they can turn in money towards their mortgage, the faster they can pay off that loan. If they own the building outright, they can apply this money towards other expenses they have.

Sign an Extended Lease

Agreeing to an extended lease can go a long way. Your landlord will appreciate knowing they have a dependable tenant that pays on time. So instead of a standard one-year lease, agree to two years.

Show Your Landlord It’s to Their Advantage That You Stay

When a unit turns over, it’s not as simple as just a new tenant moving right on in. Your landlord has much to do to get the apartment rented again. Point out these expenses and timetables to your landlord if you were to move:

  • Advertising expenses for the unit’s opening
  • Screening applicants
  • Repairing and cleaning the apartment
  • Taking the time to show the apartment to multiple applicants

When you point out how they would spend between $400-$900 on all of this, keeping your rent as is or raising it to no more than $30 a month ($360) is a killer savings for them.

Don’t Be Over Excited

If you love a place don’t let on to the landlord that you do.  If they feel you want it you will lose some negotiating power.  Always look at places only when you check your emotions at the door. This will give you the opportunity to compare properties against each other and negotiate a better deal.

The above four strategies should help you negotiate the rent on your unit. If you both come to a compromise, you’ll save time and money.

What do you think?

Chase

Should You Downsize Your Home To Rightsize Your Life?

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Should You Downsize Your Home To Rightsize Your Life?

Sometimes downsizing your home may just be the best way of rightsizing your life. If you’re wondering how you could possibly manage to live in a smaller home, let’s put things in perspective….

In the 21st century, most American families live in much larger homes than those enjoyed by previous generations with far larger families. In the 1950s, average houses were about 1,000 square feet. In the 1970s, average houses were about 1,400 square feet. Then, by 2004, average houses were as much as 2,330 square feet. And now, they are about 2,600 square feet.

It’s a lot more space with a lot less people.

Unfortunately, you probably consider even this space too small. Moreover, while not appreciating this doubled space, you’re probably also miserable about paying down the mortgage and taking care of utilities, maintenance, insurance, and taxes.

Worse still, many people have been working more for less money after the financial crisis of 2007.

It’s not a pretty picture.

One simple solution is to downsize your home. Unfortunately, this solution may send you into a panic. After all, you want to make progress in life, not begin getting worse. Only too often, downsizing has a social stigma– it’s often associated with failing in life.

This is actually not an accurate interpretation of what’s going on because sometimes less can be more.

Why Less Is More

Unemployment still remains uncomfortably high. After the financial crisis in 2008, many people were forced to downsize because of a pay cut or job loss.

However, what they discovered was that downsizing their homes made their lives much easier. Some downsized from a big home to a condominium; some downsized from a big home to a small home; and some downsized from owning a home to renting one.

Initially, there was resistance until they ran out of their savings from their previously well-paid work and then ran out of options to borrow money to stay afloat. Then, they didn’t have a choice.

First, there was a sense of grief. However, after a few months into their new lifestyle, they noticed something surprising — they were actually living better.

They were feeling more peaceful, calmer, and less financially overwhelmed. And, they also had to spend a lot less time cleaning and maintaining their new place. Interestingly, too, retired people, whose big families had long since left, realized that their big home had been more of a burden than a joy.

After holding on as long as they could to their old ways, they found that after they sold their homes and moved to a smaller place, it was the best decision that they had ever made.

Two Common Objections

When it comes to moving to a smaller place, what bothers most people are two practical questions: where to put all their stuff and how to endure the hardship of a big move?

Where will I put all my stuff?

The biggest form of resistance when it comes to downsizing is storage. How do you go from a big home to a small one and still have room to move around in it? Where should you put all the things that you’ve gathered over a period of many years?

The best place to put it is on Craigslist, on eBay, and garage sale. Yes, sell it. When you look over your stuff, you’ll find that most of it is something that you don’t use. By uncluttering your home, you will unclutter your mind and heart as well.

I hate moving!

Homeowners hate moving as much as grade-schoolers hate extra homework. Generally speaking, people have been traumatized by moving over the course of their lives. Moving is not only psychologically draining, but also physically taxing. If you’re not in great shape or have a busy life, the idea of packing and moving can appear overwhelming.

Fortunately, moving is neither as expensive nor as physically exhausting as most people think. You don’t need a pickup and lots of friends to move. In fact, a moving company can do all the heavy lifting for you and take care of all the transportation costs at very reasonable rates. In addition to moving services, sites like www.mayflower.com also provide tools and tips for facilitating a smooth move.

Should You Downsize?

Here, then, are four good reasons to consider downsizing:

  • You will probably reduce your mortgage payment by as much as $500 a month.
  • You will probably reduce your overall debt by no longer spending your money to own and maintain a large home.
  • You will probably significantly contribute to your retirement fund.
  • You will probably pay off your new mortgage faster.

In short, you will throw off the burden of worry and stress that you probably now have if expenses exceed income.

Chase