Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat.

Theodore Roosevelt, The Strenuous Life

June 3, 2012

Legal Views, Money and Finance

Comments Off on Is Your Identification in Good Shape?

Recent trends are causing new problems with our identification.  For example, as of 2011, birth certificates issued by American jurisdictions that do not list the parents of the applicant no longer constitute proof of citizenship for issuance of a passport. This is a problem for people applying for passports and can be one for those who hold U.S. passports but fail to renew them.

Lawyers and financial advisers ask about estate planning, but seldom check whether the client has adequate documentation of their identification. Here is a short check list to make sure you have the basics covered.

 

1. Is the name you are using the same on the most recent of the following documents: name change order, order of dissolution or divorce, marriage license, and birth certificate? If not, it is time to visit the local court house. This is the kind of law, petitioning to change your name, for which you should not need a lawyer in many jurisdictions. In Washington, the courts of limited jurisdiction often have simple forms available.

2. Do you have adequate proof of citizenship or other proof of your right to be in the United States? As stated earlier, if your proof of birth does not list your parents, it is time to contact the state or territory where you were born to get a new certificate of birth. This can take many weeks, and should be done even if you have no immediate need for a passport.

3. Are all your important records under the same name? These include your legal name as established by the documents listed in item no. 1 above, your academic records, your certificate of citizenship if applicable, licenses you hold, your social security and tax records, and your business and credit records.

4. Can you prove citizenship to a country other than the United States? Some Americans  enjoy citizenship to more than one nation. Dual citizens may not wish to take any action to prove a second citizenship, and that is fine. Reasons might include the need for U.S. government security clearances, which can be impossible to acquire if you have exercised rights as a foreign national while an American. But proving citizenship to a country can take a long time, and can grow in difficulty as ancestors die and records and memories of residences fade. It is silly to wish to move somewhere immediately and find it will take you a year or more to do it when a little advance work at your leisure would have made the move easy and quick.

Because of changes in the documentation required by the United States to cross the U.S./Canada border a few years ago, I realized that the documents I had did not allow travel between the two countries, despite being a citizen of both.  My decision to get an enhanced driver’s license was a good one, but the state would only issue it with my name as it appeared on my U.S. Certificate of Citizenship. That name was different than the one I use. It was different than the one on my state licenses, credit records, real estate holdings, and even different than the one on my social security records.  I would not have been able to use my license as identification with credit cards or even in court to prove I was a lawyer – the bar association records would not have matched my common picture identification. So I obtained a new birth certificate; the old one was not valid and had not been since 1994. I then changed my name to the one I use for all other purposes and applied for the enhanced driver’s license. I recently obtained a passport using the name that is mine for all purposes. The benefits are personal, but also inure to my survivors. They can prove that the guy named on my death certificate is the same dude that holds various assets without resorting to affidavits or worse (because more costly, difficult, risky, and time-consuming), going to court to have a judge decide the two names used to identify me were for the same person. Note that taking care of identification problems now is easier and cheaper than waiting until you or your survivors need a lawyer arguing in court to sort things out.

March 11, 2012

Money and Finance, Opinion

Comments Off on A Shift in the U.S. Housing Paradigm

Many years ago my then boss explained that you could live in a house for nothing; every payment would be covered by the appreciation in value. What a deal! It will be unlikely for you to agree with all of my conclusions about the housing market, but see how far off the mark the following lists are.

The Old Thoughts

Housing is an investment for the owner-occupant.

You cannot lose money in housing. Finance as much as possible to maximize leveraging.

There will be a growing demand for housing as long as the population increases.

Repair before selling to maximize profit.

Be careful of location. Buy the worst house in the best neighborhood.

Buy in a great school district.

Houses sell quickly, so buying for an upwardly mobile and career-oriented individual is a great decision.

The New Paradigm

Housing is an expense. The land is a small portion of the expenditure, so it’s better to think of a house as a depreciating asset.

You can lose a lot of money in housing. The greater the purchase price, the greater the opportunity for loss.

The demand for housing is amazingly elastic. Even with increasing population, demand can decrease as the average number of occupants per dwelling increases, and those demographic groups who typically buy cannot due to unemployment and low wages.

Caution is warranted with improvements and repairs made in preparation for sale. Cleaning, painting and yard work are okay, and you’ll have to make repairs anyway if the buyer uses FHA financing, which is quite common now. But improvements will yield 50 cents on the dollar at sale if you’re lucky. (The real estate agents will still encourage you to repair houses.  The reason is simple. Most agents still work on commission. Repairs and improvements speed sales. Agents are happy to earn 5% on the 50% of value remaining for each dollar you spent.)

Location is still important, but can be trumped by a shrinking local economy that was impossible to predict.

Renting may be better for those who will pursue career goals perhaps with a move to another city. Career aspirations and where we live can be antagonistic goals now, especially if we own a house.

February 19, 2012

Current Events, Money and Finance, Opinion

Comments Off on The Curse of Fame or the Risk of Wealth?

The Seattle Times published an essay by Kathleen Parker on February 15 entitled Whitney Houston: the Curse of Fame. The earliest comments to the article disagreed with Ms. Parker, assuming that Whitney died of a drug or alcohol overdose and emphasizing that Ms. Houston made her own bad choices. This is a case where you can agree with both viewpoints; there is no inconsistency. Whitney did make bad choices in how she lived, perhaps for almost the last two decades of her life. However, her situation, with lots of money, low education, the rigors of performing, and the company she kept certainly changed the risk of making those bad choices.  In all fairness, the comments as of today are more balanced than the early few. For example, one noted that there are actually few people with fame that succumb to self-indulgence and mind-altering substances.

Ms. Parker’s editorial is thought-provoking. Fame does not mandate stupid choices, but the loss of privacy is usually inherent, pernicious and irreversible. How many of us want our worst behavior, greatest weaknesses, physical infirmities, and social missteps known to all? This loss is costly, and not just economically. Have you ever gone shopping without wanting to meet anyone you knew or who knew of you?

It is very easy to think that more wealth would improve our lives and make things almost perfect for us; that the negatives accompanying wealth are minor annoyances. The truth is more harsh. Wealth brings about some serious problems. Everybody is friendly to you, even people that do not like you. It is difficult to distinguish friend from foe. Good choices, like learning a craft, volunteering, returning to college, starting a new profession late in life, exercising, limiting the intake of excellent liquor, avoiding expensive drugs whether legal or not, exercising, helping others, and even deciding to perform some menial labor on your own house (or at one of your estates) can become difficult choices and seem like silly things to do.

I have long noted the effects of wealth on people generally, and term the potential bad consequences from some choices open to them as “wealth risk.” The wealthy can buy cars with top speeds near 200 mph that are street legal. They can sky dive, engage in rock climbing, buy illegal drugs in copious quantities, and engage in many activities that are more risky than working forty hours each week.

It seems most of us should find happiness in our present circumstances and get to a point where we might change very little of our lives with an unexpected infusion of wealth.

January 14, 2012

Money and Finance

1 comment

My wife and I are practicing frugality to a greater extent than ever, despite there being no pressing need by what I would guess to be the standards of most people. There has been no job loss nor huge expense. All debts are retired, and cash flow has never been better.

The reasons for this behavior are hard to understand, but are likely related to a basic affinity for some level of frugality that is in our nature, our experience in knowing depression era parents and grandparents, and the recent plunge of the middle class who were not careful with their expenditures or who were unlucky in timing and have moved to that nervous group who struggle to pay the mortgage, fuel bills, car loans, etc. etc.

So here are some money savings ideas:

1. Keep your driving to a minimum. For example, shop on the way home from work to reduce the number of trips.

2. Drive a car that sips gasoline. We put most of our miles on a Honda Civic that gets 32 to 39 miles per gallon, and usually gets 34 to 36. We also have two 4 wheel drive pickups that are driven 2000 to 3000 miles each per year, only as needed to carry loads or when a second vehicle is needed.

3. I bring a sack lunch to work every day.

4. My sack lunch is double bagged. Two bags last much longer than twice as long as a single bag. Yes, I carry my lunch in the same bags for many weeks.

5. We shop at a few good stores: Trader Joe’s, Costco; Fred Meyer; WalMart, and Home Depot.

6. We do not pay interest or bank fees.

7. We fix stuff ourselves: ABS brake failures, intake manifold gasket replacements, electrical failures and additions, appliances, plumbing failures, roof replacements, adding windows, building structures, replacing engines, sweeping chimneys, etc. Sometimes we hire work done and watch the repair so that we can do it ourselves the next time. Health permitting, this will be the case with our septic system dosing pump, which was replaced last November. It cost $2500 and I can do a much better job myself for less than $1000. It will be done faster, too.

8. Top load washing machines work great and are cheaper than front load. Saving water with front load technology seems silly; our wash water is plenty dirty.

9. Pressed shirts last two days in winter, when a T-shirt is beneath.

10. Cheap Norelco shavers work great.

11. Non-name brand or bulk bathroom supplies from Costco or WalMart are good enough.

12. I do not need an i-phone at $70 per month. My old flip phone works fine.

13. Basic cable television service is good enough.

14. I buy cars new and keep them for no less than 11 years. My F-150 will be 16 years old in March.

15. We make an effort to clean and repair things to keep them longer than average.

16. We do not have trash pick-up service in this rural area. We haul our trash to the transfer station a few times per year in the old F-150.

17. We service our own water treatment equipment.

18. Reverse osmosis (RO) water is cheaper than bottled water and makes excellent coffee.

19. We essentially do not eat at restaurants.

20. Yes, we eat food that is past the pull date. We are still alive.

21. We never go to movie theatres. Our home theatre with BlueRay, Dolby 5.1, and 37 inch HD television is just fine.

22. Coffee is whole bean and comes in a 3 pound bag from Costco. It is San Fransisco brand, not Starbucks.

23. We have money for great dental care, medical care, and other professional services as needed.

24. Light colored laundry goes into a duffel bag I carried as a Boy Scout in 1967. That is 45 years ago. It has some holes in it, but they are too small still for the dirty laundry to fall through.

September 18, 2011

Money and Finance, Opinion

Comments Off on A Report Card for the United States

If I were to outline the chief responsibilities of any central government, I would only include three essential functions: (1) the common defense, assuring that the nation is not conquered; (2) assuring that human rights are preserved; (3) operating the government with fiscal prudence. The report card for the United States government would be:

Defense: B

The U.S. has achieved the essential objective against our enemies, defeating them and keeping them outside our borders. A higher grade would correspond to not invading countries based on bad data and without justification, and by achieving great results at less expense.

Human Rights: B+

The U.S., despite some glitches and gaffes, has done quite well in this regard. Exceptions include over-regulation (100 watt lamps as we know them are about to be illegal to produce and sell; prohibition was silly; and the internment of the Japanese and modern airport security are a few other exceptions to a good record.)

Fiscal Prudence: D

By not creating a surplus within ten years, we are counting on inflation to reduce the ratio of debt to GDP. This is so bad that it is essentially a failure to even admit the magnitude of the problem, always the first and essential step in solving one. This D has a good chance of becoming an F if it leads to the result that is increasingly probable, a decline in the wealth and power of the United States.

July 16, 2011

Managing Debt, Money and Finance, Opinion

Comments Off on U.S. Efforts at Deficit Reduction

News concerning debt ceiling negotiations recently mentioned three plans by  Mr. Obama to cut the deficit. The most aggressive, and offered as such, is a $3 trillion cut.  He did not say that we will cut $3 trillion over ten years, or an average of $300 billion per year. Assuming an equal cut per year, a big leap, this is only a 20% cut in the current deficit,  reducing the deficit to about $1.2 trillion per year. And it is quite likely the majority of the cuts will be delayed to affect future administrations.  Thus, the unsustainable and profligate spending will continue,  providing substantial annual additions to the $14.3 trillion debt of the United States. The Republicans are correct that this level of deficit reduction simply postpones more instances of raising the debt ceiling in the future. Also, cutting the deficit the same amount each year over ten years is not in the interests of Mr. Obama because delaying the cuts helps his chances for re-election.

Stated differently, the current debate is not about reducing or eliminating the debt of the United States. It is about finding an agreement on the appropriate rate at which the debt should increase!  If the United States eliminated the deficit, there would be no need to increase the debt ceiling.

Paul Krugman and many Democrats argue that this is not the time to cut government spending because we need to create jobs. They are right, except that the U.S. government cannot afford to do the best thing. We spent too much during good times and bad since World War II, creating a huge debt load.

The Republicans are against raising taxes. They are wrong. Taxes must rise to resolve this. They should agree to a ten year tax increase, with a sunset provision and a tax trigger, causing the application of the tax only if deficit spending is at or below an agreed annual target. Cutting Social Security benefits is within the authority of Congress, but they should not do it for anyone who is paying social security taxes. We are relying on Social Security for our retirements and will need much of that income to cover medical insurance costs, especially if we retire prior to attaining the Medicare eligibility age of 65.

News organizations should be more factual in reporting what is happening, clarifying when someone refers to a reduction over a ten year period and leaves the period of the reduction out of the statement. News organizations should be clear that the debt will continue to rise irrespective of which party dominates the outcome. And finally, news organizations should simply stop reporting on these negotiations daily. The budget, tax law, spending, and debt management are under the exclusive control of Congress and Mr. Obama. They made this mess; they need to solve it.

The average citizen is simply stuck with what passes Congress and is signed by Obama. Congress and Mr. President, please do your job and tell us the truth about what you are doing. We don’t hold the power to decide this issue, but you may not get re-elected if you continue to screw this up.

The budget fight continues. Here are a few myths and observations:

1. It is the wrong time to fight the deficit and debt. Creation of jobs is what is important.

This is catchy. It is correct, except that we are essentially out of money. Indeed, the U.S. would be brilliant to spend any surplus on re-vitalizing the economy. The problem is that the U.S. already expended the funds and cannot afford to stimulate the economy as much as it should.

2. We should not cut spending for public radio because U.S. spending for the Corporation for Public Broadcasting is trivial compared to the deficit and debt.

Most spending that is wasteful or that should be reviewed for cutting is trivial compared to the enormous debt of the U.S. This argument applied to all expenditures dooms to failure the frugal and diligent who believe spending is too high.

3. We are making cuts to the wrong programs.

The parties need to first agree on the magnitude of the cuts, then they can fight about where the cuts should be taken. There are two issues. There is no reason to disagree on the cuts, but where they should be made is a natural area for controversy.

4. We have a spending problem, not a revenue problem. New taxes are not justified.

The first sentence is true. However, the hole we have dug is too big to fill without new taxes. The only questions should be against whom should they be levied and how much should they be.

5. We have a budget deal that kept the U.S. Government open for business. Isn’t this wonderful?

Right. Congress cut the budget about 1% and spending is more than 40% greater than income. Great work.

6. We need to close tax loopholes for corporations.

This is not so. It is far better to use the Individual Income Tax as a tax for individuals and keep corporations in the U.S. by not taxing them at all.

 

There is no one to bail out the U.S. in case we default or otherwise need financial help. It took years to create the current mess and will take much diligence and pain to reverse the trend. The analogy is to the family that is spending at the rate of 140% of its income; a lot of good expenditures must be cut to make the finances work in the long term.

BBC World News is reporting this situation well, distinguishing between the debt and deficits of the United States and regularly comparing our debt to GDP ratio with that of other nations struggling under mountains of debt. When people know the amount of debt we have per worker the political pressure will increase on our leaders. This debt level makes every major spending decision, such as funding a huge stimulus package or war effort, a Hobson’s choice. We gamble with not addressing a present need or risk economic collapse because of excess spending and debt. This is not a path to a world leadership position and is unacceptable.

 

March 12, 2011

Current Events, Managing Debt, Money and Finance

Comments Off on The Effect of Japan’s Debt on Recovery From the Earthquake and Tsunami

Japan will soon embark on a massive reconstruction from the earthquake. We all know that natural disasters that cause the death of people and the destruction of property are bad. This post confines itself to the property loss and economic effects.

I am a fiscal conservative, and have argued in this blog that the debt of the United States is a significant problem. Japan’s debt (compared to GDP) is much greater than the debt of the United States. Both countries are far from having a surplus.

If Japan had a budget surplus and monetary reserves, it could pay for the work needed to recovery from the earthquake. This would modernize the areas destroyed, employ people, and stimulate the Japanese economy for years to come. Instead, Japan has two very bad choices: minimize the repair subsidies by government or go deeper into debt.

The United States, to maintain freedom to choose military options based on national interests, to recover from disasters, to have money to help other nations, and to remain a world power and agent of change, must deal with its deficits and reverse the constant increase in our national debt.

CNN reports that the Debt Commission is calling for a $4 trillion deficit reduction over the next 10 years. That is $400 billion per year in cuts, reducing the current rate and projected rate of annual deficits by about half.  Is this enough? By my simple calculations, the U.S. will continue to increase its debt load. Although some Democrats are already complaining, the commission’s plan should be more aggressive. The U.S. should have a balanced budget within no more than five years and be running surpluses continually within ten years. And the sooner the better.

Implicit in my view is continuing to fight inflation and not letting it exceed 2 to 3 % per annum, with less than 1% still a bit better.

Congratulations to the chairmen of the commission, Alan Simpson and Erskine Bowles, for a major step in the right direction.

November 1, 2010

Money and Finance, Opinion

1 comment

I want Netflix to expand their download service to include current news shows and television shows, all without commercials, and the download to occur at my flat panel LCD television hard drive for viewing at my convenience.  We will need a bit more work on LCD televisions and some creative contracting by Netflix. I would disconnect my cable TV service, and share the savings with Netflix by doubling my current payment to them. This is not asking too much, is it?

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