Monday, June 2, 2008

Having a Second Child May Be the Worst Thing You Can Do For Your First

Author: Nick
Category: Money
Topics: ,

comic 31 - financial time traveler

Good news for all you fans of eating food so you can live: short-term food prices are expected to finally ease following a period of soaring food prices. The bad news: food prices are expected to continue climbing faster than in past years for the foreseeable future.

Fingers continue to be pointed at various “root causes” of the skyrocketing food prices. If you put four different economic analysts in a room, you’d get a list of causes a mile long, and that list would certainly include things like currency devaluation, oil prices, food being converted to fuel, and obese Americans who like to eat anything that isn’t nailed down. And each of those economic analysts could probably provide a dozen reasons why each of those causes isn’t as important as the others.

But whether you’re an economic analyst, oil tycoon, or obese American, there’s little arguing against one important fact of life: the demand for everything is growing. The world population continues to grow, and with more people comes more demand for food, oil, gold, silver, copper, silicone, and dozens of other commodities. The last time I checked, the Earth itself is not growing proportionately to the increase in population; in fact, it isn’t growing at all! So more people end up fighting over a fixed set of resources, and you don’t need an economic analyst to remind you about the concept of supply and demand.

On a large scale, the rapidly growing world population will pose problems across the map for big countries like the United States and Russia as well as the smaller countries nobody really cares about. On a smaller scale, large families will feel the hurt much more as consumable goods become more and more expensive. Consider this example: A family of three (mom, dad, son) currently survives and thrives on just 70% of mom and dad’s income. Mom and dad do the math and decide to have a second child. Their reasoning is that, if each family member comes with a proportionate amount of expenses, another child would only take 20-25% of their current income to support—something they can clearly afford… right now. But what if the cost of living goes up much faster than the family income (say, twice as fast)? It might only take a few years before the family can no longer keep up with the same quality of life they had before. Here’s a graphic that illustrates this situation:

one- vs. two-child expense graph

In the table above, assume the family income grows by 3% per year but the cost of living jumps 6% annually. The family can raise one child to adulthood quite comfortably even with the inflation rate growing faster than the family income, but adding a second child to the mix could mean the family will hit money troubles before the second kid hits kindergarten.

Of course, this scenario makes a lot of assumptions. A hard-working family may be able to keep up with cost of living increases no matter how high prices go. And there are always cost-cutting measures families can take for those years when things get a little too pricey. But this situation is probably more common in today’s society than most people think. So what usually happens when that two-child family hits the point when their expenses exceed their income? Probably they cut costs, partially to the detriment of their firstborn. Sorry, Billy, you can’t have a book to read because your younger sister needs braces. The one-child family, in the meantime, just bought their eight-year-old a new Lexus.

I’m not going to tell you that you should only have one child. But I will tell you that you shouldn’t have two or more children. Otherwise you won’t be able to shower your firstborn with the total sum of your monetary love, so he or she will grow up to have eight children out of spite. Then food will cost $80 a pound, gas $30 a gallon, and gold $5,000 an ounce.

All just because you thought having two children wasn’t such a big deal.

Monday, May 5, 2008

If Gas Suddenly Cost $100 a Gallon, Could You Survive?

Author: Nick
Category: Money
Topics: ,

comic 21 - world without oil

According to some guy who thought we were all gonna die on Y2K, the skyrocketing price of oil may soon doom suburbia. In place of the sprawling suburban landscape will be a return to small towns situated around retail hubs with everything in walking or bicycle distance. You’ll travel between towns by trains powered by enslaved poor people, and you’ll never eat fruit out of season again.

Okay, so maybe this guy’s just a bit of a nut-job and the future of American society isn’t that grim (or hopeful, depending on how you view suburbia). But there’s no debating that today’s world of the 100-mile commute only came about thanks to gobs and gobs of dirt cheap oil. If anything ever happened to that cheap oil, a lot of things we take for granted today would become a thing of the past.

So what would super-expensive oil mean for your life? Well, if you buy into the end-of-the-world theory, then things would quiet down pretty quickly after an initial few months of rioting that would leave millions dead of violence or starvation. Those small towns I mentioned would start to form gradually with support from local farms and nearby light manufacturing. If your current career is physician, barber, handyman, or prostitute, you’d continue in your profession; otherwise, you’ll become a common laborer hopping from job to job.

The good news is that all of those environmental catastrophes that scientists are predicting for us would go away because nobody would be paying scientists to make those sort of predictions anymore. The air would become cleaner, people would get more exercise from walking and performing more physical work, and the average American’s quality of life would ultimately reach a new high. Eventually your town would put up one of those adorable signs that says “Name of Town, Population: Some Teeny Number.”

Personally, I don’t think we’ll ever end up like this because most people would probably shoot themselves before giving up their automobiles. Or perhaps science will invent us a way out of this with a cheaper, renewable alternative energy source that will be quickly adopted and is already available in large quantities. And if not, when we’re lining up to exchange our office jobs for small-town work, I call blacksmith.

Thursday, April 17, 2008

Save Your Failing Restaurant in an Eat-at-Home Economy

Author: Nick
Category: Money
Topics: ,

comic 14 - restaurant

Call it what you want—a recession, an “economic correction,” a figment of your imagination—the economy is hurting. And nowhere is that more apparent than in my belly. Just to make ends meet, I’ve had to cut down my daily caloric intake from 7,000 calories to a mere 6,750. This has had a devastating effect on the local restaurant industry: eateries in my neighborhood are closing down at a rate of one roughly every 37 seconds! (No! Not the Dunkin Donuts! Take the Taco Bell instead!)

Okay, so maybe the situation isn’t that bad, but one only needs to walk into a local casual dining establishment to see that people just aren’t eating out as much today. Case in point: in April 2007, when I went to an annual work luncheon for my small team at a local Italian restaurant, every seat in the place was packed by noon; at this year’s meeting, our 10-person team accounted for about half of the crowd at lunchtime.

If you’re a restaurant operator, you may be going out of your mind right now trying to figure out how to prop up your dwindling business. With rising food prices making it more expensive to cook up that plate of fettuccine alfredo, and rising fuel prices making it more expensive for both customers to get to the dining table and for restaurants to get the ingredients to their kitchens, the situation seems pretty dire all around. But fear not, suffering restaurateurs! My 25 years of food-eating experience and I are here to offer you a selection of tasty tactics you can use not only to ride out the restaurant recession but to help you see your best sales in years.

  1. Cut the fat off the menu. Well, not literally (we Americans love our lard, after all). If your menu is loaded with dishes that force you to keep expensive ingredients in stock while the dishes themselves aren’t that popular, you might want to move them off in favor of lighter, cheaper fare.
  2. Substitute ingredients… carefully. Is anybody really gonna notice if you replace that fresh-chopped tomato sauce with Prego? With lighter customer volume, now might be a good time to play around with different brands and suppliers. Just don’t make tons of changes at once or you could stand to upset a few of the regulars.
  3. Toss consumers a bone. Yes, you’re hurting financially, but that’s because we are too. While it might seem counterintuitive, lower menu prices and coupons can help bring in customers who might otherwise stay at home and heat up a can of soup.
  4. Reward frequent diners. Keep ’em coming back with deals like “pay 5 times, get the 6th meal on us.” Little rewards like this that make frequent customers feel special can help even the most budget-minded ignore rising food and fuel prices and sit themselves at your table week after week.
  5. Cut hours, even days. If it’s costing you more in electricity and staff than you bring in to keep that restaurant open until midnight, consider closing at 10pm. Or if Mondays are slow, money-losing days, maybe you should give your eatery the day off.
  6. Diversify. While cutting back on menu options is one way to cut costs, going the opposite direction might work too. In a dreary, upsetting economic environment like today, some customers may appreciate seeing some new and exciting dishes added to the menu. Or perhaps you could make some small tweaks to existing menu items to give them some extra ‘zaz and boink!
  7. Leverage the power of the internet. Does your restaurant have a website? If not, you’re losing out on one cheap, easy way for customers to find out more about your restaurant. Even a basic web page with a menu and directions could bring in more patrons, especially if your cuisine is unique and hard to find in your area.
  8. Get super-creative. Put your imagination to the test and see what you can come up with to help revitalize your restaurant’s image. Invest in your storefront, make Wednesday nights ’80s Karaoke Night, put in new dining furniture—the possibilities are only as endless as your savings account.
  9. Remember: sex sells. No, I’m not suggesting you install a stripper pole in the middle of your restaurant’s dining room, but you probably could stand to capitalize a little more on your hot college girl wait staff. On a related subject, there aren’t nearly enough Maid cafés in this country.

Hopefully following some of these steps will have your restaurant on the road to booming business again in no time. No need to thank me, restaurant owners… though if you really want to, I certainly won’t turn down a complimentary seven-course feast in my honor.

Monday, April 7, 2008

Seven Unconventional Ways to Fight High Grocery Prices

Author: Nick
Category: Money
Topics: , ,

comic 10 - gallon of milk

It all started a couple of weeks ago when I noticed a package of boneless chicken breasts at the grocery store that cost $9 a pound. Nine dollars for one pound of chicken—the slowest, stupidest, least tasty of all grocery-quality animals. I could get some real breasts for less than that. Fortunately there were some chicken nuggets in the next aisle on sale for $2.50 a pound, so those yearning for their chix fix would not have to go home hungry.

Unfortunately this was only the first of outrageous grocery store surprises that would greet us on that trip. Most produce items had increased in price by 20% since last year, milk won the race against gasoline to $4 a gallon, and even ramen noodles had gone up in price to 12 cents a package instead of 10. Even filthy rich people are not immune to these increases; fancy-food retailer Whole Foods recently announced that, in an effort to avoid raising its prices, it will now be known as Three-Quarters Foods.

If you’re feeling the pinch in your pocket book when you purchase your products at the supermarket, you’re certainly not alone. And if buying the necessities of life are keeping you from being able to afford your skyrocketing mortgage or raging alcohol addiction, here are some steps you can take to take back your grocery stores from high prices.

  1. Go on a diet. Statistically speaking, there is a good chance you are a fat tub o’ lard. (My apologies to the skinny bitches out there.) Take a close look at your diet and determine if you really need those 900 calories worth of potato chips you eat every day.
  2. Grow everything yourself. It’s not as hard as you think to be self-sufficient with just a little hard work, some packets of seeds, and 12 acres of rich farmland. And lucky for you, 12 acres of prime farmland in your town can be had for just $3.7 million. Kiss expensive groceries goodbye!
  3. Look at another store. I know a couple of people who haven’t been to more than one grocery store or supermarket in the last decade. In fact, my wife’s aunt has been going to the same corner grocery store for the last 32 years for all of her food and household needs, even after it became a post office in 1997. You might find that another store has the products you typically by for a little less than your usual place.
  4. Consider alternatives. Don’t just limit yourself to substituting fresh and wholesome chicken for processed chicken nuggets. Love milk but can’t afford $4 a gallon? Buy powdered milk by the boxful—enough for gallons and gallons of a milk-like entity—for pennies on the dollar. The possibilities are endless; of course, so are the price increases, so you’ll eventually have to substitute everything you like to eat with whatever you find in the day-old section of the bakery.
  5. Try online grocery shopping. One of the best parts of online grocery shopping is that it opens you up to a whole new world of deals and discounts that aren’t available in store. You’ll also find it can take half the time of in-store shopping without sacrificing quality.
  6. Cut out the middle man. If only you could buy your apples, bread, and dead cow parts directly from the farmer instead of having to pay extra for the supermarket middle man. Well, you can—just swing by your local farmers’ market where you can find some of the best produce and other all-natural food items, often for a good deal less than you’ll pay in a store.
  7. Join the shoplifting revolution! Okay, hear me out. If everyone starts shoplifting cartloads of groceries, supermarkets will have no choice but to drop their prices. Sure, some might call it looting, but I prefer the more modern term democratic price correction.

Yay! Now you can afford to eat again. Sadly, thanks to the high price of fuel, you can’t afford to drive to the grocery store anymore. But it doesn’t matter anyway because truckers can’t afford to deliver inventories to the stores. That $3.7 million for 12 acres doesn’t sound so bad now, does it?

Thursday, March 20, 2008

If You Don’t Like The Economy, Just Wait 15 Minutes

Author: Nick
Category: Money

3 - economic news overload

Guess what, everyone? The economy is recovering! Oil is down, the dollar is up, and once-dead stocks are set to come back to life. So start buying houses again, bring your money invested overseas back home, and throw caution to the wind.

Wait wait wait! This just in. The economy is shot to hell again. Stock prices are plummeting, inflation is skyrocketing, and the price of a slice of pizza is soaring. Walk away from your mortgage, trade in your car for a bicycle, and stash your cash under your mattress.

No wait, I take that back…

Depending on where and when you get your financial news, you may get a completely optimistic viewpoint that promises the economy is on the path to recovery—even though it hasn’t officially entered recession or depression or any other unhappy words. But 15 minutes later, that optimism turns to despair and hopelessness as some company somewhere lowers its profit forecast by 3% and takes out half the U.S. economy in the process.

Trying to read the pulse of the economy has gotten a lot harder lately. That’s because, in this age of instant news transmission and media sensationalism, the health of the economy has changed from a day-by-day vital sign to one that is switching directions every few seconds. Just look at this graph of the Dow Jones Industrial Average for the last 38 years. Gone is the relatively flat line of the 1970s and 1980s. In its place is something that looks like a roller coaster built by a crack fiend.

For the typical American consumer, hearing about things like “rampant inflation” and “looming recession” can be very scary, especially if you know what those things actually mean for you. But you shouldn’t worry too much about 99% of the everyday economic news you hear. Here’s a quick guide to scary-sounding financial events you shouldn’t panic over personally:

  • [Insert company name] [bad news goes here]. Yeah, some big companies reporting major losses can have an immediate impact on the economy in general. Fortunately there are lots of big companies out there, so the investors driving most of the big financial news lately will get over it in 10 minutes when another company reports record profits.
  • Unemployment is up. All this means is that across every job field in existence in the whole country, there are slightly fewer people working than before. This doesn’t necessarily mean your job is at risk. If you’re in a high-demand field and you’re a hard worker, you don’t really need to worry if Burger King replaces half its drive-thru workers with robots in India.
  • Stocks are falling. Don’t start checking your 401(k) balance compulsively. And even if it sounds like there are more down days than up, the news just gets louder when the stock market takes a hit.
  • The dollar is at record lows. Unless you and your life savings were planning to move to Europe next month, you shouldn’t worry too much about the falling dollar. Yes, things here might get more expensive faster, but you’ve got 300 million other people alongside you in the same predicament, so it’s not like you’re alone in this.
  • Interest rate are [doing whatever]. Whether it’s the Fed rate, your mortgage rate, or your savings account rate, you shouldn’t panic if 6% turns into 4% turns into 3%. If your high-yield savings account rate drops too low for your tastes, it may be time to start playing the stock market a little more which will probably see gains when the cost of borrowing money declines.

And while there are plenty of economic indicators over which you shouldn’t get in a tizzy, there are a few things you’ll want to watch out for that may have a more direct impact on your financial picture.

  • [Insert YOUR company name] [bad news goes here]. Depending on where you work, your company might not be big enough to make broad financial waves, so you may have to look to closer sources for news on the financial health of your employer. If things look bad, start planning appropriately for potential layoffs and other bad news.
  • Your individual investments are heading downhill. If you’re into dropping large amounts of money on the latest “sure thing,” you’ll need to be much more paranoid than people like me whose only risky investments are index funds.
  • Your direct expenses are going up. Yes, you should be a bit concerned when gasoline prices go up (not crude oil prices; you don’t use raw crude oil for anything). But rather than pacing around the room pulling your hair out, you should think about ways to decrease those expenses (cutting back or switching to a cheaper alternative, for instance) to address such changes.
  • McDonald’s Dollar Menu now costs $1.10. If this ever happens, I will dump my life savings into gold and hide out in the mountains for a few years.