Meditations on a Hillbilly Elegy

hillbilly-elegy
Photo: Amazon.com

I have been keen to read Hillbilly Elegy by J.D. Vance. Why? Because rural America and the working class played such a pivotal role in this year’s election – despite being overlooked by the Old Guard of both major political parties.

I want to share with you some of my impressions from this thought-provoking book. (Which made Economist magazine’s “Books of the Year 2016” list.)  Indeed, Hillbilly Elegy: A Memoir of a Family and Culture in Crisis provides critical insight into the plight of America’s rural poor and working class.

Hillbilly Elegy is part autobiography and part cultural analysis; it traces Mr. Vance’s own odyssey as a descendant from ‘hillbilly’ ancestors to a graduate of Yale Law School. He accomplished this despite being raised in a less-than-nurturing environment by single mother struggling with addiction. Vance’s story is poignant, but it also presents a larger narrative about the rural poor and America’s working class. I categorize these groups as the America Forgotten and the America Left Behind.

Here are some takeaways and key points.

  • Striking parallels between the rural poor and the inner-city poor – terrible conditions that transcend racial and geographic lines: the lack of positive male role models and nurturing fathers. Rampant drug and alcohol addiction. Children raised primarily by grandparents due to absent or impaired parents. Poor education and unhealthy diet. Too many poor choices. Hopelessness and giving up. Traumatic stress brought on by continuous exposure to violence. The list goes on.

However, the urban poor are considerably more visible, while rural poverty is largely hidden: out of sight and out of mind. This is: The America Forgotten.

  • Unraveling of the American Dream – at the close of World War II, the United States was the only manufacturing power left standing. Returning veterans benefited from free college tuition and special financing for homes, thanks to the GI bill. A burgeoning middle class emerged. There were no limits to what America – and Americans – could accomplish. The nation enjoyed decades of prosperity.

Then, in the 70s, fissures appeared in the Great America Dream: oil embargoes, Watergate and the fall of Vietnam. The 1980s saw massive deindustrialization and intensified global competition. The 1990s brought the dotcom boom but also extensive global outsourcing. Corporations grew more bottom-line oriented and cost-cutting became relentless. Then came the devastating Great Recession, the most severe economic downturn in four generations. Those fortunate enough to hang onto jobs, houses and investments prospered during the ensuing years but, millions of Americans have yet to participate in this ‘recovery’. They are The America Left Behind.

  • Decimation of the working class and the hollowing out of the middle class – two generations ago, it was quite possible for those with a high school education to secure a well-paying job in manufacturing, with benefits and pension. Today, pensions have all but disappeared in the private sector. In the wake of de-industrialization and the Great Recession, we have become an increasingly stratified nation economically. Upward mobility and dreams of advancement are getting squashed.
  • The poor warrant compassion but many game the system – Mr. Vance relates the story of working as a grocery store checker during high school. At the store, he witnessed welfare and food stamp recipients in the check-out line, talking on their cell phones; a cell phone was not something he could afford on his grocery store paycheck. (This was back in the ‘90s when cell phones were truly a luxury item.) There are age-old (and largely unanswered) questions: What kind of aid causes more harm than good? Which type of aid truly empowers the recipients? Good intentions are not enough. Witness the billions of dollars poured into the War on Poverty in the 60s versus its muted impact. Or how the thousands of NGOs working in Haiti have proven largely ineffective.
  • Importance of ‘social capital’ – a lesson Mr. Vance learned at Yale: the vast benefit of knowing the right people. While most of us are not privy to the ‘Old Boy Network’, networking wherever (and whenever) we can does pay significant dividends.
  • Making a difference in someone’s life. In his early teens, Mr. Vance was getting poor grades and experimenting with alcohol and drugs. Then his grandmother (Mamaw) took him in. providing a stable, secure environment he had lacked most of his life. She provided nurturing and ‘encouragement’ – frequently in the form of swift kicks to the derriere. Many of us can credit someone for making a difference in our lives. For me, it was Mrs. Parker, my high school math teacher, who scolded me for putting off applying for that scholarship to engineering school. Go make a difference: one life at a time.

Note: This book contains crude language that may not be appropriate for younger readers.

P.S. Billy Joel’s 1982 recording Allentown very succinctly sums up the demise of American industry. Click here to listen.

P.P.S. I want Frugal, Wealthy and Wise readers know that I did not actually purchase a copy of Hillbilly Elegy. I had hoped check out the book or audio recording from the library over the Thanksgiving weekend. Unfortunately, the book is in great demand and the waiting list is weeks out. Then my wife gave me this brilliant suggestion: sign up for a free 30-day trial of Audible and download the audio recording, which I did. (Audible permits you to download two audio books during the 30-day trial, but you can only ‘play this card’ once. We spend a fair amount of money each year at Amazon for non-book items, so I don’t feel we’re freeloaders.)

© 2016 Paul J Reimold

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A Class on Personal Finance

tenth-logoFYI for readers in the Philadelphia area: I will be teaching a class on stewardship and personal finance at Tenth Presbyterian Church starting Sunday, December 18, 9:00 – 10:15 AM, in Fellowship Hall east. There will be 9 sessions running through February 26, 2017 (no class on Christmas or New Year’s Day).

The class will be interactive and tailored to the financial questions, needs challenges and goals of the individuals attending. Bring questions!

Here are some of the proposed topics:

  • A Biblical perspective on money, wealth, stewardship and contentment
  • Practical suggestions on becoming savvy consumers, cutting costs,  stretching dollars and living below your means.
  • Getting out of debt, staying out if debt. Good debt vs. bad debt
  • Saving and investing: the power of compounding, the importance of an emergency fund, long term investment for college and retirement. Saving for a house.
  • Legal essentials, particularly for families with young children.

Please join us if you can. Information on parking can be found on Tenth’s website.  Regards, Paul

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Photo: artoflove.com

Running the Marathon to Financial Independence

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Photo: wooderice.com

Fall is marathon season here on the East Coast: The Washington DC Marine Corps Marathon took place October 30; New York’s was November 6 and the Philadelphia Marathon was held this past Sunday November 20 – traditionally the Sunday before Thanksgiving. (I’m not certain, but it’s quite possible that the route of the Marine Corps Marathon skirted the Washington Swamp.)

There are numerous parallels between completing a 26.2 mile run and attaining financial independence. First off, I am of the mind that many, if not most, people are capable of achieving either or both; I ran my first marathon at the age of 54. OK, you probably won’t place in your age group or BQ (qualify for the Boston Marathon) the first time out, but there’s a likely possibility that you can finish. Some people walk the entire route. Granted it takes them many hours, but they finish. (Disclaimer: do consult with your physician prior to undertaking such a rigorous goal). Both achievements require considerable effort, discipline, patience and time, but the rewards are worth it.

Let’s walk through (so to speak) the steps involved for both

  • Set Your Goals

Running a marathon doesn’t just happen: one must set intermediate goals (like a 5K or 10K run) while keeping your eye on the ultimate goal. The same goes for becoming financially independent. Granted there are rare and improbable cases when someone receives an inheritance or wins a lottery, but please don’t pin your hopes and future on either of these.

Set your financial goals and quantify them as much as possible: example: your kids graduating from college debt-free, living without financial worries for the rest of your life or leaving a legacy. Set intermediate goals as well – goals for attaining a level of savings and investments at a given age or stage of life. These intermediate goals are the equivalent to running the 5K, 10K and half marathon races on your way to a full marathon.

  • Plan and Prepare

You must plan and prepare to attain your goals. If you are starting out as a total couch potato, running a marathon will likely be a multi-year project. (Again, please seek guidance from your doctor first.) If you have several 5K or 10K runs under your belt, then a training plan lasting several months can get you prepared. I particularly like (and have used) Hal Higdon’s training plans. His novice runner plan lasts for 30 weeks while plans for more experienced runners last 18 weeks. Be aware of the commitment in time and effort. The longest daily run for all plans tops out at 20 miles, approximately 3 weeks before the big event.

Similarly, you must be planning and preparing for financial independence. Educate yourself on becoming a savvy consumer and investor – I’d recommend reading Kiplinger Magazine as a start. Read books on personal finance, seek the counsel of others. Above all, commit to a frugal lifestyle and living well below your means.

  • Arrive Early

The last thing you need on the day of your big event it to be stressed out getting there. Arrive early. Parking will be easier and closer to the starting line. Allow for time in the long Porta Pot queues.  Stretch your muscles, focus your mind, chit-chat with fellow athletes.

For investors, time is you best friend. The earlier you start saving and investing, the longer your investments have to grow and multiply (refer to FW&W postings Pennies a Day and the Rule of 72).

  • Pace Yourself / Don’t Start Out Too Fast

The starting gun goes off. The crowds cheer. The loudspeakers are blaring the Theme from Rocky. At the starting line. you get a high five from the mayor himself. You are Pumped! Resist the urge to start out too fast! Relax and loosen up. Stick to your determined pace. You have many miles and several hours in front of you.

You get your first real job out of college and think you’ve made it. Guess what? After taxes, living expenses and going out with your buddies, there is probably not a lot left over at the end of the month. Pace your spending and keep it in check. You have years ahead of you on the road to financial independence. Another parallel: better to build wealth the slow and boring way (think low-cost index mutual funds) than trying to make a quick killing on risky investments.

  • Don’t Quit Too Early

The route takes you back to the Art Museum at mile 13. There is this sign, a very cruel sign: Finish line (for the half marathon) to the right, mile 14 (that’s you) to the left. You feel a strong urge to bear to the right and call it a day.

You career progresses and your income grows. It’s very tempting to give in to ‘lifestyle inflation’. Resist. Stay the course. Continue to live well below your means and invest the difference.

  • Persist, persist, persist

You hit the wall somewhere between mile 18 and 20. The very definition of eternity is running miles 20 – 25 of a marathon. One foot in front of the other. Keep going. This ‘eternity’ won’t last forever.

The going gets tough financially, too: college tuition, medical bills, a layoff or career transition. Keep at it. And don’t tap your investments if there is any way to avoid it.

  • Savor Your Accomplishments

Once you get to mile 25, you start to perk up. The end is in sight! You hear the announcer and sight the finish line. You did it! They drape you with a medal and hand you a bottle of water. Walk around some and go get something to eat. Celebrate with friends and family. And remember that an ice bath is more effective than a hot shower at relieving the pain of sore muscles.

Once you attain financial independence, you have options: downsizing your job, volunteering, pursuing a hobby or passion. A splurge or two is in order, provided you subsequently return to your Frugal and Wise ways.

rocky
Photo credit: spatz_2011 via Foter.com / CC BY-ND

PS I can’t write about running in Philadelphia in the vicinity of the Art Museum without giving you a link to the Theme from Rocky (Gonna Fly Now) Even 40 years later, it still gives me goosebumps.

© 2016 Paul J Reimold

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My Favorite Things Part III

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The Next Installment of My Favorite Things ….

Melitta European Roast Coffee – ditch that ruinous daily latte habit; brew yourself an awesome pot of coffee at home for a fraction of the cost! A 12 ounce can of Melitta goes for $5-6 at regular price but can be had on sale at Shop Rite for as little as $3. Even at $6 a can, that’s only 25 cents per 8-ounce cup. Take that, you Four Dollar Latte!!! melitta

Our friend, fellow blogger, coffee aficionado and roaster Bryan Stoudt once complimented us on the coffee we served. That’s a resounding endorsement from someone who knows good coffee when he sips it!

GasBuddy– gas prices in given area might vary by as much as 15 cents per gallon, or even more. gasbuddyThe GasBuddy mobile app or website helps you find the least expensive gas station near you, whether in your neighborhood or on a road trip across the country. And it’s free (though they do derive revenue comes from ads).

  • CONS: It may not save you that much money. If you drive 12,000 miles a year, get 20 miles to gallon and GasBuddy saves you 5 cents per gallon every time you fill up (optimistic, IMO), that’s only $30 per year. Also, there is a lot of frustration with the recent update to their mobile app.

ALDI Supermarketsaldi

If you are fortunate to have an ALDI nearby, you cannot beat their prices. ALDI sometimes gets put down as the ‘ghetto’ grocery store. But guess what? ALDI is owned by the same German consortium that runs the hip Trader Joe’s chain. And ALDI is to be greatly commended for bringing inexpensive, fresh food options to America’s inner cities.

  • CONS: Typically, smaller stores with a somewhat limited selection. Mostly store brands with few name brands. Remember to bring your own bags.

That’s all for now. Look for more My Favorite Things postings to come. And please send me a list of Your Favorite Things.

Meanwhile, click this YouTube link to hear Mary Martin singing My Favorite Things from the original Broadway musical. Sound of Music opened on Broadway this month, 57 years ago (16 November, 1959)

Cheers, Paul

© 2016 Paul J Reimold

 

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A Penny Saved is NOT a Penny Earned

It’s More. Much More.

pennies
Photo credit: Maura Teague via Foter.com / CC BY

Yeah, yeah, we’ve all heard that famous saying made by Benjamin Franklin.

Guess what? Ben never said, “a penny saved is a penny earned.” So don’t believe everything you Google. More about what he actually did say is found further down in this article.

There are two arguments for why a penny saved is more than a penny earned.

The first reason can be summed up in a single word: TaxesA penny saved is considerably more than a penny earned when you factor in the taxes most of us pay.

Here’s a sampling of the taxes that reduce our net wages and earnings. Note that state and local payroll taxes vary widely across the country. I included tax rates for Pennsylvania (since that’s where I reside).

  • Federal Income Tax: marginal tax rate brackets are 10%, 15%, 25%, 28%, 33%, 35% 39.6% depending upon income. For more detail on Federal income tax brackets, click here.
  • Pennsylvania Income Tax: 3.07% of earnings
  • Municipal Income Tax: varies from none to 3.92% for residents of Philadelphia. Many municipalities in Pennsylvania extract a 1% payroll tax.
  • Social Security: 6.2% on the first $118,500 earned, $7,347 maximum
  • Medicare: 1.45% on the first $200,000 earned, 2.35% thereafter
  • PA State Unemployment Insurance: 0.07%

Granted, taxation rules, especially at the federal level, are mindbogglingly complex. But it boils down to this: a penny saved is substantially more than a penny earned. But that also means a penny spent is significantly more than a penny earned. Here are some simplified examples to illustrate the point. These calculations use Pennsylvania income tax rates with municipal tax is assumed to be 1%.:

  • Lunch at McDonalds (10% federal tax bracket): Cost: $5   Total taxes on wages: 21.79%   Actual cost pretax: $6.39   A penny saved = 1.28 pennies earned.
  • Pack of cigarettes (15% federal tax bracket): Cost: $7   Total taxes on wages: 26.79%   Actual cost pretax: $9.56   A penny saved = 1.37 pennies earned.
  • Morning latte (25% federal tax bracket): Cost: $4   Total taxes on wages: 36.79%   Actual cost pretax: $6.33   A penny saved = 1.58 pennies earned.
  • Monthly lease payment on a Mercedes C class sedan (28% federal tax bracket): Payment: $419  Total taxes on wages: 39.79%   Actual cost pretax: $695.90   A penny saved = 1.66 pennies earned.

What are the takeaways and calls to action from this little exercise?

  • Think in terms of what goods and services are costing you pretax, not post-tax. Which expenditures do you really want to spend your hard-earned pennies and dollars on?
  • Be savvy about preparing your state and federal income tax returns. Make sure that you paying the least amount of taxes that you are legitimately obligated to pay. Itemize deductions on federal returns when they exceed the standard deduction.
  • Pay for as many expenses pretax as you possibly can. These can include the following:
    • Employees’ portion of health and disability insurance
    • Out of pocket medical expenses paid via an HSA or FSA (Health Savings Account/Flexible Spending Account)
    • Child care expenses paid via an FSA
    • Commuting (public transportation and parking)

In future postings, I will elaborate on HSA’s and FSA’s as well as other tax saving strategies.

The second argument for why a penny saved is not a penny earned? A penny saved and invested can multiply into many, many pennies. A penny spent?  Well that’s penny gone forever. See my earlier articles Pennies a Day and the Rule of 72 to review the power of compounding.

So what did Ben Franklin actually say? “A penny saved is twopence dear.

Perhaps he meant that a penny saved can grow to become two pennies (or a twopence.)

May Ben’s words inspire you in your saving, your investing and your (judicious) spending.

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Photo credit: Nic Taylor Photography via Foter.com / CC BY-NC-ND

© 2016 Paul J Reimold

 

 

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