Frequently magazine articles are written about how to have a million dollars in retirement. And, in fact, with some good planning that starts with the first good job at 25 years old, it is really not that hard to do provided there is a willingness to sacrifice for today to live well during retirement. But even before, don't borrow money to pay for university expenses. If parents cannot pay for university cost, go to a community college for the first two years and then transfer to the university of your dreams and work your way through school without incurring debt. It is pretty obvious that no one in the US is going to live the good life on Social Security and Medicare alone assuming they are still around when many young people retire. Instead, there are some basic things that can be done to get to a million dollars in retirement as follows:
1. One way or another save 10% of annual salary. If your company provides a 401K match, put in the maximum to the match. Make sure you have at least 6 months salary in a savings account to cover emergencies. And, buy insurance to protect you from unexpected losses.
2. Buy a home at the first opportunity, particularly when mortgage interest rates are low, to take advantage of cheap money. Pay off a home before retirement so its value can be monetized when you downsize to a smaller home and or cheaper city.
3. Keep a new car for at least 10 years. Studies show that people who lease a car their whole life will have $400,000 less in retirement than if they bought and kept a new car for 10 years.
4. For employees that travel on business, take advantage of all the airline and hotel programs to gather points for free vacations.
5. If you can't do it alone, partner with others to invest in rental properties at the first opportunity.
6. Forget about buying the weekly Starbuck's Frapacinos for $5 a cup. McDonald's coffee for 50 cents, or a buck is just fine.
7. Eat in at least 5 nights a week. Take your lunch to work in a bag.
8. Don't waste too much money on liquor, particularly at bars or restaurants. If you are going to have an occasional drink, do it at home. It is safer and cheaper.
9. Bargain shop. If it is not on sale at a deep discount, don't buy it. Forget about all the name brand hype. A shirt is a shirt.
10. Splurge on yourself and family once in a while; but not on a regular basis.
If you practice these 10 simple rules, the odds are pretty good, you will end up as a millionaire in retirement. If not, you are out of luck.
Friday, September 9, 2016
Thursday, June 30, 2016
Baby Boomers Impact On Business & The US
78 million Baby Boomers are turning 65 at the rate of 10,000 a day for next 18 - 20 years. Presumably, this huge demographic will begin collecting Social Security and Medicare, assuming they remain solvent, transferring about $46 Trillion of wealth from the federal government to these recipients. In essence, instead of paying taxes into the system, most of them will begin taking their money out. Of course, both Social Security and Medicare are headed toward insolvency unless Congress and the President, whoever he or she may be does something to modify these programs, one way or another.
In any case, since this group is the largest single demographic in American history, their retirement will have a huge impact on global business and the US in general. There is a good likelihood that half or more of these Baby Boomers are financially ill prepared to retire because they did little to save for retirement during their working years. These people will have little disposable income depending on government and relatives, if they are lucky enough to have any with money, for their sustenance. They probably will be living in smaller rental units because in many cases, they never paid off a home. The smarter half, if it is half, may have the money to live happily ever after so to speak, assuming they are not supporting their kids in one way or another and or that government does not attempt to confiscate their assets to support those with nothing.
It is the Baby Boomer half with money that will help shape the global economy in terms of their buying habits. If they were smart they paid off their homes; but not all of them did so. Some are still paying off mortgages, which will take a lot of their disposable income. If their homes are paid off, they will spend money on experiences; travel, eating out, golf and other recreational activities, spending time with family out etc. However, their need for new cars, new homes, new furniture, new clothing etc will be limited.
By the time these Baby Boomers are 75, they will start to utilize home care and eventually assisted living services converting their home equity and other invested monies into the services they need to continue living life. If they did not do so already, they will downsize their homes one way or another either moving to smaller houses and or moving into assisted living facilities. There will also be a shift from many high cost cities to lower cost second tier smaller cities. The Home Care and Assisted Living industries, built to deal with the World War II Generation, is already a Multi-Billion industry and it has not even started. After a ten year lull, these industries will boom beginning in 2025 as Baby Boomers have need of these services.
It is clear that 78 million Baby Boomers will have a significant impact on business and the US in retirement; but in very different ways than when they were working. Happy Hour may start a lot earlier than 4 pm. Cars that can drive themselves will be in demand; but instead of owning two, or three cars, there will one in a household. The need for living space will be diminished as services will become much more important. Businesses that adapt to this demographic will do very well. Those that do nothing to adapt will see their revenues shrink.
In any case, since this group is the largest single demographic in American history, their retirement will have a huge impact on global business and the US in general. There is a good likelihood that half or more of these Baby Boomers are financially ill prepared to retire because they did little to save for retirement during their working years. These people will have little disposable income depending on government and relatives, if they are lucky enough to have any with money, for their sustenance. They probably will be living in smaller rental units because in many cases, they never paid off a home. The smarter half, if it is half, may have the money to live happily ever after so to speak, assuming they are not supporting their kids in one way or another and or that government does not attempt to confiscate their assets to support those with nothing.
It is the Baby Boomer half with money that will help shape the global economy in terms of their buying habits. If they were smart they paid off their homes; but not all of them did so. Some are still paying off mortgages, which will take a lot of their disposable income. If their homes are paid off, they will spend money on experiences; travel, eating out, golf and other recreational activities, spending time with family out etc. However, their need for new cars, new homes, new furniture, new clothing etc will be limited.
By the time these Baby Boomers are 75, they will start to utilize home care and eventually assisted living services converting their home equity and other invested monies into the services they need to continue living life. If they did not do so already, they will downsize their homes one way or another either moving to smaller houses and or moving into assisted living facilities. There will also be a shift from many high cost cities to lower cost second tier smaller cities. The Home Care and Assisted Living industries, built to deal with the World War II Generation, is already a Multi-Billion industry and it has not even started. After a ten year lull, these industries will boom beginning in 2025 as Baby Boomers have need of these services.
It is clear that 78 million Baby Boomers will have a significant impact on business and the US in retirement; but in very different ways than when they were working. Happy Hour may start a lot earlier than 4 pm. Cars that can drive themselves will be in demand; but instead of owning two, or three cars, there will one in a household. The need for living space will be diminished as services will become much more important. Businesses that adapt to this demographic will do very well. Those that do nothing to adapt will see their revenues shrink.
Monday, June 27, 2016
Bigger Government Bad For Business
There is no doubt that Bigger Government is bad for business. In fact, bigger government grows through higher taxes and other revenue generation and more regulations at the expense of the Private Sector. We have clearly seen this during the Obama years as taxes and regulations have expanded dramatically resulting in higher government spending and very slow economic expansion of 2% or less each year that is not keeping up with population growth.
Local, State and Federal Government spending now comprise nearly 40% of Gross Domestic Product about the highest in American history. Of the roughly $15 Trillion US economy, government is responsible for about $6 Trillion in spending for goods and services. To make these purchases, government at all levels confiscates private sector monies in the form of income taxes, all sorts of fees and fines and further borrows billions more to fund government operating and other expenses. This is money taken out of the economy that is not available in the Private Sector to invest monies to create jobs. It really is that simple.
Many economists have stated that the best economic growth in the US occurs when total government spending is around 25 - 27% of GDP. That is about 17-18% Federal and perhaps 10% Local and State. Even though the American people are experiencing a very high tax burden and regulations that are killing jobs and it has led to about 95 million people out of workforce, the lowest labor participation rate in four decades and the highest poverty rate since Jimmy Carter was President, Progressives call for even higher taxes and more job killing regulations.
Apparently, they never learned the lessons of Economics 101, or just plain common sense. In order for the US economy to grow at the 3% or more a year, the rate needed to experience any kind of real economic vitality in our country, we must cut taxes and regulations dramatically. Just doing more of the same will lead to the same dismal economic results we have seen since the Fiscal Collapse in 2008-09. We also have to free up the Energy Sector to make energy cheaper and cleaner to raise the standard of living in the United States. This is not brain surgery. Government has to get out of the way and allow the Private Sector to do what is does best and that is to create economic growth and jobs. As a side note, Big Government is also a threat to our Freedoms.
Many economists have stated that the best economic growth in the US occurs when total government spending is around 25 - 27% of GDP. That is about 17-18% Federal and perhaps 10% Local and State. Even though the American people are experiencing a very high tax burden and regulations that are killing jobs and it has led to about 95 million people out of workforce, the lowest labor participation rate in four decades and the highest poverty rate since Jimmy Carter was President, Progressives call for even higher taxes and more job killing regulations.
Apparently, they never learned the lessons of Economics 101, or just plain common sense. In order for the US economy to grow at the 3% or more a year, the rate needed to experience any kind of real economic vitality in our country, we must cut taxes and regulations dramatically. Just doing more of the same will lead to the same dismal economic results we have seen since the Fiscal Collapse in 2008-09. We also have to free up the Energy Sector to make energy cheaper and cleaner to raise the standard of living in the United States. This is not brain surgery. Government has to get out of the way and allow the Private Sector to do what is does best and that is to create economic growth and jobs. As a side note, Big Government is also a threat to our Freedoms.
Sunday, June 26, 2016
Brexit - Good For Great Britain
The British people wisely voted to leave the European Union. In doing so, they cast aside more than 100,000 pages of stifling, job killing regulations that were a threat to their freedom and economic development. The European Union, which should have simply been a Free Trade Zone and a vehicle for a common currency, morphed into another huge layer of Socialist government attempting to dictate regulations, written by unelected and unaccountable bureaucrats, that intrude into all aspects of daily life.
In fact, the British people were losing control of THEIR borders and their country as more than 60% of regulations where completely out of their control.
Despite the short term dislocation from Brexit, in the long term Great Britain and the British people will be far better off by taking back their country.
This decision has the potential for putting the word "Great" back into the name Great Britain. Let's not forget that Great Britain is the 5th largest economy in the world. They have been a global power for more than 500 years. They don't need bureaucrats from little countries, with little economic success, dictating job killing regulations and or trade policy to them. Most important, Great Britain is still a member of NATO, far more important than the EU, the G7 and has a permanent seat on the UN Security Council, all of which means that their voice will be heard loud and clear and with more impact than ever than just being one of 28 countries.
The British people, through their elected representatives are now free to turn Great Britain into a business powerhouse by lowering taxes and getting rid of job killing regulations. They are fortunate in that London, as business, financial, transportation and entertainment world class city is going no where. From London, Great Britain can attract companies from all over the world to move their headquarters there as they vote with their feet to get out of the European Union, as well as, other countries seeking a more advantageous business environment. History is our teacher.
Great Britain can now act in its best interests to bring jobs to their country and to control its borders so that immigration is not automatic. All the way around, Brexit will be good for Great Britain, the British people and the world.
This decision has the potential for putting the word "Great" back into the name Great Britain. Let's not forget that Great Britain is the 5th largest economy in the world. They have been a global power for more than 500 years. They don't need bureaucrats from little countries, with little economic success, dictating job killing regulations and or trade policy to them. Most important, Great Britain is still a member of NATO, far more important than the EU, the G7 and has a permanent seat on the UN Security Council, all of which means that their voice will be heard loud and clear and with more impact than ever than just being one of 28 countries.
The British people, through their elected representatives are now free to turn Great Britain into a business powerhouse by lowering taxes and getting rid of job killing regulations. They are fortunate in that London, as business, financial, transportation and entertainment world class city is going no where. From London, Great Britain can attract companies from all over the world to move their headquarters there as they vote with their feet to get out of the European Union, as well as, other countries seeking a more advantageous business environment. History is our teacher.
Great Britain can now act in its best interests to bring jobs to their country and to control its borders so that immigration is not automatic. All the way around, Brexit will be good for Great Britain, the British people and the world.
Wednesday, March 2, 2016
Employee Benefits - The Real Cost
Many times, employees do not understand their total cost to a company. In addition to normal base salary or hourly rates, plus any other commission, bonuses or incentives, various benefits add significant cost to hiring an employee. Right off the bat, in the United States, employers get hit with 7.65% of total salary for Social Security and Medicare before any other benefits are added. Paid sick time, vacation and holidays are not free either, since the employee is actually being paid for not working those days. Many companies pay for some portion of medical and dental benefits and sometimes match 401K contributions and other benefits.
So, when we speak of the full load, we must add all these other costs into the configuration. Depending on family size, benefits and employee contributions, the full load can be 20% - 40% of the employee's salary to form the total cost of compensation and benefits. This is the reason why adding additional employees to any company should be a serious discussion. In our company, this CEO Blogger approves all new hire and replacement hire decisions, since in a service company like ours, people make up 70% of our expense line.
Most important, it is easier to add benefits as a business grows than to take them away in bad times. However, it might be best when times are good not to add new benefits, paid by the company, at all. Instead, companies are now adding what are called Voluntary Benefits, which could include all sorts of goods and services convenience packaged that can be offered employees at no risk, or cost to the company. This is a better way to go than adding costly benefits, paid for by the company, that in bad times are often eliminated.
So, when we speak of the full load, we must add all these other costs into the configuration. Depending on family size, benefits and employee contributions, the full load can be 20% - 40% of the employee's salary to form the total cost of compensation and benefits. This is the reason why adding additional employees to any company should be a serious discussion. In our company, this CEO Blogger approves all new hire and replacement hire decisions, since in a service company like ours, people make up 70% of our expense line.
Most important, it is easier to add benefits as a business grows than to take them away in bad times. However, it might be best when times are good not to add new benefits, paid by the company, at all. Instead, companies are now adding what are called Voluntary Benefits, which could include all sorts of goods and services convenience packaged that can be offered employees at no risk, or cost to the company. This is a better way to go than adding costly benefits, paid for by the company, that in bad times are often eliminated.
Tuesday, March 1, 2016
Raising The Federal Minimum Wage - A Bad Idea
We often hear calls from liberal politicians and unions for raising the $7.25 federal minimum wage. It would be a very bad idea. First of all, a very small percentage of Americans are actually paid the federal minimum wage because while employers in states and cities cannot not pay less than the federal minimum wage, these localities often have higher minimum wages in place. Further, many lower skilled, under-educated employees are paid more than minimum wage because of market forces that require higher wages to attract workers. So, even fast food companies and retailers that typically pay lower wages are not paying minimum wage to most of their employees.
Minimum wage, which should be defined by states and even locally based on cost of the living for the area, is usually paid to Americans in entry level jobs and often to young people in part time work. Those who call for a federal minimum wage of $15 an hour, if ever enacted, would be a job killer. Those in manufacturing jobs in the US are competing with workers in foreign countries that are often paid $5 a hour fully loaded. Moving the minimum wage up to $15, which would presumably move wages up across the board, would just result in even more jobs being pushed overseas as has been happening for 20 years as a result of union demands for higher and higher compensation and benefits in the US. About 3 million manufacturing jobs in the US are now overseas because unions pushed and pushed for higher wages and benefits to the point that they made no sense.
In addition, at $15 a hour companies that cannot off shore jobs, would just bring in more automation. We are seeing it now as stores like Home Depot and Lowe's now have self check out stands with one employee manning 4 stations. It would be very easy to turn fast food registers into self service, with the customer placing the order and one employee taking the money for four registers. If the minimum wage is raised too high, companies will find ways to eliminate labor cost. So, those that keep pushing for a higher federal minimum wage will do a disservice to the very people they are trying to help.
Higher labor cost would just be passed on to the customer. A higher federal minimum wage would mean higher prices as Wal Mart and or for goods and services in our country. It would result in an even lower standard of living for the working poor. A better idea is improving our education system so that those with little or no job skills, or education gain both so that they will be paid a whole lot more than the minimum wage.
Minimum wage, which should be defined by states and even locally based on cost of the living for the area, is usually paid to Americans in entry level jobs and often to young people in part time work. Those who call for a federal minimum wage of $15 an hour, if ever enacted, would be a job killer. Those in manufacturing jobs in the US are competing with workers in foreign countries that are often paid $5 a hour fully loaded. Moving the minimum wage up to $15, which would presumably move wages up across the board, would just result in even more jobs being pushed overseas as has been happening for 20 years as a result of union demands for higher and higher compensation and benefits in the US. About 3 million manufacturing jobs in the US are now overseas because unions pushed and pushed for higher wages and benefits to the point that they made no sense.
In addition, at $15 a hour companies that cannot off shore jobs, would just bring in more automation. We are seeing it now as stores like Home Depot and Lowe's now have self check out stands with one employee manning 4 stations. It would be very easy to turn fast food registers into self service, with the customer placing the order and one employee taking the money for four registers. If the minimum wage is raised too high, companies will find ways to eliminate labor cost. So, those that keep pushing for a higher federal minimum wage will do a disservice to the very people they are trying to help.
Higher labor cost would just be passed on to the customer. A higher federal minimum wage would mean higher prices as Wal Mart and or for goods and services in our country. It would result in an even lower standard of living for the working poor. A better idea is improving our education system so that those with little or no job skills, or education gain both so that they will be paid a whole lot more than the minimum wage.
Wednesday, February 3, 2016
The Challenges of Managing Different Businesses
Perhaps the biggest challenge for a CEO is managing different businesses, since it is not uncommon for a holding company to own a number of subsidiaries that may, or may not be related. While each business may have a life of its own with different compensation plans and even personalities, it is the CEO's job to meld a common culture based on the company's core values. And further, since resource allocations are always involved, the CEO is ultimately perhaps the only person in the company that can balance the interests of all employees, clients and customers, particularly when various managers fail to see the big picture because of a narrow focus.
Managing any business is about long term success, not short term gains. Since there will always be business cycles where one business is up and another is down, it is important to recognize that we grow a company as a team, not as individual contributors. That is never tested more than during bad times when tough decisions are required. Long term employees get it always demonstrating business maturity. Short term employees will never get it.
The fact is that in any company's history, there will be good years and bad years. As someone who has successfully managed through multiple Recessions, the Dot Com Bust, 9/11, the lowest and highest interest rates in American history and the Fiscal Collapse of 2008, I can say that good managers perform best in bad times. Bad managers are usually gone one way or another. In managing different businesses within one company, it is critical to forge one company culture, while recognizing industry differences.
That culture cannot be built on selfish interests. Though selfish interests may result in short term gains, they cannot be the basis for long term success. Further, while it would be great if it was the case for all employees, at a minimum, all senior managers must understand the big picture to bring value to a company. It can't work any other way.
Managing any business is about long term success, not short term gains. Since there will always be business cycles where one business is up and another is down, it is important to recognize that we grow a company as a team, not as individual contributors. That is never tested more than during bad times when tough decisions are required. Long term employees get it always demonstrating business maturity. Short term employees will never get it.
The fact is that in any company's history, there will be good years and bad years. As someone who has successfully managed through multiple Recessions, the Dot Com Bust, 9/11, the lowest and highest interest rates in American history and the Fiscal Collapse of 2008, I can say that good managers perform best in bad times. Bad managers are usually gone one way or another. In managing different businesses within one company, it is critical to forge one company culture, while recognizing industry differences.
That culture cannot be built on selfish interests. Though selfish interests may result in short term gains, they cannot be the basis for long term success. Further, while it would be great if it was the case for all employees, at a minimum, all senior managers must understand the big picture to bring value to a company. It can't work any other way.
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