Saturday, February 28, 2009

Teacher Salary Envy – Part II

Much to my surprise, my post on teacher salaries attracted a large number of viewers and comments. Rather than respond to the comments and questions individually, I have drafted this follow up post.

  • How much should teachers be paid? In my opinion, teachers should be paid a wage similar to the private sector wage for professionals with similar education, experience, and expertise. If we do not pay a reasonably competitive wage to our teachers, we will be unable to attract good people into the field.


    Entry-level salaries should be similar to entry- level salaries for college graduates. In my town, starting teachers fresh out of school are paid $33,000 per year. In our state, the average entry-level finance positions pays $40-50K per year.

    Until I see evidence people are rushing into the teaching field for the big paychecks, I will not consider them "overpaid."

  • In our state, teacher salaries increase based upon service length and educational advancement. Although teachers can get a provisional certificate after college and student teaching, they must complete a Masters Degree to keep their job. (In the business sector, employees reimbursed for some or all educational expenses. Teachers are not.) The maximum teaching salary in our town is $66,000. To get that salary, a teacher must have 14 years experience, a Masters Degree and enough hours for a PhD.

    In judging the salaries our teachers are paid, one should consider the cost of living in our state. When I lived in Texas, I rented a nice apartment for $600 per month. A similar (but not as nice) apartment in my area would have been $1,000+ per month.

    Note – I understand many college graduates get stuck in "McJobs" after graduation. These (hopefully) temporary positions involve low pay and no benefits. Nevertheless, these jobs are not meant to be careers and should not be considered comparable (for salary comparison purposes) to a fulltime professional job. When I finished college, I had a "McJob" until I found a permanent position. My first real job (a long time ago) paid $28,000 + benefits.


  • Pay for Performance: While it would be nice to pay "good" teachers more than "bad" teachers, nobody has developed an effective means of identifying top, individual performers. With respect to group performance, our state is consistently ranked in the top five in the United States.


  • "They only work 9 months per year": (In our state, it is 10 months per year).


    Frankly, the 2 months "off" is an unpaid furlough. With only 8 weeks available to work a summer job, getting a summer job making decent money is difficult. Almost every teacher I know would love to give up the vacation for 2 months of additional pay.


    By any measure, the teachers I know work hard. Each day, my wife gets to school around 7am and leaves after 5pm (often close to 6pm). Most nights, she spends time grading papers and/or working on lesson plans. Growing up, I distinctly remember my mom working almost every Sunday. Years later, my wife does the same thing. Week in week out, my wife spends significantly more time working than just about anyone I know (including me).


  • Envy of what Teachers make: If you think they are overpaid, I suggest you do what is necessary to become a teacher. Invest the money in a degree. Invest the money in a Masters degree. Go after that starting salary. If they are truly overpaid, you will feel like you have won the lottery.


Thursday, February 26, 2009

Teacher Pay and Envy

When my wife and I got serious, I eventually learned how much she made. Because my mother was a teacher, I knew they didn't make the "big bucks." Nevertheless, it seemed smaller than I expected. I know my old employer paid more to recent graduates for entry level positions than experienced teachers seemed to make.

Years later, teacher pay is a big issue in her school district. It is semi-rural and many of the residents are opposed to spending much on education. Indeed, her district spends less per pupil per year than similar districts and the town has a very low tax rate. Nevertheless, the economic crisis has given anti-education zealots the excuse to try to break open the union contract. Simply put, unless the teachers agree to reduce their pay (despite a contract), the district will lay off a number of teachers. Furthermore, they are making comments that it is criminal for teachers to allow the layoffs to occur.

Watching this drama unfold, I have been struck by the venom of people who want teachers to make as little as possible. If you read their comments in the papers, you would think teachers make CEO salaries with enormous bonuses. While I do not know the exact number, I would guestimate the average teacher in the district makes $50K per year + benefits.

Wednesday, February 25, 2009

Good News – Friend Hired

A few days ago, I posted about dealing with friends who get Rif'd in downsizing. Today, I got the good news that one of them landed a job with a good company. It is nice to know some people are landing on their feet.

Tuesday, February 24, 2009

IHOP Blows – Horrible Experience

Looking for "Breakfast for Dinner" after a hard day at work, we decided to meet at IHOP for dinner. Much to our surprise, it was National Pancake Day. Because we weren't in the mood for a two order of pancakes, we even cut our order to one "free" shortstack. It should have been free because we never got it. Simply put, the service was tragic.


  1. The couple next to us was seated after us. They got their food, ate it, and left before we got our food. When we asked the waitress about it, she said she would not check with the cook because he was a "jerk" who didn't like to be questioned.
  2. After we got most of our food, we tried twice to get our pancakes without success. Eventually, my wife left while I waited for the check which never came.
  3. Finally, I got up and went to the desk to pay. When I explained to the manager why we didn't have a check, he could have given a flip. He volunteered that "he" (I assume the head manager) failed to schedule enough people. I asked if I could get a coupon for our pancakes that we never got, he said it was a one time deal and he couldn't help us.

Guess what moron – our visit to your store was a last time deal. Good luck with no customers.

Monday, February 23, 2009

When Co-Workers/Friends get Rif’d?

For the second time this year, I received an e-mail from a current or former co-worker indicating their position had been eliminated. In the first case, the person was a good friend and I offered to be a reference in her next job search. In today's incident, the person was someone from another office who provided me with information. Although I did not know her, I still felt great sadness for her.

When this happens, what is the appropriate thing to do/say?


Sunday, February 22, 2009

Fixed Expenses – Recipe for Bankruptcy

Although people know the auto industry is in serious trouble, they do not understand the main reason so many of them are in danger of bankruptcy. Simply put, automobile companies face enormous fixed costs. Why?

  1. Debt – all the automakers have a relatively high amount of debt on their books. No matter how many cars they sell, or don't sell, they must pay a pretty big nut.
  2. Plants and Equipment – if a plant makes 100 cars or 10,000 cars, the cost of "owning" the plant and equipment does not change.
  3. Union Costs – the biggest mistake the automakers made over the years was allowing the UAW to force them into contracts that force them to pay workers to stay home and to pay high retiree costs – even if cars are not being made.

Bottom Line – unless they can bring down their fixed cost to reflect the lower demand for cars, they are doomed to bankruptcy.

This lesson applies to personal finance. They higher your fixed costs (in real dollars), the greater the chance you will face bankruptcy. Our fixed costs are:

  1. Debt payments – mortgage, car payments, student loans, and credit card payments can add up to a big number. While I don't believe everything Dave Ramsey says, lower debt can free most of us from financial ruin.
  2. Honestly, nothing else matters. Almost nobody goes bankrupt from rent payments, food bills, or clothing. Other than debt, the other big driver of bankruptcy is unexpected expenses that drive up debt – car and house repairs and medical expenses being the major causes.

$925 hour – Bankruptcy is Expensive

A few weeks ago, I had to hire a bankruptcy attorney for a matter at work. After I heard his rate, I decided I should have taken bankruptcy law during law school. Frankly, all he had to do was present a relatively simple motion.

After reading this story, I think bankruptcy law might be the best racket going.


In Tribune Bankruptcy, Judge Caps Sidley's Fees at $925/hr

Posted by Dan Slater

In a tough economy, rife with bankruptcies and bailouts, fee applications may not be sliding by judges the way they used to.

Bloomberg reports that U.S. Bankruptcy Court Judge Kevin Carey has ruled that Sidley Austin's lawyers may collect a maximum of $925 an hour for bankruptcy work on Tribune Co., instead of the $1,100 the firm originally requested.

Judge Carey reportedly said in a hearing today that any bankruptcy lawyer who tries to charge $1,000 an hour will need to prove he or she is worth that much. "To the extent that this applicant or any other hits that mark I will require evidence in support of that rate," Carey said.

The decision by Carey to lower the maximum fee Sidley can charge is unusual, Lynn LoPucki, who teaches bankruptcy law at the University of California at Los Angeles, said in an interview. "I never saw any of these fee applications not get approved," LoPucki said.

LoPucki maintains a database with samples of high bankruptcy fees. The $1,100 Sidley requested for its top lawyers on the case was higher than any fee in that database, LoPucki said, adding that the $925/hr fee that was approved is still higher than all but a handful of rates in bankruptcy.

A call to Sidley Austin was not immediately returned.

Saturday, February 21, 2009

1.75% CD – 1yr??

As per my prior post, my wife and I are building a 1 year CD ladder ($500 per month) as part of our cash holdings. Unfortunately, ING Direct lowered the interest rate on a 1 year CD to a whopping 1.75%. I considered skipping this month's contribution (month 5 in the 12 month plan) because of the dismal return.

Nevertheless, the low interest rate reflects the fact lenders and borrowers think interest rates will continue to fall or remain flat. For that reason, we made our contribution. The upside of laddering CD's is the opportunity to profit from higher interest rates. Some of my older CD's are paying in excess of 4%. Our blended rate on all our CD's is in excess of what we would earn in a high interest savings account or a money market account.

Currently, we have accounts at ING and Emigrant Direct. In all likelihood, I am going to find another bank to protect against low rates by ING. As for Emigrant, they seem to favor longer term CD's that I don't want.

Friday, February 20, 2009

Obama’s Mortgage Plan - Thoughts

  1. The plan to allow borrowers, who are current on their mortgages that are insured by Fannie/Freddie, refinance their loans provided their loan is within 105% of the current home value is a no brainer. Although these loans are a little "high risk," allowing borrowers to convert their loans to lower, fixed rates should make them less likely to default. The fact I hope to qualify for a refi under this plan is a pleasant bonus.
  2. Subsidized Cram-Downs – The conservative in me views this as a government giveaway to borrowers who should never have been given the loans. I find it hard to justify paying my taxes to pay someone else's mortgage. I like my plan (voluntary cram down by lenders in return for government floor) better. Everyone benefits and the government subsidy is spread out more evenly.

Tuesday, February 17, 2009

My Mortgage Crisis Solution


Rather than buy "toxic assets," I suggest the government adopt the following plan for banks and mortgage trusts that voluntarily agree to participate.

All banks and mortgage trusts (the things that issued the CDO's) that want some relief from troubled loans would be offered the opportunity to convert existing loans into federally guaranteed loans. This program would be limited to mortgages issued during the problem years (2004-2007).

If they say yes, the lenders would:

  1. Agree to write down the principal balance by X% (probably 20%) for every loan they have issued. Subprime, prime, alt A, the whole kit and caboodle.
  2. Agree to offer EVERY SINGLE borrower the option to convert their loan into a fixed, 30 year loan. The interest rate would be based upon credit scores and would be competitive with current rates.
  3. The Federal Government would agree to insure the remaining loan balance (thus capping the lender's losses).

The Upside:

  1. Lender balance sheets would stabilize.
  2. At a 20% discount to current value, the "new" loans would more accurately reflect the value of the collateral. As a result, borrowers would have an incentive to fight for their properties. With a reasonable fixed rate interest rate in place, people would eliminate the risk of having their mortgage payments spike on them.

Sunday, February 15, 2009

Our Loan Profile

With my tax refund in hand, I paid off one of my student loans. By redirecting the payment on my loan to my wife's smallest loan, we will have the loan paid off by next year at the latest. With a little luck and frugality, we may be able to pay it off by December.

Remaining Debt:

  1. Mortgage and Heloc – the combined payment is 12.5% of our combined gross income.
  2. Car Loan – my wife's vehicle is paid off and my payment is 2.2% of our combined gross income. Because the car loan is at zero percent interest, we are not paying anything "extra." Next year, we are planning on buying my wife a new car. In the meantime, we are setting aside $400 per month in a "car fund" at Emigrant Direct.
  3. Student Loans – combined MANDATORY payments are approximately 4.5% of our combined gross income. After we pay off my wife's loan, we will redirect the extra amount towards her Stafford Loans. Because they are not deductible or dischargeable, they are the "worst" loans in our portfolio. As a result, they are the priority.
  4. Credit Card Debt – Net Debt = Zero. Our credit card debt is paid off in full each month.

Thursday, February 12, 2009

Stanford Financial – Fraud Warning!!!

If you have invested with Stanford Financial, particularly in offshore "CD's," I strongly recommend moving your money to safer waters. According to this story in Businessweek, they have placed a large portion of their client's money in CD's issued by a "bank" in Aruba. This "bank" pays rates that are significantly higher than rates offered by traditional (and regulated and insured) banks.

As a golf fan, I noticed Stanford Financial moved big in sports marketing a few years ago. Curious, I googled them and discovered the are run by a Texan who goes by the name "Sir Allen Stanford." They don't appear to have any special skills and they spend a ton of money on marketing. I don't have enough money to call him the next Madoff; however, I would not want be his client if he is.

Wednesday, February 11, 2009

Congress grills the CEO’s – Grade F

While stuck in traffic, I got to listen to about 1 hour of the CNBC coverage (on Sirius) of the congressional hearings involving the bank CEO's. While the CEO's did not come off smelling like a rose, our congressmen (and women) managed to make themselves look like complete morons.

My favorite part involved a congressman asking one of the CEO's why other banks turned down the TARP money. Although he politely answered "to avoid government interference in their business," one could hear him thinking "to avoid BS like this hearing."

Tuesday, February 10, 2009

Musak – RIP!!!

According to news reports, the Musak (aka Elevator Music) Inc. has filed for bankruptcy. The twisted side of me thinks its funny how the recession could kill of elevator music?

The financial analyst in me wonders how they could have become leveraged enough to make bankruptcy a reality. It could not have been a "growth" company and I cannot imagine it would need financing for capital expenditures.

PS – I wish the best for their employees.

Saturday, February 7, 2009

Testing for Dollars

Yesterday, I completed the 2nd of a series tests necessary to obtain a professional designation relevant to my field. If you work for a large company, make sure you check your HR website for information on professional designation/testing. In addition to paying for the course materials and/or the class, many companies will pay a bonus for completion of each test and a bonus for completion of the designation.

In addition to making you more marketable with your current employer, a professional designation can open doors to networking opportunities outside your company should you need (or have) to make a change.

Friday, February 6, 2009

$11 from Fidelity Credit Card

Today, I noticed a surprise $11 addition to our Fidelity brokerage account. When I looked into it, I realized it was "Cash Back" from my Fidelity Amex Cash Back card. At 2%, it pays a very fair rebate. Unlike most cash back cards, they pay the rebate monthly instead of annually. If only they used a better card servicer (FIA Card Services is aweful and doesn't direct feed into Quicken), it would become our primary card.

Wednesday, February 4, 2009

Valentines Day – Best Tip Ever

NEVER EVER GO OUT ON VALENTINE'S DAY. A few years ago, a friend explained why he and his wife agreed to celebrate Valentines Day on the Saturday following. It was such a good idea, I adopted it for myself.

Why going out on V-Day is a nightmare?

  1. If you have kids, getting a sitter is a nightmare and/or expensive;
  2. It often falls in the middle of the week. You have to rush to dinner from work. Not exactly a recipe for romance.
  3. Even if you get reservations, you are often forced into a rushed experience with a fixed price menu. Basically, they tell you what you are going to have after the jack up the prices.

If you wait until Saturday? All these problems go away. Whatever your budget, you will get more bang for your bucks.

Tuesday, February 3, 2009

Summary of Accounts

Checking Accounts:

  1. ING Direct – Primary Account for payment of bills. Paychecks are direct deposited into this account and distributed as appropriate to other accounts.
  2. Local Bank. Because it has free ATM transactions anywhere, we always get "cash" from this account. Although ING Direct is fantastic, it is impossible to send a check with an invoice or to write a check to a local merchant (typically a contractor). Generally, we keep a $500 cushion in the account + enough money for normal ATM transactions.


Savings Accounts:

  1. ING Direct – Primary Savings Account. As per my prior posts, we are gradually moving some savings into a CD ladder at ING. Although it does not necessarily have the absolute best interest rates, they have great service and the convenience is worth keep most everything with one bank.
  2. Local Bank – Bail Money Savings. Frankly, the bank pays a nominal interest rate, but it is better than nothing. We keep $1,000 in this account for any emergency that cannot wait a few days.
  3. Emigrant Direct – Property Taxes. My mortgage company does not escrow my property taxes. To make sure we have enough money to pay them, we transfer 1/12 of our annual tax to the account every month.
  4. Vanguard – Technically, this is a brokerage account; however, I treat it like a long-term savings account. All the money is invested in a tax-free money market mutual fund.

Two Americas – Not Paying Taxes

Another day, another Obama appointee has been caught not paying his/her taxes. On a day when I filed my taxes, I have realized John Edwards was right. There are Two Americas. Normal America where we pay our taxes and complain about it. Washington, where the entitled fail to pay taxes and claim we are not paying our fair shared.

Sunday, February 1, 2009

Daschle – The Cheater


Great, we are going to have a tax cheater in charge of healthcare. Although he claims his corrections ($140, 000 in back taxes and interes) were to correct innocent oversights. Do these changes seem like an accident to you?

  • Unreported income from the use of the car service valued at $255,256 for three years.
  • He amended his returns to cover $83,333 in unreported consulting income for 2007.
  • He reduced his charitable contributions by $14,963.


$6,000 CD Ladder

As our plan to build our savings plan continues to make good progress, I am 1/3 of the way towards building a CD ladder built out of twelve, $500 CD's that expire each month. Using my ING Direct account, setting it up has been easy. As each CD matures, I plan on rolling over money (and interest) into a new 12 month CD.

Why? By agreeing to tie up my money for 12 months at a time, I get a slightly better interest rate on my money.

In an emergency? This money is not the "oh crap" emergency fund that would be tapped first. This money is the "worst case scenario" emergency fund. Should I need to tap it, I would have at least (remember it is growing) $500 available every month. It could go a long way towards paying monthly bills. Of course, there is always the option (a bad one) of taking all the money at the price of a penalty.

Ultimate Goal? Once I get the ladder set up, I plan on adding additional money each month until I eventually have a $12,000 ladder in place.