Foo Bar and Grill

I have a rule that is based on my observations about economics over the years: the economic policy or action that makes people feel good is guaranteed, nearly without exception, to be the most harmful to those it is intended to help. Some examples:

1. The minimum wage hurts the poor by driving up unemployment, and pushes some number of the poor - as well as their employers - into the underground market. A better way to help the poor is with the EITC.

2. "Fair trade" and most things trade-related hurt poor countries more than they "help". But they do make you feel good about your latte...

3. If you're a Chinese peasant, your employment options typically include a threadbare existence scraping food out of the ground, or a hope of a better future by working in a Walmart-supplying factory. Going after Walmart hurts far more poor people than it helps, both here and abroad.

4. Want to improve education? Support vouchers. Want to feel good about it? Support pumping more money at the educational establishment; they're doing such a good job...

The fundamental reason the feel-good axiom holds is that there ain't no free lunch. If you add conditions and regulations to things, no matter how well-intentioned, they get more expensive and result in unintended consequences.

One of the refrains on many personal-finance blogs is that one should move "Somewhere Cheap" if one intends to do well financially. The problem for us is that "Somewhere Cheap" is usually somewhere with awful weather, a bad economy, and a generally uninteresting cultural environment. And as a rare Silicon Valley native, much of my extended family is here, so it's unlikely that we'll move anytime soon.

So, we "live below our means" by doing Other Things:

1. We pay cash for cars and drive them until they disintegrate. One nice thing about the mild weather in this area is cars last forever - no rust, excessive heat or cold, sand, or other nastiness. So a reasonably maintained car should run at least 10 years or more - ours all have.

2. We do lots of day trips and adventures in nearby areas. Yosemite is only three hours away, and Lake Tahoe is about 4 hours away, so a tank of gas and $75 in winter makes for a nice weekend of Yosemite hiking. Add another $100 for Lake Tahoe and we can have a nice dinner and see a show at one of the casinos. We also go on at least one multi-day backpacking trip each year. Good museums are everywhere, and there's plenty of good city walks, from Cliff Drive in Santa Cruz to The Embarcadero in San Francisco - as well as numerous hiking trails in the Santa Cruz Mountains.

3. Utility rates here are not low, but total utility costs are relatively cheap, due to smallish house sizes and mild weather. Our gas, electric, and water costs are rarely over $100/month total, except for a couple months in midwinter. In months when we don't run the furnace, the total is rarely above $70. We don't have AC, and miss not having it for about one week per year.

4. We shop carefully. My wife is extremely good at figuring out where the deals are for particular types of food: she buys spices at a Korean grocery, a few other things at an Indian grocery, many other items at the Chinese supermarket (she's Chinese), bulk stuff at Costco, and loss leaders at Albertsons and Safeway.

5. We make do. Unless we get obscenely rich, we aren't likely to live in a place much bigger than 1500 square feet or so. Our current house is on a lot that's about 4000 square feet. So, we have learned to live "small and well", making full use of our living space and being careful about avoiding clutter.

6. I frequently telecommute, which saves quite a bit on gas and wear&tear.

7. We both take our lunches to work. This saves at least $10-$15 per workday.

8. Other LBYM standbys work just as well here as they do anywhere else: we don't run up credit card debt, fully leverage our 401Ks and Roth IRAs, and generally don't throw money around.

To paraphrase Edgar Djikstra...

Ramit's post is wonderful - one of the best things I've read on any blog in a long time.

One of my standing gripes with our tax code is that many taxes are hidden. One, in particular, is the "employer's share" of Social Security, as well as unemployment insurance, etc. If you're an employee, you pay these taxes, although they are hidden from you since they come out of your share of the gross payroll, not out of your visible salary. The employer doesn't pay them; calling them the "employer's share" is a fiction to make it seem that there's some mythical "burden-sharing" taking place.

My proposal: print the entire cost of an employee on his paycheck. Include the "employer's share" of social security and medicare, as well as all other government-related taxes and costs of hiring the employee. Also, if you want serious medical insurance discussions, print the per capita cost of employee medical insurance on the paycheck as well.

Discussions of taxes will be far more intelligent if people don't imagine that "someone else" is paying taxes that they are in fact paying.

1. "Only a fraction". This one annoys me on many levels, since it's mathematically meaningless. 1/1 is a fraction, as is 33/22 or 7/5. Even in its typical use, meaning "less than the whole", it's quite unhelpful since 999/1000 is also a fraction, so it's quite correct to say "only a fraction of Indians live in India" since some Indians live in other countries, although over a billion Indians actually do live in India. This expression is used when someone wants to sound mathematical but can't be bothered to look up the numbers. At least say something with a pretense of precision, like "a small percentage".

2. "Spiraling", meaning "going up". This is usually used in reference to some economic indicator, ie "inflation is spiraling". It's either going up or going down, but it's definitely not spinning - although it's likely that politicians will be doing plenty of spinning around it. Even a more generous definition, ie "spiraling out of control", is derived from observing out of control airplanes crashing _down_ after they've been rendered inoperable somehow. Please say "going up".

3. "Hello?", said in a singsong voice with a trailing inflection, followed by some statement. This is used when Person A is calling Person B an idiot for neglecting some detail that Person A regards as profoundly important. I've rarely heard this expression used when Person A isn't the actual idiot...

I'll doubtless think of more...