Cost of Living: at great cost, without a lot of living.

With the current state of the economy, I've become very concerned about life after retirement. Trustees of Social security report that Social Security will be completely depleted by 2040 and Medicare will be depleted by 2018. That is less that 10 years from now. Since this announcement, those of us who are planning for our retirement have had to shift gears. Many investment professionals are advising their clients not to include Social Security and Medicare benefits as part of their investment strategy. As a result, many investors turned to stocks, bonds, mutual funds, IRA's and 401k's. Unfortunately, with the wall street free fall, Ponzi schemes and empty 401k coffers, many are left scratching their heads wondering how they are going to make it. As a result, many retiree's have been thrust back into the workforce just to make ends meet.

In a similarly difficult position are those of us who have a decade or two before retirement. Our investment strategy is that there isn't money there to invest. In fact, the investment landscape has become so volatile that some people; having moved out of mom and dad's house decades ago, are forced to move back in with their parents just so they can get ahead. Why is this happening? Are people just making poor investment choices? Are extravagant lifestyles to blame? I'm sure there are many reasons why this happens, but I intend to shed some light on what I think is happening. I think a good place to start is the statistics. I've chosen to make a comparison of life in 1980 to life in 2009. I will be using a simple inflation calculator to illustrate my point.

The first category I want to compare is income. In 1980, the average income in the United States was $19,500/yr. Plugging that figure into the inflation calculator shows us that $19,500 in 1980 dollars is $53,448.31 in 2009 dollars. Unfortunately, the U.S. Census bureau lists the average U.S. income is only $48,934.00 or 10% lower than projected. Many blame skyrocketing health insurance premiums as the primary reason for this lower than expected income growth. I will address health care issues later. So, this tells us that Americans are earning 10% less than they did almost 30 years ago.

The next comparison I'd like to make is residency. According to usgovinfo.about.com the average single-family home was valued at $56,300.00 in 1980. According to our inflation calculator, buying that same home in 2009 should cost $154,314.85. In 2009, the average price for a single-family dwelling is more than $260,000.00.That means American's are spending 40% more on their primary residence than they did in 1980. Now that we have established that American's are earning 10% less and spending 40% more for their homes, let's look at how John Q Public gets to work each day.

In 1980, a Buick Le Sabre with a V-8 and moderately optioned, had a sticker price of 7,088.25. Our inflation calculator tells us that in 2009 dollars, that same car should cost $19,428.46. According to the Buick website, their entry level automobile starts at $26,390.00 without options. Auto makers claim that better quality products and state of the art safety features justify the increased cost. I disagree. Statistics show the average U.S. car costs roughly $63.00 per labor hour to build. On the other hand, Japanese automakers build cars at a cost of about $36.00 per labor hour. U.S. automakers should be ashamed! Not only do Japanese automakers build cars for about $27.00 per man hour less that U.S. automakers, they also build better cars. Why is there such a huge gap in these numbers, the UAW, plain and simple.

Speaking of the UAW, I want to talk about NAFTA. I'll admit, on paper, NAFTA seemed like a great idea. I think it was believed that by loosening import/export policy, it would be an incredible boost to our economy. Sadly, it's intended purpose was exploited. Instead of removing obstacles on trade-routes and improving our economy, employers found loop holes that allowed them to send high-paying jobs to countries who pay laborers a fraction of what employees are paid in the US. According to fair.org, 400,000 U.S. jobs have been lost to foreign countries and the U.S. went from a 1.7 billion dollar trade surplus with Mexico to a 15 billion dollar deficit just 5 years later and that includes the devaluation of the peso. There's no guessing here, the only reason why these jobs are going over seas is wages. And who is at the forefront of higher U.S. earnings? The afl-cio.

Organized labor played an important part in championing fair wages and a safe working conditions, but this need has slowly diminished over time. For those of you that still believe labor unions are looking out for your best interest, understand you are being deceived. Labor unions are like any other business, they are in this to make money for themselves. If unions have your best interests in mind, then why would they continue to push employers to pay workers higher wages right up to the point where employers can no longer afford to pay their labor force. They aren't looking out for you at all. What they are pushing here is your eventual unemployment.

Now let's talk about food. According to the bureau of labor statistics, in 1980, the average person spent around $87.00 per month for groceries. When you plug that $87.00 per month into our inflation calculator, that same $87.00 would cost over $225.00 in 2009. However, the BLS states that $87.00 worth of groceries would now cost a little more than $210.00. Although that is less than predicted by our calculator, remember, families are making 10% less and paying 40% more for their homes. There are so many other items and so many variables in a monthly budget, but the expenses I've covered above are the core expenses of most U.S. households.

Now that we have established basic input/output, let's look at how well or how poor a fictional family would live based on the data above. According to our data, the average family income is $48,934.00 or $4077.00 per month gross. Once you take away all the usual deductions, our net income is actually $3098.52 Based on the data above, the median home price in 2009 is $260,000.00. If the loan is financed at 30 years and 6% interest, the monthly mortgage payment is $1,671.50. Most professionals will tell you that as a rule of thumb, you should spend no more than 30% of your monthly income on your mortgage. Unfortunately, our fictional family is spending 41% of their income on their house payment. As it stands, after we make our house payment, we are left with $1,427.02

Now that our house payment is paid, the next bill we are going to pay is our car payment. Our family financed their new Buick with no money down for a term of 5 years with about 9% interest. That makes our monthly car payment $479.42. If you factor in the amount of gasoline the average American spends each month ($169.92) and the average cost for car insurance each month ($78.00), Americans are spending $726.71 on transportation. This leaves us with $700.31. Now that we've made our house payment and our car payment, it's time to go buy our monthly groceries. Like we said above, the average family spends about $210.00 each month for groceries. Once we've bought our groceries, we are left with $490.31. The next checks we need to write are for our utilities. The average electric bill is about $120.00 per month, natural gas usage averages about $110.00 per month, the average phone bill is a conservative $80.00 per month, and cable and internet total about $100.00 per month. And so, that means the average American is spending about $410.00 per month on utilities. That leaves us with $80 and some change. At this point, most people would look at their budget and decide it's necessary to make some sacrifices. And so, our family concludes that since cable and internet aren't "vital", most families would dump those services. This adds $100.00 back into our budget and now instead of just $80.00 surplus, we now have $180.00 left.

According to U.S. government statistics, in 2009, U.S. households should expect to pay an average of $2,500.00 each year in out of pocket medical expenses. That breaks down to $208.33 per month. Plugging that figure into our budget, once the most basic monthly expenses are paid, we are left with a negative balance of $28.33. We're not done yet. There are still quite a few monthly expenses that haven't been mentioned yet. We still haven't considered, clothing, household items, home repairs, car repairs, license plates, trash collection, education expenses, personal care, child care, gifts and charitable contributions. Even if we estimate each of those expenses at a ridiculous amount of ten dollars per month each, we are still looking at being in the red $148.33.

For the sake of space and time, I have gone back and plugged our 1980 figures into our budget equation and instead of a negative balance of $148.33, we have a surplus of $376.66. For the sake of effect. When we plug our $376.66 surplus into our inflation calculator, our $376.66 1980 dollars becomes $971.89.

I wish I could say there is light at the end of the tunnel, but I can't. Unfortunately, things are going to get worse. Insurance premiums are going to continue to rise as will our out of pocket expenses. Secondary education is going to cost more and more and once we have depleted social security and medicare, households on fixed incomes are going to get hit the worst.

There are no simple solutions. What we need to do is just accept the fact that the glory days are over. We need to accept the fact that life could return to what it was like during the great depression. In fact, I think it is at least possible that life may actually become a whole lot worse. The days of careless spending are over. No more can we casually sit with a credit card watching the home shopping network. No more can we watch "My Super Sweet Sixteen" and not be nauseated by such blatant displays of entitlement. The days of excesses are behind us.

If there isn't a turn around soon, it is safe to say that we can expect to see a rise in corruption. A troubled economy means less taxes, less taxes mean less money to pay our police officers, fire fighters, our paramedics. Less pay for our police, fire and EMS services can lead to a need for other forms of income. Drugs, protection, pay-offs etc. And where there is corruption like this, that's when citizens will do whatever it takes to protect what is theirs. I think we are going to see a sharp rise in crimes such as robbery, burglary, assaults, rapes, muggings, drug and alcohol related crimes. We are going to see an explosion of identity thefts and scams. We will likely see public assistance coffers run dry. And sadly, we should also expect to see the number of homeless shelters, food banks and soup kitchens skyrocket.

I don't think there is an easy solution to this problem and unfortunately, even direct efforts to prevent this from happening may already be too late, even if something is done to correct it today. The only thing I can offer is to tell you it is time to accept what is happening. It serves no good purpose to lie to ourselves that the worst is behind us and in just a few short months we will be living the good life again.

I have toyed with the idea of owning a handgun for quite some time. Each time I've considered it, I've never able to get past the incredible risk involved with owning and keeping a gun in a home with children. With the way things are going in the world today, my daughter has become one of the reasons why I feel I need a fire arm. The jury is still out on that one, but I'm hoping to resolve this issue once and for all.

I know some of you see this blog as the proverbial sandwich board that says "the end of the world is near." if that is how you see it, it was never my intention. What I was attempting to do is shake people loose from their ambivalence. The more prepared we are collectively, the better chance we have to weather this storm.

The chalk dust that never settled, at least not for me

American Heritage Dictionary defines "relationship" as "The condition or fact of being related; connection or association." Under the same heading, relationship is also defined as, "A romantic or sexual involvement." It is this second definition that I would like to place emphasis upon.

Now before you click away from this blog in disgust, know that what is contained here isn't some sort of pornographic depiction, but rather an unfortunate outcome based on events that may or may not have happened. This may sound cryptic, but I assure you, what I am about to share with you shocked a rural Indiana town and still conjures a myriad of emotion even after more than 20 years.

During my senior year, I was involved in a few after school activities. Although I enjoyed all of the activities I participated in, the one that gave me the most satisfaction was our school's speech/forensics team. Not only was it my favorite, it was also the most difficult. Up to that point, I was terrified by the thought of public speaking. When I joined, I knew getting up in front of others was going to be my biggest challenge. Fortunately, within the first few weeks, I had become more and more confident. I credit this turn around to the students who encouraged me and my coach, Dorana Pethtel who mentored me.

Not only was I able to thrive under her guidance, many of the students she taught credit her much the same way. I can say with all honesty that had she not been my teacher and coach, I would not have achieved nearly as much. I think one of her best qualities is that she didn't establish a classroom hierarchy, instead she chose to view her classroom and speech team as more of a partnership.

In the winter of 1986, our community was rocked to learn that this same speech coach/teacher and her husband; also a school teacher, had been arrested and charged with child molesting. As you can imagine, when they were officially charged, the school board suspended them from teaching pending the outcome of this investigation. As time passed, we learned more and more about the charges that had been filed against them. . It was later learned that they were accused of molesting two students. The students claimed they had been invited over to the Pethtel's home where they had been provided with alcohol and then became involved in a sexual encounter with Dorana and her husband Steve.

The trial lasted for several days and their attorney felt confident that they would be acquitted on all charges. To every one's disbelief, they were found guilty on all charges. However, during the last couple of days of the trial, the Pethtel's attorney told us that the two students who had accused them of child molesting, admitted to the prosecutor they had made the whole thing up. He went on to say that the prosecutor blew up at them and told them that if they took this revelation to the judge, they would likely go to jail longer than the teachers they had accused.

When it was over, Dorana had been sentenced to 4 years in prison and Steve had been ordered to serve 5 years. The day of their sentencing would be the last time I would see them before they were sent off to prison. No matter how hard I've tried, I still haven't been able to get my head around this whole thing. When Dorana was taken away from us, all of us on the speech team felt as if we'd just been orphaned. Sadly, we weren't able to end our year on the high note that all of us so richly deserved. Our year-end banquet wasn't the celebration that we'd hoped for. No words of gratitude to our coach who encouraged us and taught us to push beyond our personal limitations. And no special congratulations from a coach to those who'd performed admirably. Nothing but a tear-stained letter of thanks from our teacher who was forbidden to attend.

Now, before you go get your nunchaku, I don't intend to prove whether they are guilty or not. I graciously acquiesce. I admit that I am not at all qualified to pass judgement upon them for the crimes they were accused. Sadly, neither were the legal "professionals" given the task of discovering the truth in their case.What I do intend to do is illustrate simple cause and effect.

First of all, what made Dorana such a damn good teacher and speech coach? Number one, because she truly listened. Secondly, because she spoke to the kids in their language. I'm not saying she talked like a teenager, rather she knew how to get through to her students in the language they understood. As I mentioned before, had I been coached on the speech team by any other person, I would likely have achieved much less than I did. She knew what my insecurities were and taught me to overcome them. I feel she was an extraordinarily gifted educator. I don't base that assessment on any academic credential, I base it solely on how much it allowed me to thrive.

Do I think they were capable of committing the crimes they were accused? Given the right circumstances, any one of us are "capable" of committing unthinkable crimes. We are flawed, fallible creatures.

One of the arguments the prosecutor used against them was the fact that students regularly visited the Pethtel's at their home. He suggested the Pethtel's used these invitations to their home were a vehicle for coercion. It is this line of thinking that suggests the prosecutor thought that perception is 9/10ths of the law.

I've remained in contact with quite a few of my old speech team friends and every once in awhile, the subject of their trial comes up and I'm asked if I think they did molest the two students. In my heart I don't believe they did it. In fact, none of the students I've remained friends with ever came forward admitting they had been involved in any kind of illicit behavior with the Pethtels. Many of my old speech friends have gone on to be very successful people. Among the students on the speech team during the 1986/1987 school year, there is a forensic pathologist, an engineer, a police officer and published writer, a deputy prosecuting attorney, 1 or 2 lawyers,Technical Support Consultant/Analyst 2 at the Notre Dame University academic library, and a hugely popular Florida radio personality just to name a few. In fact, Chadd Thomas; the hugely popular Florida radio personality states on his my space page that one of his heroes was Dorana Pethtel. He writes, " And my freshman Speech teacher, Doranna Pethtel, for bringing me so far out of my shell that I can never go back."

In summary, I would like to make a couple of things perfectly clear. Even though I have listed a number of examples of successful students under her direction, that is not to suggest that ANY crime should be excused based on professional success. None of us are above the law. I would also like to make clear that I am not suggesting they were guilty for the crimes they were charged. I've simply never doubted their innocence. What I am saying is that it saddens me to think of all the students since my senior year of high school whose lives could have been changed as profoundly as mine.

It is my sincerest hope that the two students who accused Dorana and Steve Pethtel of molesting them, read this post. If Dorana and Steve were wrongly accused, I can't imagine the guilt you've had to live with for more than 20 years. I encourage you today to set the record straight. I know the events of the past cannot be undone, but it's never to late to do the right thing. I'm sure Dorana and Steve have tried very hard to put the past behind them. But I believe they will never experience complete closure until you acknowledge the truth.

Current economic climate calls for major changes in the customer service industry

Some economists suggest that we are not even close to reaching rock bottom of this horrific financial catastrophe. In fact, it would be very difficult to find many families who have not been deeply and profoundly affected by the current economy. Some experts suggest that in some ways, this current economic nightmare is worse than the events that took place during the great depression. That is difficult to confirm since only 3% of Americans; or less than 13,000,000 people alive today were born before 1929. And an even fewer number in this group were old enough to remember what life was like then.
Although there aren't many people alive today that experienced life during that dark time in our history, the stories of how families survived the depression have been passed down through the generations. If we are to emerge from this crisis intact, we may find ourselves turning to these stories of survival as a reference for our survival now. In fact, I sure could have used one of those depression-era survival tactics last week, but unfortunately, I was not able to find one.
Over the course of the last 18 to 24 months, my family has had to make several significant sacrifices. Vacations have been postponed; some indefinitely, we got rid of cable tv and the internet. We went from 2 vehicles to 1, and great effort has been made to spend every grocery dollar wisely. Despite all these sweeping changes, we have never been able to be more than one paycheck away from homelessness. One of these sweeping changes involved a drastic decrease of the amount of electricity we were using. One of these changes involved the thermostat. Instead of setting it at 68 to 70 degrees, we decided to maintain it at 63 to 66 degrees. We also made serious effort to turn off unnecesary lights and even reduced our hot water useage significantly. Although it was a struggle for us at first, seeing the electric bill that reflected our savings made it worthwhile. We were so proud of our accomplishment. And so, for the next three months, our electric bill remained more than 50% bellow what we had paid for each month in previous years. We felt all of our efforts to our reduce our useage had really paid off. We could not have been more wrong.
Back in March, we received our monthly electric bill and when we opened it, we were in shock. We had gone from being billed an average of about $50.00 for each of the three previous months, to a bill showing charges of nearly $600.00. At first we were shocked and angry, but the more we thought about it, we just knew this bill must have contained an error. I called American Electric Power the next day in an attempt to get this problem straightened out. To my shock, I was told the bill we received was completely accurate. I was told that the reason behind this extraordinary bill was due to bad winter weather. AEP went on to explain that because of "bad weather" they were unable to send someone to take an actual reading of our useage meter so an estimate was made. When AEP was finally able to take an actual reading from our meter, it was learned that they had grossly underestimated our useage and we were now being billed for the difference. I explained to AEP that there was no way I would be able to pay that bill in full and added that this particular electric bill was more than our monthly mortgage payment.
Although we were able to make our first payment of the arrangement we'd made with AEP, life happens and we were forced to use the money we'd saved to make our second arranged payment to AEP on something else. A short time later, we received the next AEP bill with the total amount still due, minus our first arranged payment and a notice to disconnect if the total bill wasn't paid by a certain date. Immediately upon receiving this notice, we contacted AEP again and asked them to work with us. We were told that if we did not pay the complete bill within 3 days, our power was going to be turned off. End of story.
The next step I made was to contact the Utility Regulatory Commission and find out what my rights were as a consumer and to attempt to prevent this kind of thing from happening to other AEP customers as well. Sadly, the URC did little more than to put AEP's explanation of events in their own words. In the end, either we pay the entire amount owed or our electricity would be turned off.
Tens of thousands of businesses and organization around the country have launch never before seen programs and incentives to help struggling American families. Food retailers are launching huge campaigns aimed at the dwindling family food dollar, car companies are offering to make your car payments for you if you loose your job, food banks are sprouting up across the country by the thousands. What I want to know is what roll is AEP going to take to assist struggling families? Probably nothing.
This may seem pessimistic, but why would AEP want to launch a similar campaign? What would be the incentive? Grocery stores offer lower prices to keep you from shopping their competition. The auto industry is offering huge incentives simply as a means of survival. No matter the industry, business MUST take drastic measures to retain the consumer base.
AEP will never offer any such program because they don't have to. On the Corporate Citizenship page of their website, AEP states they are concerned about their customers experiencing hardship during these dark economic times. They claim to have access to more than 45 million dollars to assist customers suffering financial hardship. If you read closely, you'll find that of the $45,193,999 they say is available to consumers, only $300,000 of that is contributed by AEP. The remaining 44.9 million come from U.S. government programs. Of all funds available, AEP's contribution consists of only .6% of total funds available.
If that isn't frustrating enough, AEP's P&L for 2008 reports revenues exceeding 14 billion dollars. Sadly, their $300,000.00 contribution to families in need is only .002% of their 14 billion total revenues for 2008. Their P&L also listed AEP's CEO Michael Morris' total annual compensation for 2008 was 9.7 million dollars. But, despite the fact that his annual salary falls just bellow the national average, while blue collar families were facing lay-offs, part-time employment and in some cases, lower wages, Mr. Morris was given a 7% increase.
With the number of unemployment claims increasing sharply, more and more struggling families are going to lose their homes to foreclosure. AEP's rigid inflexibility will continue to play a significant role in these events. AEP, you need to fix this. You need to fix this not because you have to, fix this because you know it's the right thing to do.