Live Real, Now

The no-pants guide to spending, saving, and thriving in the real world.

Search Results for: debt-burnout/payday-loans-suck

Twinkies: A Failure of Unionization

News

Box of Twinkies
Box of Twinkies (Photo credit: Wikipedia)

Twinkies may survive nuclear warfare, but the iconic sweet treat ultimately couldn’t withstand the might of the unionized workforce. Faced with mounting losses and overwhelming debt, due in no small part to the relentless demands of the various unions representing the nearly 19,000 employees, Hostess Brands filed bankruptcy for the second time in January 2012 and ultimately requested permission to liquidate it’s assets in November of last year when a buyer failed to materialize. While many factors played a part in the demise of the maker of such all-American snacks as Ding Dongs and Ring Dings, as well as childhood favorite Wonderbread, there is no denying the fact that costs imposed by union contracts were a major factor in the shuttering of this once-beloved company.

While there is certainly plenty of blame to go around, the simple fact is that nearly 97 percent of the company’s unsecured claims were from employee pension funds, according to the Chapter 11 filing. How did those claims arise? Simply put, the skyrocketing pension expenses were caused by the unions continuing to push for overly generous retirement rewards despite overwhelming evidence that the company could never sustain those costs. True, the unions did agree to considerable concessions prior to and even following the first bankruptcy filing in 2004. However, that was only after union officials had pushed wages and other benefits into the stratosphere, even though Hostess has been struggling for years to remain competitive.

Certainly America’s changing eating habits, increased competition from such companies as McKee Foods, makers of Little Debbie snack cakes, and rising commodity costs all contributed to the ultimate demise of Twinkies. There is no doubt, though, that union contracts inhibited the company’s ability to adapt and make the necessary changes to remain profitable. Not only were employee costs out of control, ridiculous union rules made it nearly impossible for the company to make money. These are just a few of the rules that hampered Hostess’ management:

  • Twinkies and Wonder Bread could not be delivered on the same truck.
  • Drivers could only deliver one product, even if they did not have a load and a load of another product was waiting to go out.
  • Drivers could only drive. They had to wait for loaders to fill their trucks.
  • Likewise, loaders could only handle one product. Their contract prohibited a Twinkie loader from helping out if the Wonder Bread loaders were shorthanded.

Yes, management agreed to these terms, but often they were forced to do so in order to prevent a costly strike. In fact, it was a labor strike that lead to the decision to liquidate.

Unions are meant to protect workers from dangerous working conditions, overbearing management and unfair labor practices. Ensuring a living wage and decent benefits is another of their responsibilities. However, it is evident that in this case, the unions became as much an enemy of the Hostess employees as of the company’s management. As a result of their unwillingness to compromise and make wage and benefit concessions, almost 20,000 people no longer have a job that needs to be protected. In the end, the unions drove not only the company but themselves out of business.

Not to fear, however. Two private equity firms acquired Hostess’ assets last fall and are beginning to turn the company around. Production of Twinkies began again in June, and the gooey sponge cakes returned to store shelves on July 15. The workforce has been dramatically reduced and will not be unionized. In the end, probably the only winner in this battle is America’s sweet tooth.

Related articles
Enhanced by Zemanta

How to Live Happily Without a Budget

Finance

Three years ago, we sat down and built our budget. We spent 9 months adding the non-monthly bills that we forgot about when we created the budget.   Setbacks and shortfalls almost killed the budgeting plan completely. It took almost an entire year to get our budget right.

Unrelated Image

Now?  I refer to the budget once per month.   No more.   I don’t check it at bill-paying time. I don’t think about it daily.   It’s there as a reference when I need it, but it no longer drives our finances.  How did we get to that point?

First, we firmly established our budget.  We know exactly what we need to cover our expenses.   None of the predictable bills catch us by surprise any more.  This is important.

Once we had the budget established, the rest was easy.   I moved almost every bill to US Bank’s online bill-pay system and switched to electronic billing and automatic payments.   The automatic payments are all through US Bank.  I only allow my mortgage to be set up with the merchant. I want total, instant control over the rest.  I won’t call a merchant to ask them to change a payment if something comes up.   The bank sends me an email when a payment is automatically scheduled, and again when it is paid.

Once I got comfortable with the automatic payments, I switched to electronic billing. I don’t need to see the bill or waste the paper if I know it is being handled for me which is why I encourage you to manage all your finances online.  I do check the few bills that may change, like the credit card and cell phone.  Now, I see few of my bills.  They are all sent electronically to my bank, automatically paid, and scheduled in Quicken–all without intervention from me.

[ad name=”inlineleft”]We also use an envelope system.  I know how much we need for groceries, baby crap, clothes, etc.   At the beginning of the month, I take out all of that money in cash and put it into the appropriate envelopes.   Other than this money, almost everything else takes care of itself. I don’t need to pay attention to by bills on a day-t0-day basis.   Any extra money that comes in gets divided among our debt repayment and savings goals, which only takes a few minutes to arrange.

I glance over my budget at the beginning of every month, but I only review it when something changes. If we change our cell phone, or our budgeted gas bill changes, I make the change to our budget.  Other than that, it’s not even an afterthought.

That’s how we do it.

Another option includes the Sloppy Math System. This consists simply of rounding deposits down and rounding expenses up.  The more you round, the better the system works.    If you round every deposit down $50, and round every expense up to the next $10, you are naturally building more room for error.  Given enough time, you will have enough of a slush fund to handle emergencies and the occasional impulse purchase.

Get Age on your Side

Misc

Albert Einstein.
Albert Einstein. (Photo credit: Wikipedia)

One of the best ways in the early years of your career to provide for your long term future is to have a 401K for your retirement where your employer will match your own contributions up to a certain figure. Your contribution is pre-tax incidentally. Albert Einstein once said that compound interest was the ‘eighth wonder of the world’ and it is compound interest that will help even small amounts to grow into a substantial figure on retirement if savings begin in your 20s.

It is worth illustrating this with real figures. A figure of $4,000 a year saved between the ages of 25 and 35 with no further contributions after that will produce a larger final figure at 65 than someone starting at 35 and contributing $4,000 per annum for 30 years. The latter has invested three times as much as well. The factors that decide this are time and compound interest. The whole total of former is working for him or her for 30 years. A fair amount of the second example is only ‘working’ positively for a limited time. Start early!

An Illustration

It is worth looking at examples to see what size of fund is realistic. 8% is not an unreasonable sum to put away on a salary of $40,000 a year, a salary that grows at 2% per annum for 20 years. If the employer pays 3% in addition and growth is a modest 7%, the fund at the end of 20 years would be around $210,000. If you can put 10% in instead, or if you extend the saving period to 30 years the fund rockets to over $500,000! It’s time and compound interest again because in the example over 20 years you will have only put in just under $80,000 yourself to have a fund two and a half times bigger.

A Couple of Observations

Can there be a bigger argument for saving from an early age than that? Surely not! The question is how to manage your money well enough so that you can start to save in the early years of your career. You may well have a student loan to begin to pay off. Probably two of the most important things to do with realisticloans.com, or not to do depending how you look at it are:

  • Credit Cards. Avoid building up debts by buying things you cannot afford. The interest charged on outstanding balances is penal. If you have a balance, perhaps as a legacy of subsidizing your student life, take out a personal loan to clear it. It is much cheaper in terms of interest rate and repayable in monthly instalments over a fixed term
  • Resist the temptation of trying to impress with material things. Impress people by who you are and not a new car or the latest fashions.

Expenditure

There is no doubt that you may well have monthly expenditure you did not face before, especially if you have relocated to start work. Such expenditure is unavoidable but you should spend some time on researching whether you are getting the best deals. That applies to a number of significant things such as utilities, insurance and telephone. There are comparison websites that do a good deal of research for you and at least will provide you with a short list to look at further.

The aim is to create a regular surplus that can be transferred out of your checking account when your monthly pay comes in to work positively for you and your future. You will need to apply self-discipline to your finances but you can see from the example of ‘time and compound interest’ what they benefits are for being in control. It really is not much to sacrifice.

There will be times in the years to come when you have big financial decisions to make. Real estate comes to mind immediately and a long term mortgage can reasonably be regarded as positive debt because it should produce good growth over the term you have committed yourself to. With real estate often comes marriage and a family; and all the expense that involves. Yet that responsibility is yet another reason to start young in saving for the future, and your possible dependents.

Net Worth Update

Misc

The remodel of our inherited new house is about done.   The bills have basically been paid and the insurance checks have been cashed.

Now that it’s all (more or less) done, I’m finding my financial situation has changed a bit.   My credit card is paid off, except for our regular monthly expenses and a couple of remodeling expenses that will be paid off in the next week or so.   Our mortgage is within site of being paid off, and we have a rental property that is mortgage-free.

With all of the changes, I took the time to measure the difference.

 Net Worth

Let me tell you how nervous this post makes me.   My business partner is under the impression that I no don’t care about our business because I no longer have any worries.

That’s crap.

Yes, our net worth has gone up $329,000.   That’s not nothing, but it’s hardly enough to retire on.

$113,000 of it is in retirement accounts.  I mean, great, we’re a bit ahead of where we need to be, but it’s not like that money is putting food on the table for us this week.

$177,600 of it is in our rental property.   Which doesn’t start driving income until February.   Today, it’s a $25,000 money sink.  That’s money we would have had to spend to sell it, even if we didn’t want to keep it.

There’s a $10,000 car that we need to deal with, we’ve paid off our credit card debt, and we have an extra $10,000 in the bank.

So, yes, we are in a much better place financially.  That’s a comfort, long-term.   Day-to-day?   Our credit card payment has been pushed to our mortgage, so that’s not extra spending money.   We don’t know exactly how much of the $10,000 in the bank still needs to be spent on the house, and we don’t know how we’re going to reorganize our vehicle situation.

That’s a lot of uncertainty that, at most, involves $20,000.   Again, it’s not nothing, but it’s not a lot.   It won’t cover our barebones expenses for 6 months.    We pay $15,000 per year just in daycare, and we need to put braces on a kid next year.

We are in a much better place, but I can’t stop hustling.

 

Enhanced by Zemanta

Birthday Parties are Evil

Finance, Parenting

This is a post from my archives.

I hate birthday parties.   Well, not all birthday parties.  Not even most parties.  Just the expensive-for-the-sake-of-expensive parties.  The bar-raising parties.  The status-boosting parties.  I’m done.

My son is seven years older than my first daughter.  In those seven years, with only one kid, we managed to spoil him regarding birthday parties.  Every party was big and there were a lot of presents. That’s an expensive way to run a birthday and it is a lot of stress.   We even moved the parties home, but still invited all of our friends and family.   It was much too stressful.

A good friend used the pizza and game place, buying tokens for everyone at the party.  That’s incredibly expensive.  Even if I  wanted to, I couldn’t afford that for three kids.   There’s an element of keeping up with everyone around me, but I just can’t make myself care about that anymore.  They aren’t paying my debt or cleaning my house.  They don’t get a vote.

My  plan this year was to have a sleepover for my son.   He had five friends spend the night, playing games and watching movies.  They giggled and squealed for eighteen hours, all for the cost of some take-and-bake pizzas and snacks.  It was a hit for everyone involved. The other parents got a night off and all of the kids had a blast.

My girls are one and two.  We’re done with parties for them, too. They got big parties for their first birthdays.  Those are parties for the adults; the kids don’t care.  In a few years–even a few months–they won’t remember the party.   My older daughter’s birthday will be a trip to the apple orchard, followed by cake and ice cream.   She’ll get presents.  She’ll get “her day”. She’ll remember that her birthday is special, without costing a lot of money.

We want them to have fun.  We want them all to feel special. We also want to manage their expectations and keep the parties from breaking the budget.  So far this year, it is working.

How do you run a birthday party on a budget?