Monday, January 21, 2008

Recession Ramblings

No one can say for certain whether or not we are currently in a recession, but economists are saying that the effect of the economy largely depends on the stability of each individual’s company.

The companies my husband and I work for seem more stable than they did at the beginning of the recession in 2001.

As you may recall, my husband and I both worked for the same company in the late 90’s. This company continuously struggled to make payroll. I used to joke, if they couldn’t make money in the “exuberant 90’s” they certainly weren’t going to do well in an economic downturn. Sure enough, when the economy went into a recession in March 2001 this company was hit hard. My husband ended up being laid off due to lack of work.

I had started a new job in 1999. My new company was well established, having been in business over 50 years. This did not prevent them from coming extremely close to closing its doors for good. In 2001, they were highly leveraged, had a huge build up of inventory, and had recently begun selling specialized tech equipment that was not part of their core business. Unbeknownst to them, the technology for this equipment evolved quickly, leaving company shelves bulging with obsolete inventory. Once the recession hit, sales dwindled and a huge cash shortage ensued. To make matters worse, the cost of both business and health insurance sky rocketed. To save the company, management went into a major cost cutting endeavor like I had never seen before. A new bank was brought in with less stringent collateral requirements which provided a higher line of credit. Debt was refinanced at much lower interest rates. Massive amounts of inventory were returned to vendors for credit (of course this was after huge restocking fees were tacked on). For inventory not returned, management begged manufacturers for deep discounts and lengthy repayment plans. Employees were laid off. Every discretionary service was cancelled; including cleaning services at all company stores. After a two year struggle the company’s finances began turning around culminating in 2005 with the healthiest balance sheet in the company’s history.

What has changed in seven years?
The latest economic news reports that employers are not trimming hours as they usually do when demand for their product falls off. Plus, inventories are not unusually high making it less urgent for manufacturers to scale off production.

On a personal level: My husband has a new job which he loves; just last week he was assigned to a new project that comes with a three year contract. My company has never gotten back to the glut of excess spending of the late 1990’s. Our inventories are lean and manageable. Employee count remains low; few new overhead positions have been added. Are sales down? Yes. Are margins low? Yes. Is the year going to be easy? No. But I am confident both companies are healthy enough to ride the storm.

Tuesday, January 15, 2008

A little bit of gratitude to shake a bad day

In response to a horrendous day, I am listing five “feel good” entries from my gratitude journal in no particular order. During the past two months have been grateful for:

1. Tyler, my co-worker, for finding an error I had made so that it could be corrected in a timely fashion and a future problem eliminated. Typically, I would have internalized this mistake and spent the rest of the day feeling bad about myself. Once I acknowledged that I was grateful to Tyler, I just fixed it and moved on.

1. A. On a side note, Tyler made a mistake in the same system in early January. He came to me asking for my assistance fixing it, even admitting the system is not as easy as it looks.

2. My dogs, Buck and Teddy and all of the puppies my husband has been training. They keep me grounded and living in the present.

3. The window in my office from which I can watch the season's change, monitor the weather and occasionally catch a glimpse of wild life. In the past I have taken this window for granted, not realizing what a benefit it is. I am reminded of a company I visited a few years back that had virtually no windows. The most popular topic of conversation around the office was whether anyone had been outside, and if so what the weather was like.

4. Plumbing that works and a hot morning shower. Nothing makes you appreciate modern technology more than when it does not work.

5. A phone call from Judy my favorite acquaintance. Judy was a business associate who had recently left her position to go on permanent disability; she has cancer. I loved working with her, missed her terribly and had run out of lame business excuses to call her. She called me out of the blue before the holidays for the simple and perfect reason ~ to wish me a Merry Christmas. In today’s world of hectic schedules acquaintances and business associates are our new friends. It took this phone call for me to realize I don't need a business reason to call her; I can call just to say hi and ask how she is doing.

Saturday, January 12, 2008

Paradox of choice

The price of oil has hit $100 a barrel, grocery costs are up 6% over last year and the out of pocket costs for prescription drugs is ever increasing. What are we the middle class, as we find ourselves continuously strapped for cash, to do?

In order to make ends meet, I am hearing my co-workers making the choice to forego refilling their prescription drug medications. One employee admitted he had stopped taking his asthma medication when his out of pocket cost hit $60 a refill. Only after he received a warning for excessive absenteeism did he indicate that perhaps he would cancel his cable instead. Another employee who complains of leg pain when he cannot afford his blood pressure medication can afford to go out to eat for breakfast and lunch everyday plus spend most of his weekends betting at the dog track. My favorite story is the employee who disgusted with her high out of pocket cost for lipitor began a diet an exercise program that has resulted in a 20 lb. weight loss, lowering her cholesterol and no longer needing her medication.

I understand our company drug plan requires higher out-of-pocket costs every year causing greater financial hardship. We have a formulary drug plan; a plan with a list of preferred drugs. If your doctor prescribes a non-formulary drug (one that is not on the list) your out of pocket cost is higher.

We are all faced with choices every day in our lives, perhaps too many choices; let’s make sure we look at all our options before choosing not to take our meds.

Sunday, January 06, 2008

Vacation time is not free

In addition to math essentials, I recommend Penelope Trunk incorporate a few accounting essentials into her career. In her post she states:

Extra Vacation time is free to the company

Extra vacation time is not free to the company. When an accountant pays an employee for time not worked an account is charged in the general ledger called vacation expense. Expense accounts are used, in most cases, to record costs. In addition to paying an employee for time not worked, the company may actually incur additional costs due to an employee’s extra vacation. The employee’s work still needs to be completed. He/she may need to work extra hours resulting in overtime pay to get his job done. Also, co-workers may work additional hours to cover for him in his absence. If his work is not completed there is always the potential for lost sales and lower productivity.

I understand the point of Penelope’s post is to get you thinking about benefits other than salary when negotiating your compensation package, but she is wrong about vacation time being free to the company and it isn't always that simple. She states in entirety:

Getting a Raise

Use numbers to negotiate your raise, too. When it comes to compensation, do your own research to present a rational, numbers-based explanation for why your salary is not in line with comparable salaries in your field. If your company won’t budge, figure out which non-financial perks will equal a financial perk. (Finally! A use for high school algebra!) For example, extra vacation time is free to the company and a laptop, after tax deductions, is very cheap for the company.

I am not saying don't ask for additional vacation, I have received additional vacation in lieu of a raise higher raise in past employment. After the 2001 downturn and as more companies switch to PTO plans, I believe extra vacation is not a benefit handed over easily. Other benefits that are more readily given to employees are payment for additional training if job related, especially if asked for during a profitable period. This shows initiative plus the company benefits from your increased knowledge. My company has given laptops, but only to employees that are not in the office on a daily basis or travel a lot. Another benefit I've seen given is to for the company to pay an employee’s high speed internet connection if they do a lot of work from home.

Don't be afraid to negotiate non-financial benefits, but do know your facts up front.

Financial Illiteracy

Once again I am amazed by the lack of financial literacy in this country ~

From “Richistan” by Robert Frank:
At a summer camp for young Richistans (a term coined by Frank to describe the nouveau riche - a group of self-made entrepreneurs with wealth that equals or surpasses old money) - One of the rich kids asks the question, "So is the stock market the same the as a mutual fund?" Most members of the group looked stumped.

A stock represents a share of partial ownership in a corporation.

A mutual fund offers partial ownership in a professionally-managed group of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.

Saturday, January 05, 2008

The New Year's Ham Tradition

Each year for as long as anyone can remember, my company has given employees a New Year’s ham. This is a nice gesture and all; the hams are huge weighing close to fifteen pounds and probably cost at least $25 apiece. My husband and I enjoyed this ham the first couple of years, but found it increasingly difficult to eat fifteen pounds of ham in one year. Once we began finding the previous year’s ham still in our freezer at Christmas time, we decided to give all future New Years ham’s away. Last year, I gave my ham to a friend whose husband had been out of work. This year's ham went to a needy family we found through our local food pantry.

I don’t want to seem ungrateful, but the New Year’s ham tradition is an outdated idea. I am sure for the employee that is single, has a small family, is vegetarian or like me can no longer eat 15 pounds of ham in one year this gesture is wasted. It is time for companies to give up outdated traditions and look for new perks that will appeal to a greater majority of employees.

Tuesday, January 01, 2008

2008 "The Year of Gratitude"

I am proclaiming 2008 to be the year of gratitude. I came to this conclusion after reading "Happier," by Tal-Ben Shahar which I picked up on a whim last October. Shahar proclaims that those who keep a daily gratitude journal – writing down at least 5 things they were grateful for every day – enjoy higher levels of emotional and physical well-being. This wasn’t the first time I’ve heard of the “grateful living concept,” but it was the first time I took it seriously. In the past, I felt gratitude journals were corny and a waste of time.

I started my own gratitude journal in late October and am proud to say I have not missed a day. It has been an insightful exercise with the greatest insight occurring on truly awful days when I am forced to find something positive, usually the little things, rather than dwell on negative events. It is amazing how easy I have found this exercise to be. Once I got started, I keep finding more and more things to be grateful for; many days my list well surpasses five items.

In going through my old journals, I discovered the following list (unfortunately I did not jot down the author) of the benefits of gratitude: 1. People that don’t fixate on material goods eventually cut back on envy and nagging comparisons. 2. Traumatic memories fade into the background for people who are regularly grateful. 3. Troublesome thoughts appear less frequently and with less intensity, which suggest gratitude may enhance emotional healing. 4. Thankfulness helps the brain fully process events. 5. Grateful people achieve closure by making sense of negative events so that they mesh with a generally positive outlook.

I am looking forward to continuing my gratitude journal in 2008.