cost of living http://www.wisebread.com/taxonomy/term/8175/all en-US Don't Choose These 10 Cities If You Want to Retire Comfortably http://www.wisebread.com/dont-choose-these-10-cities-if-you-want-to-retire-comfortably <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-choose-these-10-cities-if-you-want-to-retire-comfortably" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/washington dc.jpg" alt="washington dc" title="washington dc" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Retirement is a time to enjoy hobbies, move a little slower in daily life, travel, and after decades of hard work, just rest. All of which is tough if you pick the wrong retirement city. (See also: <a href="http://www.wisebread.com/10-unexpected-things-you-should-consider-when-picking-where-you-retire?ref=seealso">10 Unexpected Things You Should Consider When Picking Where You Retire</a>)</p> <p>When looking at locations, you'll generally want to weigh six categories: cost of living, housing costs, taxes, the health care system, activities for seniors, and, yes, the weather. And with those in mind, you'll likely want to steer clear of these 10 cities that fall short in one or two or more of those categories.</p> <h2>1. San Francisco, CA</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/golden%20gate%20bridge.jpg" /></p> <p>The weather is very mild &mdash; it doesn't get hot in the summer and winters are usually rainy. However, the cost of housing in this area is so high that most retirees are not going to be able to find it within their budget. Retirement income is taxed heavily in the state of California, unlike many other states. The cost of living is also very high. In fact, Kiplinger ranked <a href="http://www.kiplinger.com/slideshow/retirement/T006-S001-worst-states-for-retirement/index.html">California as the worst state to retire</a>.</p> <h2>2. Honolulu, HI</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/honolulu.jpg" /></p> <p>While the location is beautiful and the weather gorgeous year round, Honolulu will require you to have quite a large nest egg. According to a recent <a href="http://wallethub.com/edu/best-places-to-retire/6165/">study done by WalletHub</a>, cost of living in the city are among the highest in the country. It's also very expensive to travel to and from Hawaii, making family gatherings more difficult.</p> <h2>3. Oklahoma City, OK</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/oklahoma%20city.jpg" /></p> <p>Healthcare is a concern for all seniors, and it will be a real concern if you retire to Oklahoma, which ranks among one of <a href="http://nhqrnet.ahrq.gov/inhqrdr/Oklahoma/snapshot/summary/All_Measures/All_Topics">the worst in the country for health care</a> (trailed only by West Virginia). Crime is also a problem here, with the city <a href="http://os.cqpress.com/citycrime/2013/2014_CityCrimeRankingsbyPopulation.pdf">ranking 7th in the nation</a> for crime among large cities.</p> <h2>4. Louisville, KY</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/louisville.jpg" /></p> <p>The low cost of living, modest housing costs, and picturesque mountains may make it appear to be a good choice for retirement, but Louisville has been named as the &quot;<a href="http://www.aafa.org/pdfs/FINAL_public_LIST_Spring_2014.pdf">worst place for allergy sufferers to live</a>,&quot; making it an easy destination to avoid by retirees with respiratory or other health issues.</p> <h2>5. Bridgeport, CT</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/bridgeport.jpg" /></p> <p>High taxes are a major concern for retirees, and some states tax retirement income much more than other states. (Florida's low rate is what makes it one of the most desirable states for retirees, for example.) But Connecticut is one of those states that taxes both Social Security and pension income. Bridgeport, more specifically, has expensive housing costs and even more expensive health care costs. Assisted living facilities in this area of the country can charge over over $400 a day &mdash; <a href="https://www.genworth.com/cost-of-care/landing.html">almost twice the national average</a> for long-term care, which will deplete your nest egg very quickly should you require assistance at some point.</p> <h2>6. New York, NY</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/new%20york%20city.jpg" /></p> <p>The Big Apple requires a big budget, as real estate is pricey and hard to afford on a fixed income. By taking your current retirement budget and adjusting it to the high cost of living for any of the more popular parts of NYC <a href="http://money.cnn.com/calculator/pf/cost-of-living/">via this calculator</a>, you can see that the real estate isn't the only thing that will cost you. Even retirees who own their own homes will feel the pinch of higher utility bills and transportation fees.</p> <h2>7. Chicago, IL</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/chicago.jpg" /></p> <p>Illinois as a whole gets a low approval rating from its own residents, with one in four saying <a href="http://www.gallup.com/poll/168653/montanans-alaskans-say-states-among-top-places-live.aspx">the state is the worst place to live</a>. Why? It could possibly be because of the high income tax hikes and lower bond rates, both signs of a troubled economy. Add in the fact that many Chicago residents have decided to leave the city altogether, making Chi-town the <a href="http://www.forbes.com/pictures/mli45lmhg/4-chicago-ill/">6th most-abandoned large city</a> in the U.S. and it's a less appealing option to live out the rest of your years.</p> <h2>8. Philadelphia, PA</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/philadelphia.jpg" /></p> <p>While it's not as expensive to live in as New York City, there are some issues that may keep the 65 and older crowd away from the city of brotherly love. A higher-than-average sales tax and poor air quality may be of concern to retirees. Throw in the <a href="http://os.cqpress.com/citycrime/2013/2014_CityCrimeRankingsbyPopulation.pdf">high rate of crime</a> (it ranks 5th nationwide), and you have a few good reasons to shop around for your retirement abode.</p> <h2>9. Washington, D.C.</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/washington%20dc.jpg" /></p> <p>In addition to brutally cold winters, economics continues to be a problem for our nation's capital, with the numbers of those under the <a href="http://www.dcfpi.org/poverty-rates-remain-high-for-some-groups-of-dc-residents">poverty line increasing</a> &mdash; despite a rise in median income. With seniors living on a fixed income, the high cost of real estate can also cause concern.</p> <h2>10. Providence, RI</h2> <p><img width="605" height="340" alt="" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/providence.jpg" /></p> <p>Across numerous rating scales out there, Providence almost always appears at the top of the worst lists. This is due to a high cost of living, high tax rates, and one of the highest unemployment rates in the nation (currently at a rate of 10% for the city and <a href="http://www.providencejournal.com/business/content/20141124-r.i.-unemployment-rate-again-3rd-worst-in-nation.ece">3rd highest</a> for the entire state.) If you are hoping to supplement your income or kill some boredom during your retired years, finding a part-time job in Providence may be impossible.</p> <p><em>Where are you planning to retire?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/linsey-knerl">Linsey Knerl</a> of <a href="http://www.wisebread.com/dont-choose-these-10-cities-if-you-want-to-retire-comfortably">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/book-review-work-less-live-more">Book review: Work Less, Live More</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/x-exciting-world-cities-you-can-afford-to-retire-in">4 Exciting World Cities You Can Afford to Retire In</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-five-types-of-people-who-never-retire-are-you-one-of-them">The Five Types of People Who Never Retire (Are You One of Them?)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-money-should-a-ceo-make">How much money should a CEO make?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Retirement cost of living places to retire retire retirement cities where to live Thu, 04 Dec 2014 11:00:07 +0000 Linsey Knerl 1263679 at http://www.wisebread.com The Buy-Nothing Lifestyle: Lessons from a Frugal Experiment http://www.wisebread.com/the-buy-nothing-lifestyle-lessons-from-a-frugal-experiment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-buy-nothing-lifestyle-lessons-from-a-frugal-experiment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000009438271Smallcr.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Could you be ready for a lower-cost lifestyle? During the start of the year, many people resolve to make positive changes in their lives. They usually take on the goal to lose weight or to reduce their debt. But what about the &quot;no buy&quot; lifestyle? This sounds pretty extreme or somewhat absurd, but there are people who seem up to the challenge.</p> <p>For instance, there's David Hochman, who was able to get through a whole month without spending beyond $100. In fact, his entire family was part of this frugal experiment. Their rules were simple: Other than the bare essentials, like fresh milk and fruit, the Hochman family would do its best not to buy anything.</p> <p>While this sounds like a pretty extreme way of cutting costs, realize that this was just an experiment to determine how feasible it was to live on very little. (Although <a href="http://www.wisebread.com/ready-for-extreme-saving-money-saving-advice-for-an-extreme-economy">extreme saving</a> is somewhat of a sport for some people.) David Hochman's<a href="http://www.rd.com/home-garden/hochman-family-cuts-spending/article99718.html"> <em>Reader's Digest</em> narration</a> of his family's adventures reveals he learned quite a few things, among them:</p> <ol> <li>Their cupboards had a LOT of food that got them through the month. David's most priceless find: a can of black beans.<br /> &nbsp;</li> <li>The free food samples at Costco helped them get by with less.&nbsp;<br /> &nbsp;</li> <li>They could score some free stuff by answering surveys from sites&nbsp;like MySurvey.com.<br /> &nbsp;</li> <li>A plumbing emergency could actually be solved by a shot of dishwashing liquid poured into boiling water and poured down a drain that was threatening to regurgitate sewage.<br /> &nbsp;</li> <li>There are generous people out there who are willing to give useful things away. For instance, someone offered a free 52-inch plasma TV on Craigslist. (Well, the benefactor just didn't want his ex-wife to get the TV during their divorce proceedings, but that's another story.)</li> </ol> <p>Towards the end of their frugal-living adventure, David and his family found it more and more difficult to keep things together. The pressure of sticking to this financial challenge was starting to affect their relationships, leading to frayed nerves. By the end of the month, they were bickering, feeling irritable and stressed out. Clearly, there is a downside to radical savings methods and forcing ourselves to adapt to very stringent, limited budgets.</p> <p>On the other hand, there were also a lot of valuable lessons learned from this experience. Things turned out differently for David once the experiment was over. He had expected his family to return to its previous spending habits, but they didn't. Instead, David's family members stayed close to home and learned how to keep their frugal habits in place. Their experience with extreme frugal living allowed David and his family to realize that they could live on much less and to appreciate the things that they already have. By these measures, this experiment was a success.</p> <p>David recalled a rich person once telling him, &quot;Money is important only if you don't have any.&quot; Indeed, that can be a bit of a paradox: Most of us actually have so much, but it's a pity that we don't always appreciate the things we already have.</p> <p>For more examples of extreme savings challenges, check out this <a href="http://www.myfoxtwincities.com/dpp/buzz/Cheap-Chick-Extreme-Savings-Challenge-nov-9-2010">list of one-year challenges</a> that other folks have embarked on. Here's a look at a few of them:</p> <ul> <li><a href="http://groups.yahoo.com/group/thecompact/">The Compact</a> is a group of people from San Francisco who've made the commitment not to buy anything new for an entire year.<br /> &nbsp;</li> <li><a href="http://www.thegreatamericanappareldiet.com/">The Great American Apparel Diet</a> is an ongoing pledge you can make that involves not buying any new clothes for a year.<br /> &nbsp;</li> <li>What about promising to skip on dining out and entertainment for a year? Check out this blog called noteatingoutinny.com/.</li> </ul> <p><em>So how about you? Could you possibly learn to live on much less?</em>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> of <a href="http://www.wisebread.com/the-buy-nothing-lifestyle-lessons-from-a-frugal-experiment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dreams-you-wont-achieve-unless-you-live-below-your-means">5 Dreams You Won&#039;t Achieve Unless You Live Below Your Means</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-non-members-can-get-at-costco-including-cheap-eye-exams">7 Things Non-Members Can Get at Costco (Including Cheap Eye Exams!)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-things-you-should-buy-at-costco">15 Things You Should Buy at Costco</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-end-of-the-energizer-bunny-six-products-that-dont-need-batteries">The end of the Energizer bunny: SIX products that don&#039;t need batteries.</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-little-luxuries-that-go-a-long-way">8 Little Luxuries That Go a Long Way</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Lifestyle Shopping cost of living costco food pantry living well spending less Thu, 27 Jan 2011 13:00:11 +0000 Silicon Valley Blogger 469561 at http://www.wisebread.com How to Minimize the Cost of Living When Moving: The Cost of Living Myth http://www.wisebread.com/how-to-minimize-the-cost-of-living-when-moving-the-cost-of-living-myth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-minimize-the-cost-of-living-when-moving-the-cost-of-living-myth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/1451038457_e9f2a06106.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><em>&ldquo;You&rsquo;re crazy. I can&rsquo;t afford to move there &mdash; the cost of living is way too high.&rdquo;</em></p> <p>When looking for jobs in new markets people correctly investigate the cost of living. Cost of living is an important consideration when moving to a new location. Nevertheless, there are many false assumptions regarding the cost of living differences.</p> <p>People falsely assume the cost of living calculator is infallible. While there are many sites that can give you some of those numbers, you should realize those numbers only represents a static mathematical equation. Your purchases, habits, and product usage will not be static. Therefore, you can reduce the cost of living expenses incurred by moving to a new city</p> <p><strong>The cost of living myth is that you cannot afford to move to certain cities unless you make &ldquo;x&rdquo; number of dollars.&nbsp;</strong>This simply is not true.</p> <p>I have experienced a lot of moves in my adult life. This post did not evolve out of some theoretical concepts. They are practical experiences. I have lived in three countries internationally and four different states. My conclusion is this: <strong>cost of living differences can be dealt with by lifestyle adjustments not <em>just</em> income adjustments.</strong></p> <h3>The Ice Cream Factor: Buy Less of What Costs More</h3> <p>Two liters of ice cream in my hometown (Alotau, Papua New Guinea) starts at $7.00 and goes as high as $11.00. While living in the States, we could buy the same amount of ice cream for $3. The static mathematical reality is that ice cream costs two to three times more. However, the practical reality is that we have adjusted how often we buy ice cream &mdash; less. Therefore, we now spend $7.00 per month instead of $9.00, for three containers of ice cream. Total difference = spend $2.00 less per month on ice cream.</p> <p><strong>You can minimize the impact of a cost of living change by buying more expensive items less frequently.</strong></p> <h3>The Fruit Factor: Buy Local Alternatives</h3> <p>There are certain North American fruits we cannot find. There are, however, things like apples that are available in our stores. Those items are shipped in from either Australia or New Zealand. Because they come in from overseas we pay around .50-.75 cents per apple. However, we have found fruits like Pomello (similar to grapefruit) that only cost .30 cents during harvesting season. So instead of spending .50 cents on apples, we buy pomellos for .30 cents.</p> <p><strong>You can minimize the impact of a cost of living change by buying local alternatives or items in season.</strong></p> <h3>The House Factor: Downsize</h3> <p>Housing is probably one of the most discussed parts of the cost of living. A four bedroom house is $150,000 here and $200,000 there. Yet, there are still ways to make the move if you wish. Perhaps instead of buying a four bedroom house you purchase a two bedroom house. Yes, you are not getting the same amount of house, but you are still only paying $150,000 for a house. You might even consider buying a house that has an unfinished basement or something that allows you to improve in the future.</p> <p><strong>You can minimize the impact of a cost of living change by downsizing and reducing your expectations.</strong></p> <h3>The Transportation Factor: Minimize</h3> <p>Trucks (necessary due to the number of pot holes) cost a lot to maintain where I live overseas. Unleaded gasoline costs around $7 per gallon. Still, you can get around this buy buying cars that are older than you might typically buy. Furthermore, as you explore transportation alternatives you might find that your new location has a very good public transportation system. We pay .36 cents to ride the bus anywhere in town. I know many people who live in Asia who don&rsquo;t buy a car or truck, but who purchase a scooter instead.</p> <p><strong>You can minimize the impact of a cost of living change by minimizing your vehicle usage or exploring cheaper local transportation alternatives.</strong></p> <h3>The Vacation Factor: Enjoy New Sites and Sounds</h3> <p>If you have just moved to a new city for at least that year (and probably more), you can enjoy the destinations within driving distance of your new home. Perhaps you are moving from Utah to Florida. Take a vacation to the beach and you will save on airfare and other travel expenses. Perhaps you moved from Florida to Utah. Take advantage of some great camping destinations or skiing in the winter. When looking for something fun, look locally before thinking about heading out of town.</p> <p><strong>You can minimize the impact of a cost of living change by vacationing in and around your new home.</strong></p> <p>Can you afford to move to a city with a higher cost of living?</p> <p>I hope when thinking about a future move, you won&rsquo;t just accept the cost of living myth. Ask yourself, &ldquo;will it really cost that much more?&rdquo; &ldquo;Is there anything I can do to reduce the cost of living impact?&rdquo; For example, when living overseas you will need to explore the cheapest ways to exchange foreign currency. When it comes to making your moving decision don&rsquo;t just get online and let a website tell you if you can afford to move. The calculator is static, but you must be willing to adapt, to be flexible, and to be financially resourceful. Ultimately, you can make up for a lot of cost of living changes simply by life style changes.</p> <p><em>What are your experiences with moving? What was the cost of living impact?</em></p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Craig Ford, author of <em>Money Wisdom From Proverbs</em>. Read more from Craig on his blog, Money Help For Christians.</p> <ul> <li>Why Do People Keep Making Bad Money Choices?</li> <li>88 Best Personal Finance Books: As Recommended by Personal Finance Bloggers</li> <li>Five Ways to Save Time on Your Budget</li> </ul> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/craig-ford">Craig Ford</a> of <a href="http://www.wisebread.com/how-to-minimize-the-cost-of-living-when-moving-the-cost-of-living-myth">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/roll-your-own-cost-of-living-index">Roll your own cost-of-living index</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-financial-lessons-we-learn-from-our-grandparents">10 Financial Lessons We Learn From Our Grandparents</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/51-uses-for-coca-cola-the-ultimate-list">51 Uses for Coca-Cola – the Ultimate List</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-surprising-true-source-of-wealth-creation-that-you-probably-already-have">The Surprising True Source of Wealth Creation (That You Probably Already Have)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-financial-trick-lets-you-buy-happiness">This One Financial Trick Lets You Buy Happiness</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living cost of living moving costs Fri, 11 Dec 2009 15:00:12 +0000 Craig Ford 3951 at http://www.wisebread.com How much money should a CEO make? http://www.wisebread.com/how-much-money-should-a-ceo-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-much-money-should-a-ceo-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/fatcat.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Ah, to be the head of a large American corporation... can you imagine what <a href="http://www.ips-dc.org/reports/070829-executiveexcess.pdf">life must be like at the top</a>?&nbsp;</p> <ul> <li>In 2007, the CEOs of large U.S. companies&nbsp;were paid in one day what the average US worker makes in an entire year. With an average pay of $10.8 million annually, over 364 times the pay of the average American worker. (Looking at median pay, however, brings the pay ratio closer to <a href="http://assets.opencrs.com/rpts/RL33935_20070322.pdf">179 to 1</a>.)</li> <li>CEO pay has increased 45% in the past ten years. Contrast this with the fact that the federal minimum wage increase, which just went into effect, gives bottom-rung workers roughly 7% less money, in real terms, than they were making a decade ago.</li> </ul> <p>Is this fair? Is it just?</p> <p>I myself am ambivalent on the issue. On one hand, in a capitalist society, there really isn't any limit to how much money a person can earn, technically. And there are many cases in which the CEO of a company actually conceived of and founded the company - shouldn't such an individual have the right to make oodles of money from his or her ideas? After all, some of the biggest companies in the world were started in someone's garage or home office.</p> <p>On the other hand, many of the CEOs at big US corporations did not build the company from the ground up. They might be immensely talented individuals, but do they deserve to be paid over $10 million a year, to say nothing of stock options, and perks like use of the company's jet?</p> <p>What about poorly performing CEOs? And severance packages? How much should companies pay a CEO to leave? According to the Kellogg School of business, leaving a company can be as lucrative as heading it up. Look at the severance packages for the following ex-CEOs:</p> <ul> <li>Robert Nardelli (Home Depot) - $210 million</li> <li>Michael Ovitz (Disney)&nbsp;- $140 million</li> <li>Stephen Hilbert (Conseco)&nbsp;- $72 million</li> <li>Carly Fiorina (Hewlett-Packard) - $21 million</li> </ul> <p>Is this money well-spent? Anyone who runs a small business in middle America would tell you that it doesn't seem logical to give more money to someone who is performing poorly just to make them go away. Can you imagine firing, say, someone who works for your home cleaning business because they've done a terrible job, and offering them several thousand dollars to never work for you again?</p> <p>There are a number of economic factors that play into these scenarios, usually involving risk and&nbsp;stock volatility&nbsp;(a good but oddly apologetic article on the issue can be found <a href="http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/are_large_ceo_severance_packages_justified">here</a>). Compensation packages are often meant to help protect the reputation of a departing CEO. According to the Kellogg School, &quot;Research also suggests that companies offer incoming CEOs a greater amount of ex-ante severance pay when requesting a confidentiality agreement.&quot;</p> <p>I'm trying to fathom what this really means. As someone who has signed countless confidentiality agreements without ever getting access to the coporate jet, what gives CEOs the impression that their discretion can be bought? When Fiorina left HP, her compensation package included &quot;financial counseling&quot;. What kind of counseling do you need when you're walking away with $21 million? <em>Put it mostly in savings?</em></p> <p>Publicly-traded companies are run by corporate boards who&nbsp;determine&nbsp;a CEO's pay and benefits. Board members are usually experienced leaders from other large corporations whose expertise is called upon. However, many corporate boards comprise members whose individual goals often include becoming CEOs of major US firms themselves, so it is in their interest to provide lucrative (or excessive) compensation packages to the chief executive officer.</p> <p>This has raised the question as to who, exactly, should decide how much a CEO makes? What if a company's employees had the right to vote on a compensation package for their leaders? Should a company's shareholders have a binding vote? Should there be a cap on how much an individual can earn?</p> <p>I have no easy answers, but the question has been weighing on my mind as of late. What do you think?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-karim">Andrea Karim</a> of <a href="http://www.wisebread.com/how-much-money-should-a-ceo-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-negotiate-higher-pay-at-your-next-new-job">How to Negotiate Higher Pay at Your Next New Job</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-besides-salary-to-negotiate-at-work">10 Things Besides Salary to Negotiate at Work</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-important-signs-that-your-job-sucks">10 Important Signs That Your Job Sucks</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-simple-steps-to-discovering-your-true-salary-potential">6 Simple Steps to Discovering Your True Salary Potential</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-job-sectors-where-wages-are-growing">7 Job Sectors Where Wages Are Growing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income CEO companies cost of living Fortune 500 pay pay raise pay scale salary Fri, 08 Aug 2008 17:47:04 +0000 Andrea Karim 2301 at http://www.wisebread.com Roll your own cost-of-living index http://www.wisebread.com/roll-your-own-cost-of-living-index <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/roll-your-own-cost-of-living-index" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/expensive-water.jpg" alt="High-priced water" title="Expensive Water" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>If you have a budget--more specifically, if you track your spending--you have the data you need to track changes in your own personal cost of living. That&#39;s a lot more useful than the Bureau of Labor Statistics <a href="http://www.bls.gov/cpi/">Consumer Price Index</a> (although people on Social Security, or with a lot of money invested in <a href="/tips-and-i-bonds">inflation-indexed treasury bonds</a>, care about the CPI too). It&#39;s not so easy to turn your data into a number, though. In fact, you&#39;ll face a lot of the same problems the government does.</p> <p>The first thing to do is to think about what you&#39;re really trying to get at. If all you wanted to know was your cost of living, you could calculate that pretty easily. If you&#39;re tracking your spending, it&#39;s right there--the sum of all your spending. Even if you&#39;re not, you can come pretty close: Add up all your income, subtract out any money that went into savings or investments, and the difference is, more or less, what you spent.</p> <p>Usually, though, you&#39;re trying to figure out something slightly more subtle. What you want to know is, am I getting ahead, or am I falling behind? Am I spending more because my standard of living has gone up, or am I spending more because the money is worth less?</p> <p>In some cases, it&#39;s easy to decide. If you stayed in the same apartment, and your rent went up by 3%, that&#39;s probably almost all higher cost of living. (The exception would be if the apartment had been improved in some way, such as by swapping our your old refrigerator for a new energy-efficient model.)</p> <p>In other cases, it can take thoughtful consideration and some careful calculation. Suppose your grocery bill is up by 7%. There&#39;s almost no way to know what that means in terms of your cost of living, unless you&#39;ve kept accurate notes about things like how often you ate out and how often you fed other people. A 7% increase in your grocery bill could amount to a drop in your cost of living if you cooked one extra meal a week instead of eating out. It would be a huge drop if you went from feeding two people to feeding three with only a 7% increase in cost.</p> <p>Basically, you&#39;re running into the same problems the government does. It calculates the CPI based on a standard &quot;basket&quot; of goods and services. That allows them to avoid the household size issues, but it has plenty of its own problems.</p> <h2>What goes in the basket?</h2> <p>Simply for practical reasons, the CPI price basket can&#39;t include everything anyone might buy. Government economists pick a basket with a reasonable number of items, trying to pick things that a good indicators of a whole class of items. </p> <p>One classic issue is &quot;substitution&quot;--as items become more expensive, consumers buy less of that and more of something that&#39;s cheaper. If the basket were to simply follow what people buy, it would miss some of the rise in the cost of living. On the other hand, if something that used to be a standard item (let&#39;s say, hardwood molding, cut in a particular scallop pattern), is kept in the basket even after it becomes a speciality item, the price changes in that item reflect other things than changes in the cost of living.</p> <p>The government has economists and bureaucrats trying to balance those trends. You have the advantage of being able to look at what you actually spend.</p> <h2>What&#39;s the price?</h2> <p>There are plenty of items that are always on sale, in some form. At many stores, for example, there is always one brand of soda on sale, always one brand of premium orange juice on sale, etc. Consumers who are price sensitive--and consumers who plan ahead and stock up--can always buy the one that&#39;s on sale. CPI data, though, is for specific items and is gathered at a specific time. Sale prices probably average out over time, but they may not, and they definitely introduce noise into the system.</p> <p>There&#39;s also the issue of changes in where people shop. How much of the CPI should be based on the prices at WalMart, and how much should be based on the price at the little hardware store downtown?</p> <p>Again, you don&#39;t have to worry about these issues, because you can calculate your personal CPI on what you actually spend, where you actually spend it.</p> <h2>Other issues</h2> <p>There are plenty of other issues that keep it from being a trivial exercise to calculate your own personal cost-of-living index.</p> <p>Boundary cases--If some years you pay a bill in late December and other times you pay it in early January, you&#39;ll have some years that you don&#39;t pay it and other years that you pay it twice. That doesn&#39;t mean your cost of living is bouncing around.</p> <p>Major purchases--If you bought an expensive flat-screen TV last year, but didn&#39;t buy another one this year, your &quot;household goods&quot; category might show a 50% drop, but it&#39;s hard to say just what that means in terms of your cost of living.</p> <p>Gifts--What you pay for gifts that you give is probably part of your cost of living, but it&#39;s harder to decide how to handle gifts that you receive. </p> <h2>Worth doing</h2> <p>In the greater scheme of things, though, it almost doesn&#39;t matter how you decide to handle these sorts of special cases, because the results will be useful in any case.</p> <p>If you go through the exercise, you&#39;ll definitely learn some things. If you just go with your overall impression, as opposed to actually cranking the numbers, it&#39;s easy to over-emphasize changes in the prices that are highly visible (gasoline, for example). Contrariwise, you&#39;re likely to under-emphasize price changes in things that seem to be bargains (even if it&#39;s still cheap, a 15% increase in the price of peanut butter is a 15% increase).</p> <p>The Bureau of Labor Statistics released their consumer price index today. It was up 0.2% last month, up 3.5% from a year ago.</p> <p>If any of you calculate the change in your cost of living, I&#39;d be very interested to hear what numbers you come up with.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/roll-your-own-cost-of-living-index">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/watch-out-for-surge-in-cpi">Watch Out for Surge in CPI</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oh-noes-inflation">Oh noes! Inflation!</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-surprising-true-source-of-wealth-creation-that-you-probably-already-have">The Surprising True Source of Wealth Creation (That You Probably Already Have)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-savings-mistakes-even-smart-people-make">8 Savings Mistakes Even Smart People Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/eight-natural-ways-to-make-water-more-flavorful">Eight Natural Ways to Make Water More Flavorful</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Frugal Living cost of living cpi inflation Thu, 15 Nov 2007 20:38:06 +0000 Philip Brewer 1393 at http://www.wisebread.com