Pocketmint

Okay, I went AWOL on Pocketmint again. I’m sorry, but I’m hoping when you hear why, you’ll forgive me. Around the time of my last post, my whole life took an abrupt left turn … and then just kept going.

Here are (some of) the major developments from the last three months:

1. Jak got a job.

In April, after 15 solid months of unemployment, Jak landed an open-ended full-time contract gig. The change in annual income triggered a decision we’d made last year …

2. Jak and I got legally married.

We’ve been committed life partners for twelve years, but had never brought the state into the equation. Our various personal reasons for not doing so have become less relevant over the years, and I had calculated that with only one income, being legally married would save us around $3000 per year in taxes.

Simultaneously, an even bigger change was under consideration, and by the time we had our tiny wedding ceremony at the end of May …

3. Jak and his ex-wife renegotiated their custody arrangement.

After this summer, Claire (now 14) will see her dad on vacations, for periods of a week to a month, instead of the most recent every-other-weekend arrangement. This meant we were no longer bound to Seattle, and therefore …

4. We decided to move to Mexico at the end of this summer.

We’re mostly following the same plan that we had in mind for 2017 … just moving it up by four years. The main difference is that we have less savings, and are not as far along in building our independent income streams.

But it still seems to make sense to take the plunge now.

• Last winter — the eight months from October to May — was the worst period, psychologically, that I’ve had in over fifteen years. I couldn’t make any progress on writing a book or anything else of long-term use, because day-to-day survival and basic functionality took all the spoons I had. So even though the bank still doesn’t seem to want this house any more than we do, staying here has a cost in economic productivity, as well as in happiness.
• Two years ago I was confident that, whenever the bank got around to foreclosing on our house, we would be able to find an affordable rental despite the hit to our credit rating. But Seattle overcorrected and is now in the middle of a dramatic housing shortage. There aren’t many rentals to be had, for any price.
• Jak’s current job is entirely telecommute — he’s actually contracted to a company in Atlanta. With luck, he’ll be able to keep that job for some time even after we move. That money — and our savings — will go a lot farther in a place with a cheaper cost-of-living.
• Moving away from Seattle before Claire is out of high school adds some expenses, notably increased child support payments and extra airfare for her to visit Jak and vice versa. But we ran the numbers, very conservatively, and determined that even the worst-case Mexico scenario would still be several thousand dollars cheaper per year than the best-case Seattle scenario. That either allows us to sock away more money (if Jak can keep his job) or slows down the rate of our savings burn.

So what have I been doing during my three-month silence? Writing wedding vows and organizing a guerrilla ceremony. Slowly sorting through a four-bedroom houseful of possessions: trying to determine what few things we ought to keep, and jettisoning the rest. Helping Jak with his small press venture — vetting contracts, designing book covers, programming a custom web site. Studying Spanish like crazy. Researching the recent changes to Mexican immigration policy, and trying to make a bajillion arrangements for the impending move.

Some of all this might be interesting for Pocketmint readers — I’d like to tell you about our beautiful and amazingly cheap wedding, for example — if I can just find time to document any of it. I’ll do my best to squeeze some writing in amongst everything else.

What would you most like to hear about?

Among financial bloggers, this has been designated Women’s Money Week. I don’t usually think about finances and economics in a gender-specific ways, but coincidentally, last week I happened to be reading a book called Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.

The author, Helaine Olen, devotes a chapter to the way the financial industry treats women, and reading it left me in a roil of righteous indignation.

In a nutshell, companies have found it profitable to make women feel insecure about their financial acumen so that they can then sell those women financial services and advice. (The book as a whole documents the way most of the financial advice being offered is aimed squarely at making money for the advisor, often to the detriment of the advisee.)

It’s the same strategy that glam mags use: put a Photoshopped celebrity model on the cover, some list of 25 or 50 or 99 ways you can be sexier for your man, plus some diet, skin, and hair tips. They’re not really trying to help you with all that advice; they’re trying to make you worry that you’re not pretty or thin or clear-skinned enough, so that you’ll buy the latest overpriced fashions and ‘beauty products’, advertised in their pages by the thousands.

Likewise, financial companies from banking to insurance have pounced on anything and everything which supports the stereotype of women confused and made helpless by their retirement and investing options. Some even go so far as to imply that women are just inherently less capable of handling finances than men are. You may be a whiz at stretching that grocery budget, ladies, but when it comes to retirement planning you’re in over your head. You need extra help, and hey, we just happen to have a stable of advisors waiting to tell you what to do!

So here, to combat the misinformation, are four destructive myths about women and money.

Myth 1: Women have less money because they overspend

It’s true that women have less money than men. But shopping has absolutely nothing to do with it.

Although women spend more on clothing and personal care, men spend more on nearly everything else. By every measure, in every study I could find, men’s total spending is higher.

When men and women are asked about impulse shopping, women confess to higher levels. But that’s a measure of self-perception, influenced by societal stereotypes, not an actual count of dollars. In fact, women are slightly better savers than men — on average, they save 1–2% more of their income.

The real problem is that women’s incomes are so much smaller to begin with. Women are still paid significantly less than a man with the exact same qualifications for the exact same job. This is true at every level of income, whether you’re waiting tables or running a multinational company.

How much less? One study, which controlled for variables including “college major, occupation, industry, sector, hours worked, workplace flexibility, experience, educational attainment, enrollment status, GPA, institution selectivity, age, race/ethnicity, region, marital status, and number of children,” reported a pay discrepancy of 5% right out of college, growing to 12% a decade later. That’s the income gap that can’t be explained by ‘life choices’ or anything other than simple gender discrimination.

Compound that over forty-plus years of working life and each woman winds up hundreds of thousands of dollars behind her male counterparts. On top of that, women are more likely to take time off to care for children and elderly relatives, reducing their lifetime income still further. On average, working women earn just 77% of what men do.

Biology and social tradition combine to ensure that nearly all single parents are women. Single mothers comprise about four-fifths of our country’s poor. In fact, whether they have children or not, women almost always suffer economically from divorce, while men’s financial situations usually improve after a split.

Finally, women live longer, meaning higher total costs for living expenses and health care. The death of a husband often means a dive into poverty for the surviving widow … because her earning power is less, not because she bought too many shoes.

Myth 2: Women are worse at money management

If you want to find a study to support gender superiority in personal finance, you can take your pick of dozens. But they don’t all point the same direction.

Women have more credit cards; men have more car loans. Women are more likely to carry a balance, but men carry higher dollar amounts and take out more cash advances.

Women make more budgets. Men are more likely to default on their loans and overdraw their bank accounts. The highest amount of credit card debt actually belongs to single men, who are trying to impress women they’re dating. (Apparently they haven’t gotten the memo that most women don’t find debt attractive.)

But all of this is smoke and mirrors. In every case, the difference between the genders is small — three percent here, four percent there. Nowhere is there a compelling case to be made for the superiority of one gender over another when it comes to daily finances. Credit scores don’t show a gender-related difference.

American women do file for bankruptcy significantly more often than men. But that doesn’t reflect a lack of competence, it reflects increased responsibility: the overwhelming majority of bankruptcy filers are single mothers. Seventy percent of single parents are going it entirely alone, without the benefit of child support, and only about ten percent are receiving welfare (TANF) assistance.

So before you go pointing at bankruptcy levels as evidence of women’s poor money skills, consider that the main reason for those bankruptcies is that three in five fathers default in part or in full on their legal child-support payments. Maybe it’s men, not women, who could use a little help on the money management front.

Myth 3: Women don’t plan as well for retirement

In survey after survey, men report higher confidence about their own retirement preparedness than women do — sometimes much higher. When those studies are covered in the media and touted by the financial companies that sponsored them in the first place, it’s typically with the assumption that men are indeed better prepared.

The key mistake here is equating confidence with competence. As Shakespeare put it, “The fool doth think he is wise, but the wise man knows himself to be a fool.” In modern times, this phenomenon is known as the Dunning-Kruger effect: ignorant people overestimate their own competence, whereas informed persons underestimate theirs.

Are men really doing better? In some cases, yes — though not because they’ve done a better job of planning, but simply because they have so much more money to begin with, and shorter lifespans mean less risk of outliving their assets.

But it’s also true that many men only think they’re prepared for retirement. Men tend to overestimate their prospects, while women are simply more realistic … or even underestimate their own capabilities. As one study notes, men already in retirement are enjoying it less than their female counterparts, possibly “because men tend to overestimate their financial preparedness and therefore face a more difficult financial adjustment when they retire.”

Similarly, men are much more likely to believe they know exactly how much income they’ll need in retirement. Again, this is often interpreted as evidence that women are not as adept at financial planning. I submit that maybe it’s because fewer women are so foolish as to think we can predict the future.

Do you think you know where Social Security is going to stand in 25 or 30 years? How about Medicare? Will health care be more affordable in when you’re eighty than it is right now, or less, and by how much? Will you or your partner get cancer? What about Alzheimer’s? Where will you be living in 2035? Will you own a home, or rent? Will inflation be low or high?

Are you exactly where you thought you’d be, doing what you thought twenty years ago you’d do? How many people do you know today working in jobs that no one had conceived of in 1990? Could you have predicted the state of the economy in 2010 … back in 1985?

Unless you’re less than five years from retirement, even the most educated guess could be off by a wide margin. Assuming you know the answers to any of those questions is as misguided as imagining you know what kind of return the stock market is going to provide over the next quarter century.

More evidence that women are more realistic than men: women more often factor health care expenses into their retirement plans. This is a non-trivial consideration: simulations suggest that out-of-pocket medical expenses — after Medicare pays its share — will total between one and three hundred thousand dollars per person after age 65 … assuming Congress doesn’t gut Medicare benefits or push back the eligibility age, in which case the costs will rise.

The typical retirement savings of American households aged 55-64, by contrast, is a mere $120K … not even enough to cover the lowest estimate of health care expenses for two people, much less twenty-plus years of living expenses.

With those numbers, the idea that 45% of men believe they are set for retirement (as one recent survey claims) begins to seem ludicrous. Other studies, where men and women alike are more cautious and the gender difference is only a few percent, are probably more realistic. But in that case, focusing on the gender gap obscures the larger picture: that roughly four in five Americans are not at all confident that they’ll have enough money to retire comfortably … with good reason. And those that are confident mostly shouldn’t be.

Myth 4: Women are less skilled at investing

We’ve already covered that women save more than men do. Turns out they also do more research, hold more diversified investments, and are less likely to trade on impulse — like dumping stocks during a market crash.

In fact, although a majority of women consider themselves ‘beginner’ investors — men tend to think they’re ‘intermediate’ — men’s and women’s portfolios perform equally well. Women aren’t bad investors, they’re just more humble.

But here’s the real kicker: women have higher net investment returns than men. Not because they’re better stock pickers (because that’s a loser’s game), but because they trade a lot less often. Men are more volatile — buying here, selling there — and in the process they rack up a pile of trading fees. Here, again, the culprit is overconfidence; as one scientific study notes, “Psychologists find that in areas such as Žfinance men are more overconfident than women … We find that the average turnover rate of common stocks for men is nearly one and a half times that for women. While both men and women reduce their net returns through trading, men do so by 0.94 percentage points more a year.”

Women are more risk-avoidant than men, on average … probably because they have less money to start with and therefore less of a margin for error. But despite what many advisors would like you to believe, conservative investing is not inherently a losing strategy.

The common wisdom has long been that stocks (which are volatile and risky) return more profits than bonds (which are steadier and safer) over periods measured in decades. Even now, many people will tell you that the only reason to be in bonds is if you intend to cash out within the next five years.

The reason for this advice is historical: the United States financial market had a good long run — over a century — where stocks always outperformed bonds over any thirty-year period you cared to pick. But that was not, as many assumed, an immutable law. It was a function of a unique, unrepeatable macroeconomic circumstance, with hefty contributions from the Industrial Revolution and two world wars.

That particular gravy train came to an end in the early eighties … even though no one would recognize it for decades. Starting in 1981, if you put your money into bonds and waited 30 years, you would be better off than someone who invested in stocks.

Now, that doesn’t mean that bonds will always be the better pick, any more than stocks were always the better pick before. It does put the lie, however, to the idea that women are weaker investors because they take fewer risks. Risk doesn’t guarantee reward, and statistically, women investors are more than holding their own.

… and one sad truth

I would have liked to title this article ‘Five Destructive Myths’. However, it turns out there is one financial area in which men lead women by a wide margin. I’ll explain what that is — and why, and how we can start closing the gap — in my next article.

I’ve waxed philosophical in recent articles, so I thought it was time to offer up something practical. Today I’m going to help you eat surprisingly well on just three to four dollars per day.

First, a few numbers to establish my grocery thrift credibility:

The USDA estimates monthly costs for food at different spending levels. Their December 2012 numbers for our family (adult male, adult female, teen female 25% time) at the cheapest level (the ‘Thrifty Plan’) came to $422, or about $6.30 per person per day. Full food aid benefits for two persons is $367 per month, or about $6.10 each per day.

Those figures apply only to unprepared human food ingredients. Our ‘grocery’ budget, on the other hand, would more accurately be called a ‘necessary consumables’ budget, as it includes everything that gets used up regularly, from lightbulbs to pet food to toilet paper. Nearly all of those things are purchased at the same stores at the same time as our food, so it doesn’t make sense for me to keep track of human food separately. (One of the secrets to successful budgeting: avoid unnecessary complexity!)

So I can’t compare numbers directly. But in December 2012, I spent just $251 on ‘groceries’: food plus all those other things. My average across the last four months is $288. We eat nutritiously and happily for something under $4 per person per day. In fact, most days it’s much less, as that amount covers the occasional splurge — for example, the pound and a half of king crab I served for Valentine’s Day. (That one meal cost about $10 apiece, so you can see it throws off the average.)

Any time you make food at home, you’re almost certainly saving money over eating at a restaurant or getting takeout. But there’s a lot of variation in how people shop and cook, and corresponding differences in the amount of savings.

There are lots of good frugal strategies that you’ve probably heard of before — keeping a stocked pantry and freezer, shopping the sales, buying in bulk and so on. All of those things help. But if you really want to lower your grocery costs, I believe the single most important thing you can learn is how to improvise when cooking.

This one skill gives you the following benefits:

• Nearly zero food waste, because you know how to incorporate perishable odds and ends into a new meal, saving them from the compost heap,
• Exciting culinary diversity, because you can adapt almost any recipe or cuisine on the fly, and
• Rock-bottom budget, because you can buy only what’s on sale and make a tasty meal from nearly any combination of ingredients.

No one taught me how to cook when I was growing up, so as a young adult living on my own for the first time, I approached everything methodically — even timidly — following recipes to the letter. It took me years and years of trial-and-error experimentation before I felt comfortable ‘winging it’.

Fortunately for those of you who’d like to learn improv cooking now, there are easier and faster ways. I’ve compiled a resource list that will help you get started or take your creativity to the next level.

Books

How to Cook Without a Book
How to Cook Without a Book: Meatless Meals

After looking far and wide, I feel confident saying that these are the two best books available for improv cooking beginners. Meatless Meals is more accessible, with plenty of full-color photos and clear layout, and I encourage you to give it a try even if you’re a meat-lover. The original How to Cook Without a Book could benefit from a similar redesign, but the content is broader and still very solid.

In both books Pam Anderson turns the idea of ‘recipe’ upside-down: the ingredient lists for the base recipes include things like ‘a pound of meat’, ‘a pound of vegetables’, and ‘herbs or spices of choice’; the ‘recipe’ part is more about technique than ingredients.

In How to Cook Without a Book, each base recipe is followed by suggestions for adaptation, and then by an assortment of traditional-looking recipes, all of which are variations on the original. HtCWaB: Meatless Meals breaks it down even further, giving you a ‘master formula’ from which to work.

Here, for example, is the master formula for Grain and Legume Salads:

4 cups Cooked Grains and/or Legumes (pick 1 or 2)
3 cups Raw and/or Cooked Vegetables (pick 1 or 2 cooked and 2 or 3 raw)
½ cup Extras (pick 1 or 2; optional)
¼ medium onion or 4 scallions, thinly sliced (about ½ cup)
¼ cup chopped fresh herbs (parsley, cilantro, basil, mint, or a mix)
⅓ cup Dressing (pick 1) or ¼ cup extra virgin olive oil, salt and pepper, and 2 tablespoons vinegar

Then you have a widely varied list of options for each category — in the above recipe, it’s Grains, Legumes, Raw Vegetables, Cooked Vegetables, Optional Extras, and Dressings. Each possible ingredient includes its own prep instructions. Finally, she follows up with a small assortment of her favorite combinations, for inspiration or help with flavor pairings.

Anderson’s books are geared toward flavorful, varied food that is relatively quick and easy. She’s very sensitive to the ‘weeknight dinner problem’ for cooks with day jobs, and while she does draw from different cuisines, there’s a kind of ‘American’ feel to the whole thing, in that ingredients tend to be basic to the average American kitchen/grocery store. She also explains techniques carefully so that even the newest of cooks won’t feel intimidated.

The Improvisational Cook

By contrast, Sally Schneider’s books take a more gourmet approach. Pulling a couple of recipes at random, I see ‘Lentils with Caramelized Radicchio and Pancetta Cracklings’, and ‘Leek “Noodles” with Creme Fraiche and Hazelnut Oil’.

Sally presents a single precise recipe, follows with a section titled ‘Understanding’ that gives some context and guidance, and ends with several ‘Improvisations’, some of which may veer widely from the original — so that ‘Chicken with Root Vegetables in Fragrant Lemongrass Broth’ becomes, in turn, ‘Rabbit Rillettes’ (!) and ‘Guinea Hen with Bacon and Madeira’.

This is not a book that is going to help you figure out what to do in forty-five minutes with the leftover chicken, half a cabbage and three carrots in your fridge. Her comments are conversational, sometimes even rambling — better for reading in your spare time than when you are looking for a particular solution. Where Anderson breaks down the process of improv cooking into clear steps, Schneider is more about teaching by numerous examples, leaving the task of synthesis to the reader. But it is full of fascinating techniques and ideas for the aspiring gourmet cook.

Web Pages

Five Steps to Perfect Pasta Salad

This was my introduction to Pam Anderson’s ‘pick one from column A, two from column B’ method — I stumbled across this page a couple of years ago and have used this formula many times with success.

Great Granola

This is one of my next projects. Jak loves granola, but premade is too expensive.

Basic Soup Improvisation

I listen to Lynne Rossetto Kasper’s Splendid Table nearly every week, and I never stop being amazed at the breadth of her knowledge. Here she offers a soup formula with explanations about which techniques and combinations produce which effects — the sort of gems that it can take hundreds of experiments to discover on one’s own.

How to Improvise a Vegetable Pasta

Lynne gives an example of ‘how do I use up these vegetables’ improv cooking.

Impromptu Savory Bread Puddings

Jak adores sweet bread puddings, so when I heard Lynne mention this one on a show I had to chase down the web page. Haven’t tried it yet, but I will! Good for using up stale bread and bits of vegetables, cheeses, and leftover meats.

Composed Soups – A Guide to Improvising

Another guide to soups, this one from Sally Schneider, has the same gourmet touches as her books but in a format more like Pam Anderson’s.

Are you an improv cook? Do you have any resources or tips to share? Leave a comment below!