Monday, September 15, 2008

Short Term / Long Term

Right now, Brenda's employer--Boeing--is dealing with a strike. The Machinist Union is striking on behalf of job security, more or less. Sure, they want their piece of the pie; Last year was an amazing one for Boeing. They earned a record 4.1 billon profit and had 1,413 planes on order, crushing their commercial rival, Airbus. Still, the Union is fighting for the future of their workers, since Boeing is committed to outsourcing. The problem is that Boeing would be headed down the exact same path the auto industry and the airline industry have taken--disaster. To stay at the lead fo the aerospace industry, Boeing has to keep labor costs down and that means outsourcing.

So I understand the situation the Machinists are in. Ultimately, Boeing will reduce it's work force. I'd try to protect my job, too... but I also know the average machinist earns $56,000 per year and has good benefits, including a modest pension program. How many people can earn that kind of income with nothing more than a high school education? Brenda earns around 35% more than that with over seven years of education behind her: her BBA (five-year program, with accounting focus), her MBA (a two year program), and the PMP certification (first half of the Masters in Project Management). She has a nicer work environment--often working virtually, from home--and far more opportunities for advancement, but that's not a big difference in pay considering her qualifications and how many job openings are out there for a skilled person with a finance background.

Boeing is fighting for their future. I'm glad I'm not one of the Machinists, but I don't see a lot of alternative. If Boeing fails to outsource, they'll end up loosing more and more government bids and commercial contracts. Right now, their only commercial competition is Airbus, but I'm certain the emerging industrial countries will compete in the aerospace industry, eventually, just like they are starting to compete in the automotive industry. Companies have to look to the future. Employees should, too. Boeing actually covers 100% of the expense of college courses, all the way up to a Master's degree, regardless of an employee's position in the company and regardless of what they opt to major in. It's an incredible benefit. I happen to have a very good friend who started on the line, installing windows in the planes. She finished a two-year degree, and moved into an administrative job. It was a pay cut, but far less physically demanding with ample room to grow. She then finished her four-year business degree and moved into a professional position, as a business analyst. Last year, she finished her MBA, and has continued to move up the salary grades.

While not everyone is cut out for college, the need for a college education is just a fact of life now. If you graduate from high school and want more than a life of paycheck-to-paycheck subsistence. What other choices are there? A military career probably requires officer training, and that's easier to do through ROTC than enlisting and working your way up. There are some professions that offer middle-class pay, but they require some sort of specialized training, often through vocational schools. There are handfull of very dangerous or difficult jobs that require iron will more than an education, but those are few and far between. In short, success requires some long-term planning, most often in the form of a college education.

The news this morning featured headlines about the Chapter 11 filing of Lehman Brothers and the Bank of America buying (bailing out) Merrill-Lynch. AIG, the largest insurance company in the United States, announced a dramatic plan to sell their assets and bolster capital. It's ugly news... and it's fallout from good old fashioned American stupidity.

People gambled on their homes. They bought homes they couldn't afford, paying only the interest for the first five years and hoping their finances increased enough to afford the rest of their ARMs. It's not surprising. Some point to housing prices, but those prices are driven by what people are willing to pay. If a house costs too much, then rent. It isn't ideal and you're not building equity, but you're not rolling the dice with your financial future, either. The average American household has nearly $10,000 in credit card debt. Yes, this is an average, not the median. 20% of households don't have credit cards at all and another 30% pay off their entire balance monthly, but that still means half of our country lives in perpetual debt... in addition to the expenses of over-priced cars and homes. Whatever the case, it's a rotten situation. Many people borrow from their credit cards and spend many years catching up, spending countless dollars on interest payments.

Brenda and I certainly had our share of debt. Having three children by your early twenties is a sure-fire way to ruin a person's careful plans. It's taboo for a parent to call their children a mistake, but my own children certainly weren't planned. It's not a mystery how they got here, but I wasn't careless, either. Whatever the case, we managed to get through our lean years, and have done pretty well over the last decade--improving our financial standing every year. The last five or six years have definitely been middle class living, despite the fact we rent.

We save money annually, if not every month. We have a healthy saves, about six months of our living expenses. Our only debt is our car payment (which is modest, and two years from being paid off) and Gwen's braces, which should be paid off in short order. Our credit is good (slightly above 750). In short, we're in a good position... but prices in metro Seattle are very high. We're not willing to take out an ARM, betting on a lower cost of living (as the kids move out) and regular increases (annual raises at Boeing, or even a promotion). Probable or not, it would be a gamble. We'll turn that big savings account into a down payment when we're confident we can continue to save a reasonable amount and live with reasonable standards AND still pay our mortgage. Maybe we'll be able to buy in the spring. Maybe we'll have to wait until all three kids graduation, in the summer of 2012. *Shrugs* Whatever the case, we'll plan for as much as we can. It doesn't change the economy, but at least we aren't contributing to the problems.

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