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The Urban Institute has issued a report stating the Millennial generation will have the lowest rates of marriage by age 40 than any previous generation. The report contemplates a variety of reasons for this shift, including a reduced role of marriage in a family household and the effects of the latest recession. But what does this mean for the financial future of today’s young mostly-singles?

Marriage certainly affects a couple’s finances. In many states in this country, certain effects are unavoidable by law. Nine states have community property laws, and in those states any money earned by either spouse or any property purchased bought by either spouse from money earned, if that money was earned while married, is owned equally by both spouses. But as a whole, this law doesn’t change the financial situation of the couple. If between two people cohabiting, the combined annual income is $150,000, that’s the case whether they’re married or not, whether they combine their bank accounts or not.

There may be some subtle differences. A non-married couple may need to buy separate health insurance, despite the fact that more frequently, employers consider non-married couples “domestic partnerships” and cover a domestic partner, regardless of the sex of the partner. Yet, if a partner is not covered automatically, health insurance for the family could be more expensive.

That, in itself, does not seem a strong enough reason for a researcher to make this argument, as she does in a news article about the Urban Institute’s report:

“The evidence shows that getting married increases wealth and income,” said Pamela Smock, a sociology professor at the University of Michigan.

Why would the act of getting married cause an increase of wealth and income? It may be true that wealthier people and those with higher incomes are more likely to get married in the first place, but that’s not what this researcher is saying. She is saying that marriage, independent of all other variables, not only correlates to higher wealth and income, but is a direct cause. I looked at the researcher’s list of recent publications, and did not see any articles or books focusing on wealth and income, those she has researched cohabitation extensively.

Marriage has a detrimental effect on an individual’s long-term wealth, and here are some of the more obvious reasons.

Couples who get married are more likely to have weddings. Weddings can be, but aren’t always, expensive events. Even otherwise frugal people are driven to spend more money than they could to make a memory for themselves and their families that matches the dreams they’ve had. Even with the best do-it-yourself wedding efforts, couples find weddings to be significant expenses that take resources away from other priorities, and in the worst case, pile onto already unmanageable debt.

A couple that decides not to get married can certainly opt to hold a ceremony to celebrate their togetherness, bringing friends and family together for a joyous occasion, but many do not. And if a lack of financial resources is one of the reasons to indefinitely delay a wedding, it wouldn’t make sense to hold a similar celebration for cohabitation.

I see nothing wrong with weddings, but I’d just like to encourage people to continue to think about their future financial security while planning them.

Couples who get married are more likely to have children. More and more, I’m seeing friends and family and their spouses opt to skip having children, and this reflects a national trend. And it must be related to what I’ve already mentioned in this article — as fewer Millennials get married before age 40, fewer choose to have children, even though there has been an increase of children born to couples who are not married.

Children are wonderful, and that’s what you’ll discover if you have children or if you ask any parent (who’s not dealing with a temper tantrum at that particular moment). But that doesn’t change the fact that children are expensive. The cost to raise a child to the age of eighteen can be $200,000 or more — and for most middle-class Americans, that’s going to be a gross understatement. Add any kind of prevalent developmental disability, like autism, and that total will skyrocket. And double your estimate if you plan to have two children.

Is it our duty to populate the world? Well, according to some beliefs, it is. But the choice to have children has a direct, measurable effect on the financial situation of a couple over the long-term, and it’s not positive. That’s not to say it’s a bad decision to have children; not all decisions in life rely on the financial outcome. In fact, the same people who propose the value of an education should be based solely on the return on investment seem to forget their dedication to that approach when you ask them whether their children have provided them with a good ROI.

Couples who get married are more likely to get divorced. This, and the other points above, should be obvious. No marriage means no possibility for divorce, and divorces are notoriously devastating for a couple’s finances, particularly when a couple has gotten into the habit of having only one adult bringing in an income. Add a child (or two or seven) to the mix, and a divorce can drive individuals to bankruptcy.

Unmarried households may be more transient, less permanent, but that doesn’t hold true for every couple. But overall, without marriage and an intertwining of finances, unraveling a relationship doesn’t have to mean there are any devastating financial consequences. There are fewer arguments over property, because all has always been owned by one partner or the other.

Where is the evidence that marriage increases wealth and income?

One potential reason a marriage might increase wealth and income is because of its status as a rite of passage. Despite changing society, many people feel that marriage is a necessary marker along life’s path, one that indicates a move towards an important stage of adulthood. And marriage, as well as having children, forces people to grow up. Maturing as an adult also means taking a more considered approach towards family finances. The stakes in a marriage are higher. You have more people to take care of, officially, and thus you are inclined to work harder at providing for your family.

And other people see this. It’s reflected in the attitude that one displays, consciously or not. Married men are more likely to get raises, promotions, and job offers, but married women are less likely to be awarded the same. Although society is changing, in married couples, men are more likely to have a job than women. These statistics play out in such a way that being married is good for a family’s economy.

This doesn’t necessarily mean that marriage automatically makes a man be more employable or have a higher earning potential; it could be that some men are both more likely to get married and more likely to be more employable, with some other variable having the biggest influence. But studies have shown that all other things being equal, if a supervisor infers that a man is married, he is more likely to be chosen for a positive career decision than if there is no inference.

In order to claim that getting married increases wealth and income, this employment bias would need to override the financial detriments listed above. Here’s how survivorship bias plays into this study, and will help make it seem like marriage is in fact better for a family’s wealth and income: couples who are divorced and remain so, and are therefore no longer married, disappear from the statistics. In other words, all the financial devastation brought on by divorce is missing from the data. This filter allows an interpretation that could be far from the truth. Even though most people getting divorced do in fact remarry, that marriage might occur after divorce-related financial problems, making that second marriage appear to be a good financial move.

Like any other research pertaining to families and finances, we all want vindication that we’ve made good choices. So it’s somewhat natural for married people to seek out data that validates the idea that marriage is a good financial move. College graduates want to believe that attending college (and attending their specific type of college, whether it’s Ivy League or a community college) was a good idea. We all seek out confirmation that the choices we make are good.

The path not traveled will always remain a hypothetical, though. Let’s all feel good about our choices, because there’s always the possibility that life and finances would have been much worse had the decision been different.

If you are or were married, has your marriage definitely resulted in more wealth and income? Whether or not you’re married, has the prospect for a better financial life influenced your decision?

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I grew up in competition. It was a part of my life, all over the place. And sometimes competition moved me to push my self far, motivating me to be excellent, and in other cases, competition broke down my will to excel. An individual reacts to competition different depending on the psychological factors, the situation, and how past competitions have played out. Because competition is everywhere in the world, particularly in a career or a quest for financial independence — not to mention just meeting personal goals one might set for oneself — look for ways to make competition work towards a positive outcome.

I wrote recently about one particular competitive experience. When I first began learning to play a musical instrument in school, we were seated by our perceived abilities. I was last in the row, worst clarinetist in the class. And I didn’t enjoy playing music for school, even though I had been musical at home. The following year, my family moved to a new location and a new school, and at this new school, I had a head start because my classmates were just beginning to pick up their instruments. Suddenly I was at the head of the class. And just as suddenly, I loved playing music again.

Year after year through high school, I continued playing, and continued working hard to stay the best. I was the “first chair,” and constantly faced challenges from friends who wanted to take my seat. To keep my position, I had to practice hard and stay focused on being the best. I eventually decided to study music education in college. Had I stayed in my first elementary school, it’s unlikely I’d ever pursue music as a career.

Competition was a main theme for me in high school. Another example happens to be related to music as well; our marching band competed with other similar marching bands from other schools throughout the northeast. Not every teacher agrees that competition of this type is useful in an educational setting. But competition exists in the real world, and learning how to deal with competition as a teenager might be a good way to prepare. We compete for jobs, we compete for money, we compete for recognition, and as is coming more clear to me with social media like Facebook, we compete to have admirable lives among our friends.

In the marching band world, competition was tightly controlled. One group competed against another only if they were similar in terms of size. Today, there are even more guidelines for appropriate competition — not only is size a factor, but so is funding, so a hundred-member band with twenty staff members available to focus on separate aspects of the performance doesn’t compete directly with a hundred-member band making do with only two teachers who have to do everything on their own.

Competition presents some challenges, in work and in life.

But when we compare ourselves to other people, we are often unaware of advantages, whether they are our own or of others. I can’t think of a time when I competed directly with a coworker for a promotion, but this happens all the time. And when faced with competition like this, some people shut down and give up, others rise to the occasion. If you tend to get motivated by competition in work situations, are you also using competition in social situations to motivate you?

Facebook recently conducted a social experiment on its users (without their knowledge but with the consent that comes in the form of agreeing to a contract when you sign up for an account). The news feed showed mostly positive status updates to some users and mostly negative updates to some users, and saw that users’ own moods (as measured by additional status updates) were affected by the tone of the updates they saw. On top of this, Facebook is a chance for people to market themselves to their friends and to feel good about themselves. Thus, people tend to share personal good news more often than bad news. People are more likely to use Facebook to tell the world “I got the promotion!” or “I got engaged!” when appropriate, but when a situation would call for announcing “She turned me down for a date!” or “I failed the bar!” chances are you won’t see it.

All of this makes it difficult to live up to the implied social competition. Even without Facebook, it looks like everyone’s life is better than yours. That’s only because you primarily about the good things that happens in someone’s life, while you still experience bad things even if you don’t share them with your extended group of friends.

Make competition work for you in your career.

You compete for a new job, you compete for recognition with your work, and you compete when you own a business. Without good experiences with competition in the past, there is a good chance that taking the easy way out is safer emotionally.

Steal a technique from video games. When you play a video game that’s based on progressing through a series of levels, you start out easy. You’re able to overcome initial obstacles, and as your abilities improve, you are able to face tougher challenges. The game takes you through a series of levels, training as you go to handle difficulties. You don’t get thrown to the wolves on your initial attempt.

In real life, you may not be able to choose your competition. But you can set your expectations so they match your abilities. I wouldn’t think I’d be able to compete for a first-chair position at the New York Philharmonic without first being the best clarinetist at my university (and I wasn’t). I wouldn’t think I’d be able to compete for a job in charge of a non-profit with someone who has been leading non-profits for thirty years — but I could take a different approach and start my own.

It also helps to keep a larger goal — or a mission — in mind. You may not always be recognized for your hard work, whether the recognition comes in the form of a promotion, a salary increase, an award, or even just getting a job. But if you’re doing what you need to be doing, you’re improving yourself whether other people see it or not. It can be demotivating when you constantly perform competitively and others seem to refuse to recognize how well you are doing. There are many reasons why people are rewarded for their actions, and sometimes it has nothing to do with your particular performance.

Don’t take other people’s achievements personally.

The competition to have the best life is one you can never win. If you’re feeling pressure from other people’s successes you read about on Facebook, and it’s affecting your emotions negatively, either stop reading Facebook or keep in mind that everyone who shares anything personal is automatically biased. Everyone wants to project a favorable appearance.

Not everything has to be a competition. You don’t have to be the first person among your friends to reach an important life milestone. You don’t have to show off everything that you’re happy about. People live their lives at different speeds and have different goals. You shouldn’t live your life based on anyone else’s personal achievements.

Stop comparing yourself and your life to others, and I guarantee you’ll be happier and better able to focus on achieving your own goals, whether in your career or in your life. If you’re focusing more on yourself, you’ll be able to see competition for what it is: something healthy that can spur you to move forward.

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Over the next year, Microsoft’s executive management plans to lay off 18,000 employees, including factory workers and those in professional positions.

Redundancy. As Microsoft acquired new companies, at least according to the news reports that tend to take a company’s press release and spokesperson responses at face value, they have the potential to take advantage of consolidated businesses. For example, when two companies merge, there may be no need to carry the legal team from one of the companies. The resulting larger company can probably function just as well with one legal team. Administrative departments can be merged and reduced.

There’s good advice out there about avoiding lay-offs. Make yourself indispensable to your company by working harder than everyone around you, gaining more knowledge about the organization, being involved in the corporation at a deeper level than what’s expected. But as good as that advice sounds, events like these — Microsoft’s decision to eliminate 14 percent of its workforce — are good reminders that you can do everything right, follow all the advice, and schmooze your bosses sufficiently, and still have your position end up on the cutting room floor.

Some time ago, I wrote about several signs you’re about to lose your job. These signs are all related either to your behavior or the behavior of people around you. But I didn’t mention factors that have little correlation to you or your performance. As 12,500 of the Microsoft 18,000 are seeing, simply being in a successful company, one that gets acquired by or merged with another, can signal a round of layoffs is on the horizon.

For the small business owner and employees who work in start-ups in today’s feverish start-up economy, it pays to be aware of this.

If your company has been acquired by another, one of the first things you want to do is start looking for a new job. Even when two companies that are roughly similar merge, there is a shift in culture. And that could be experienced not just by the acquired company, but by employees who work for the purchasing company as well. Changes like these shake up the employees and the management, and your routine may change. It could feel like working for a different company, not the one where you’ve been employed for a certain amount of time.

There’s something to be said for being able to adapt to a new culture. Many who do are able to eventually feel comfortable in a changed environment, and many of these with the fortitude to adapt will see themselves succeed at the new, combined organization. But you could still adapt perfectly without being immune to redundancy-based layoffs. Sometimes there’s just nothing you can do.

If your department looks like it could be combined with an existing department due to a merger or acquisition, if your role is potentially duplicated elsewhere in the company, or if you’re otherwise affected by a combination even if just culturally, start brushing up your résumé and looking for a new job. Don’t wait for the pink slip to begin your search.

You might feel that you’d rather be laid off and receive a severance package than quit right away, but if you do find a new opportunity that matches the culture you expect and is a good enough offer, there’s little reason to wait around. In fact, you can use an expected severance package in your current job as part as your negotiation tactic if you find a new job ready and willing to hire you.

At the same time, if you have the capacity, it’s always good to spend some time focusing on the potential for starting your own business. Years ago I wouldn’t have even suggested this. After all, most attempts at entrepreneurship fail and people who attempt to open small businesses often return to the traditional workforce. But starting up does work for some people, especially those who have high stakes and are motivated to keep trying. Sometimes, like I’ve found, you never know that you have the potential for business ownership until it just happens.

When this website was acquired by a large company a few years ago, I agreed to be an employee for the purchasing company, continuing to edit the site, work on related projects, and help the company achieve some of its stated goals based on my expertise. But before long, the company included me in a round of sweeping lay-offs, and it took me by surprised because the company had no other person to do the work I was doing.

I shouldn’t have been surprised. I still consult for that company today, as evidenced by my continued presence as editor here, but in a much more reduced role. It actually worked out better for me because it has freed me to do other things I want to do much sooner than I would have been able to do them otherwise. But as safe as I thought I was after being engulfed by the company, no one is ever safe. There’s probably nothing I could have done, no better performance I could have attained, no better networking with the decision-makers I could have done, no self-help book I could have read and internalized that would have changed the outcome. I’m pretty sure I still came out of the arrangement as the “winner,” but that doesn’t particularly matter.

Layoffs can happen to anyone, anytime, and the probability is heightened following mergers and acquisitions, regardless of which side of the deal any particular employee happens to be on. Like Robin Williams said to Matt Damon in the Academy Award-winning Good Will Hunting, it’s not your fault. Well, sometimes it is, but with a massive round of layoffs like the one planned by Microsoft, often it isn’t.

People who have survived a large round of layoffs will happily tell you their secret: the skills they have, the attitude they project, or the corporate political games they play that allowed them to pass through unscathed. I would ignore most of that, because there’s a great chance that many people who have done the same still saw their positions eliminated. There’s a tendency to think that two things are causally related just because they happen around the same time. In this case, those two things are an employee’s behavior and the avoidance of a lay-off round. But when companies make decisions like these, the bulk of the decision making doesn’t take anything like this into account.

In fact, if anything else, the decision is purely financial. Given two people in a redundant role, the winner will probably be the employee who costs the company less. And costing the company less is something that good employees rarely do because they’ve often successfully warranted and negotiated better-than-average compensation.

Have you been affected by a large round of layoffs at a company? What were your experiences?

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The Organisation for Economic Co-operation and Development (OECD) recently conducted a study, presenting a financial literacy test to fifteen-year-olds around the world, and has now published the group’s findings. The sample included 29,000 teens from eighteen countries (or, in the case of Belgium and China, two communities, Flemish and Shanghai). The test is designed to determine financial literacy and capability, with questions pertaining to income, taxes, borrowing, and money management.

Results show that only ten percent of the students taking the test can handle complex financial tasks. The results go much deeper, and show, like other studies before, that socioeconomic status of a community correlates strongly to financial literacy. While news outlets will certainly play up the international competitiveness — “Chinese teens are more financially capable than American teens,” for example — some of these differences disappear when taking socioeconomic opportunity into account.

In the case of China, the only city included in the survey was Shanghai, while the sample from the United States should be representative of the entire country. Even within the United States, financial literacy is biased towards economic opportunity, more than performance in other areas. The test results indicate that the strength of the correlation between socioeconomic status and financial literacy was stronger than the correlation to mathematics performance. That means that the performance gap between the wealthy and poor is wide, and the community-reinforced setbacks are harder to overcome in financial literacy than they would be in other subject areas.

Comparing the United States with the other countries studied, fifteen-year-olds in the United States are less likely to hold a bank account than the average. That is what is illustrated by the chart above.

In general, performance in math is correlated to performance in financial literacy, but that may be due to the types of questions asked in the test. Money is math, as the questions illustrate. But the design of a test can subtly benefit some cultures over others.

The skills addressed in the test, reading an invoice, basic investment knowledge and chart comprehension, reading a paystub, and a high-level evaluation of a loan offer, are all important skills from our perspective — a middle-class head of household with a job. And designing a test around these competencies shows that these are the financial skills we value.

It’s not clear whether the five financial literacy questions available online constitute the entire test given to the fifteen-year-olds in the study, but I would think it’s hard to draw conclusions from these data alone. Perhaps they measure something like “suitability for living a financially middle-class life,” which I think is something we tend to mistake for “financial literacy.”

At fifteen years of age, I’m pretty sure I’d have been able to deduce the correct answers to the questions in this test, but I didn’t have a bank account. I didn’t even have a joint bank account with my parents yet. I think I was sixteen when that day came. And when that day came, that’s when I was introduced to bank accounts.

Had I been required to take a class in elementary school about balancing a checkbook, I expect that information would not have helped me much. Anything I needed to know about the difference between gross pay and net pay would become clear with my first paycheck from Radio Shack, the first company clever enough to hire me. Unfortunately, or perhaps just differentially, many teenagers throughout the United States and the world will never see a paystub. Even among those who do work for a living, there is a vast cash-only economic society.

Who is the Organisation for Economic Co-operation and Development?

Here’s the organization’s mission statement:

The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.

The forerunner of the organization was founded in 1948 to run the Marshall Plan, using United States resources to help Europe rebuild its countries after World War Two. In the 1960s, the organization expanded in size and scope.

The OECD is funded by its member countries, with the United States leading the way by providing financial support for 21.2 percent of the organization’s budget. There doesn’t seem to be much corporate or capitalist interests, but the organization does have partnerships with the Business and Industry Advisory Committee and the Trade Union Advisory Committee. Unlike most financial literacy proponents and advocates, this mission does not seem to be spearheaded by the financial industry, who has their own goals in mind.

Is financial literacy education the answer?

The organization reviewed the data collected from the financial literacy study (which was only one part of the test) and is offering several recommendations or observations. All revolve around the recommendation that all countries provide better access to financial education to its students. According to the OECD, access to education is how countries will overcome gaps due to socioeconomic deficiencies.

Countries seek to improve financial literacy skills among students through various approaches. Some incorporate specific financial literacy content into the curriculum, either by identifying how it fits within existing subjects within the curriculum or – less frequently – by creating a stand-alone subject; others focus on helping students to develop a deeper understanding of mathematics concepts. As dedicated financial literacy approaches are relatively new (where they exist), the PISA 2012 financial literacy assessment cannot provide conclusive evidence on which of these strategies, or what combination of them, yields superior outcomes in financial literacy. The next PISA survey of financial literacy, scheduled for 2015, should provide further insights for policy.

Yet, the report does admit that incorporating financial education into school curricula is still inconclusive (although there have been studies showing that financial literacy courses are actually detrimental to long-term financial capability). Perhaps more research is needed.

Also, the organization does recognize that dealing with financial issues involves more than just cognitive processes; it’s important to be able to manage emotional and psychological factors. Students who are more inclined towards perseverance, problem solving, and having parents involved with education are perhaps more likely to succeed financially over the long-term, according to the report’s recommendations. Once again, these traits are going to naturally be more common within communities or households that are distinctly middle-class; see any article I’ve written over the past few years that deals with Maslow’s Hierarchy of Needs, survival mode, the urgency matrix, or realities of poverty to understand why.

Are there any other options?

For a few years, I’ve been thinking about what I’d like to do after inevitably moving on from Consumerism Commentary. Regulars readers are mostly aware that I sold this website a few years ago, although I’ve continued to manage it and serve as the editor and chief (and for the most part, only) writer. There is no pre-determined amount of time for which I’m obligated to stay, but I enjoy the audience here, and I’ve seen how difficult it is to start a new website from scratch and have fans continue to the new site.

In the last year, I’ve done some initial research into starting a non-profit organization with a mission similar to what financial literacy advocates are going for — and similar to the mission of Consumerism Commentary. (Readers should be aware of the mission, and I try to keep that mission in mind when I write, choose guests to appear on the podcast, and otherwise make day-to-day editorial decisions.) I have some interesting ideas, based on lots of reading about financial education and community-based projects that have been proven to change lives for the better, about how an organization could meet goals related to the mission more successfully than financial education (or at least more successfully that financial education alone).

At the same time, the prospect of spending the rest of my life fundraising (begging for money) and being the public face of an organization and missing (I prefer not to be the center of attention) are not ways of living my life that I would look forward to. So this plan is on hold, at least in the form of a non-profit organization under my leadership.

The least I can do is discuss some of these ideas more, and maybe that is the first step towards building something (else) with the potential of changing lives for the better.

Read more about OECD’s findings.

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If All Investments Are Expensive, Where Can You Invest?

by Luke Landes
Dinosaurs

Neil Irwin at the New York Times points out that all asset classes around the world are expensive compared to their historical prices. If that’s the case, is there any investment class available that has the potential to provide great returns over the long-term? Stocks and bonds; emerging markets and advanced economies; urban office towers ... Continue reading this article…

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If You Don’t Like Your Job, Get Another One

by Luke Landes
Fluffy Clouds

This “duh” advice is handed out frequently, but it may not be applicable to everyone who hears it.

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Grow Your Dough Throwdown: Second Quarter Results

by Luke Landes
Grow Your Dough Throwdown

Here’s my latest Grow Your Dough Throwodwn update as well as some information about the companies I’m investing in.

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What Is the Best Savings Rate?

by Luke Landes
Piggy Bank via Flickr

People like rules of thumb and quick answers. When a complicated question can be answered by an authority with a simple response, the reaction is likely to be one of two possibilities: a feeling of well-being and satisfaction if the questioner is meeting the requirements, or motivation to improve if the ideal situation is not ... Continue reading this article…

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Self-Proclaimed Experts and Other Potential Bad Choices

by Luke Landes
Expert [via Flickr]

Who do you know that calls himself or herself an expert in order to gain customers? Should you avoid people who market themselves aggressively in this fashion?

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Naked With Cash: Betsey S, May 2014

by Luke Landes
Betsey - Naked With Cash 2014

Betsey S presents her latest financial reports and analysis for Naked With Cash.

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