Becoming Less Dependent on Money

 
A number of years ago, Mary Beth and I decided to start saving for our future retirement. This was still decades away, but from what everyone was telling us we should start saving as soon as possible. Once we decided to start saving, the question was how much would we have to save to become financially independent? Becoming financially independent is a catch phrase used often to describe the euphoric state of never having to worry about money ever again. Now granted, there are quite a few people today that probably feel confident about their financial status and at present could be categorized as financially independent. But what about the future? No one knows for sure what the world economy will be like 50 years, 25 years, 10 years or 1 year from now.

The majority of the working class today are investing in retirement funds (401k or other) through their employers. Most of these retirement funds are vested in the stock market. And if you look back at the history of the stock market, your money would double time and time again over the years. But who's to say that the stock market will continue to repeat itself? No one knows for sure and your savings are not insured. It's a giant crap shoot that the American public is playing.

The intent of this page is not to tell you where to invest your savings but rather how to reduce the need for money.  Although it is quite difficult, if not impossible to eliminate our need for money completely there are certainly ways to reduce our dependency on money.

What steps are necessary to reduce the need for money?

I. Start by changing your money mindset.
This is by far the hardest thing to do. From the time of birth, our daily lives are filled with materialistic messages. Our ancestors were hunters and gatherers. Those instincts are still with us today. We hunt to gather BARGAINS! Our society's mindset is based on consumption of material goods. And if that wasn't bad enough, success is measured by it. How many people do you know that say "Boy, they're really doing well for themselves, they just bought a new Lexus". What you'll never hear is "Boy, they are really doing well for themselves, they just saved thousands of dollars by buying a good old used pickup truck". If you do not participate in this game, you are considered by most to be a failure and an outcast!

Regardless of the perception, it is important to put a stake in the ground and go forward with determination. At first it is very difficult to change habits. Start by making small changes. Take your lunch instead of buying lunch, buy food in bulk or plant a small vegetable garden. Reduce your energy bill by adjusting your thermostat or buy a thermostat that can be programmed. Turn the lights off in rooms after you leave them, buy energy saving light bulbs, or run the air conditioner less. Just by doing a few things a little at a time will get you to start thinking about how money is wasted. And you will find that everything that you do to reduce your dependency on money will have a very liberating effect.

II. Reduce Consumption
Especially here in the United States we are a throw away society. Instead of reusing or repairing, we just consume more and throw used things away. Start by becoming aware of what it is that you are buying and ask yourself "Do I really need this or just want this?". Become aware of every action that you take and consider the implications of your actions.

Reducing consumption has many positive attributes:

   1. It reduces pollution. Every time we throw things away it ends up in a dump heap somewhere and takes up space for hundreds or thousands of years and worse yet, it damages the environment. Use items until they cannot be used anymore, then try to find another use for them and after that, then finally pitch it.

   2. It saves natural resources. Contrary to most people's beliefs, there is not an infinite supply of resources on this planet. Reducing consumption helps save the planet's precious resources.

   3. It reduces space. Which came first the bigger house or more clutter? It's amazing how people will buy bigger homes and storage sheds just to contain their "gatherings" from their "hunts". Reducing clutter reduces the need for expensive storage. 

   4. It frees up your time. The more possessions one has, the more time is required to maintain and use those possessions. Time has a value to it. The less "stuff" you have, the more time you will have to do the things in life that are truly meaningful.

   5. It saves money. If you've got any debt this is a great way to help reduce it to zero. Only buy the necessities instead of niceties. Getting out of debt should be the top priority.

Self-Sufficiency and Basic Needs

Food, water, clothing, warmth, shelter and our health are the main ingredients. These are the things in life that truly matter. The rest of what we strive for is pure fluff. Focus on what you can do to become as self-sufficient as possible as it relates to the basic needs. Don't run out to the store to buy food that you can easily grow on your own. For example, by growing your own garden you can greatly reduce your need to purchase food and you'll eat healthier for it too. And don't forget to save seeds from the best of the garden. (Make sure the vegetables that you grow are not hybrids.) Cut and chop your own fire wood to heat your house. Use clothes until they wear out, not just because they've gone out of style.

On the other end of the spectrum, take into full consideration what you are attempting to do on your own. For example, it may not be worth the time, monetary investment and labor to raise a herd of sheep just to knit a pair of wool socks. Research all aspects of your ideas on how to become more self-sufficient before leaping into it.

The end result of being as self-sufficient as possible of the basic needs will greatly reduce your reliance upon money. If you can get out of debt and own your own home and reduce your dependency upon the need to buy necessities you'll be in much better shape to weather any "storms" in the future.

Things you can't Control

Before you go out a quit your job, lets look at what you can't control when it comes to money:

   1. Health Benefits - This is a personal preference for those that are homesteading, but we live in a society that depends on health insurance to pay the bills otherwise you could lose everything that you have worked for. Having medical insurance gives you a safety net in case of illness or injury. If either you or your spouse decides to work a regular job, make sure to get a job with health insurance coverage for both you and your spouse. It's one of the least expensive ways to obtain health insurance. Some homesteaders do not carry insurance due to the added costs. The choice is yours. Just be sure to think things through regarding health insurance for you and your family and the implications of not having health insurance.

   2. Taxes - The only thing certain in life is death and taxes. Real estate tax will always be there and there's not much you can do about it. You will need some form of income to pay for taxes. And then of course, you might get taxed on your income. Make sure you know what your tax liabilities are and always be prepared for increases. In most cases, if you move out to the country, your tax liabilities will be considerably lower.

   3. Necessary Tools - Vehicles, tractors, tillers, generators, power tools, etc. are all personal choices that we must make. There will always be some form of monetary dependency on buying tools. Although we can reduce are monetary consumption on these items, it would be very difficult if not impossible to reduce this to near zero. Be especially aware that anything motorized will always need some TLC and will eventually need major repairs.

   4. Maintenance - Even if you can supply all of the labor to fix everything that breaks on your homestead, you'll still need parts and equipment to fix it in the first place. Be prepared to spend the money necessary to help maintain your homestead. On the good side, remember that your labor will greatly reduce the cost of your repairs.

   5. Up-Front Costs - If you raise your own crops or decide on raising livestock, your going to have to make an investment up front to get the operation going. Once things are in place, hopefully (if you've done your homework) you'll be able to self-sustain the operation by either selling off surplus or bartering goods.

This page has just scratched the surface of becoming less dependent on money. There are some really good books that can give a much better information on this subject. Here are a few of my favorites:

• Back to Basics: A Complete Guide to Traditional Skills, Third Edition -- Abigail R. Gehring (Editor)

• Self-Sufficient Life and How to Live It -- John Seymour

• Storey's Basic Country Skills -- John and Martha Storey

• When Technology Fails: A Manual for Self-Reliance, Sustainability, and Surviving the Long Emergency -- Matthew Stein
  

SELF-SUFFICIENCY DEFINED

Self-sufficiency by definition is a state in which someone or something can self-sustain oneself without using outside resources. If you take that statement literally, it is impossible to obtain. Each and every living creature on this planet is dependant upon outside resources in order to survive. For instance, all animals need food to live. Most animals (excluding humans and the animals we feed) hunt and gather food as they did thousands if not millions of years ago. The majority of humans on the other hand, rely on others to produce food. We are no longer hunters and the gatherers, but rather consumers. This interdependency for the most part works. Most people buy their food instead of foraging for food themselves. Of course, buying food means that we must have money. And in order to have money, most of us need a job.  Thus starts the vicious circle that has gotten most of us removed from the basics of being self-sufficient.

Besides food, we need other things too - water, shelter and warmth. Again, most people today rely on outside resources to provide these things. People get their water from a faucet, live in a mortgaged home or apartment and rely on heat from an electric or gas utility company. So what does being self-sufficient mean in today's society?

We can be self-sufficient by using our own physical and mental skills to produce food, shelter and warmth in order to sustain one's own existence. It means not relying on others for things that you can do yourself. It is a way of life that reduces our dependency on external resources in order to live. Self-sufficiency for most homesteaders means rekindling the skills once commonly used by past generations: growing, raising and preserving food, making and repairing tools, cutting and drying firewood, mending and/or making clothes and even building a house or a barn.

This is by no means an easy feat. It requires a ton of self-discipline and a determination not found in most people. Especially in today's society where over the years we have grown accustom to depending upon others to provide for our basic needs. As technology makes life "easier", we move further and further away from the basics and lose the skills that once sustained us.

What is gained by self-sufficiency? A greater sense of freedom and greater control of one's life. You will also eat healthier knowing what went into growing and raising your own food. You will reduce your dependency on money and reduce your need to work a stressful, 60 hour per week (or more!) job. Instead of paying a repairman to fix something, you take pride in fixing it yourself.

How self-sufficient one becomes is entirely a personal decision. There are plenty of things to consider and weigh. It is up to each of us to determine how self-sufficient to become.

The following is information from a farmer who grows and packages

carrots for IGA, METRO, LOBLAWS, etc.

The small cocktail (baby) carrots you buy in small plastic bags are made

using the larger crooked or deformed carrots which are put through a

machine which cuts and shapes them into cocktail carrots . Most people

probably know this already.

What you may not know and should know is the following: once the carrots

are cut and shaped into cocktail carrots they are dipped in a solution

of water and chlorine in order to preserve them (this is the same

chlorine used your pool) since they do not have their skin or natural

protective covering, they give the m a higher dose of chlorine.

You will notice that once you keep these carrots in your refrigerator

for a few days, a white covering will form on the carrots, this is the

chlorine which resurfaces. At what cost do we put our health at risk to

have esthetically pleasing vegetables which are practically plastic?

We do hope that this information can be passed on to as many people as

possible in the hopes of informing them where these carrots come from

and how they are processed. Chlorine is a very well known carcinogen.

Please let us make this information available to as many people as

possible. If you care about your family and friends, pass it on.

Despite being buried in Health 2.0 work, somehow I’ve been managing to read a few books lately. But none of them have been quite as staggering as Free Lunch, the latest from former NY Times investigative reporter David Cay Johnston.

Johnston’s best known for his exhaustive investigation into how corporations and very very rich individuals subvert the tax code so that they pay less, while the rest of us pay more. But in this book (probably because he’s no longer a NY Times Reporter and is off the leash of restraint that the Grey Lady seems to put on its reporters) he gets almost biblical in calling out the cheats, crooks and murderers.

And when I say murderers, Johnston is talking about John Snow, Bush’s former treasury secretary — yup the one who did such a great job regulating the sub-prime mortgage market that the potential for a credit and housing collapse in the latter part of this decade was avoided…oh, wait….

 A few months ago, the MA Division of Health Care Finance and Policy (DHCFP) released a study that showed that mandated health insurance benefits cost insurance purchasers about $1.3 billion - or 12% of their premiums - each year. Thanks to DHCFP for publishing the study. This issue is always the source of heated debate, and it’s nice to have a piece included on it that tries to inform the discussion.

Business people read the study and said, “Ah ha! Mandates cost a lot of money!” That would be correct. Health care advocates read the study and said, “Ah ha! Mandates don’t cost that much money!” That’s correct too - sort of.  As usual, where you stand depends on where you sit, how much twelve percent is worth to you for what you’re getting, and who pays the bill.

It’s also hard to tell if this kind of reporting influences the policy debate in MA or not. People here are screaming about the rising cost of health care, and the legislature responded by focusing on and enacting a cost containment bill.  But at the same time, the legislature considered many new mandates during its last legislative session, including significantly expanding the mental health benefit mandate for kids and adults.  Many in the legislature would argue - correctly - that the final bills that passed didn’t expand the benefit as broadly as many advocates would have liked, thereby significantly limiting the increase in costs associated with the new coverage requirements. Again, I think this is mostly a philosophical argument about how much is enough - and one that on the margin is hard to calculate.

Health Affairs ran a couple of partisan analyses last week. Joseph Antos, of AEI, Gail Wilensky, former Bush 41 HCFA administrator, and Hans Kuttner labeled the Obama plan as excessive tax and spend socialized gulag regulation.

In the other analysis, four liberal academic wonks -- Thomas Buchmueller, Sherry A. Glied, Anne Royalty, and Katherine Swartz -- derided the McCain plan as the counter-productive ravings of a right wing nutjob. OK so they didn’t exactly say that, but you get the message. No surprises here.

The McCain plan is so far out of the mainstream that, when Bush proposed something very similar in 2006, he could not even get it introduced into a Republican-controlled Congress. Obama's plan is a wishwashy centrist Democrat plan that doesn’t even pretend to get to real universal coverage and ignores the fact that the vast majority of Democrats prefer a straight single-payer plan (and so does he when scratched hard!).

So who does Health Affairs chooses to create a middling compromise between these two?

It chooses Mark Pauly, the only leading academic health economist among the Ivy League elite who’s a paid up member of the right-wing free-marketeer club. Here’s what I wrote about Pauly in a much longer article about Malcolm Gladwell a while back:

He makes a lot of the influence of Mark Pauly. Pauly is a complete idiot respected health economist at Wharton, who earnestly believes both that the individual market works well for 80% of the people forced to be in it and is therefore OK, and that the reason we spend so much money on health care in America is a result of the fact that the rest of our economy is so dang efficient. (Both in serious studies published in Health Affairs -- I shit you not). And his article on moral hazard is supposed to be the most influential ever published in the health policy literature, and that's why the right has bought into it.

Since then there’s been a Health Affairs article where Pauly—sitting in his risk-free tenured position at U Penn with great group health insurance—provided data that showed that the individual private insurance market was egregious and discriminatory in the way it did its risk pooling. But he essentially declared that private insurers were OK because if they were any good at their jobs they could have been even more egregious and discriminatory in their risk pooling!

Of course in reality he missed the behavior of health plans in that individual market place where they showed themselves to be very good at being discriminatory by retroactively kicking out individuals who were poor risks. Luckily for the rest of us Lisa Girion was paying attention.

So now Pauly is the moderate in the middle? That defies belief, but it’s worth taking a cursory look at what he’s says. He of course dismisses single payer, and sets up a fake dismissal of a counter-weight which forces everyone moves to HDHPs and HSAs—even McCain isn’t crazy enough to suggest that (especially not after last week!).

The bit that I find most interesting is when he attacks Obama for advocating pay or play—and for his desire to keep employer-base health insurance around. Now (along with Maggie Mahar channeling Uwe Rhienhardt) I’m no fan of employer-based health insurance, but Pauly’s reasoning reminds me of another smackdown I issued a while back. He says:

There is considerable confusion (from an economic perspective) among policymakers, employers, and workers about how employer-sponsored insurance really works. The economic analysis of employment-based benefits is as clear in economic theory and empirical work as it is muddled in the public debate: theory and econometric studies both say that workers pay for the majority of health insurance costs, through lower money wages as well as through explicit premiums.

SNIP

The Obama plan, in contrast, generally seems to view employer payments as do many employers: as the employer's money, which would otherwise become part of profits if it were not paid out for health insurance.

SNIP

In the tragic paradox of health reform (as illustrated most recently in Massachusetts), substantive employer mandates kindle fierce employer opposition, even though, according to economics, employers are not the major stakeholders but are primarily conduits for payment for workers' health insurance.

This is bunk.

In Paulyworld any time a union wants to increase health benefits, the employer happily does it and correspondingly reduces wages. In Paulyworld the proportion of corporate income extracted for profit and returned to shareholders (and executives) is constant.

In reality Wall Street will tell you that the proportion of revenues going to corporate profits increased dramatically in the early to mid 2000s while the share allocated to employees’ wages fell. Of course that’s the continuation of a pattern where real wages for the vast majority of Americans have fallen over the past 30 years while corporate profits (and the “wages” for those that own corporations) have dramatically increased. The proportion of profits to revenue matters because it dramatically impacts stock prices, and stock prices determine how senior corporate executives and shareholders get paid. So for Pauly to tell you this doesn’t matter is just not true. Which is why in the real world disputes over wages and health care benefits are such a big issue.

Pauly and the other theoretical economists (including the one I ripped a few years back) will tell you that this allocation will sort itself out in the long run. I’ll just remind him of what a rather greater economist said about how we’d do in the long run.

Give him his due, Pauly does say one sensible thing about the politics of McCain’s proposal to remove tax deductibility on health benefits. The Democrats are rightfully calling that a tax increase on some people (not that I’m opposed to that!)

The most obvious problem is the questionable political attractiveness of a proposal to abolish a popular upper-middle-class tax loophole, one that delivers more than $200 billion a year in avoided taxes, primarily to higher-wage Americans. It might be preferable to begin by capping the exclusion with a cap that does not grow as fast as premiums, and thus gradually withdrawing the subsidy

Funnily enough that was how Maggie Thatcher got rid of mortgage tax deductibility in the UK. But when comparing the segmentation strategy that McCain envisages, or the closer-to-universal pooling concept of Obama, it’s not hard to guess where Pauly ends up.

My judgment is that community rating is inferior to the combination of guaranteed renewability and high-risk pools, assuming the latter could be subsidized sufficiently, with financing from general revenue taxation, but that the Obama-proposed coverage of high risks through what is effectively free reinsurance also has merit. Some combination of all three desirable features might be best.

<Sigh…>

Perhaps a compromise would have guaranteed renewability for people renewing coverage, while new buyers from a given insurer (whether coming from group insurance or uninsurance) would face three corridors, depending on how much risk differs from average: a corridor where risk rating would be permitted for people of moderately-above-average risk, a corridor where community rating would forbid further premium increases, and a corridor where much higher risks are referred to a well-subsidized high-risk pool.

This needs serious parsing. Pauly’s basically OK trusting segmentation “corridors” in a separate-but-equal mode where the really sick are going to be sent off to risk pools. We know two things about those risk pools.

1. As set up currently they do not work and provide incredibly expensive limited coverage to far fewer people than need them.
2. There is no proposal in the McCain campaign (or it seems in the Pauly doctrine) for how to change that fact

It will also be important to ensure that regulation intended to limit risk segmentation not be used as a subterfuge to disqualify less generous plans that special interests (provider groups, public health advocates) do not like

Now Pauly finally he says something I can agree with. We should indeed be cautious about the ability of providers to gouge the system—after all they’ve had 43+ years  practice at it.

Unfortunately Pauly neglects to notice that those nations which have succeeded in avoiding the “generosity” of the public’s largesse to the heath care system to the extent we’ve seen in the US, have done it precisely because they use one integrated risk pool, or a very close approximation of the same thing (e.g. in Holland). That pooling prevents those more advantaged from cutting those “separate but equal” groups adrift in their leaking lifeboats—as happens in programs for the poor here (to wit Medicaid). That’s why Ted Kennedy is so determined to keep everyone in Medicare, and that’s why the rest of the world believes in some variant of single pooling.

But to be fair, anyone reading the name of the author here would know what we were going to get and would know that it would not be a sensible proposal, but instead a “compromise” twisted by Pauly’s peculiar view of the health insurance system. At best we would we might have expected a “lets’ report both sides” story similar to what most media outlets do — even though one side is clearly operating on the fringes of both political and economic reality (and that’s not to say Obama is that much better).

The real question is why Health Affairs chose Pauly, rather than a sensible middle of the road academic, to write what could have been an important piece?