Entries from July 2008 ↓

I have only two cousins because of the one child policy. My older cousin is named Yang and he is three days older than me. Before I left China, we were sort of like twins and played with each other quite often. Last year, he finished his masters in wireless engineering in Nanjing and recently my mom told me that he got a job as an wireless engineer in Shanghai that pays about 5000 yuan a month. I thought that was great news because jobs in China are very difficult to find for young people since there are just too many college graduates. Then my mom started to name all the things she thought were negative about this job because it is her duty as a Chinese mom to report all the bad things in a gossip session.

First of all she said that my cousin is paying over 1000 yuan to rent a small apartment in the city of Shanghai even though he is only paid 5000 yuan. Second, the company he works for does not provide job security. They fire anyone at anytime they please, and some employees have committed suicide because of long work hours. Third, she said that my aunt told her that it is impossible for Yang to afford to buy a place in Shanghai on his salary. I pretty much laughed at this and said, “you think my life is so different?” When I just graduated, I was paid exactly 5000 dollars a month, and I also had living expenses of nearly 1000 a month. If I lived alone I would also have paid rent of over 1000 dollars a month. So on the expenses front, the difference between my cousin and I is that one of us uses dollar and one of us uses yuan, but our expenses are pretty much the same in terms of percentage of income. I also do not have any job security because California is an at-will state that can fire anyone they want at any time for any reason. Finally, on the real estate front, I can’t afford a place in San Francisco on my salary either! (I am using San Francisco as a parallel to Shanghai because they are both big and densely populated cities with very expensive real estate). The only thing I don’t have is the long work hours, but that is because I choose to not work long hours.

After talking to my friend Mary who goes to China often, we both came to the conclusion that the struggles of young people in China and America are very similar. Financially, we are all dealing with rising prices, stagnant pay, and unstable careers. There has also been a housing bubble in China since the Chinese Communist Party allowed personal ownership of real estate. Politically and socially we all do not have much of a say in  governments that are ruled by the generation before us. Sure, America is supposedly democratic, but honestly how many politicians actually care about our generation? Even Obama, who is supposed to be “young”, is proposing a tax proposal that eliminates taxes for seniors making under $50,000. What about the young people that make under $50,000? Anyway, I could write a whole other rant on this issue, but basically the challenges American young adults face politically are not so different from Chinese youths who are under a totalitarian regime. American youths are taught to believe that they can affect the decisions of the government, but in actuality the government is controlled by an older generation that could not care less. In a way that’s more frustrating than knowing for certain that your government will not listen.

One thing that is marked different between the lives of Chinese young adults and American young adults is that many of the urban Chinese youths we know have quite a bit financial and physical support from their parents. For example, some married only children have all four of their parents taking care of their kids. On the other hand, American young adults have to deal with costly childcare or just not have children at all. I don’t know of any non-Asian households where all four grandparents are taking care of their grandchildren full time. A lot of Chinese parents also buy houses for their children, and again, that is rare in America.

So having said that, I think my cousin is doing great in China. He has officially become independent, and that is a great achievement for any young adult.

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Recently my mom was trying to convince me to buy a house again, and once again I had to tell her that San Mateo is ridiculously expensive and renting costs one half or one third of a mortgage.  I have said this about 10000 times already.  Yes, the median price has dropped over $100k, but it still costs around $640 per square foot in my zipcode.  So I said that investing my savings in the stock market is better at this point, and to this she retorted, “You think it’s easy to make money on the stock market?  There has been no returns on the SP500 for the last 10 years while real estate doubled and tripled!”

Superficially, my mom is right.  According to Vanguard’s SP500 index fund, the returns for the last 10 years is 2.85%, and that doesn’t even beat inflation.  In the same time period real estate prices did double and triple at least in California.  However, this doesn’t mean that the SP500 gave no returns during any of those years.  If you look at Vanguard’s fund record, the return for the last 5 years is more than 7%, and that handily beats inflation.  Most people I know who invest in the SP500 do so through 401ks and IRAs and contribute money as time goes on. So even if the money they put in 10 years ago did not earn money, the money they put in during the lowest years of the market would be earning quite a bit.  The only situation where someone would be earning 2.8% on all their money is if they put in all their money 10 years ago and left it there and that is hardly the case with most investors.

Additionally, investors in stocks are not restricted to buying stocks in the SP500.  In the last ten years international stocks in South America, Europe, Asia, and Oceania have been performing quite well. Investors could have bought REITs which get their dividends from real estate and participated in the real estate boom. The possibilities are endless.  Even in the current down market, it is possible to make money in the stock market.

Ultimately, hindsight is 20/20, and I think my mom is wrong in saying that stocks are the lesser investment because she is cherry picking a decade where real estate appreciated abnormally. Don’t get me wrong, I think it is possible to make money in real estate, too, but worshiping one asset class as the ultimate holy grail is a bit short sighted.  I like stocks for their liquidity and hassle-free nature.  For example, I never have to mow the lawn of my mutual funds or fix their roofs.  If I can get enough return from my funds to come out ahead, then I am happy.  Basically, I still believe that having a diversified portfolio of low cost funds is the way to build wealth.  Eventually I will buy a house, but I will probably be paying cash and the amount of cash I spend won’t exceed 25% of my portfolio.  I would do it this way so I don’t overload my portfolio with real estate.

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As many of you bloggers already know, this weekend is the BlogHer ‘08 conference in San Francisco. I was planning to attend, but got lazy and missed the registration deadline. Additionally, these couple months have been kind of crazy in terms of having free weekends. Nevertheless, several Wise Bread bloggers are flying in so we will be meeting for dinner in San Francisco tomorrow! I am pretty excited about meeting Lynn, Will, Greg, Linsey, and Carrie. Anyway, I’m sure the conference will be awesome and they will be spreading the word for Wise Bread.

Besides that, we found out that our rent is not increasing. This is the advantage in finding a nice landlord. I know that his HOA fees went up a little bit, so keeping the rent the same actually means he is losing a little bit of profit, but having good tenants that pay on time like us is very valuable to a landlord, too.

As usual people are asking me when I will have babies. Honestly, that is up to God and the hubby. Obviously I can’t have a baby on my own, so I don’t know why I get the most queries about this subject. So I tend to say, “ask my husband” now. As I have said before, I prefer to have the first kid before I turn 30, but it is not totally up to me.

Finally, my husband and I are playing in the Arkham Horror summer league. He named our team Team Chimerica. It’s a combination of the words China and America, and also looks like the word chimera. He has been chronicling our battles against ancient evil at his blog. If you have never played Arkham Horror before then my hubby’s posts may sound like insane nerd babble, but this cooperative game is the only board game where we don’t try to kill each other but instead work together to fight an Ancient One and other monsters.

That is all for this really random post. There are more personal finance topics to write about and more evil to fight, but for now I must figure out what to have for dinner.

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Today I read the story of Terry Childs, a bonafide BOFH of the City of San Francisco. Apparently he was disciplined for poor performance and so he took matters into his own hands and changed everybody’s passwords on the system. Now San Francisco’s networks are in his control even though he has been arrested and the city has set a $5 million bail.

First of all, I find this whole story bizarre because since the perpetuator is in jail and the city has physical access to the machines then they are able to reset the passwords or reinstall the systems. Second, what the hell were they doing by giving this guy so much power over the network? It doesn’t even seem like he was the IT director from the report. Third, I find the city’s reaction to this mischief to be quite overblown. The network is still running, but other admins cannot access the system. This shows that perhaps the other admins ARE more incompetent than Childs. They could have resolved the matter in a more civil manner than arresting the guy. That probably just pissed off the guy more.

Anyway, this guy was paid $150k last year, and since he has pulled this stunt I doubt he will be getting any new job offers soon. I don’t know if he did this to spite his employer or to keep his job, but it is safe to say that he probably would be fired soon enough.

Instead of doing this, he could have just told his superiors the security flaws and problems he sees at work. If they don’t listen, then there are other jobs out there he could apply for. If I were really angry at an employer I would just pack up and leave. I have left jobs before where someone or something pissed me off, but I just don’t think it is worthwhile to plan some kind of revenge. Terry Childs may have embarrassed his employer, but he also embarrassed himself by being so unprofessional.

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This weekend my church had its first ever meeting related to finances.  The financial details are supposed to be confidential so I will not talk about it here.  However, I was pretty encouraged by what the leadership said about how they conduct the finances of the church.

The main message I got from the meeting is that God is in control, but we still have to be good stewards of the money we are given.  My church is quite small so it is not very wealthy. The elders of the church are volunteers and they work on the finances of the church on their own time.  They assured us that all of our tithes are being spent responsibly and they have been making great progress in eliminating debt.   They also told us how our pastor is always dedicated to finding the best price when he buys something for the church and how they all try to live below their means to honor God.  I was very happy to hear all of this because I agree with all of it.  I know some Christian churches preach a philosophy that says you could be raptured anytime so it doesn’t matter how much money you spend.  Also, some pastors of mega churches are also extremely wealthy and live very flashy lifestyles with sports cars and Rolexes.  I am glad that I don’t see these attitudes at my church.

If you were there and heard some of the financial details, then you might be quite amazed as to how this little church has operated for so long in such an expensive place like San Mateo.  Seriously, the events surrounding the finances of my church just convinced me further that God is working here and that living beneath my means is the right thing to do. I am really blessed to be part of this church, and I hope to contribute more to it in the future.

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