CAUGHT IN THE HYPE?

CAUGHT IN THE HYPE?

By Jim “Gymbeaux” Brown, August 5, 2016

What do all these people have in common?

Tiger Woods, Stewart Cink, Anthony Kim, Justin Leonard, Michael Jordan, Rory Mcllroy, Nick Watney, Charl Schwartzel, Michelle Wie, Suzann Pettersen, Carmelo Anthony, Derek Jeter, Chris Paul, Ray Allen, DJ Augustin, Mike Bibby, Dre Bly, Michael Finley, Richard Hamilton, April Holmes, Juwan Howard, Joe Johnson, Andruw Jones, Kevin Martin, Quentin Richardson, CC Sabathia, Bobby Simmons, Jason Taylor, Gerald Wallace, Josh Howard, Michael Crabtree, Dwight Freeney, LaMarr Woodley, Cristiano Ronaldo, Wayne Rooney, Didier Drogba, Adam Jones, Evan Longoria, Giancarlo Stanton, and Andrew McCutchen

Honestly, I don’t even know who some of these people are let alone what they may have in common but I checked.  While this is an extensive list, I am certain that some are  no longer on the list and others have been added.

What do they have in common?  They either are or were all sponsored by Nike®.  Why is that important?  To all of them it is important because they receive MILLIONS of dollars from Nike® because of who they are and far more importantly, WHO THEY INFLUENCE to want, not necessarily buy, but who wants the NIKE® products they sell.  Mostly children and very young adults.  For example, if you want the shoes that someone like Michael Jordan, Tiger Woods or Michelle Wie wear, you will have to pay top dollar to buy them when there are obviously other shoes on the market that are equally as good or maybe even better at much lower prices.  Therefore, while Nike® pays these athletes MILLIONS OF DOLLARS to wear and promote their products or for this example, their shoes, who REALLY pays these athletes to wear the NIKE® brand?  THE PEOPLE WHO BUY THEM!

I do not intend to pick on or single out NIKE®, on the contrary, they represent just one company and there are hundreds of companies just like NIKE® for certain. 

There is something really wrong with this picture when you fully analyze it.  Let’s say for example that a pair of shoes worn by one of these athletes retails for $100.00.  How much do you think the shoe actually costs to produce?

Here is a web site http://thinkprogress.org/culture/2015/10/04/3708914/stephon-marbury-shoe-rerelease/ that indicates that it costs just $5.00 to $30.00 to actually produce a pair of Air Jordans.  That means that for every pair of Air Jordans that is sold for $100.00 (more often much more), NIKE® on paper makes $70.00 in raw profit.  Every business is in business to earn a profit, that is not the point or in dispute.  The point is that if you knew that a pair of shoes costs only $5.00 to $30.00 to produce, why on Earth would you spend $100.00 or more just because an athlete promotes the product?  It makes no sense.  Question:  Do you think one of these athletes would wear the NIKE® brand if they were not being paid to do so?  I seriously doubt it.  They would go to another brand/company who agreed to pay them to wear THEIR shoes, shirts, hats, clubs, glove, bat, etc.  Does that mean the equipment they wear is worn because it enhances their ability to play a sport?  Of course not.  If it did, do you not think EVERY athlete would be wearing the same pair of basketball or golf shoes? 

It gets even worse, at least in my opinion.  The next time you are in a store that sells tennis shoes, no matter what their intended purpose (basketball, running, exercise, etc), check the label to determine where they were made.  To some this might not be important.  To others it is critical.  Most tennis shoes are made in one of several Asian markets.  That in of itself is not the critical point I want to make.  The CRITICAL point is that they are being made under conditions that most America workers would consider deplorable either because of the rate of pay,  and/or the actual working conditions.  That is why it is becoming more difficult to “Buy American” because so many of the products we want are no longer made in America.  Why do you suppose that is?  The NIKE® example is just one of the reasons.  It is far cheaper to make the products overseas in countries that take advantage of the low wages and working conditions in exchange for making obscene profits on the sale of each pair of shoes.  I do not know of what business you may be engaged in, but I am certain you would like to make $70.00 on a pair of shoes you sell that only costs $5.00 to $30.00 to make.  Who are the real winners in this situation?  The athletes of course; far more than even NIKE® for they have do nothing to actually earn that money other than just wear or use the product.

Here is a web site that lists shoes made in America.  To my surprise there are more than I would have imagined.  I seriously doubt, however, that you will see any of them being worn by athletes who are paid to wear the more famous footware.  This does not only apply just to shoes, it applies to all types of clothing and athletic equipment.  http://www.usalovelist.com/american-made-shoes-ultimate-source-list/

Now comes the real rub for me.  Have you seen the advertisements featuring Hall of Famer Bret Farve promoting a “new” razor to keep you clean shaven and looking more handsome and more professional in your appearance?  Have you seen Bret Farve today as he prepares to accept his Hall of Fame Award?  Just in case you may have missed it…

Who’s kidding whom?  I could not help but wonder how much he is being paid to promote a product that he obviously does not use.  I could also not help but wonder how many people have been suckered in by his obviously misleading commercials?  It’s all about the money, not the product or even his personal likes.  I’d be smiling too!

Another great example occurred a lot of years ago at the PGA’s New Orleans Open where I and a bunch of Coast Guard folks worked as Marshalls.  At the time professional golfer Lee Trevino advertised products under the name of Shakespeare.  At the Open he hit a shot near where I was standing along the ropes keeping the spectators on one side and the players on the other.  One spectator looked down and saw Trevino’s golf ball which at that time was a Titleist, a ball used more on the PGA Tour than any other.  The spectator said, (I heard him), “That’s not a Shakespear!?  Trevino looked up at him and said and I quote, “Do I look like a fool to you?”  Meaning he was being paid to say one thing in the commercials but played what he obviously considered a better ball for which he was not being paid to play.

One more item, not to just pick on NIKE® but have you noticed the number of professionals and collegiate uniforms that display the NIKE® “swoosh?”  That does not come without a cost.  The organizations like the NFL want you to pay upwards of $80.00 for an “official NFL®” team polo shirt or $25.00 for a bobble-head doll.  There is no way that shirt costs $80.00 to produce.  The difference between the cost of production and the end price of $80.00 is for both NIKE® and the NFL® to take advantage of the consumer desire for the product, a desire created by the NFL and NIKE®, good for them.

It is a vicious cycle.  First they create the demand for the product no matter its cost.  But first they agree to pay its sponsoring athletes horrendous amounts of money to promote their product thus creating the demand.  Then the consumer buys the product at highly overpriced prices (when compared to actual production costs).  That makes money for the company who then does the same thing with other athletes thus adding an even higher price for their products because they have to pay additional sponsoring athletes/teams.  But it does not stop at a pair of shoes or shirt.  Have you wondered why ticket prices are so high to watch in person your favorite team or athlete?  We complain about paying a labor charge of $80.00 to get our cars repaired but think nothing of paying $80.00 for a ticket to a professional football game. 

Final thought.  If you want to become independently wealthy, become a professional athlete or a movie/TV actor OR you can learn to be more frugal about what you spend your money on.  For example, you can spend the $80.00 for a team logo shirt OR you can go to a local department type store or a Big Box store and buy a polo shirt in your team’s colors for less than $20.00; you just made $60.00 on the transaction.  How many hours would you have to work at your job to make $60.00?  How about $80.00?  I cannot think of a bigger waste of money than buying an 8-year old child expensive tennis shoes because a professional athlete wears them (makes money off them) when the shoes will probably not fit the child in 6 to 10 months as his or her feet grow larger.  

Am I missing something?

Can I Afford To Buy It?

CAN I AFFORD TO BUY IT?

By Jim “Gymbeaux” Brown, August 3, 2016

You are about to load up your shopping cart, a real 4-wheel type or on your Internet page.  Have you asked the Million Dollar Question?  CAN I AFFORD TO BUY IT?  If the answer is YES; how do you know?

I have found that most people, even in today’s world of high technology, DO NOT HAVE A WORKING BUDGET for their home and some not even for their businesses, especially independent contractors.  When you have a desire to purchase something or if you have an emergency, how do you really know if you can afford to pay the price if you have no idea what your income versus expenses really looks like?

It is very simple.  You identify every expense you have during a year, EVERY EXPENSE, overlook nothing.  As an example, if you have children and friends who you typically buy gifts for whether it be for birthdays, anniversaries, Christmas, or whatever, you have Gift Expenses.  Do you know how much you spend EVERY YEAR on gifts for others?  If you have never added them up, you are in for a REAL SHOCK!  I know because I have 4 children, 9 grand children and 2 great grand children.  If we purchase gifts for just their birthdays and for Christmas that is 16 gifts a year not to mention any significant others, ourselves, other relatives, births, etc.

More expenses:  Home or rent payments, and all types of insurance like Homeowners, Renters, Autos.  All utilities like electricity, gas, water, sewerage, garbage collection, and cable television.  Telephones.  Student loans.  Personal loans. Emergency money fund.  Retirement fund. The list goes on and on depending upon your life style.  Have you taken account of ALL of your expenses and put them to paper or computer?  If not, how can you possibly answer the question, CAN I AFFORD TO BUY THIS?

Next step is to account and make a list of all types of income.  If you are a member of a family you probably have more than one income earner in the family and you probably have more than just one type of income per earner.  As an example, you may have more than one job and other members of your family may as well.  If you are eligible, you may also have retirement income, social security income, disability income, investment income, etc.  Have you listed them all and added them up to see what your total annual income really is?  Remember, it is possible to earn non-taxable income so the income you report on your Federal and State Income Returns may not be your ACTUAL annual income.  As an example some disability income is non-taxable.  You want to list every source of income and the respective amount.

This Nugget is for everyone but especially young people.  You want to learn more about managing your money when you are young while it may be very simple and straight forward.  As you grow older it becomes more complex and difficult to maintain IF you haven’t started from the very beginning and then constantly maintain your budget to insure it is always up to date and accurate.

I have created a Microsoft Excel Spreadsheet Template to track your monthly expenses and income and it will calculate your monthly balance, either positive or negative as you enter the numbers.  If you use the spreadsheet you can very easily answer the question, CAN I AFFORD TO BUY THIS?  Unfortunately the blog program I use does not enable me to attach the spreadsheet to this Nugget.  If you would like a copy that you can modify and complete as you wish, send an email to JimBrown@gymbeaux.com and simply put SPREADSHEET in the subject line.

This additional note is more for the young folks who read this Nugget.  Not everyone works on a per hour wage system.  Whether you do or you do not, your real income is BEFORE TAXES so what you indicate as your total monthly or annual income does not include the amount you pay in income taxes.  Always keep that in mind.  Here is an additional test to determine if you can afford to buy something.  Calculate your annual income as a per hour income no matter how much you make during the year.  Do it if for no reason other than simple curiosity.  Here are two examples:

Most people think in a 40-hour work week term even though a great many work more than 40 hours and many more work less than 40 hours.  But for this purpose, think about a 40 hour work week, 8 hours per day.  There are 52 weeks in a year therefore the average person who works 40 hours a week, works a total of 2,080 hours a year not including any vacation time and I would assume you are still being paid for.  Using these numbers, calculate your per-hour wage.

If you earn $36,000 annually, that equates to a $17.30 per hour worked.  If you earn $100,000 annually, that equates to $48.07 per hour.  One more, $250,000 annually equals $120.19 per hour.

Now think about this.  You go to a doctor’s office and you sit and wait to see the doctor, or you sit and wait to have your car repaired, or consider anytime you sit and wait to have something done.  Let’s say it is a doctor and you wait one hour just to see the doctor.  In effect you are paying $17.30 to wait to see the doctor if you earn $36,000 annually.  If you earn $250,000 annually that one hour wait is like spending $120.19 just to wait to see a doctor.  If you want to buy a $120.00 item like a sports coat or dress, how many hours would you have to work to pay cash for the item?  At $17.30 per hour, it would take you 7 hours of work to pay cash for it.  At $250,000 it is hardly worth concerning yourself over but, and this is a HUGE BUT, if you read the Millionaire Next Door you will discover that millionaires worry more about what they spend their money on than you would ever imagine.  For example millionaires who have worked to attain that status as compared to winning the lottery, typically do not live in the biggest and best homes in town.  They do not dirve the most expensive cars.  Paying top dollar for every item they buy is NOT how they became millionaires!  I attended a course designed for independent contractors on prepareing income taxes.  It was truly amazing.  The purpose of the course was to teach independent contractors, like real estate agents, to keep MORE of what they EARN and pay LESS towards federal income taxes.  One item of significance was to NOT buy a brand new car.  He not only suggested buying a used car with low mileage he demonstrated how that affects your bottom line of personal profit by doing so.  In short, why max out your expenses because you can?  At least at this moment in time why make the decision to buy the biggest and best of anything because we all know, “things” change and so does your income.  I recommend using the “waiting time” to advance your personal knowledge of what you do to earn income in the career you have chosen by reading a book or a book on your tablet or smart phone.

You should establish a primary goal of creating a savings account that you can access when needed.  For example, buying a home may increase your total net worth but if you need immediate cash for any reason, you would have to take out a loan against your home to access your wealth that is tied up in your home.  You want to have at least 3 months of your income available to you in the form of liquid cash like a savings account or anything you can access within 24 hours.  Another example.  I live in a hurricane area of the country.  You may have to evacuate for any length of time – short or long term.  If the hurricane hits directly in your area, is it possible that you may lose your source of work income?  The answer is yes unless your place of employment has arranged for some type of loss of work insurance for you or you have done it for yourself; most people do not provide that type of insurance on themselves.  Therefore if your place of employment is a total loss, what will you live on until you can find additional employment and that would prove to be problematic if you plan to return to a devastated area.  What if you simply lose your job?  Either way you need to have money to live on.  Where do you plan to get money if you have not planned to save the money you have already earned.  That is why most financial planners suggest you should have in a savings plan at least 3 months of income as a MINIMUM.  Do you have that now?  If not, why not?  Most people spend more than they earn as if nothing will ever change.  Gary Keller, co-founder of Keller Williams Realty, teaches the best advice when it comes to financial management, LEAD WITH REVENUES (INCOME), NOT WITH EXPENSES (DEBT)!  Or in other words, think twice before going into debt to buy anything with the possible exception of buying a home to live in. Therefore, on the spreadsheet, there is an expense item listed as EMERGENCY MONEY.  It is highly rcommended that you pay yourself first (about 10% of your monthly income) to insure that you will have that emergency fund whenever it is needed.

Fewer and fewer people work at companies that provide long term retirement pensions and it becomes the responsibility of the employee to begin at the earliest stage of their working life to create a program to put aside enough money so that one day you will be able to retire.  One of the best ways to insure you keep pace with inflation over time is to always set aside (expense) a pre-determined percentage of your income AND any increase in your annual income just for retirement.  By this I mean if you start out working for $17.30 an hour and you receive an increase of just $2.00 per hour, you should increase the amount you are setting aside for retirement by a percentage of the increase.  Let’s use 10% as an example.  $2.00 per hour equals $80.00 a month.  Therefore you should add 10% or $8.00 a month to your RETIREMENT FUND!  It may be a small amount but it gets you into the habit of keeping up with the cost of living increases (inflation) over time.  If you are at the $100,000 income level and you get a raise of $5,000 annually; if you made the decision to set aside 10% of the increase for retirement, you would add $500 annually or $42.00 a month to your RETIREMENT FUND.  DON’T TOUCH THE MONEY YOU HAVE SET ASIDE FOR RETIREMENT!  PERIOD!  I would strongly recommend talking to a financial adviser to find a place to invest in your future retirement that would be NON TAXABLE until such time as you use the money you set aside.

It has been a very long time since I was in junior or senior high school.  Back then, none of this was ever taught in school and I seriously doubt it is being taught today.  If it were, more people would be doing it from their earliest of beginnings in the work force.  Are you doing any of these things?  Hopefully yes but sadly few are.  Don’t let that be you.