March 31, 2011

People Who Drive Luxury Cars Are Usually Affluent

The book The Millionare Next Door which I reviewed a while ago was an interesting book.   It pointed out how many millionaires live modest middle class style lives.    The book had an entire chapter about how millionaires buy cars.   It talked about how much millionaires pay on average, whether they buy new or used, what brands they buy etc.   One interesting conclusion from that book is that most millionaires don't seem to drive expensive cars.    That piece of data from the book seems to have caused many people to conclude that most of the people driving expensive cars are not rich.    But that is not a safe conclusion.

Just because most millionaires don't drive expensive cars does not mean that most expensive car drivers are not well off.

Its theoretically possible that most luxury car drivers are actually poor people, but you can not conclude that by only knowing that most millionaires don't drive expensive cars.

Here are several examples to illustrate analogous logic :
Most of the people with low incomes don't have high net worth.   That does not mean that having high net worth means that you have a high income.

Most of the Republicans in American don't live in Texas.   That does not mean that most Texans are Democrats.
Most of the people who get a Bachelors degree don't go to graduate school.    This does not imply that most graduate school students didn't get bachelors degrees.

Lets look at fake numbers to illustrate the point :

Lets say that 5% of the American population are millionaires.    Lets say that only 30% of millionaires drive luxury cars.   Most millionaires don't drive luxury cars.    We can figure that if 30% of millionaires drive luxury cars and 5% of the population are millionaires then that means 1.5% of the population are millionaires who drive luxury cars.   But if we know that only 2% of the total population drives luxury cars and 1.5% of them are millionares then we conclude also that most luxury car drivers are millionaires.  SO this is a situation where most millionaires do not drive luxury cars but most luxury car drivers are millionaires.

Household income and wealth Demographic Data of Luxury Car Drivers

This Forbes article What Your Car Says About You from 2008 talked about the demographics of luxury cars.

Most notable they found that the median income of Porsche 911 drivers was $390,000.   Thats pretty clear cut case that most Porsche 911 drivers are doing quite well.

Bentley's are very expensive.   "Buyers of this ultra-luxury car tend to be highly successful, with a net worth on average of $30 million, according to Bentley."  Thats just an average so I guess a few very rich folks could skew that number.

A Businessweek article titled With Lincoln, Ford Isn't in the Lap of Luxury listed median incomes of the owners of various luxury brands.

Cadillac $129,656
BMW $169,289
Lexus $141,745
Mercedes-Benz $174,558
Audi $183,601
Lincoln $113,782

Now of course these are just median incomes and a relatively high median income doesn't mean you're a millionaire.   But theres fairly high correlation between high income and high wealth.

Are Most Luxury Car drivers Millionaires?

I didn't find a clear answer to this.   Auto sales figures from the WSJ show that about 7% of the autos sold are "luxury" models.     We can also find that about 5% of the households in the U.S. are millionaires.
But I don't know exactly what % of millionaires drive luxury cars.   The Millionaire Next Door has some data on that but its pretty old information.

How Expensive Are Luxury Cars Anyway?

Ok now having said all the above about luxury cars we should also consider that not all luxury car brand models are that expensive.  Some luxury brand models are not that expensive.   In fact you can spend more on a typical minivan than a Mercedes.    You can buy a Mercedes C class for under $34,000.   You could spend over $38,000 on a Chrysler Town and Country minivan.  

March 30, 2011

High School GPA versus College Success

A while back I stated my opinion that you shouldn't bother going to college if you can't at least get B's in high school.   I still stand by that generalization.   If the best you can do is barely squeaking by as 'average' in high school then you'll very likely struggle to pass in college.    If you were below average in high school, I think that rather than jumping into college you'd be better off finding employment and working for a year, going to a skilled trade, possibly joining the military or simply taking some time to decide what is best for your future.   Of course there are exceptions and a small portion of students who do poorly in high school may go on to achieve success in college.   There were a couple replies to that original article from people who disagreed with me because they were poor students in high school but were able to succeed in college.

Am I right in making a generalization that most C high school students struggle in college?  It seemed to me a fairly safe assumption that if you struggle in high school you'll struggle even more in college.  Sometimes though such assumptions can turn out to be false so it is best to look at actual data to validate the idea.  Today I'll dig into that data a little more to explore the correlation between grades in high school and students success in college.

Today's C is the new D
First off lets start out with some perspective of what a C average in high school actually means today.  C grades in high school are typically not 'average' as they may have been thought of in the past.  The vast majority of college freshmen got A's and B's in high school.  According to census data on college freshmen almost half (48%) of the students entering college had high school GPA's in the A- to A+ range.   That would mean the median high school GPA for college freshman is around 3.4 to 3.5 range give or take.    Another 47% of students had high school GPA's in the B- to B+ range.   Only 4.5% of entering college freshmen in 2009 had high school grades of C or lower. By comparison 30 yeas ago in 1980 about 15% of entering freshmen had C or worse high school grades.

First a study tying high school grades to college success

I found a report titled Predicting Different Levels of Academic Success in College Using High School GPA and ACT Composite Score. ACT Research Report Series  that looked at the correlation between GPAs received in high school by students and the college GPAs achieved by the those same students.   They looked at over 200,000 students and tracked their grades in college and compared them to their high school GPAs.  Theres a fairly good correlation between high school GPA and college GPA.

For students with high school GPA's of 2.0 the probability of getting a college GPA of 2.0 or better is about 0.5, so around half the C students  in high school do better or worse than C in college.   The probability of C students getting a 2.5 or better in college drops to 0.2 and the probability of 3.0 in college is down to just 0.05.   To put that another way 95% of students who got C averages in high school do not achieve B average or better in college.   Keep in mind that this is any and all colleges so we're not talking about Harvard.   We're talking about getting B's in any college in general.    Of course there are exceptions and about 5% of the C students in high school go on to get B or A grades in college.

Figure 2 in the report on page 17 is a graph showing the relationship between high school GPA and college GPAs.   Here is that same data in table form :

High School GPAs
College GPA 2.0 2.5 3.0 3.5 4.0
2.0 or better 0.50 0.65 0.75 0.90 0.95
2.5 or better  0.20 0.40 0.60 0.75 0.85
3.0 or better 0.05 0.15 0.30 0.50 0.75
3.25 or better 0.01 0.05 0.13 0.30 0.60
3.5 or better 0.01 0.02 0.08 0.20 0.47
3.75 or better 0.01 0.01 0.01 0.08 0.30

The columns are the high school GPA obtained and the numbers are the probability of achieving the college GPA for each row.  For example if you look at the top and find the column for 3.5 high school GPA then the chances of getting each of the college GPAs on the far left are given by the numbers.   They have a 0.90 chance of getting over 2.0 in college, 0.75 of 2.5 or better, 0.5 probability for 3.0 or better college grades etc.

Second study from Back in "the olden days"

I also found a smaller paper from 1958 titled the Correlation of High School and College Grades t from the American Journal of Physics that looked at the correlation between high school grades in math and science and the grades in college.   Table 2 in that paper presents the relationship between high school grades in math and the first year math course grades in college for 238 students:

College math grade
High school grades below 2.0 2.0 to 2.4 2.5 to 4.0
A 17% 14% 69%
B 37% 25% 38%
C or D 71% 13% 16%

You can see a high correlation between high school grades and college grades.  Most students who got C's or D's in high school went on to get C's and D's in college.   However you can see that theres still 16% of the students who had C or lower in high school but ended up with B or A grades in college.     Only 12% of the students in the sample had A grades in high school while 40% had B's and 48% got C's or D's.    In this group at least back in 1958 the C grade was more of a true average or median grade with about half students getting above C and about half getting C or lower.   If you took that group of students from 1958 and put them in a school today I would expect that many of the kids getting C's back in the 50's would be getting B's or even A's today. This is an important detail that we should keep in mind that grade inflation has made a C grade level today far worse than what a C from decades past represented.   

One More Study on the Topic

I also found the article with the lengthy title of  "VALIDITY OF HIGH-SCHOOL GRADES IN PREDICTING STUDENT SUCCESS BEYOND THE FRESHMAN YEAR: High-School Record vs. Standardized Tests as Indicators of Four-Year College Outcomes"   (via google)   That one is from the University of California system study of about 80,000 students.  

It says pretty bluntly :

The study finds that high-school grade point average (HSGPA) is consistently the best predictor not only of freshman grades in college, the outcome indicator most often employed in predictive-validity studies, but of four-year college outcomes as well.

However I should point out that the U.C. system is pretty selective and most of the students admitted are in the top 10% or so of the graduates in California.   It doesn't really relate to 'C' students since they can't usually get into U.C. schools.   I do think though that their general conclusion that high school grades are a good predictor of college success is useful to see.

Bottom Line : The data I found confirms my belief that a C student in high school today has a very low chance of obtaining good grades in college. 

March 29, 2011

Effective Income Tax Rates by Income Level

When you hear about taxes you usually hear the marginal tax rates discussed most.   People talk about being in the 25% tax bracket or maybe discuss a new law proposing an increase in the top tax bracket.  The marginal tax rate is what you pay in taxes on each additional dollar earned.    A better picture of your actual tax obligations is your effective tax rate.   Today I'll show what the effective tax rates are for different income levels.

I got the numbers from the IRS statistics site.  The latest figures there were for 2008.

There were 142M total tax filers in 2008.   The total effective tax rate for all payers was 13.9%.  

87% of tax filers had AGI of under $100,000 and paid an effective tax rate below 10%.

Here is at table showing the number of tax filers in each income group and their respective effective tax rates:

# filers % of AGI
No adjusted gross income 2,489,989 0.0%
$1 under $5,000 11,638,707 5.0%
$5,000 under $10,000 12,139,638 2.6%
$10,000 under $15,000 11,702,056 2.9%
$15,000 under $20,000 11,076,002 3.8%
$20,000 under $25,000 9,866,247 5.2%
$25,000 under $30,000 8,743,581 6.2%
$30,000 under $40,000 14,554,280 6.8%
$40,000 under $50,000 11,087,123 7.5%
$50,000 under $75,000 19,196,461 8.5%
$75,000 under $100,000 11,729,485 9.3%
$100,000 under $200,000 13,851,341 12.7%
$200,000 under $500,000 3,476,747 19.6%
$500,000 under $1,000,000 577,618 24.1%
$1,000,000 under $1,500,000 140,635 24.8%
$1,500,000 under $2,000,000 59,460 25.0%
$2,000,000 under $5,000,000 86,329 24.8%
$5,000,000 under $10,000,000 21,390 24.0%
$10,000,000 or more 13,480 21.1%

Here is the data shown graphically :

For the picture I chopped off the data at the $1M income level just to make the picture cleaner.

March 28, 2011

Impact of Power Lines on Home Values

Not in MY backyard!
While we've been house hunting lately we have seen some homes that back to power lines.   Those homes are a bit cheaper than comparable homes.   Roughly I'd say they tend to run about 10% lower priced than similar homes that aren't near power lines.

There are two major reasons that power lines near a home will hurt the home value :  1) safety concerns and 2) they are an eyesore.

Are power lines really a Health Hazard?

There is a concern that power lines can cause or increase the risk of disease such as cancer.   This is based on the idea that the Electro Magnetic Fields (EMF) from the power lines are a health hazard.   But the science to back this theory is not so clear.

The EPA says : "The general scientific consensus is that, thus far, the evidence available is weak and is not sufficient to establish a definitive cause-effect relationship."

But the NIEHS says : "After reviewing more than two decades of research in this area, NIEHS scientists have concluded that the overall pattern of results suggests a weak association between increasing exposure to EMFs and an increased risk of childhood leukemia. The few studies that have been conducted on adult exposures show no evidence of a link between residential EMF exposure and adult cancers, including leukemia, brain cancer, and breast cancer."

One study from the NIEHS says :"The scientific evidence suggesting that ELF-EMF exposures pose any health risk is weak."   and "The NIEHS does not believe that other cancers or non-cancer health outcomes provide sufficient evidence of a risk to currently warrant concern."

To sum that all up :   There is some weak evidence that electro magnetic fields (EMF) can cause health risk specifically for childhood leukemia but the link is not conclusive and the evidence is somewhat debated.   So, to ask the question again : are they dangerous?  Answer : Maybe a little bit but we're not too sure.

The Ugly Factor

Whether or not power lines pose a health risk aside, it is straight forward that power lines can be pretty ugly.  Most people don't want to look out their windows and see large metal industrial looking monstrosities.   Of course some people might not mind.   I'd wager that most people would consider powerlines to be a negative as far as appearances.    This will undoubtedly impact the value of a home with a view of power lines.

How much Is the Impact to Sales Values?

The combined impact of fears of health risks and ugly factor of power lines causes homes near power lines to be lower in value.   Exactly how much that matters will of course vary.

This article discusses the impact on home values.  They cite a few studies that all agree that nearby power lines do hurt the market value of homes.

A 1995 study in Canada said : "We find that properties adjacent to a line lose 6.3 percent of their value due to proximity and the visual impact."

A 1995 poll of St. Louis real estate agents found that "54% of those surveyed believed high voltage overhead electric transmission lines ("HVOETLs") "very negatively affected" residential property values; another 23.8% considered HVOETLs to "somewhat negatively" affect property values"

In 1997 in Colorado a study found : "From the data analyzed, it is concluded that from an overall value perspective, an electric transmission line easement has less than a 10% impact on price, and in most instances, less than a 5% impact on price"

I would assume that the closer a house is to power lines and the larger the power lines are the more it will hurt the home values.

Bottom Line:   Power lines might be hazardous to your health and they are certainly unattractive.   This results in homes near powerlines having market values up to 10% lower.

Photo by vaxomatic 

March 27, 2011

Do Stock Values Drop After Dividend Payouts?

Have you ever seen someone make the following kind of statement? :

After a stock pays out the dividend the market value of the stock will drop by that same amount the day the dividend is paid out.   For example :  ABC corp trades at $20 and pays out a $0.50 quarterly dividend the day the stock pays the 50¢ dividend the shares will drop by the same 50¢ amount down to $19.50.     The market may cause the stock to go up or down which would otherwise hide this effect.

The above statement is not a direct quote but a paraphrased version of what I've seen several people say.    I actually only heard this for the first time myself recently (probably within the past 6 months?).   When I first heard this I thought to myself  : "Oh, huh, I didn't know that."    I tried to verify it by looking at the value of stocks but when you look at a company that pays a 10¢ dividend and the price of the stock bounces up and down +/- 50¢ in a given day its impossible to differentiate the impact of that 10¢ dividend from other daily market movements.

For example lets look at GE historical prices..
On Feb. 23, 2011 the stock closed at $20.37.   They then paid a dividend of 14¢.    It opened at $20.12 on Feb. 24th.    Thats $0.25 lower than the close price which might include that 14¢ dividend.   The stock was down more than 14¢.

But back on Feb 18th GE closed at $21.44 and then opened on Monday Feb 22nd at $20.88.   So the difference between closing on Friday and opening on Monday was down $0.66.   With that kind of swing between close on one day and open on another its hard to see the impact of a 14¢ dividend.

But a 14¢ dividend is less than 1% of the market value of GE and the day to day volatility can easily be more than 1%.   In order to see the phenomenon better it would be best to find a company that pays out a really big dividend that is not easily confused with the market volatility.    If the dividend is 0.7% and the market goes up or down 0.5 to 1% daily then you'll never really see the impact of that 0.7%.     Lets look at the change in market value from close to open in GE stock on a daily basis.  I've highlighted the dividend dates in yellow:

As you can see the yellow dividend dates are just buried in the noise of the normal market fluctuations for GE stock.  So its impossible to see any real pattern from the dividend payouts.

What you need is a stock that pays out a large dividend that might cause a drop that is much larger and clearly not a result of typical market fluctuations. If a company has a very large dividend of say 5% then its a lot easier to see the impact.    Its pretty rare to find a company that pays out such a high dividend rate. 
I was able to find a company with a very large dividend : American Capital Agency Corp. (AGNC).   Their dividend is $1.40 per quarter and they are trading around $28 lately.   So their quarterly dividend is pretty close to 5% of the stocks market value.     Plus they've been paying that $1.40 dividend for 7 quarters straight so it would be easy to see some history.  

Here is how the stock closed and opened around dividend payouts for AGNC in the past 7 quarters :

close open diff
3/18/11 $30.67 $29.50 $1.17
12/28/10 $29.57 $28.29 $1.28
9/23/10 $29.27 $27.90 $1.37
6/25/10 $28.97 $27.20 $1.77
3/26/09 $27.70 $26.45 $1.25
12/29/09 $28.49 $27.01 $1.48
9/29/09 $30.28 $28.55 $1.73

The day after the dividend pay out the stock opened down between $1.17 and $1.77.   Thats a big change and not far from the $1.40 dividend on average.  How does that compare to the normal daily fluctuations in the market value of AGNC?     In that same period the stock was changed more than $1 between close and open only 13 times total and 7 of those were the day after dividend payments.  and Lets look at it graphically again :

Again the dividend dates are in yellow.   This time its much more obvious that the dividend dates are causing the stock to drop significantly.   The drop is also clearly not normal for the daily market fluctuations for AGNC.

I think this is pretty evident if you look at a large dividend.    Yes the stock values do drop after dividend payouts.  

Now that I've been able to successfully see the effect for myself I'll go ahead and get another opinion.   The Motley Fool says this :

"The exchanges often, though not always, adjust the trading price downward by the amount of the dividend on the ex-div date. For most dividends, this adjustment is lost in the noise of the day's trading. For large dividends, on a historic price chart, it can look like a sudden drastic drop. For instance, on Jan. 25, 2006, TDAmeritrade's stock opened $6.44 lower than it had closed the night before. Six dollars of that drop was due to the adjustment for a special dividend."

So they confirm it and give another good example with that $6 special dividend by TD Ameritrade (AMTD).  But there is one detail in that quote from Motley Fool to take note of.   They say that the ""The exchanges often, though not always, adjust the trading price..."    I would interpret that to mean that some exchanges may not do it.  But Motley Fool doesn't go into specifics. 

Whats this all mean?    Well dividends aren't just free money windfalls that come out of thin air.  The dividend is subtracted from the stock price and paid out in cash.   Most stocks pay lower dividends and the dividend adjustment will not be easily visible due to market volatility.   But the reduction in market value is there and much more easily seen in examples of dividends that are larger compared to the market value of the stock.  

Does this mean dividend paying stocks are bad investments?   Oh, no not at all.   Many dividend paying stocks are great investments.   But you should be aware that the dividend payout reduces the market price of the stock.

Bottom Line : The market value of a stock will drop the day after the ex-dividend pay out.   This is not obvious in the market changes for stocks with smaller dividends but can be seen with examples of dividends that are a higher % of the market value. 

March 25, 2011

Best of blog posts for week of March 25th

My Money Blog shares an interesting study that talks about retirement savings rates : What Is A “Safe” Savings Rate? How About 16.62%

fivecentnickel shares their  Thoughts on Wealth and Reaching the Crossover Point  and points to a neat retirement planning site at

Good Advice for Parents with Children Going to College

WSJ published the article Before You Choose that College.. which I found carried via Yahoo.   I think it has some good tips for parents of children headed to college.

Their advice is as follows :

1. Encourage your child to select a career first, and then a school.
2. Don't promise your child you'll pay the entire tuition.
3. When deciding between an in-state public university on the one hand and a private university or out-of-state public university on the other, make your child responsible for at least some of the costs of choosing the more expensive option.
4. Make a deal with your child: Underperform and you're out.
5. Help children protect their health and finances from uncertainty and risk.

You can read the entire original article for their full explanation and reasoning for each point.

I would generally agree with all of these.  Here's my take on their advice.

#1, I think this first tip of theirs is probably the most important in general.  Encouraging your kid to pick a career field is a very good idea.   Far too many people go into college without any idea what they want to major in or do with their lives.   This can cause them to drift from major to major and end up taking 5 years, 6 years or even longer to complete school.    I had a clear idea on what my career field would be before college (engineering) and I was able to graduate in 4 years.   I really think that having a career in mind from the start helped a lot.   I know it is hard for kids to decide what they want to do when they grow up but the sooner you get them seriously thinking about it then the easier it will be for them to decide.  Don't let them wait till they're 18 years old and registering for college courses before they start the process.

The 2,3 & 4 items are motivating the student to do well.   Giving them a financial stake in their education helps them feel more inclined to work hard.   Making acceptable grades a requirement for further funding should also help motivate the student to stick to their studies.   I would just make sure that you don't push these items too far.   Expecting your child to contribute to paying for college is a good idea I think, but on the other hand you shouldn't kick them out on their 18th birthday and cut them off.   Requiring too much from your student or holding back money too much could cause them to end up working 60 hours a week to pay for tuition.       Working hard never hurt anyone but even the best of us can struggle if we're working too much.   Too much work will leave too little time for study and could end up jeopardizing the students grades.   Also be fair when expecting good grades.   Its not reasonable to demand straight A's from a student and doing so is going to put too much pressure on most students.   But expecting B average or better is pretty reasonable and shouldn't be t too harsh for most students.

I guess I'm not too concerned about #5 as it seems to mostly deal with medical records.  

March 24, 2011

Programmable Thermostats with Heat Pumps, Steam heat and Radiant floor heating

Recently J.D. at GetRichSlowly wrote an article questioning  Do Programmable Thermostats Really Save Money?  J.D. pointed out that while programmable thermostats can save you energy they often don't because people don't use them properly.   That is true.   A programmable thermostat is basically just a timer that automatically turns your heat on and off.    The real savings comes from setting the thermostat properly.

One other concern with programmable thermostats that many people may not be aware of is that they don't work well with all styles of heat.   The website from the Department of Energy points out that programmable thermostats have "limitations" when used with heat pumps, electric resistance heating, steam heating and radiant floor heating.

If you have heat pumps, electric resistance heating, steam heating and radiant floor heating then you need to make sure you use a thermostat that is specifically designed for use with your style of heating.

Each of these heating systems operates differently than a plain forced air furnace.   The normal programmable thermostats are basically used to create a setback so that the heat is turned down when you're asleep or away from the home.   However this can fail to work efficiently and backfire when using heat pumps, electrical resistance, steam heat or radiant floor heating.   A standard programmable thermostat can end up costing you money if used with heat pumps, electric resistance heating, steam heating or radiant floor heating.

Heres some quotes form the DoE Energysavers website on how each of the forms of heat may not work well with a standard programmable thermostat: 

Heat Pumps

"Programmable thermostats are generally not recommended for heat pumps. In its cooling mode, a heat pump operates like an air conditioner, so turning up the thermostat (either manually or with a programmable thermostat) will save energy and money. But when a heat pump is in its heating mode, setting back its thermostat can cause the unit to operate inefficiently,..."

Electric resistance

"Electric resistance systems, such as electric baseboard heating, require thermostats capable of directly controlling 120-volt or 240-volt circuits. Only a few companies manufacture line-voltage programmable thermostats."

Steam or Radiant floor heat 

"For steam heating and radiant floor heating systems, the problem is their slow response time: both types of systems may have a response time of several hours. This leads some people to suggest that setback is inappropriate for these systems."

If you have any of these heating systems then you either just stick with your manual thermostat or you could  look for a specialized programmable thermostat that  is designed to work with your heating system.  If you don't know for sure what heating system you have then you should definitely find that out before you attempt to change your thermostat.

March 23, 2011

How Many People Work Multiple Jobs?

When I was in college I worked two jobs for a while.   Once in a while I'll see people encourage others to get a second job to make more money.    A friend of my wife's had been working two jobs until recently.   I've done it myself in the past briefly and I know others do it but I don't know how common it really is.   How many people actually hold multiple jobs?   Easily answered... BLS has data on multiple job holders.

In 2010 there were about 6.8 million people or 4.9% of the population working two jobs.   

Hmmm... at the same time about 10% of the population was unemployed.   Those dual job workers are hogging jobs!    I'm mostly kidding here.  I'm sure most people working multiple jobs are not doing so for fun and they likely have to work multiple jobs to support themselves and their families.

A little over half of the people with two jobs have a full time job and a part time job.   About a quarter have two part time jobs.   A small amount of people actually work two full time jobs (80 hours a week).  

Here's a look at what Part time (PT) versus Full time (FT) jobs are held by the people working 2 jobs :

March 22, 2011

Most Common Degrees Obtained by Gender

I bet you've been curious to know how many women obtained psychology degrees and how many men got degrees in math haven't you?   Well today is your lucky day.

I got the data from the Dept. of Education website here : Table 286. Bachelor's, master's, and doctor's degrees conferred by degree-granting institutions, by sex of student and discipline division: 2008-09.
I decided to focus on just the Bachelor degrees granted.

I sorted out the data and filtered it to find the most popular degrees obtained by men and women for the 2009 graduating class.   Some of the categories below are specific degrees like physics or nursing.   Other categories are for broader categories like engineering which is made up of several specialty degrees or for broader fields like education which has several sub areas.

 Here is the list of most popular bachelor degrees for Women in the 2008 and 2009 school year:

# degrees % of total
Education field 80,549 8.8%
Psychology 72,783 7.9%
Business admin 64,122 7.0%
Nursing 61,405 6.7%
Visual and performing arts fields 54,089 5.9%
English  37,489 4.1%
Biology 33,950 3.7%
Liberal arts 30,480 3.3%
Accounting 24,068 2.6%
Communications 22,000 2.4%
Sociology 20,064 2.2%
Family, consumer sciences 19,151 2.1%
Marketing 18,025 2.0%
Political science 17,447 1.9%
multi-disciplinary studies 17,067 1.9%
Parks rec, fitness studies 15,001 1.6%
Foreign languages 14,856 1.6%
History 14,271 1.6%
Social work 13,080 1.4%
Engineering 12,417 1.4%
Finance 11,136 1.2%
Criminal justice, safety studies 11,125 1.2%
Business 10,359 1.1%
Journalism 8,348 0.9%
Agriculture field 7,483 0.8%
Economics 7,433 0.8%
Math and statistics 6,703 0.7%
Criminal justice admin. 6,604 0.7%
Anthropology 6,198 0.7%
Ethnic, cultural, gender studies 6,037 0.7%
Chemistry 5,650 0.6%
Physics 5,465 0.6%
social sciences 5,394 0.6%
Philosophy and religious fields 4,683 0.5%
Natural resources field 4,404 0.5%

That represents 81.8% of all degrees women earn.   The remaining 19.2% of the degrees are spread around other less popular degree fields.

Now the list of most popular degrees for men :

# degrees % of total
Business admin 66,190 9.7%
Engineering 56,716 8.3%
Visual and performing arts fields 35,051 5.1%
Finance 22,931 3.3%
Biology 21,906 3.2%
Psychology 21,488 3.1%
Education field 21,159 3.1%
Political science 20,947 3.1%
Accounting 20,446 3.0%
History 20,440 3.0%
English  17,973 2.6%
Economics 17,756 2.6%
Parks rec, fitness studies 16,666 2.4%
Liberal arts 16,616 2.4%
Marketing 14,613 2.1%
Engineering tech 13,589 2.0%
Business 11,878 1.7%
Communications 11,229 1.6%
Criminal justice, safety studies 11,012 1.6%
Computer Information Sciences 10,392 1.5%
Math and statistics 8,793 1.3%
Sociology 8,668 1.3%
Philosophy and religious fields 7,761 1.1%
Agriculture field 7,677 1.1%
Nursing 7,478 1.1%
multi-disciplinary studies 7,283 1.1%
Computer Science 6,655 1.0%
Criminal justice admin. 6,620 1.0%
Foreign languages 6,302 0.9%
Theology and religious fields 5,950 0.9%
Chemistry 5,723 0.8%
Natural resources field 5,424 0.8%
Management Information Systems 5,299 0.8%
Physics 5,090 0.7%
Journalism 4,091 0.6%
Information science 3,759 0.5%
Communications technologies 3,699 0.5%
Architecture 3,695 0.5%
Physics 3,684 0.5%
Information Technology 3,251 0.5%
Radio & Television 3,215 0.5%
social sciences 3,199 0.5%

Those degrees add up to 83.5% of all the degrees men get.   The other 16.5% of men get degrees in other things not listed here.

More Affluent Degrees

I decided to break out what I call the 'most affluent' degrees.    These are degrees that I commonly see listed in higher paying jobs and jobs that have fairly good demand.   Now of course there is no guarantee that someone graduating with a degree in one of these fields will end up with a higher paying job but its a fairly safe bet.

Women :

Business admin 7.0%
Nursing 6.7%
Accounting 2.6%
Engineering 1.4%
Finance 1.2%
Business 1.1%
Math and statistics 0.7%
Physics 0.6%
Computer Information Sciences 0.2%
Engineering tech 0.2%
Information science 0.1%
Information Technology 0.1%
Computer Science 0.1%
Physics 0.1%

Men :

Business admin 9.7%
Engineering 8.3%
Finance 3.3%
Accounting 3.0%
Engineering tech 2.0%
Business 1.7%
Computer Information Sciences 1.5%
Math and statistics 1.3%
Nursing 1.1%
Computer Science 1.0%
Physics 0.7%
Information science 0.5%
Physics 0.5%
Information Technology 0.5%

For women the total who got degrees in the 'more affluent' categories was 22.2% and for men 35.1%

Less affluent degrees

On the opposite side of the more affluent degree fields are the degrees that more often  lead to lower paying jobs or underemployment.  In general these degrees feed into careers with lower compensation.   For example, social work and ethnic studies don't pay well.   Some of the degree fields may have fair compensation but very high competition for few jobs.    Actors may make good average salary but most aspiring actors have difficulty finding steady work in the field.

For women the number of degrees obtained in 'less affluent' degree categories are :

Psychology 7.9%
Visual and performing arts fields 5.9%
English  4.1%
Liberal arts 3.3%
Sociology 2.2%
Family, consumer sciences 2.1%
Parks rec, fitness studies 1.6%
History 1.6%
Social work 1.4%
Anthropology 0.7%
Ethnic, cultural, gender studies 0.7%
Philosophy and religious fields 0.5%
Theology and religious fields 0.3%
Communications technologies 0.2%

For men :

Visual and performing arts fields 5.1%
Psychology 3.1%
History 3.0%
English  2.6%
Parks rec, fitness studies 2.4%
Liberal arts 2.4%
Sociology 1.3%
Philosophy and religious fields 1.1%
Theology and religious fields 0.9%
Communications technologies 0.5%

In total 22.5% of men and 32.5% of women obtained degrees in these 'less affluent' areas.

March 18, 2011

Best of blog posts for week of March 18th

Bargaineering helps us with Understanding How Income Is Taxed

Bargaineering also covers another tax topic with Child Tax Credit Explained

On Get Rich Slowly they have Tax Prep Costs: How Much Will It Cost to Get Your Taxes Done? which has a good summary / roundup of what various tax prep software packages cost.

As a reminder see my post from Wednesday on Tax Deals from Ebates for an extra 10-15% cash back on HR Block & TurboTax software.

We're House Shopping

Last Fall I was first Thinking About Buying a Foreclosure as Investment but then we scrapped that idea and instead started Looking at Buying a House for ourselves.  We continued to look at houses online for a while after that through the winder.   Then last month we found a house listed that looked really nice so I called up our Realtor and we went and saw the house.   The house was indeed pretty nice but it had an offer already and was snatched up.    We weren't ready to put in an offer much less get in a bidding war.

Since then we've looked at over a dozen houses.    We've been looking at 2-3 houses each week usually on the weekend.    As we look at more houses we get a better idea of what we like and what is out there.  


Initially we started with a budget in the $350,000 to $400,000 range.  Now our budget is up to $450,000.   I got pre-qualified for a loan but we're not yet pre-approved.   We do plan to get pre-approved but just haven't gotten around to doing so yet.   We have a lot of documents to gather and I need to get some things from my father about the rentals we jointly own with him.

Key things we've learned in our search so far :

1. We don't like bedrooms that are smaller than 10' x 10'.   It seems rooms smaller then that are just 'too small' for our tastes.   9' x 10' is too small.   10' x 11' is OK.  
2. The right yard is hard to find.  Finding a newer house with a good size yard in our area is hard.  Most of the newer houses around here are built on small lots.  At least the homes in our price range.      If we look at older houses then we could get a bigger yard, but then you're dealing with out of date interior, awkward floor plans etc.
3. Some houses we've looked at were adjacent to major streets.  We've decided against these houses due to the amount of noise you get from the traffic.
4. We've also decided against homes that back to major electrical power lines.

The things we want :
Our basic 'wants' list in rough priority order are : 
1. More room,  2. Better School district. 3. Key amenities, 4. Nice yard, 5. Good neighborhood, 6. Upgraded interior, 7 Closer to city / not too far from work.

1 & 7. We're only looking at houses of a certain size and in a particular area, so that narrows the search to homes that give us more room and are closer to the city.   Being closer to the city is not really a priority its more of a nice side benefit of the better school district.  But I'd prefer not to be too far from work, so theres a balance between those two.

2. The school district can be a little tricky.   We're  probably over analyzing this but we've looked at the test scores for the local schools and we really want to stick to the very best schools.   If we're going to move and spend tons of money on a new house then we don't want to settle for 2nd best schools.  

3, 4, 5 & 6 : All these items fall into finding the right combination of home for the price.   We can usually find 3 of the 4, but most every home we've looked is lacking something.

Here's the quick history of the houses we've looked at so far :

#1 nice but it sold
#2 We liked the look and floor plan.  Bad : smallish, not great neighborhood
#3 Very big house that had a pool.  Bad : busy street behind it
#4 Generally OK house,   Bad: busy road, small yard
#5 Again decent house,   Bad : tiny tiny yard, looked ok in picture but in person it was like 8' x 10'
#6 OK but Bad : backed to road
#7 Very nice house recently remodelled in good neighborhood.  Bad : slightly small and sold quickly
decided to increase prices
#8  My wife loved the way this house looked in the pictures.  It was large and looked awesome.  Bad  on a bad road, the interior finishes were not nearly as nice as pictures seemed.  That really disappointed my wife.
#9 Great house.  Bad : No backyard
#10 Generally OK house for a good price : Bad : smallish yard, needed work, short sale, had an offer in
#11 Good house.  Bad : incorrect school, bit overpriced
#12 Generally nice house in good neighborhood.  Bad : smallish, busy road
#13 Nice new construction house.   Bad : yard was too small
#14 Good size house in good neighborhood.  Bad : over priced and a little worn and dated

March 17, 2011

How Advertisments Impact Us

I just made you want a burger, didn't I?.
I would say a relatively common theme in personal finance is to criticize marketing and advertisements and blame them for encouraging over spending and consumerism mentalities.   The basic argument seems to be that advertisements pitch items we don't really need and individuals then are swayed to spend money they shouldn't.    I don't think that advertisements are as evil as some people make  them out to be. 

Of course advertisement can sway peoples opinions about products or companies.   If nothing else advertisements help promote brand awareness among consumers that may help steer more consumers towards the company in question.   Personally I think that most ads don't do much at all for most viewers except getting the company more exposure.

Mmmmm... Asbestos.
Ads that don't apply to me

When I'm watching TV and see the ads they offer  it seems that about half the ads are for stuff I'd never need or want.   There are ads for prescription drugs for ailments I don't have, feminine hygiene products, products for children which I don't have, ads to settle debt that I don't have, etc.   Sometimes when I'm watching an NBA game I'll see ads in Chinese.  Many ads are pitching things I've already bought or buy.   I see ads for movies that I've already seen.  There are ads for the TV show that I'm currently watching.   There are also PR type ads for the electric utility that we get our electricity from.   It seems that the majority of ads on TV are for stuff I don't need or already buy.

Ads with Information I actually want

That leaves some goods or services on TV commercials that I am interested in.  I must admit that I like seeing TV ads for new cars and movies.   I like cars.   I find it interesting to see the new cars on the market.   A flashy ad for the new Mustang will draw my attention.   But I am not in the market for a new car and do not expect to buy a new car any time soon.   These ads educate me on the brands and models available but they are not going to compel me to run out and buy a new car.   If I'm entirely honest with myself I should admit that the ads may raise my desire for a nice fancy new car.   
Ads for movies on the other hand can definitely have an impact on my spending.   I like seeing trailers and ads for movies to know what movies are coming out and get an idea if I'd enjoy watching them or not.  If I don't see ads for movies on TV commercials then I'm likely to purposefully seek out movie trailer videos online.   A very good movie commercial can definitely influence my decision to go spend money to watch the movie.

Must.. buy... BMW...

Another category of ads are for things that I may already be looking to buy or might have some interest in.   My wife and I have been talking about some remodeling projects around the house so if I were to see an ad pitching a remodeling service that specializes in doing work we're interested in then that might influence our spending decisions.   These ads basically educate me on goods or services that I may not be aware of but are actually interested in purchasing.   I don't think this is a bad thing.   If I'm in the market to buy a new dishwasher and am only considering two local shops that I know of then see an ad for a third shop who I didn't realize carries dishwashers then that expands my options.   Or if I'm looking to buy a dishwasher and see an ad that a store has dishwashers on sale then I really don't see the harm in that ad.

Sometimes Its just about Brand Awareness.

Would you rather buy Levi's jeans or Smith jeans?   Would you be more likely to drink a Coca-Cola or a Jones soda?   Would you invest your money with Schwab or with Miller?    For all three of these questions I bet that the vast majority of people would go with Levis, Coke and Schwab purely because these companies are known entities.   You are at least aware of the company if not already a customer.   All three of them have pretty high brand awareness.   A lot of time I think the primary purpose of advertisements is just to raise brand awareness.   You're a lot more likely to buy items or purchase services from companies you've heard of versus companies you aren't aware of.

Take that Hertz!
Competing Ads Negate Each other

Lets say you're in the market to buy a car.    You turn on the TV and watch a few shows.   Over the course of a few hours you might see several advertisements of cars.  You are now equally aware of all the different makes and models of cars that you saw on those ads.   A particularly good or bad ad may change your view for or against a particular car model.   But for the most part all these ads do is to raise each option to a level playing field.  

Lets do a little experiment

Taking a random sample of about a half dozen web pages that I happen to have open right now, I see web ads for the following :

Groupon, Netflix, A tax preparation service, E*trade, Tradeking, TD Ameritrade & Scottrade as well as a big ad for VanguardOracle ad about downloading WSJ for Ipad.  I'm not really clear who the ad is for, Oracle, WSJ or Apple, online access to the WSJ, Pfizer PR type ad, ad for unnamed company offering 'perfect celebrity skin without injections and recovering from back surgery in 5 days, Lendingtree advertising refinance for a low APR  and finally an ad for Progressive insurance.

Thats about 14 different companies.
3/ 14 : Already a customer : I already purchase services from three of the companies: Netflix, Scottrade and I'm already signed up for Groupon. 
5/ 14 : Could be interested : Tradeking, TD Ameritrade, Vanguard, Lendingtree and Progressive might be of interest to me if I was currently shopping for a brokerage account, mortgage or insurance.
6 / 14  NO interest. : I hate E*trade and won't touch em with a 20' pole.   I don't have an Ipad nor any interest in Oracle and I don't want or need to read the WSJ.   The Pfizer ad doesn't do anything to me and only seems to want to get their name known in a positive light.   The celebrity skin item is of no interest to me at all.

Most of the ads, 9 out of 14, I either already purchase or have no interest in.    The other 5 ads are potentially interesting but didn't compel me in anyway.

This is all just my personal opinion.    I'm sure that other people see ads much differently than I do. 

What do you think?    Do advertisements compel people to spend money on product or services in general?   How much impact do ads really have?

Photos : In N Out by caccamo, asbestos by Marxchivist, BMW by mroach & Avis by Bidgee.

March 16, 2011

Tax Deals on Ebates

Have you done your taxes yet?    Well you've only got about a month left.  If you haven't done them yet then you can get a cash back discount on tax software via Ebates.   Right now two of the most popular tax software packages will get you 10-15% cash back :

H.R. Block is 15% cash back
TurboTax at 10% back

To get the cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the merchant before you do your shopping.  

Education Attainment by Age Level in the United States

 Does "everyone" go to college nowadays?   What about in the "olden days"?    I thought it would be interesting to look at the education attainment levels in the US among on different age groups.   I'm figuring that most people obtain their education when they are young so the different education attainment levels for different age groups would reflect changing education attainment levels over time.   In other words if more young people go to college today then more young people will have degrees, or if fewer people in their 50's have degrees that would mostly be a reflection of fewer people going to college 20-30 years ago.   However, there are many exceptions among people who go back to college later in life.  But by and large the fast majority of college students are under 30 years old.   OK, enough talk.. lets get to the data!

The Census page : Education Attainment in the United States 2009 
I looked at just the data for everyone over 25 years old for all races.   I am only looking at people over 25 to give people enough time to graduate from college.   I decided to break it down by age group mostly to see how much education attainment levels has actually changed across generations.

First lets look at the entire population.  Education attainment in the US for people 25 years and older is as follows :

Drop Out 13%
High School Diploma 31%
Some College 17%
Associates degree 9%
Bachelors 19%
Graduate 11%

Or Graphically it looks like this :

Here is a table with the % of education attainment by age group :

Drop Out HS Some College Assoc. Bach. Grad
25 to 29 11% 29% 21% 9% 23% 7%
30 to 34 12% 27% 18% 9% 22% 11%
35 to 39 12% 27% 17% 10% 22% 12%
40 to 44 11% 30% 16% 10% 21% 11%
45 to 49 11% 32% 17% 11% 19% 10%
50 to 54 11% 32% 17% 11% 18% 11%
55 to 59 11% 30% 18% 10% 18% 12%
60 to 64 11% 30% 17% 9% 19% 14%
65 to 69 16% 35% 16% 7% 14% 11%
70 to 74 20% 38% 15% 5% 13% 9%
75+ 26% 37% 14% 5% 11% 7%

Here is that same data shown graphically :

Now if you break it down differently and look at who goes to college versus who doesn't it looks like this :

Drop Out HS Any College
25 to 29 11% 29% 60%
30 to 34 12% 27% 61%
35 to 39 12% 27% 61%
40 to 44 11% 30% 58%
45 to 49 11% 32% 57%
50 to 54 11% 32% 57%
55 to 59 11% 30% 59%
60 to 64 11% 30% 59%
65 to 69 16% 35% 48%
70 to 74 20% 38% 42%
75+ 26% 37% 37%

Graphically that looks like this :

Thats a little stark to me.   There isn't much variation in the rate of drop outs, high school grads or people who have some college between ages 25 and 64. However for people 65 years and older the education attainment levels are quite different than for those of us who are younger than 65.

Now if you just look at the % of people who have a 4 year degree or more :

Bachelors or more
25 to 29 31%
30 to 34 34%
35 to 39 34%
40 to 44 32%
45 to 49 29%
50 to 54 29%
55 to 59 31%
60 to 64 33%
65 to 69 26%
70 to 74 23%
75+ 18%

Graphically that looks like this :

If I break it down into larger age groups of about 20 years you can see that there is some generational differences in education :

25 to 44 45 to 64 65 + 
Drop Out 12% 11% 22%
HS 28% 31% 36%
Some College 18% 17% 15%
Associates 10% 10% 5%
Bachelors 22% 19% 13%
Grad 10% 12% 9%

And graphically that looks like this :

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