Things I take for granted part 2 : Washing machines

It's Saturday. You roll up your sleeves, gather all the sheets, clothes, rags and towels and bundle them up in a big batch. You mount the bundle on top of your head, grab your washboard, your

pack of lye, your bristle brush and prepare for the 6 mile walk to the river bed to put in a good 8 hour day of work washing it all. In much of the world that's still the way housewives clean the family's garb each week. It's back-breaking labor and almost none of us in the modern world have ever experienced it. 

I even left out the wringer used to wring out the water, and then having to carry all the wet clothes back home to hang on lines and waiting for a good day of sunlight so they can dry. Not to mention that if it rains or snows you have to start the process over again. It's quite ridiculous to a westerner that this is even a reality anywhere in the world. What's funny is that it's likely that your parents or perhaps grandparents can remember a time where they had to do something similar. Most likely though they had plumbing inside the house and they filled up a few tubs with warm water and saved themselves the walk to the river. 

Knowing this, it's incredible that we complain about having to do laundry. I literally have to walk about 8 feet and dump everything into the machine, hit a couple of buttons, and then watch 30 minutes of TV while millions of scrubbing bubbles magically and gently wash the grime out of my clothes and magically soften the fabric.

So next time you have to do laundry, pour your self a glass of wine and give a big hug to that massive white box that does all the work. And for the love of god, stop bitching about having to do your laundry.

The minimum wage debate and why it's ridiculous

I have so little time to write these days and in fact I'm writing this on my only break of the week. I writing because apparently, according to the numbers, most of you reading the article think the minimum wage should be at $15 instead of whatever it is in your area. Supposedly because you don't think there is any harm in increasing the minimum wage. Well follow me down this rabbit hole for just a few minutes and if you still think the minimum wage should be set by the government and imposed on all employers then you will probably always make the minimum wage. Here are a few things to consider:

1) The minimum wage doesn't just affect the people making minimum wage. If you're currently making $15/hour, you're likely not in an entry-level position at your company. The problem is, if the new minimum wage is $15, then your wage will have to increase to at least $20 to keep you at your current job. So the wage increases affect your employer's entire payroll, not just the people they're paying minimum wage to. 

2) The reason minimum wage jobs exist is to allow for entry level jobs from which you can pull yourself up with your own bootstraps. They are not meant for you to stay in for life. If you're making minimum wage right now and you don't have a solid plan for how to work your way out of that position and into a higher paying position then what is lacking is ambition, not regulatory policy. If we were to increase the minimum wage to meet living standards of a city like Los Angeles then there would literally be no reason for anyone at the minimum wage to ever excel in life. All the people with no drive in their life would basically stay put in their position and make a living. 

3) I don't pay people minimum wage, because I know that as a business owner, if I want quality people to work for me, I'll have to pay them what they're worth. Most of the consultants who work for me make over $100/hour. That's how the free market economy works. So why do I care about the minimum wage? Here's why: Let's talk about Costco. Costco is known for limiting markups on items to 14%. In the quarter ending 8/31/14 Costco had $35B in revenue with $34B in operating expenses. They don't really report what percentage of that is labor but they do report that $3.4B is from "Selling/General/Admin. Expenses". Which includes labor. The rest is likely just the cost of product. So that $3.4B comes right out of that $14% mark up. Now if we increase minimum wage $9 to $15, that's a 66% increase in the minimum wage which is likely to eat right into that 14%. Costco doesn't pay anyone the minimum wage, in fact their average is $19 per hour, but remember, raising the minimum wage increases all wages (see #1). So now what? Well, no problem, Costco will just increase their markup from 14% to say 20% to make up the difference because if they report any less they will lose all their investors. So that increase is going to come directly out of the pockets of all the people who buy from Costco, including those who make the new $15/hour minimum wage. And their landlords, and the people who provide them services. Everyone's costs will go up tremendously which will inevitably increase all prices of all goods and services. Much like the increase in the price of gasoline (another basic business expense) has raised prices over the years across the board. At this point you might say, well who cares? Everyone gets paid more and everything costs a little more, so who are we hurting by increasing the minimum wage? We're hurtin the dollar. Because as you noticed from above, it lost value almost instantly. The other problem is that the wages don't increase by the same amount in China, India, Europe, Brazil and the rest of the world and the dollar loses a lot of ground in the world market. 
Don't believe me? Check out this graph that the pro-minimum-wage-hike side has put together to demonstrate the plight of the lower working class. To me though this represents the fact that the value of the dollar is directly affected by changes in the minimum wage.

4) The small business owner will have to find new ways to eliminate labor as the cost of labor begins to match the cost of technology that will replace those workers. (See local grocery store check out line robots.) Business who can't cut labor costs have two options: 1) Go out of business 2) Increase prices and risk losing customers. And many times those lost customers are not just going to the competitor, they're going away for ever. When the price of a pizza goes from $19.99 to $26.99, the consumer doesn't just go to a different pizza place, he stops ordering pizza and makes a sandwich at home. The pizza place dies and so do the dozens of jobs it was creating. Including the jobs it was creating indirectly, like jobs at suppliers and service providers to whom the pizza place was a customer.

5) You might say that a rising tide lifts all boats. True that! The minimum wage goes up, so all wages go up, so prices go up, so rents go up, so the living expenses will not be met by the minimum wage, so the minimum wage goes up, so all wages go up and on and on and on. 

In short, increasing the minimum wage is like saying that there are people drowning in the pool. But instead of teaching them how to swim and get out of the pool, you move the pool to the 2nd floor of the building. Guess what?! The same people will still drown. 

So to those of you who now hate me because you make minimum wage, or close to it. I will leave you with this. I worked at a restaurant while I put myself through college. I got paid minimum wage at $4.25/hour while the average rent in the city I lived in was $1200/mo for a two bedroom. The average rent is now $2400 while the minimum wage is $9. Same same. But the only thing different is the dollar is now worth half as much. I worked hard at that restaurant and the wages were a joke. But I knew that I had to find a way to change my station in life. It never even occurred to me that the fix would be to bitch about the minimum wage. I knew that if I worked harder, and pushed my way through life I would eventually do better. 

Low paying jobs are an incredibly important part of the economy. They are absolutely vital because to employ the very beginner work-force, a very low wage is required. The investment a business has to make in a entry-level employee who is not generating revenue is tremendously high and it must be offset by a very low wage. Once you have gotten that training and experience it's up to you to move to another job. The employers know this and it's figured into the low wage. That's why the wage is low. So you get yourself out of it and make room for the next guy who is going to work his way up. Instead, we raise the minimum wage, which keeps people in those jobs and doesn't allow for the entry-level work force to enter the market because the minimum-wagers are hogging all the jobs.

The minimum wage is NOT meant to be a living wage and it should NOT be! It should instead inspire you to learn new skills, make new connections, and lift yourself out of poverty. A low wage job is what makes America a land of opportunity, because anyone who wants to work, can find a legal job to do. It might be at a low wage, but that's how you start, it doesn't have to be how you always live.

Put all your love or hate in the comments below.

5 things you should stop complaining about right now

All I hear lately is complaints. From people right here in the US. The most comfortable, abundant country in the world. Most days, your biggest problem is: "Dude! I ate too much, I feel sick." Or, "Man, I am so hung over, we drank way too much this weekend." Here is a list of 5 things you so called "intellectuals" complain about every day and why you should just stop.  

Lack of jobs

If you spent the time you have spent complaining about and analyzing the job market in the US on learning some 21st century skills like social marketing or software development you would probably have a new lucrative career by now. But no, you'd much rather bitch about how Mexicans are taking our jobs and waa waa India, waa waa China, waa waa Phillipines. They moved your cheese, get over it, find new cheese already. For god's sake, it's never been easier to make a bit above minimum wage. If you own a car you can be an Uber/lyft/sidecar driver in in less than a week. You can do any of nearly 10,000 tasks for $5 on Fiverr and make a living. You can sell stuff on eBay, Amazon, Etc, etc...
So please, stop complaining about the job market and change your state in life. It may never be as good as your mortgage days, but you can earn a good living and have a roof over your head and food on your table if you are willing to, umm, you know, work. 

Global warming

All your environmentalists make me sick. You think you're saving the planet with your Prius or Tesla or whatever and scoff at the likes of myself who drive a 20 mpg vehicle. Well, lets get one thing straight. If you even take a single commercial flight each year, your carbon footprint is increased by 10,000 times what you "saved" with your electic "car". The earth is not dying because everyone isn't as smug as you. The earth is dying because you don't understand the impact of the things you do. Blaming global warming on cars is like blaming your obesity on, ummm, Chicken. Yeah, sure, chicken has calories, and you can get fat from it, but you should look into that after you cut out pizza, doughnuts, ice cream, pasta, garlic toast, chili fries, and fried rice. 

GMO products
Do you know where you would be without GMO products? Not alive. And I don't mean that you would have died by now. I mean that you would likely never have been born. The world's food supply depends largely on mass-farmed products. It has to because there is now just way too damned many of us, and we love to eat so goddamn much of everything at our favorite time, not only when they are in season. Well, guess what, melons, lettuce, apples, and tomatoes don't just grow all year long. So unless you wanna stop eating those things 6 months out of the year, I suggest you educate yourself about GMO foods and direct your opposition to the subset of them that hurt us rather than the 90% of them that help us survive. True, GMO foods are engineered for the wrong reasons and more commonly than we would like, but if you don't understand GMO, and just run your mouth about it ignorantly, all you are doing is hurting your own cause. 

High gas prices

This is my favorite one. At the time of this writing Current price of Petrol (Gas) in the UK is £1.34 (and higher) per litre. 1 US gallon = 3.78541178 litres so the true price of a gallon of gas in the UK in American dollars is about $10. That's more than twice what I paid at the pump today for 91 Octane ($4.10). In fact its 2.4x the price. And the UK is not even the highest prices. According to Bloomberg, UK is #13 on the list with Norway, Netherlands, and Italy rounding out the top 3. The US is actually number 51 of their list of 61 countries. With Venezuela paying only $0.04 per gallon of gas, followed by Saudi Arabia and Kuwait at $0.45 and $0.81 respectively. But get this through your head, if you are NOT okay with us getting involved with wars in the middle east and you don't want our troops to be all up in that bitch, then you CANNOT at the same time complain about high gas prices. So to recap, our gas prices are actually quite low compared to nearly every other civilized nation (Although we do spent a disproportionate amount of our income on gas at nearly 3%). And, you can't have it both ways, we're either the a'hole super power causing sh*t in the middle east to get our foothold on where the black gold is, or we end up paying as much as all other European countries. 

China is stealing our products

This one sucks. I agree. But have you ever read Sun Tzu's Art of War? You really should. This is just textbook stuff to the Chinese. In a war, and the economic war is a war, every thing you do is fair. There is no honor in losing because you were fair. In fact, the sneakier you are, the higher the praise. So if you found a way to cheat and get your way against the enemy, then good for you. If you lost, because you didn't take advantage of obvious things like infringing on patents and copyrights, then you have dishonored your troops and country by being a bad general. Win at all costs. So knowing that mentality (and obvious cultural difference), you can sit there and whine and bitch about how China is stealing your junk, or you can develop better customer service, refine your product, and win the heart of your customer with good marketing. And With all the time you'll save not crying, maybe you can find a way to screw the Chinese out of a couple of bucks while you're at it. 

Waaaaa

I HaZ Bitcoin

Many of you have asked me what the heck Bitcoins are. Well, I spent 3+ hours today trying to get this video right in one shot. Every time I went on a huge tangent about currencies so I had to start over and tried really hard to keep it simple. But it's just not a very simple discussion. 

Challenge: If you're part of the first 100 people to subscribe to my blog and put  your public wallet address in the comments, I will deposit a small fraction of a bitcoin into your wallet. It won't be much, but it will get you started. Offer ends 1/1/2014 :)

Cheers

Why I'm considering going without health insurance for the first time in 20 years

I've been with Kaiser for the past few years and have enjoyed affordable and ample care. But as of next year that's all about to change thanks to Obama care. My premiums are going up by 55% while my coverage will decline tremendously. I'll let you watch the video on why I think this has happened.

5 changes that will make the Covered California (Calheers.ca,gov) site better instantly

I spent about 30 minutes today to try and sign up for Covered California. Sort of a eat my own dogfood type of effort. Immediately I noticed some really big things that will turn even the most eager users off. I am writing this post so that maybe they will pay attention and make some changes. 

The overarching message here is: "Keep the user in mind". 

To set the stage, I'm a married man in my mid-30s who currently has health insurance through Kaiser Permanente. I work in the technology sector.

I tried about 12 times using the chrome browser to get the login page to load and each time I was greeted with this message: 

Clicking on the link did nothing.

After 12 attempts I switched over to Internet Explorer 10 and was finally able to sign up and login. 

The sign up process was relatively simple with the exception of the fact that it asked me for my SSN without ensuring me that it would stay safe in their hands. I was able to skip this field during the signup process so that was good.

The username has to be 8 characters long which is in my opinion a point of friction and will cause the form to produce and error for 1/2 the people who try to sign up. Why not do a quick edit check with Javascript and let the person know right away before they have to submit the form and see the error? 

Anyway, I then tried to login and got a 404 not found page. I refreshed 2 times and got the login screen which asked me for 5 answers to secret question. As soon as I selected those, it crashed and made me login again. That I will forgive because it is a new site and they're still working out the bugs. But the secret question thing .... it should be optional IMO. 

Then I tried to actually Apply for a plan. That's when things got really ugly. I cannot proceed in this form without providing them with my SSN and Naturalization documentation. WHAT?!! Why do you need these just to show me what plans I qualify for and how much they will be? Why at this stage? And again, I don't feel safe entering my SSN in your 404-Not-Found website just yet, so unless you're gonna make me feel safe with my information with a robust website, then don't ask me this stuff until I'm ready to commit. I can't even navigate directly to www.calheers.ca.gov ... What is v.calheers.ca.gov? You have to know that this is confusing your users. You have to know that I may not be interested in the plans once I see them, so having given you a bunch of information during the shopping stage is just going to drive users away. I would love to see the bounce rates of this page. Let me guess, 100%. 

And really, what is with all the different branding? Are you trying to make me suspicious of you? There is healthcare.gov, that takes me to coveredca.com, that takes me to v.calheers.ca.gov which has the title AHBX portal. How is that user friendly?

But don't worry, CoveredCA. I'm not all negative feedback. I actually have some very simple solutions to make this easier for you:

1) Pick a web domain and stick with it. CoveredCa.com makes sense since people have been hearing it.

2) Allow the user to enter non-personal information and arrive at a quote with details. Then if and only if he chooses to select the plan, make him verify all you want.

3) At least try to have the styling of your site match Healthcare.gov in some meaningful way. Users like continuity, it builds trust.

4) If you want me to enter my SSN and DOB and other identity information ensure me that it's going to be safe somehow. 

5) This initiative already has enough barriers, if I am having trouble using the system, you can be sure that my mother is definitely going to have issues. Things like browser compatibility, Http routing errors, general performance, and post submit error checking are only going to add friction to the process. As it stands right now, I cannot imagine you'll have many people complete the application process, much less sign up for coverage. Glad to help. 

ObamaCare (ACA) for Dummies - Understand it all in 4 minutes

I've been seeing a lot of posts on my social network about the ACA (Accountable Care Act) also known as ObamaCare and it seems to me that nearly all of us are to some degree confused what it means. So I figured why not post some of the major highlights so that you understand them better. Much of what you will read in this post was copied and pasted from Healthcare.gov. So here goes:

What is a Marketplace?

The Marketplace is a new way to find health coverage. It can help if you don’t have coverage now or if you have it but want to look at other options.

Insurance plans in the Marketplace are offered by private companies. They cover the same core set of benefits called essential health benefits. No plan can turn you away or charge you more because you have an illness or medical condition. They must cover treatments for these conditions. Plans can't charge women more than men for the same plan. Many preventive services are covered at no cost to you.

No matter what state you live in, you can use the Marketplace. Some states operate their own Marketplace. In some states, the Marketplace is run by the Federal government. Find a marketplace for yourself.

What are "essential health benefits"?

Essential health benefits must include items and services within at least the following 10 categories: 

• ambulatory patient services
• emergency services
• hospitalization
• maternity and newborn care
• mental health and substance use disorder services, including behavioral health treatment
•  prescription drugs
• rehabilitative and habilitative services and devices
• laboratory services
• preventive and wellness services and chronic disease management
• pediatric services, including oral and vision care.

Insurance policies must cover these benefits in order to be certified and offered in the Health Insurance Marketplace, and all Medicaid state plans must cover these services by 2014.

How should I choose a plan?

Plans in the new market place are put into 4 basic categories:

• Bronze
• Silver
• Gold
• Platinum

IMPORTANT: The categories do not reflect the quality or amount of care the plans provide.

The category you choose affects how much your premium costs each month and what portion of the bill you pay for things like hospital visits or prescription medications.

You just gotta ask yourself: Do you expect a lot of doctor visits or need regular prescriptions?

• If you do, you may want a Gold or Platinum plan.
• If you don't, you may prefer a Bronze or Silver plan. But keep in mind that if you get in a serious accident or have an unexpected health problem, Bronze and Silver plans will require you to pay more of the costs.

What are the different plans? 

Basically there are two categories:

• Private: Depending on your household income you may qualify for reduced premiums. All plans cover essential health benefits, pre-existing conditions, and preventive care. If you don’t qualify for lower costs, you can still use the Marketplace to buy insurance at the standard price.
• Medicaid and CHIP (Children Health Insurance Program): Both of these are for those with VERY limited income. 

When can I sign up and when does coverage begin?

Marketplace open enrollment begins October 1, 2013  and ends March 31, 2014. If you enroll by December 15, 2013, coverage can begin as soon as January 1, 2014.

Do I have to offer health coverage to my employees?

Short answer: If you have less than 50 FTE employees, No. Otherwise, maybe. Long answer.

What if I'm self-employed (and have no employees)?
You're not considered an employer. You can use the individual Marketplace to find coverage that fits your needs.

What is AIM and do I qualify? 

AIM: Access for Infants and Mothers provides low cost health insurance coverage to uninsured, middle income pregnant women. The total cost is 1.5% of the subscriber's adjusted annual household income. This is much less than the cost under Covered California. If you are pregnant, with income between $3,256 - $4,884 per month for a family of 3, you may qualify for AIM. You’ll find a complete income chart by family size for AIM here: http://www.aim.ca.gov/costs/income_guidelines.aspx . Medi-Cal provides coverage if your income is below these limits.

What if I don't want insurance?

Most people must have health coverage in 2014 or pay a fee. If you don’t have coverage in 2014, you’ll have to pay a penalty of $95 per adult, $47.50 per child, or 1% of your income (whichever is higher). The fee increases every year. Some people may qualify for an exemption to this fee.

Will there be enough doctors and will they accept these plans?

Maybe, maybe not. But that's the beauty of a free market (all private plans). It will self-adjust until it works. Nothing is sustainable without all parties benefiting to some degree and it may take a few years but it will adjust appropriately. In the mean time, your doctor may not accept your new plan but some doctor somewhere will. If you don't like it, opt for a more expensive option or pay cash for your care. 

To Conclude ...

If you already have health insurance then ACA shouldn't effect you unless you want to shop again starting today. 

If you don't have health insurance now you have to have it and you can get some very basic insurance very cheap. It won't be great, but nothing cheap ever is. 

If you have very low income, you now have an option you didn't have before.

Ready to apply? Get started.

Questions? Call 1-800-318-2596, 24 hours a day, 7 days a week. (TTY: 1-855-889-4325)

Things I take for granted Part 1: Hot Shower

So lately I've been noticing some very big things that we take for granted. If you really think about it, a hot shower is just about the most luxurious amenity in our homes these days. On any given morning, I can roll out of bed and walk into my shower and turn the faucet on and within seconds, water perfectly heated to my desired temperature flows out effortlessly for as long as I like. I can literally sit for an hour and relax under this substance that in parts of the world could satisfy the survival needs of hundreds of dying thirsty villagers.

I live in Southern California. An arid desert with no substantial fresh water source. The seemingly
limitless water gushing out of my shower head has no business being anywhere near my house. Technically, I shouldn't even be able to live here much less use up ridiculous amounts of water every morning. So am I really taking it for granted? Well, in 1960, California voters approved financing for construction of the initial features of the State Water Project (SWP). The project includes some 22 dams and reservoirs, a Delta pumping plant, a 444-mile-long aqueduct that carries water from the Delta through the San Joaquin Valley to southern California. The project begins at Oroville Dam on the Feather River and ends at Lake Perris near Riverside. At the Tehachapi Mountains, giant pumps lift the water from the California Aqueduct some 2,000 feet over the mountains and into southern California. The rest of my water comes from the Colorado River. A 1440 mile long river that runs through seven states, several Indian Reservations and Mexico. And about 30% of it comes from under ground well sources. All that water goes through reservoirs, treatment facilities and is finally delivered through large distribution networks that were developed to pipe treated surface and groundwater to my home where it waits at the tap for me to turn on the faucet. Oh and I totally skipped over the fact that a similar thing has to happen with natural gas, which goes through similar pipelines to get to my house, and is used to heat up 80 gallons at a time to near boiling temperatures and keep it there until I'm ready to use it in the morning. And yes, every day, I take all that for granted.

The lie about saving for your retirement

I got out of college in the late 90s in the middle of perhaps the best job market in decades. The biggest requirement for a well paying job with great benefits was being able to fog up a mirror consistently. So like many in my class, I put my dreams of graduate school on hold to pursue a well paying job and never looked back. The company I worked for hired me and a few dozen others as "College Hires" and sent us out for  two week of training in of all places Mishawaka IN. There were close to 60 of us and since for most of us, our first paycheck was the most money we had ever made, our employer, being socially responsible, felt it was necessary to give us some training on retirement planning.

The session was taught by So-and-so from Such-and-such Investments LLC and focused on the 401K plan and a diversified portfolio and made some grandiose claims about how saving a nickel a day when we were 23 could be turn into a million dollars when we're retired. There wasn't a word about anything other than ways to manage your money in how to plan for retirement. We all bought it. All of it. 

The Cliff Carl took us too

Fast forward 15 years and a day after my wedding I met Carl. He was walking along the beach in Palos Verdes, CA when my wife and I ran into him and he told us about a small cliff we could dive from about a mile away. He led the way and we followed. He was fast and in our great wedding shape we had a hard time keeping pace. After a few dives I talked to Carl and quickly found he was a Viet Nam vet and a retired professional who now works part time as a consultant. What came next was a total shock. Carl was 73. I had figured him for 53 max. He told me about his grand kids and how he can still outrun them and how he spends most of his free time with them playing around.

Carl made me think of all the others in his age who spend most of their time at the doctor's office and hardly ever have time for their families. And even when they have time, the quality of the time they spend with their family is affected by the poor health. They can't be active and they spend most of their money on medical expenses. That short conversation with Carl showed me the inauthentic lie retirement planning had been all along. What were we saving all this money for? To pay our medical bills when we get old? That's precisely it.

Medicare covers only 59% of the cost of health care for seniors and that's predicted to only decrease making the personal contribution a larger percentage of the care. In fact, a couple aged 65 might need $387,000 saved in order to be confident of covering their health care costs in retirement, not including outlays for long-term care, finds a report from the Employee Benefit Research Institute (EBRI). Add that to the fact that the cost of healthcare and the worker contribution are increasing at a much faster rater than compensation and inflation, and you get to know why saving money for your retirement should be re-branded as saving money for your healthcare.

Healthcare expenses for seniors increased by 5% in 2011 from the previous year. And that percentage increase is likely to be small compared to what we see year-over-year in the next 20 years. So the dollars you save today will have to grow by 5% annually just to meet the increase in your future healthcare costs, and they have to grow by an additional 6% to meet Such-n-such Investments LLC's projections for you to retire by 70. That's 11% annual increase in your retirement savings just so you can have 90% chance of having enough money to survive. If you know anything about money, you know that 11% is a ridiculous expectation.

You may have already jumped ahead of me here and figured out for yourself that an investment in your health and wellness is far greater than an investment in your 401K. Not only is being healthy going to prevent unnecessary healthcare dollars from being spent, but you'll be able to work and keep active well into your sixties and seventies if you are healthy and well. I'm not saying that you shouldn't save your money, but I am confident that your health and wellness will count far more than your money. No amount of money is going to cure diabetes, heart disease, or any of the other dozens of completely preventable killers that will have you spend your old age in a wheelchair.

What's more, my new friend Carl, even though retired, still works 20-25 hours a week doing consulting. That's additional income he can count on in his 70s which is allowing him to be net positive far longer than the average for his generation. I'm no mathematician, so I used Bloomberg's 401k calculator to determine how much a very well deciplined 23 year old could save for retirement if he starts out making 50k/year and contributes 5% of all his income for the next 42 years towards retirement.

401K Summary
Your Contribution:	5%
Employer Match Rate:	50%
Percentage of Contribution Employer Matches:	100%
Investment Rate:	5%
Salary Increase Rate:	5%
Value of Your 401(k)Plan in 42 Years:	$1,223,797.79

The answer is $1.22M. That's with a 5% consistent salary increase. Not a bad loot. But if that 23 year old starts today, he'll be 65 in 2055. Now earlier we said that the cost of Healthcare is increasing at 5% a year and for a 65 year old in the US it's close to 15k/year. If the growth continues at 5%, then in 2055 the cost his health care will be closer to $116k per year. Not to mention that if his additional living costs go up by even 2% year over year at a modest 40K for current cost of living, he's looking at $92k/year to pay his non-healthcare related expenses living very modestly. 

$92K + $116K(healthcare) = $208K Total cost of modest living in 2055

And that's just his 65 year old self. If you notice the graph above has a much higher rate of change when he's in his 70s. His cost of living is likely to be well into $300k/year when he's Carl's age. And the majority, more than half, of the cost will be his healthcare cost. 

Well, it doesn't take a rocket scientist to realize that an investment in your wellness will pay much higher dividends than an investment in your 401K when you retire in 2055. I'm not saying you shouldn't save your money. But I would rather see a few of those dollars go towards:

• Eating healthier and natural foods
• Buying better, more natural groceries and cooking at home
• Gym membership and exercise equipment
• Adventure travel that involves activity
• Better chairs, beds, and furniture that ensures better posture
• Moving to geographical areas with lower smog and other environmental hazards
• Cycling or walking as a means of transportation
• Dedicating yourself to an active lifestyle

What investments are you making in your wellness?

Amazon AWS, Should I choose a reserved or OnDemand EC2 instance?

Well I'm glad you ask. I set out to answer the same question for our mobile app backend servers. Our mobile app currently runs on two Medium EC2 instances along with several other services like RDS, S3, and SES. We also have 1 micro development server, and 1 micro test server. Setting this all up can be a real challenge but figuring out how much it's all going to cost you is nothing short of rocket surgery.

Reserved vs. OnDemand EC2 AWS instances Cost Analysis

As you may already know, much of your AWS bill is going to come from your EC2 instances (Amazon Elastic Compute Cloud). Now Amazon gives you this nifty "simple" calculator to use to determine what your total cost is going to be but if you're like me, that's only going to confuse you more than help. To further complicated things, Amazon gives you several choices on how you can consume these instance:

• On Demand - "pay for compute capacity by the hour with no long-term commitments"
• Spot - "bid for unused Amazon EC2 capacity" and save upto 50+% but variable availability.
• Reserved - make a low, one-time payment for each instance you want to reserve and in turn receive a significant discount on the hourly charge for that instance. This reserved option comes with several options of it's own based on how much you want to use the thing.
• Low Utilization
• Medium Utilization
• High Utilization

The trouble is you now need to answer some tough questions. What do I need this instance for? How much utilization do I need (how much uptime)? And how long am I willing to commit for? I had these same questions but wanted a way to see all the hard dollars before I made a decision. In the case of our app, I know I'll need the two medium instances for at least the next 5-6 months and potentially longer. As for the Micro instances, they are actually quite useful regardless of what's going on so we may use them for the entire year no matter what is happening. But is it all worth committing to a whole year?

So I took a few minutes (okay an hour) to sift through all the pricing information on the AWS pricing site and put together a spreadsheet that gave me the information I needed, mainly:

• Compare the cost of several sizes of reserved vs. OnDemand instances over 6 and 12 months
• Determine the % savings over 6 and 12 months  on all utilizations and sizes
• Determine how long it would take for us to break even with the 1 year commitment.

I found some pretty neat stuff. It turns out that the reserved instances can save you upto 44% in 1 year when compared to OnDemand instances when you pick the heavy utilization option and since our app is always on we would likely choose that option. It's important to understand what AWS intended for the different utilization types. They don't mean you are getting a different kind of instance, it's just a billing scheme. You're able to get a deeper discount if you're using more, that's all. So effectively, the following savings is what you can expect:

Reserved EC2 Savings over 6 and 12 months

Another thing I found interesting was that even if you're using the instance at 100% utilization, you're better of with the light utilization option if you're only going to keep it less than 7.5 months. Haha, how did I get that number?

Well, lets say:

L= upfront cost of light utilization

c= hourly cost of light utilization

H= upfront cost of heavy utilization

h= hourly cost of heavy utilization

X= Number of hours  before it's suitable to upgrade from Light to High. 

Then:

L+(cX) = H+(hX) 

so

X= (L - H) / (h - c)

Divide that number by 720 (The number of hours in a month) and you get 7.5

As similar calculations will show that you're better off for 8.3 months on Low vs. Medium, and 6 months on Medium vs. Heavy. In other words, at full utilization:

Months before I should upgraded from

Small to Medium: 8.3 months

Small to High: 7.5 months

Medium to High: 6 months

All this actually makes the medium option a lame duck unless your needs are unique. 

So the basic lesson here is, if you're planning to keep an instance for at least 100 days (3.3 months) at full utilization, you're better off buying into the AWS reserved instance. 

Here's a link to the google spreadsheet I put together so you can do your own variation. Also note that the numbers don't apply to the micro instance the same way as they do to the other instances. 

Cheers

LINK TO THE GOOGLE SPREADSHEET