Travel Protection Insurance - What a Scam...

It's summer and many of us are planning trips and vacations. As we are making our plans, and trying to find the best possible deals on those vacations, some of us may be tempted to purchase travel protection insurance. Such insurance is supposed to refund the cost of travel if you are unable to go on your vacation for a reason which is covered by the plan. Before you are tempted to purchase such insurance, check out this article in the NY Times describing one couple's experience in trying to claim the supposed benefit offered by their travel protection plan. Here is a brief excerpt:

"All told, my parents paid Vantage $9,688 for the trip and an additional $978 for the travel protection. One month before the planned departure, my father suffered a heart attack. My mother canceled the trip and requested a refund.

However, Vantage Travel responded by sending my parents vouchers for credit for future travel with Vantage. Apparently, in one of the many mailings there was fine print indicating that the “refund” would be in the form of credit."

I think that there are two issues here. First, the specific case being discussed in the article is borderline fraud - in fact, as described in the article the company was making an effort to mislead its customers without actually going on the record with anything that customers could use to sue them. The second issue is the value of travel protection. Even if it worked exactly as expected, why buy insurance for something which is not critical? In addition, the couple in the article paid an extra 10% of the total cost of the trip to cover the travel protection... that's simply preposterous in my opinion.

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Should Bonuses Be "Fair"?

Earlier this week I had a meeting with some of my fellow executives in which we discussed awarding bonuses to company employees for achieving important company milestones. We started to argue about how such bonuses should be paid. Should they be awarded to those individuals who truly did an amazing job and performed above and beyond the call of duty? Should they be distributed equally among the entire team according to seniority level? There were three of us in the room and I quickly found myself arguing a 2:1 minority position.

My take is that bonuses should be awarded to those who truly over performed. I think that we need to differentiate between those who merely perform and those that outshine the rest of the pack. In every organization there are a few individuals who carry more than their fair share of the load. These stars should be publicly recognized and lavishly compensated. They are the example for the rest of the team. My colleagues believed that differentiating in this fashion would lead to frustration and discontent among those individuals who would not receive a bonus. They think that the bonuses should be paid as a reward to the entire team on a job well done, not to reward individuals.

My colleagues' position should be divided into two parts. First let's look at the discontentment argument. My problem with this argument is that it can easily be reversed. In my opinion, if we gave our star performers the same treatment as everyone else, THEY would be demotivated. Why work harder if you get the same treatment as everyone else? In addition, as long as the criteria for awarding the bonuses are clear and fair, and everyone knows that they too could achieve the same rewards by executing to those standards, what is there to complain about? My point is that business should be a meritocracy, not a commune. Yes, as heartless as some think it sounds, some people do deserve more than others because they give more to the organization. What's wrong with that?

The second argument made by my colleagues is a bit tougher to deal with. They claim that the team as a whole should be recognized for the achievement and that this would encourage team work and limit political behavior. Possibly that's true. However, I think that we can recognize the team's overall performance by giving some kind of group award, such as having a big party, giving each team member a small token of appreciation (a bottle of wine? a certificate to Amazon?) or having a fun event. That does not mean that the bonus pool needs to be "fairly" shared...

By the way, just so that I am not suspected of ulterior motives, no-one is talking of giving a bonus to the executive team. In fact, our bonuses this year were eliminated in recognition of the economic environment, while the rest of the team received their bonuses as scheduled.

I would love to know what the rest of you are thinking about this issue, but I can't promise to change my mind.

Incidentally, check out the Money Hacks Carnival at Blogging Banks.

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Why I Want to Be Rich

I read a post on the Simple Dollar about the connection between money and power. Trent was making the point that many people want to be wealthy to gain respect and influence. That's obviously true, but my reasons are different. To me wealth equals freedom. It's not so much that I want to buy stuff, or own things or spend my money like a drunken sailor. There are certainly things that I would buy or do if I had the money to do so (buying a trip to the international space station is probably the most expensive of these), but my real drive to wealth comes from insecurity.

I am worried. I am worried that I will one day lose my job and won't be able to get another. I am worried that I will not be able to provide for my family. I am worried that my kids will have to support me in old age. I am worried that one of my family members will become chronically ill and that my medical insurance will not be sufficient to treat them. I am simply worried. Wealth would create security and remove these concerns.

It's not that I walk around constantly obsessing about these things. I consider myself a well adjusted human being. I am simply very cognizant of the fact that bad things happen to good people, and if bad things happen to me or to my family, I want to have the resources to deal with them. Wealth for me represents freedom from worry. Peace of mind.

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The Tangible (but Limited) Benefits of Positive Thinking

We are going through a very exciting and nerve wracking time at work these days. My company, which is a technology start-up, is about to launch its first commercial product in just a few short days. This is a high-stakes and highly emotional time for us. Our ability to raise more funds and to survive in a very tough market are at stake. When you are so involved in "the game" it's tough to maintain your long term perspective and to identify the long term positive trends. The progress you are making is only visible if you compare your current position to where you were several months prior. On a day to day basis, it's tough to avoid getting on a roller coaster of hopes and disappointments as potential deadly challenges appear and are overcome.

I believe in the power of positive thinking. No, I am not one of those starry eyed individuals who believe in the power of holistic medicine or in faith healing. I am squarely on the side of science and atheism. However, it is clear to me that in an organization there is such a thing as momentum. Momentum is a self reinforcing trend whereby success breeds success and failure leads to more failure. I am not sure what the mechanism whereby positive feelings lead to positive results are, but I feel strongly that it has a lot to do with motivation.

When people see the rest of the team is feeling positive, or when they feel that things are going well, they recognize that they are part of something good and that success is within their grasp. They are motivated to try a little harder to achieve that success. The same is true in the reverse case - if people believe they are going to fail, they have no motivation to work hard. Why should they? Whatever they do, they can't succeed... failure is then sure to follow.

Last year we had a little bit of negative momentum going in the organization. One part of it was a leadership problem. The other was a lack of focus. Over the past several months, momentum has decidedly shifted to the positive due to some good management decisions and a little bit of luck. Our team is energized and confident. Yes, you can still hear the odd negative voice out there, but overall it is clear to the team that things are moving in the right direction. Which brings me to my "No Bad News Friday" initiative. I started this as a joke, after a week of technical set-backs. In a meeting with some of the engineers where many of our technical challenges were discussed, I said "fine, but since tomorrow is No Bad New Friday, I expect some positive results". Call it a coincidence, and it certainly was a coincidence, but that Friday we had some very encouraging developments.

Since that time, everyone in the office is talking about No Bad News Friday. I am not superstitious enough to believe that anything real is happening here, but I do know that the overall sense, attitude and motivation of the team is improving. There is nothing wrong with encouraging people to feel good about themselves and about what they are doing, provided that you don't stick your head in the sand and refuse to deal with reality as it is. Having said that, there is nothing wrong with pushing bad news to Monday... :-)

Take a look at a few other career related posts from around the PF world:

Debbie of American Consumer News has a post about how to avoid lay-offs. One of her tips: pretend like you just got your job and need to impress people.

Boston Gal offers a glimpse into the world of the unemployed. It's rough out there. No doubt.

Jim of Bargaineering offered a post about the top paying companies. Interested, but I am wondering if those averages aren't skewed by a a relatively small number of highly paid individuals.

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Don't Kid Yourself: We Are NOT More Frugal

There is much talk these days about the American Consumer's new found frugality. Turn on the news, open a newspaper or browse the money sites online and everyone is saying that frugal is now fashionable and that over spending is "so 2007". For example, in this month's edition of Money Magazine the Editor's Note includes the following:

"...For one, the American consumer will no longer support global growth on his debt burdened shoulders..."

I don't buy it.

True, folks are spending less and saving more these days - the savings rate hit 5.7% in April according to the Federal Reserve Bank of St. Louis. However, looking at the data more carefully shows the personal savings rate almost always spikes in recessions, only to fall back down once the economy recovers. What makes us think that this time will be any different? Yes, this time the spike in the personal savings rate appears sharper than usual. However, I believe that this sharper spike is a response to what is turning out to be a very deep recession which is stoking people's justified fears about losing their jobs.

Once the economy recovers, I am willing to bet our compatriots will fall back into their free wheeling, crazy spending ways.

This leads me to another point. Have you noticed how easy it is for people to assume that things are permanent? People's ability and willingness to adjust their baseline and to assume that whatever is now happening is the new reality which will last forever is asstounding to me. When the stock market or real estate prices go up, people assume that the good times are here to stay - "it's a new economy". When the markets decline, people flee for the hill with shouts of "the sky is falling" echoing through the wilderness. It is a flaw of human psychology - our memories are short and our tendency to extrapolate is over developed.

Recognizing this, I try to avoid thinking too highly of my own abilities to spot a pattern, and try to make as few predictions as I can (especially about the future, to borrow a phrase).

Here are a few other posts that deal with the topic of frugality:

Trent of a Simple Money explained that cutting spending is not the same as saving. You also need to make sure the money is not wasted on some other unnecessary activity.

Frugal Dad makes the point that eating out is not always a waste of money.

Blunt Money has a post about spending $900 in unplanned expenses this month. Nothing wrong with spending the cash if you have it. Just make sure you don't rob your future self of a decent standard of living to pay for a higher standard of living than you can afford today.

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