What People Get Wrong About Financial Literacy

Every spring a friend in North Carolina and I have a NCAA college basketball tournament bet. He takes the teams representing the Atlantic Coast Conference and I get those representing the Pacific-12. If his teams win more games, I send him a t-shirt, if mine win more, I anxiously await my cotton trophy. This year, neither conference did well, but I barely won a stylish long sleeve Guilford College tee*.

We met teaching and playing noon basketball at Guilford College in Greensboro, North Carolina, in the 90s. This year, along with the shirt(s—one for the Good Wife too, and a coffee mug, Christmas in April), he included four copies of recent Guilfordians, the liberal, liberal arts school’s student paper.

Reading them made it seem like time had stood still. Faculty salaries were still the lowest among a large comparison group of peers. Enrollment was down. Faculty morale was flagging. Some well-liked faculty were leaving to the disappointment of students. Students were protesting the administration’s salaries, which had increased markedly, and were at least average among the same comparison group. Tucked in one of the articles was a devastating detail that will make the new president’s job especially difficult. The small Quaker school has $16m in deferred maintenance. They budget $1.8m a year for continuing maintenance, meaning they’re eight years behind. Some students complained about mold in the dorms.

Colleges on the financial edge routinely defer maintenance. “Let’s delay the roof on the science lab another year.” Eventually, the quality of life for students and faculty suffers, and as with mounting credit card debt, the financial challenges multiply and trustees fret they’ll never catch up. Public schools, churches, and city council’s everywhere face the exact same challenge. Can we manage our finite revenue—whether bonds or levees, charitable contributions, or taxes—well enough to maintain our existing buildings, roadways, and parks? If you want to assess the health of a school district, church, or city, find out how much maintenance they have deferred.

We’re fortunate that our Washington State home backs up to beautiful woods that we’ve enjoyed for sixteen years. In the woods there are hiking and running trails, deer, owls, and a path to a nice city park. Now the woods are for sale and three different developers are interested. Many in our community who have organized to save the woods from being turned into another housing development attended the City Council meeting last week to implore the Council to follow through on their own five-year plan for creating more park space.

The organizing committee has done great work thinking creatively about grants and related funding that makes the purchase seem feasible. imgres But the city has been deferring maintenance on our existing parks. One includes a nice boardwalk along the Puget Sound, a walkway so neglected, parts of it will be closed to the public this summer. While sympathetic to our arguments, the city manager and council both regretted that the city can’t afford to purchase and preserve the woods because they’ve deferred far too much maintenance.

It’s human nature to put off saving for future expenses. Just like colleges, school districts, and churches, I do it all the time too. I replace my nicked up bicycle tires after flatting a few times. I get my lawn mower tuned up when it won’t start. I go to the doctor when I’m near death.

I talked to the college senior recently about car ownership. Most twenty-one year olds think exclusively about the purchase price, “If I can just save $5k for that $5k car.” I impressed on her the need for a “cushion” for additional costs like insurance, gas, and regular maintenance including oil changes, the battery, and tires. In an ideal world, she’d also factor in replacement costs, but that’s pie in the sky. Once I broadened her thinking about car ownership, she realized it’s not financially feasible yet.**

Most financial literacy talk is seriously flawed. Everyone overemphasizes technical knowledge. Do you know the “rule of 72”? Do you understand the power of compounding interest? Do you understand asset allocation, mutual funds, investing costs, dollar cost averaging, and taxes impact on your returns?

People think if schools just taught that knowledge all would be well, but it’s not that people don’t know enough about personal finance, it’s that they lack the self-discipline to spend less than they earn. Including legions of college educated people who would pass a personal finance multiple-choice test.

Schools can’t teach young people to defer purchases, to set aside money to adequately maintain and eventually replace possessions, to live within one’s means. The only way to teach anyone the limits of consumerism, to delay gratification, the importance of savings, and how to live within one’s means, is to model it for them over time.

Fortunately, my parents, especially my dad, taught me those habits without ever sitting me down for any sort of money talk. For colleges, churches, cities, and families, “deferred maintenance” means “We’re in the habit of spending more than we have.” Like mounting interest charges, it ties the hands of college administrators, church councils, city councils, and families.

We are extremely fortunate to be able to meet our family’s basic needs each month with some money left over. We can do one of three things with our surplus. 1) Succumb to status anxiety and buy unnecessary luxury items; 2) Keep existential questions about life’s larger purposes at bay through mindless consumerism; or 3) Set some of the surplus aside for anticipated future expenses.

* During graduate school, my friend was a UC Santa Cruz hippie. The UC Santa Cruz mascot is the banana slug. Second Born and I had lunch in downtown Santa Cruz in late January. After lunch we found a must have t-shirt that featured a large banana slug with the caption “SLUG LIFE”. The perfect gift for my next loss. So good in fact we decided I had to send it this year win or lose. He was very grateful and assured us he’ll get a lot of grief for it from his Geezer basketball pals. That, of course, was our hope.

** Odd to me that she’s not more motivated to make it financially feasible. At eighteen, I couldn’t wait to own my own car. So I parked golf carts and picked up range balls for a few years and bought a VW Bug for $1,500. Most gratifying purchase of all time. For the time being at least, in keeping with her peers, she’s perfectly content to bicycle, use public transportation, or, and maybe this is the problem, use her parents spare car.

Expanding Minimalism’s Reach

If our government’s closed, why are politicians still appearing on my television? I guess once you get in the habit of working really hard for what’s in the best interest of the people, you just can’t stop.

On Fox News I learned the shutdown’s Obama’s fault. Their refrain is “the American people don’t wan’t ObamaCare.” Guess I don’t count. At times like this, all you can do is watch Saturday Night Live.

My vote for most interesting Affordable Care Act article of the recent past, “An Overlooked Obamacare Flaw: Too Many Choices“. The gist of it:

. .  .the typical family will be able to choose from 53 health plans, on average, with a few states, including Florida and Arizona, offering more than 100. “There’s no way people are going to be able to make optimal decisions, except by luck,” says Barry Schwartz, a psychology professor at Swarthmore University and author of The Paradox of Choice: Why More Is Less. “If you have 40 or 50 insurance possibilities, there will be less uptake and people will make bad decisions.”

The seminal study of excessive choice was a 2000 paper recounting an experiment at a California grocery store in which two tasting tables were set up side-by-side: one offering samples of six jams, the other offering samples of 24. The “extensive” selection of jams attracted more shoppers than the “limited” selection. But only 3% of the extensive samplers made a purchase after tasting. Of those who sampled from the limited selection, 30% made a purchase.

“An extensive array of options can at first seem highly appealing to consumers,” the researchers concluded, “yet can reduce their subsequent motivation to purchase the product.” Too much choice, they found, can be “demotivating” and leave shoppers confused.

The same dynamic applies to decisions in which a lot more is at stake than deciding what to spread on your toast. After the government passed the Medicare Part D prescription drug benefit in 2003, seniors suddenly could choose from dozens of plans that would help lower their prescription drug costs. But many found the offerings so confusing they didn’t sign up, while others mistakenly chose a plan that didn’t lower their costs nearly as much as it could have.

“Decision quality deteriorates as the number of plans increases,” one study reported.

Minimalists focus almost exclusively on decluttering tangible items that often overwhelm—clothes in closets, papers in file cabinets, everything in garages—while ignoring the less tangible, but equally cluttered areas of our lives.

We’re not just overwhelmed by our mindless consumerism and the trail of material possessions that results from it, we’re overwhelmed by a steady torrent of stimuli—whether it’s hundreds of insurance plans, emails, interpersonal interactions, television channels, or advertisements.

Advanced minimalism is the art of narrowing one’s focus and decluttering one’s mind by consciously setting limits. For example, I allow myself to read ten blogs at any given time. That means if you send me a link to your mind blowing blog, I’ll have to decide whether it deserves more of my limited attention than one of my current ten. In the same spirit, I recently deleted some television channels that were more popular with the birdies before they flew the coup.

Social science suggests that if consumers had ten insurance plans to choose among, they’d be much better off. Less is almost always more. This was, in large part, Steve Jobs’ genius—off-the-charts focus. Once he shrunk Apple’s product line, customers weren’t confused, sales caught fire, and the company quickly rebounded.

Another way to impose limits is to lean on others for help. Some of the most popular websites on-line help citizens and consumers narrow their choices to a more manageable level. For example, for bibliophiles, there’s FiveBooks. And for people who want to manage their time better and be more productive there’s Lifehacker. And for consumers overwhelmed by Amazon.com, there’s The Sweethome and The Wirecutter.

My aim is different than the people who write for Lifehacker. They want to help readers get more done. My question to them is, for what purposes? Set limits on stimuli that tend to overwhelm to think about larger life purposes. If we just let any and all email, media images, and the cacophony of modern life wash over us, we’ll live day-to-day without any sense of purpose.

Minimalism must be about more than cleaning out garages. Our goal should be to create silent spaces in our lives, and from them, purpose.

Embrace the Waste

I love that about a quarter of PressingPause’s readers are from outside the United States. Hard to know of course if they’re ex patriot readers, or as I assume, genuine article foreign nationals. The contents of this post will most likely strike them as odd. Especially those with no firsthand experience of living in the United States.

Americans are unusually productive and wasteful. We work hard Monday through Friday and then buy lots of things on Saturday and Sunday that we don’t need. Yin and Yang. Over and over. As a result, our homes, no matter the size, get filled up with all sorts of ridiculous stuff. By which I mean The Magic Bullet. The technical term is clutter.

Given this national characteristic, many moons ago, a tradition was born in the U.S. The garage sale. A garage sale is when a family spreads out all of their leftover, unused stuff in front of their home and offers it for sale to anyone that’s interested. Our neighborhood designates the first Saturday in June to be a “neighborhood garage sale”. Too bad you missed ours or you could have bought a Charlie and the Chocolate Factory DVD; some unused, unopened 10w-30 motor oil; or an outdoor umbrella real cheap. Since my family is more frugal than most, we don’t normally participate. But this year I decided it was time to do some “thinning” of our worldly possessions since it’s been a long time and the youngest is getting ready to depart for college. It was especially fun to partner with her.

American wastefulness is often stomach turning, but Saturday during our garage sale, I realized it also provides opportunities. The sociologist in me loved the garage sale. For four hours I talked to a cross-section of society that I almost never get to. Many were first generation Americans smartly taking advantage of multi-generational American waste. For many it was a weekend ritual that they took very seriously.

Rule one, show up early. If the newspaper advert and signs say 8:00 a.m., start cruising the hood at 7:30 a.m. That way you might just luck into a free wheelbarrow or a nice $20 edger. Remember, the good stuff goes fast. My favorite part of the morning was foreign speaking customers who appeared to be just getting going in the U.S. using their smart phones to research prices.

If you have the time, join the garage sale masses. There are excellent bargains all around. Just make a list of things you need first or you’ll soon find yourself on the selling end.

In the U.S., people routinely fill up their garages so that they have to park their cars elsewhere. And sometimes, the garage isn’t nearly big enough for all of their stuff, let alone their cars. When that happens, people rent a second garage in a storage facility. Thus, if you have a lot more capital than time, invest in a storage facility.

A shiny new one recently opened near us and every time I drive by it I think to myself, “Damn. That’s the perfect investment.” Americans’ waste knows no bounds. You can bet on it. And invest in it. And profit from it. Especially where there’s population growth. Simple to build, storage facilities require little overhead. Unlike a rented house, no one is every going to call you at 1 a.m. to complain that the toilet is clogged again. There may be downsides to the investment, but I don’t want to know them. My ignorance makes me blissful.

Do not try to talk me out of it. I’m taking the $160 I made this weekend, embracing the waste, and going all in on another storage facility. I probably need other investors to buy the needed land. Care to join me?

The Best Get Rich Scheme You’ll Read About All Day

Huffington Post-like tabloid headline alert. By “best” I mean “only”, by “get rich” I mean have a little more money leftover at the end of the month, and by “scheme” I mean partner with your neighbor-friends to buy in bulk.

The Byrnes family likes them some guacamole. Avocados are usually $1.50 at the local grocery store, but are sometimes on sale for 99 cents. At Costco, six are $4.99. I believe in slow-mo, one 83 cent avocado at a time, financial improvement.

The problem of course is eating them before they go bad. One Costco shopper offered this tip in an on-line forum, “My technique is to put the newly purchased bag in the fridge for a week, and then take out one avocado and put it on the counter and keep a close eye on it. As soon as it feels a bit soft I use it up and take out another avocado. I’m surprised at how well this works for me.”

Overtime, buying avocados and many other consumer goods in bulk can lead to serious savings, but if you’re one or two people, or even a smallish family, avoiding waste is always a challenge. Which makes me wonder, why don’t individuals, couples, and/or families form informal neighborhood-based cooperatives to buy things much more cheaply in bulk? For example, someone buys two gallons of milk, six avocados, and a case of beer at Costco and walks over to their neighbors and gives them one gallon of milk, three avocados, and twelve bottles of beer for a few dollars savings.

Not a life-changing transaction, but it illustrates the concept. The key of course, is scaling the bulk buying up, and thereby, extending the savings.

There are a few imminently surmountable reasons for why this networking isn’t more common. People may not have close friends near by. Or people may have nearby friends, but be hesitant to buck the deep-seated individualism that’s ingrained in American life. Can we come together on which beer? Or maybe people don’t feel it’s worth taking non-working time to coordinate group Costco runs. Or like a solo car commuter whose resistant to join a carpool, maybe people don’t want to give up the freedom to shop on their own schedules.

It’s ironic that people’s wages aren’t keeping up with inflation and we’re living in the midst of a social media revolution and we don’t partner up more often to buy in bulk. Maybe necessity is the mother of invention. Maybe as young, tech savvy people struggle to achieve economic independence, informal bulk-buying neighborhood cooperatives will naturally bubble up.

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Green goodness

The Problem with the Simple Living Movement

The high priests and priestesses of minimalism don’t know it, but they have a problem. They’re seriously disliked by the majority of people who are struggling to get by. Ordinary people deeply resent the “voluntary” nature of most high-profile minimalists who write about the joys of downsizing on their numerous blogs, or for the New York Times, or Sunset Magazine.

Take for example how Graham Hill starts his New York Times essay titled “Living With Less. A Lot Less.” 

I LIVE in a 420-square-foot studio. I sleep in a bed that folds down from the wall. I have six dress shirts. I have 10 shallow bowls that I use for salads and main dishes. When people come over for dinner, I pull out my extendable dining room table. I don’t have a single CD or DVD and I have 10 percent of the books I once did.

I have come a long way from the life I had in the late ’90s, when, flush with cash from an Internet start-up sale, I had a giant house crammed with stuff — electronics and cars and appliances and gadgets.

Somehow this stuff ended up running my life, or a lot of it; the things I consumed ended up consuming me. My circumstances are unusual (not everyone gets an Internet windfall before turning 30), but my relationship with material things isn’t.

Half way into Hill’s story, I started to guess at the vibe of the 329 comments already posted. As David Brooks can confirm, New York Times readers are an unhappy bunch. Hill probably wanted praise, but I’ve seen this car crash enough times to know how it transpires. A lot of readers tore into him. Like Michelle from Chicago:

There is a big difference between choosing minimalism and minimalism being a harsh aspect of daily life. At any moment, Mr. Hill could choose to buy more things. If one of his 6 dress shirts rips, he can simply buy a new one. It’s a far cry from a minimum wage worker who has this lifestyle by default, because there isn’t money to rent a larger apartment or money to replace a torn shirt.

The sad fact of the matter is the gap between the “haves” and “have nots” is so great the “have nots” are unable to give any credit to the “haves” for living below their considerable means. I believe Hill and others like him deserve credit for their thoughtful and principled simplicity, but it’s naive for him, for me, for anyone to expect those trying to live month-to-month to cheer well-to-do minimalists for critiquing conspicuous consumption.

I was mindful of this dynamic when commenting on a blog recently. I was responding to a post about the recent highs in the stock market. I wrote that many people are starting to invest in stocks which means it might be a good time to take some profits. And then consciously added, “for those fortunate enough to have them.” If I hadn’t added that phrase, my comment would’ve prompted other replies of the “who has profits these days” variety.

Where does this leave Hill, myself, and many other minimalists who recommend voluntary simplicity? Can it be done without offending? Probably not. Which makes me think maybe we should stop writing about it altogether. Maybe we should just live it and wait to see if anyone asks, “What gives? Why do you live the way you do? Why such a small apartment? Why so few possessions? Why don’t you ever check bags when flying?”

Someone now leave the obvious comment. Nevermind, I’ll do it myself. “What the hell Ron, why do you assume people can afford to fly?”

What I Learned From a Forced Digital Sabbatical

Despite my charming personality, my university students have a very hard time unplugging from their phones and the internet for the length of a class session—one hour and forty-five minutes. I just did it for 100 hours. I know, total badass.

My digital sabbatical was forced in the sense that I didn’t volunteer to participate. Some families from church were going to Holden Village in Washington State’s Cascade mountains, a four hour car trip, seventy minute boat ride, and slow 11 mile uphill bus ride away. They asked if we wanted to join them. Betrothed wanted to go. Happy wife, happy life.

Actually, I dig Holden. We had been once before, about ten summers ago. Beautiful setting in a dramatic, heavily forested mountain valley. Simple living. Eat, hike, read, pray, socialize, repeat. This time there was 4-5 feet of snow.

Lessons learned:

1) It’s good for introverts to (interpersonally) stretch on occasion. As a card carrying introvert, I like solitude. At Holden I actually have to talk to other human beings at meals, on group hikes, at church services, and in the evenings. I enjoy socializing in moderation.

2) One can read mad amounts when unplugged. I took an unread novel on my iPad and decided to leave behind a hardcopy nonfiction book I’ve just started. Mistake. Thanks to some reading marathons, I blew through the 300 page novel and then scavenged for additional reading material including three sample chapters previously downloaded to the Pad and the cookbook that derailed my reading in the middle of last year. Then I found and read a recent issue of Sports Illustrated. I often wish I read more. All I have to do is step back from the laptop and television.

3) Group living is more exasperating, but ultimately, more enjoyable. One of our carpooling friends decided on the way to the boat to stop and visit her sister in Wenatchee on the way home. “Your kidding me,” I thought to myself. When we turned away from home for that detour I was running low on patience and wishing we had driven separately. But the visit was short and nice. The sister’s husband sells apples all over the world. He had just returned from Germany and Italy and explained how he had tried unsuccessfully to visit a large (10,000 boxes) new customer in Libya. The apple snack was delicious and the family was personable and interesting. I’m glad I met them even if we got home an hour later. We also would have lost out on a lot of joking and good conversation if we had driven separately.

4) While unplugged, the world will continue pretty much as is. In the summer, I think the boat runs daily, so there’s always a day-old New York Times in the village library, but last week there was only our Friday and Monday boat arrival and departure, so no new papers, causing a serious uptick in blood pressure. To make matters worse, our carpoolers drove all the way home without turning on National Public Radio. What if North Korea nuked the South I wondered? Did UCLA beat Stanford? Did Christine Gregoire get a new job in the Administration? Alas, the Russian asteroid and the South African para-athlete girlfriend’s shooting and death were still headline news. It was as if a global news gatekeeper was saying, “Okay, nothing to look at here, move along.”

5) Teenagers are prone to exaggeration. Everything was going fine until Saturday night Contra dancing. Shit, sounds like something Oliver North might have done in the mid-80s. The GalPal was a tad excited. After sticking a fork in my novel, I dragged myself to the dining hall where the tables had all been pushed aside. Betrothed and Seventeen were having a great time. After their dance, Seventeen made a bee-line for me and said, “You HAVE to dance with mom! It will MAKE her life!” “Nahhhh.” “No SERIOUSLY Dad, it will MAKE her life!” Well, who knew, it turns out I have mad Contra dancing skills. And now, apparently, Betrothed can die in peace. I will spare you the photo album and video library of the event.

6) Teenagers aren’t just funny looking, they’re funny. I may have doctored the whiteboard next to the teen’s door. Shortly afterwards they returned serve with this salvo, which as you can see, I doctored.

Advantage twelfth graders.

Advantage twelfth graders.

7) In ping-pong, as in life, quit while you’re ahead. The first night I opened a can of whup ass on the GalPal. We rolled through 7-0 and it ended up something like 21-13. The second night, she also made a stirring comeback, but ultimately succumbed, 22-20. The third night, somehow, she couldn’t find me.

8) I’m a legend in my own mind. Despite turning a year older a week ago, I can still reverse slam dunk with a backpack on.

Mad hops

Mad hops

How long could you completely unplug? I’m guessing somewhere between 1 hour and forty-five minutes and 100 hours? Don’t hurt yourself trying to replicate my feat, but do consider a Holden Village get-away. It’s great for the soul. You don’t have to be Lutheran or even Christian, and you can decide how little or how much to participate in Village life. The lodging is rustic, but clean and comfortable enough for a few days or weeks. The food is mostly vegetarian, plentiful, and tasty. And don’t forget, if you volunteer to scoop ice-cream, you get a free serving afterwards.

A Minimalist Life

I’m easily distracted. In church on Sunday, I couldn’t help but think about minimalism. As one part of “Scout Sunday” the pastor asked past and present scouts to recite the scouts’ values. They did okay until about the ninth value. Twelve?! That’s about nine too many. And when I should have been concentrating on the sermon, I was thinking about this quote from a minimalist Londoner who just built a home.

People do comment on our tidiness, but I find it fascinating that they find it fascinating. If you have a thing of beauty, like a piece of architecture, and then you fill it up with things, then you somehow diminish it and you cannot really appreciate the space you live in. We have exposed the things we really love, like the photography and the books.

One group unnecessarily complicating things, one homeowner purposely and thoughtfully stripping things down to their bare minimum.

People associate minimalism with life simplifying projects, whether recycling old clothes, shredding unnecessary office papers, or decluttering a garage, but it can be a helpful organizing principle for all of one’s life.

Minimalism is about embracing limits that others mostly ignore. The starting point is the ultimate limit, one’s mortality. Minimalists are more mindful than most that their time is limited; as a result, they tend to be more interested in the quality of their life experiences than accumulating lots of money and possessions.

Minimalists believe stripping things down is liberating—whether electronic data, personal commitments, and friendships. Consider each.

Electronic minimalism. This one’s tough because digital clutter can be neatly contained within a smartphone, tablet, laptop, or desktop computer. If you’re like one of my offspring, your desktop may be proof of that. To practice electronic minimalism, create folders for loose documents, and use folders within folders. But first, delete as many unnecessary, out-of-date documents, bookmarks, and email messages as possible. I DIG that electronic wadding up and shredding of paper sound my MacBook Pro makes whenever I empty the trash. Like a Pavlov dog, I’m motivated to trash things just to hear the sound.

“Zero email inbox” is a futile, overly perfectionist goal, but if you typically have more than 20-40 messages in your inbox, delete more often and create and use more folders. Same with website bookmarks. Delete those you haven’t used in a long time and put the the remaining ones into folders. This makes it easier to avoid mindless web surfing. Same with applications. Some people have over a hundred apps. I find that odd because the fewer you use, the easier it is to quickly and easily access them. Maybe some mega app users would say they use folders and don’t have a problem, but most people probably use 10% of their apps 90% of the time. Why not just remove most of the 90%?

Electronic minimalism is based on the premise that fewer docs, email messages, website bookmarks, and applications makes it easier to find things, get one’s work done, and then enjoy life off-line.

Scheduling minimalism. As an introvert, and often to the GalPal’s regret, this one comes relatively easily for me. This is the countercultural practice of not committing to many activities—whether one’s own, or a partner’s, or one’s children’s. It’s saying to oneself, “I’d like to attend that event, participate in that weekly activity, or go on that trip, but I’m okay missing out on that fun because the busyness trade-off isn’t worth it.” Obviously, “too busy” is a subjective concept. The key is to know your particular physical and social limits and to intentionally err on the side of underscheduling.

Interpersonal minimalism. This is the related, countercultural practice of purposely focusing on a limited number of close friendships. I’ve written about the quality versus quantity of friendships conundrum before here. Young people’s embrace of social media has made this type of minimalism especially rare. Many high school and college aged young adults have a thousand plus Facebook “friends”. Interpersonal minimalism means focusing most of your friendship activity on people who you interact with face-to-face on a weekly basis.

Stripping down activities creates momentum which leads to additional ideas for simplifying not just one’s garage, but one’s life. In what other aspects of your life has less proven more?

[My favorite book on minimalism—Francine Jay's The Joy of Less, A Minimalist Living Guide]