Help Me

Help others.

When Mother Dear died two years ago, my brothers, sister, and I inherited what was left in her charitable foundation. Meaning every four years I get to give away some money. This year it’s my turn and I’m not sure whom I should give the money to. Leaning towards a few non-profits that work with the homeless in our fair city.

How do you decide whom to give to? My thinking is guided by two important things. First, the gifts have to be ones moms would’ve made. Second, the gifts should have a lasting impact.

The first principle is a breeze because Mother Dear was profoundly generous. Unlike me, she didn’t overthink things. Instead, she instinctively gave when made aware of obvious needs. No paralysis by analysis.

The second principle is where I need your help. Consider this philanthropic case study. Tom and Christy Lee deserve lots of credit for their selflessness and for helping me refine my philosophy of philanthropy. Consider the math, $5,495 donated to forgive the school lunch debts of 262 families. An average of $21 per family.

It’s possible that an unexpected $21, like tiny micro-loans that have received so much positive press, could make a meaningful difference in a low-income family’s struggle to turn an economic corner. But if the families who received the unexpected loan forgiveness don’t address any of the underlying causes that resulted in them falling behind on their children’s school meals, won’t they be in the exact same place in a year’s time? Does the $21 have a lasting impact? I’m skeptical.

And isn’t the same conundrum even more pronounced for the organizations I’m considering giving to? If the organizations I’m considering giving to feed, clothe, and shelter the most vulnerable members of our community, but don’t also provide substance abuse and mental health counseling or job training and low income housing, won’t the numbers of homeless continue to tick upwards?

So is the answer to give to “both/and” organizations, non-profits that both meet the immediate needs of the most vulnerable and work equally hard to remedy one or more of the underlying causes of institutional homelessness?

Also, how do I assess the relative efficiency of the local organizations I’m considering? The overhead of medium and large sized non-profits are carefully scrutinized by excellent websites, but not smaller, grass-roots ones. How can I know whether 50 or 90 cents of every dollar ends up directly benefitting those in need?

Ultimately, how might I maximize the long-term benefits of these gifts, honor my mom, and extend her legacy?

 

Advice for New Investors

Or old. My previous reference and link to Amazon’s historic stock run up was a disservice to all of the esteemed readers of the humble blog. Same with my occasional references to Apple. Please strike all my references to individual stocks from the record.

Jeff Sommer restores order with “How Stocks Can Make You Rich. But They Probably Won’t“.

Heart of the matter:

How can those two sets of facts — the underperformance of the typical stock and the outperformance of the overall stock market — both be correct?

It is because a relative handful of stocks tend to outperform all others by tremendous amounts.

The conclusion:

“. . . most people picking stocks are unlikely to do well for very long.”

In related news, during the evening commute I enjoy listening to Seattle radio’s “Ron and Don”. They care about their community, they’re funny, and they have a beautiful rapport. However, their good work is seriously undermined by their pimping of an on-line trading school. They’re smart enough to know that 99% of day traders get their asses handed to them, despite that, they promote the shit out it.

I wrote them and asked why. No reply. Yet.

How to Get Rich in America

The Economist explains. From the last pgraph:

“. . . the simplest way to become extremely rich is by being born to the right parents. The second-easiest way is to find a rich spouse. If neither approach works, you could try to get into a top college. . .”

I don’t know this to be true, but I suspect for the top 1% of Americans, their investment or “passive” income rivals or exceeds their job-based income. It’s as if they’re getting paid for two jobs despite just working one. Pieces like this make me wonder why are income and wealth so often conflated? There’s a correlation sure, but it’s nowhere near 1.0.

Peak United States

How do we know if we’re in decline? What are signs of slippage? Do mirrors help? What about comparisons to other people and places?

What psychological barriers prevent us from acknowledging our decline?

Why, despite being very well educated and very comfortable with numbers, do I not understand our tax system well enough to prepare my family’s taxes? Why do I have to pay an expert to prepare them?

Why are there 1,000+ deductions? Why is Congress so susceptible to accounting firms’ lobbyists? And realtors’ lobbyists? Why hasn’t there been meaningful tax reform since 1986? Why does our tax accounting system benefit members of Congress more than their constituents? Why do well-to-do, stock owning citizens, pay less in taxes than others? Why do most other developed countries have far more simple, fair, and efficient tax systems? Why aren’t more people agitating for answers to that question? Why have citizens allowed their representatives to defend the status quo for 30+ years?

Why, despite being very well educated and very comfortable with numbers, do I not understand my health insurance? Why am I told what my doctor visit, biopsies, surgical consultation, and minor surgeries all cost a few weeks afterwards? What if restaurants didn’t have menus, but instead, just told you what you owed after you ate? Why are there initial charges and secondary “what insurance allows” charges? Why does Kaiser-Permanente make me go to a “surgery consultation” when the surgeon said it was unnecessary, “but Seattle won’t let us do our own scheduling”? Why was I charged $206 for the unnecessary 20 minute “consultation”?

Why is Congress so beholden to medical insurance lobbyists? Why do many other developed countries have far more simple, comprehensive, and efficient health insurance systems? Why are so many citizens resigned to health insurance pricing and paperwork lunacy? Why do citizens continue to elect representatives who preserve the medical insurance status quo?

How does anyone of sound mind claim that the U.S. is “the greatest country on God’s green earth” when our tax and health insurance systems are fucked up way beyond our compromised legislative body’s ability to fix them?

postscript

 

 

 

 

 

 

The Credential Conundrum—Limiting Whose Qualified for Which Jobs

Recently I wrote that I’m lucky that my work as a college prof affords me ample opportunities to learn about myself and become a better person. That doesn’t stop me from daydreaming about other work.

Depending upon the day, I’d like to be Dustin Johnson’s caddy, write a newspaper column, be a subsistence farmer, have a radio talk show. The alternative work that loops the most in my peabrain is money counselor by which I mean a hybrid of a financial planner and a financial therapist. I enjoy managing money a lot and I’m always intrigued by people’s disparate thinking about money’s relative importance and how those differences complicate partnerships. Most of all, I’d enjoy helping people reduce the gaps between what they think about money and how they live their lives.

I didn’t know shit about investing thirty years ago when my parents gifted me some money to save on their federal taxes. Somehow, as a modestly paid school teacher, I knew the gift was an exceedingly rare opportunity to build a little bit of a financial cushion, that is, if I didn’t blow it. So I started reading John Bogle’s books, the first step in my personal finance self education. Today, I’m a good money manager for at least two reasons—my independent studies and I internalized some of my dad’s self discipline.

What I’d like to do for an alternative living is listen to individuals or couples talk about their dreams, their finances, their greatest challenges and then help them clarify their priorities, adjust their spending, restructure their portfolios, and enjoy more open and honest communication about money. There’s gotta be people interested in that doesn’t there?

There’s only one problem, to do that work I’d need a long list of personal finance and counseling licenses and certificates. Absent an alphabet soup of credentials, my self education and life experience don’t count in the formal economy.

Licenses and certificates are required in many sectors of the economy. They are designed to help consumers know they can trust that the holders of the licenses and certificates are competent. Take my work with teachers-to-be. Often people bemoan the fact that a Ph.D. can’t teach elementary, middle, or high school without first completing a formal teacher education program that typically lasts 1-2 years, not to mention passing related requirements including content area exams and a student-teaching based performance assessment.

Similarly, if you want to work on people’s nails or hair, you can’t simply rent a space and hang out a shingle, beauty schools offer formal training that culminates in licenses that enable you to “join the club”. Sometimes, when work is complex and requires specialized expertise, the Credential Industrial Complex contributes to public trust. Other times though, when the related work isn’t terribly complex, like working on nails or driving a cab, they can be used to limit competition.

Money counseling is on the “complex, requiring specialized expertise” end of the continuum, but wouldn’t it be nice if our job gatekeepers, the credentialing officials, devised intelligent ways to give some credit to individuals for self study and life experience. Absent that, everyone has to start from scratch, meaning people on the back nine of life, like myself, are less likely to switch things up.

 

Rethinking Work

My favorite 21 year old is graduating college this May and “launching” shortly thereafter. A college friend, a 56 year old retired SoCal fire fighter, was just accepted to a Physician’s Assistant program. This is for them. And everyone in between.

Our work tends to be the result of our personal interests; compensation considerations; and though we may not want to admit it, the relative prestige or social status associated with our chosen occupations.

More specifically, we choose among possible jobs not just because they pay the bills, but also because of the particular activities associated with them-we become teachers instead of accountants because we enjoy interacting with young people in classrooms more than we like crunching numbers in cubicles. A person attends seminary rather than law school because they want to make a tangible difference in their community without any pressure to maximize their billable hours. A person becomes a landscape architect rather than a golf club professional because they like plants and the outdoors more than they do beginning golfers.

Additionally, my fire fighter friend, if he’s typical of other fire fighters, probably partly chose his first career because of the unique work-life balance it afforded with a positive mix of twenty-four hour shifts and more than normal days off each month. I’m sure the excellent salary and benefits, service-orientation, and built in station-based community probably factored in too. A pretty great job altogether, apart from the extreme occasional danger.

Here is what even my daughter’s very good, vocation-oriented career placement center probably won’t tell her when she inquires about different possible jobs. Think about more than pay and primary activities. Talk to people doing the work about the less visible and less obvious activities, and the culture of their workplace, meaning the nature of their relationships with all of the people they regularly interact with. For me, as a university professor/administrator, my relationships are with faculty colleagues in my department and across campus, students, and numerous staff and administrators. Don’t fixate on the relative appeal of any job’s primary activities, instead, carefully reflect on the personal qualities each particular work culture is likely to cultivate.

For example, people think of teaching almost exclusively as what goes on between a teacher and her students during the middle of the day within the four walls of an individual classroom. But that’s the tip of the iceberg. Ignored are the hours spent planning daily lessons; the hours spent alone reading and responding to student work; the hours spent teaming with colleagues to plan, problem solve, and respond to student work; the time spent continuing one’s teacher education; the time spent being a part of the school’s extracurricular activities. Conventional wisdom about teaching might account for about a third of a teacher’s weekly activities.

Every job comes with a distinct work culture, some work cultures cultivate more socially redeeming personal qualities than others. Working at Chicago’s Newberry Library is probably similar, but not the same as working at Northwestern University’s Main Library. So it’s a two-fold learning process, learning about library culture generally, and a particular library’s variation on “what’s typical” more specifically. How to do that? Talk to people at the library about the culture, what’s rewarding, what’s most exasperating, why. When, at the end of your interview, you’re asked if you have any questions, ask about the work culture, what do employees say when asked what’s the best part of working at x, what are some commonalities that prove most challenging.

Most people think about work in terms of how they’ll benefit/change the people they work with, giving little to no thought about how their work will change them. Every job you do for very long will change you, for better or worse, probably more than you’ll change anyone at work. Ask people doing the work you’re considering, “How has being a landscape architect, nanny, teacher, engineer, nurse, journalist, changed you as a person?” What personal qualities does the work cultivate? In what ways, if at all, are you a better human being as a result of doing this work?”

If they can’t answer that question positively, cross it off your list. Be bold. Don’t obsess about the obvious activities, the pay, the benefits, the perceived prestige; instead think about work as a context for self understanding and self improvement. Don’t think about work as an end in itself, meaning don’t fret about how your job or career compares to your peers; instead think about work as a means to becoming a better human being.

I’m fortunate that my work culture values good, open-ended questions, but my comfort with ambiguity can exasperate more concrete sequential, literal-minded people. And I’m fortunate to work with people, teachers-to-be, who are more altruistic and socially conscious than average. Their idealism and service orientation is a nice counterbalance to my cynicism and selfishness. I’m a better person because of their optimism and vitality. When it comes to the other two-thirds of my work, it’s mostly about conflict management, which provides daily opportunities to become a better human being. More specifically, I’m convinced my success resolving workplace conflicts depends almost entirely upon my ability to carefully, actively, and sensitively listen to others.

It’s cool that being a decent husband, father, friend, and citizen depends almost entirely upon the same thing. And for that reason, I’m fortunate to get to do the work I do.

The Ultimate Personal Finance Challenge

There are two types of investors, active and passive. Active investors are always educating themselves about personal finance; and paradoxically, tend to use passive funds, due to their lower fees and superior performance. In addition, they are purposeful in choosing a particular asset allocation and they monitor their progress regularly. They invest time and energy into increasing their wealth. I’m an active investor.

Passive investors, because they often think they’re not smart enough, often delegate to financial planners upon whom they depend for choosing particular investments and determining an asset allocation. Passive investors tend to end up with active funds with higher fees because they’re not paying very close attention.* They may not open their quarterly statements. Picture them falling asleep at the wheel of a semi-autonomous, financial planner driven car.

The most important thing I’ve learned in thirty years of investing is that there’s an undeniable point of diminishing returns when it comes to business smarts and investing success. Simply put, some of the most well-educated and successful business people I have ever known have made some of the worst investment decisions I have ever seen. And to add insult to injury, they’ve been unable to admit the error of their ways and reverse course. Too smart for their own good.

Personal finance research shows that once active investors master earning more than they spend, wire the difference into specific exchange traded funds monthly, and decide how best to balance bonds and stocks, additional trading detracts from their returns. Think of trading based on possible changes in the market as a “too smart for one’s own good” tax. Here’s one example.

Once you master earning more than you spend, wire the difference into specific exchange traded funds monthly, and decide how best to balance bonds and stocks, your ultimate personal finance challenge is doing nothing. Hence, consider my triumvirate of personal finance resolutions for 2017: 1) I will not be too smart for my own good. 2) I will not try to guess the market’s direction. 3) I will not trade. Or for the sake of additional research, you could guess and trade away and then we can compare returns in 11+ months.

* I hired an advisor in the early 1990s. Learned an expensive, but ultimately, invaluable lesson, no one cares nearly as much about your financial well-being as you do.

What Home Buyers Get Wrong

Six months on in the new crib, I’m ready to educate my brother who is allegedly studying design. This is for him, but I’ve been posting so infrequently of late, feel free to eavesdrop. Bro, just send a check for whatever you think my insights are worth.

Home buyers focus too narrowly on total square feet, too often thinking the bigger the better. We moved to a slightly smaller home, but it feels larger because we regularly use much more of the total area. In other words, there’s no wasted space. And even though there’s less total square footage, the kitchen is quite a bit larger. The beauty of the kitchen layout is you can open every drawer and the dishwasher and the refrigerator and still have two-three feet all around. No more sucking everything in when moving the silverware from the dishwasher to the drawer. In fact, now there’s nothing stopping me from packing on an extra 40-50 lbs this winter.

Our new master bathroom is about 60% the size of our former one. And it’s perfect. That other 40% was wasted space for the purpose of what, a slightly higher sales price? The new one has just enough room to do everything comfortably, and when it comes time to clean, it’s a breeze because damn near everything is in reach.

Homebuyers don’t realize small things make a big difference. Especially when combined together. Case in point, dimmable lights. Mercy me, how did I live in an on-off world all those years? There’s nothing like entering the bathroom at 5:30a, flipping the switch, and being met by a faint pre-dawn-like light. Same when preparing to retire at night. There’s nothing like brushing one’s teeth under a faint post-sunset-like glimmer. Every light should be dimmable.

Another lesson. You can’t put a value on genuine quiet, and on natural beauty, and on the edifying result of the two combined.

Another lesson. You can’t have genuine quiet and natural beauty without sacrificing some community. There are always trade-offs. Long time readers of the humble blog will know I value community. Is sacrificing some community worth the return in quiet, natural beauty, peace? Stay tuned, time will tell.

What else do home buyers get wrong?

 

Is There A Way To Climb Out Of This?

As in inveterate eavesdropper, I enjoy “Dear Abby” type columns. Presently, I like Slate.com’s “Dear Helaine” who answers personal finance questions.

Today’s “Dear Helaine” letter stopped me in my tracks because it succinctly and powerfully captures so many citizens’ dire reality.

 Helaine,

I am 41 years old and have not come into any windfalls of money, nor is there any hope I will. My financial situation is as follows: I make $15 an hour plus tips, and my paycheck is usually about $1,300 every two weeks after taxes. My rent and utilities take up about half of this income. My husband is unable to work because of a disability that is not disabling enough to qualify for Social Security. Our children are 22, 19, and 16. We have been living in a cycle of poverty pretty much for the past 23 years. And yes, we’ve been hit with student loans and medical bills that just don’t get paid—my husband is $30,000 in default. My older kids are working in low-wage jobs, $10 to $12 an hour, but as of now are not contributing to household expenses because I want them to build a life outside of the money-sucking hole of my reality. So, yeah, it’s dire. What kind of financial planning helps people get out of poverty? I am moderately intelligent and a really hard worker. I’m also kind of giving up. Most of the time, I would rather spend $8 on a pack of PBR than plan for retirement or emergency funds. My financial life is an emergency. Is there a way to climb out of this?

As I read it, I thought of Conservative Republicans’ knee-jerk response to poverty, people are lazy. I trust that this woman is telling the truth when she says she’s a “really hard worker”.

I purposely didn’t read Helaine’s response because I wanted to think about it independently. And I wanted to know what you think.

Two initial observations.

• student loans and minimum wage jobs, will their young adult children get college degrees, will those degrees provide them with any kind of competitive edge ?

• the husband is a “net loss”, spending, but not earning, can he do anything to generate some income?

It’s very easy to understand how the author, and the legions in her situation, would simply say “fuck it”, I’m going to enjoy today a little bit because tomorrow is looking real bleak.

I’m going to go back now and read Helaine’s reply. Mine would take a long time to write because there is no easy answer or quick fix to the family’s predicament. Of course the same is true of poverty writ large.

Final thought. Will this woman, her husband, and the 19 and 22 year olds vote? If so, for whom? They, and the legions like them, could determine the election.

[Can’t decide whether to give Olen an “A” or “A-“. Either way, a caring and thoughtful reply.]