Category Archives: Money Matters

What Dave Ramsey Gets Wrong

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Whenever personal debt counselor/media giant Dave Ramsey is criticized, he says something to the effect of “I help more people in an hour than they’ll help in their lifetime.” Ego aside, he’s right. When he sticks to what he does best, inspire people to reign in their spending and eliminate their personal debt, he’s golden. But when he uses his media pulpit to preach his conservative politics and personal theology, he’s completely full of shit.

Last Thursday night, on the commute home, I caught the second half of a call from a wealthy person who wanted Dave to tell him it was alright to buy a $65,000 sport car. Dave said of course it was because $65,000 was a small proportion of his total net worth. Then he launched into a ten minute long harangue about the one problem that may “very likely be the downfall of the United States.” Not health care inflation, not a disappearing middle class or reduced food stamps for those living in poverty, not the achievement gap in public schooling, and not global warming. Our greatest threat is too many people are envious of the rich.

“What’s too wealthy?” he kept asking, only to add, “YOU DON’T GET TO DECIDE! YOU DON’T GET TO DECIDE! YOU DON’T GET TO DECIDE!” Obviously, Dave needs his own counselor. I’ve listened to him long enough to know his schtick. He reads the Old Testament book of Proverbs selectively, always highlighting the specific ones that seemingly endorse wealth. Meanwhile, I’ve never heard him mention Matthew 19:24, “Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

As a multimillionaire Christian, Dave appears utterly unwilling to grapple with Jesus’s words or example in the New Testament. I’m certain he could explain Matthew 19:24 in ways you and I don’t understand. The same with Luke 6:20, “Looking at his disciples, Jesus said: “Blessed are you who are poor, for yours is the kingdom of God.” Dave would probably tell me I’m taking those verses far too literally.

Here’s a Proverb I haven’t heard Dave cite, Chapter 14, verse 31, “Whoever oppresses the poor shows contempt for their Maker, but whoever is kind to the needy honors God.” In his diatribe, Dave discounted the entire Operation Wall Street movement as just another example of class envy run amok.

Hey Dave, don’t take democratic critiques of free market capitalism so personally. What the Operation Wall Streeters wanted is what most Americans want, for us to keep closing the gap between the stated egalitarian ideals in our founding documents and our day-to-day economics and politics. Simply put, people want a more level playing field. Right now Dave, whether you’re willing to acknowledge it or not, the field tilts towards Wall Street bankers, you, me, and other people driving $65,000 sports cars.

It’s not that Dave thinks differently than me, extreme wealth and Christian faith is a topic that reasonable people can and do disagree about, it’s that he doesn’t think at all. He refuses to consider whether great wealth complicates faith. He is utterly unwilling to consider questions that might lead to insights into the relationship between faith and wealth. Questions like, how much is too much? Why is it easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God? Or why is there a tendency to oppress the poor? Or why did Jesus identify with the poor?

I suspect he’s unwilling to ask those types of questions because he doesn’t want to consider lifestyle changes. Dave digs his luxury cars, his boats, his lake home, all the trappings of his considerable success. 

While unlikely, imagine Dave were to read this. “If Jesus of Nazareth doesn’t get to decide what’s too wealthy,” he’d roar, “Ron of Olympia definitely doesn’t!”

Choosing Debt

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Something’s wrong.

I just finished reading a batch of student essays about whether money is important or not and what recent social scientific research suggests about money and happiness.

Some of my students’ families struggle financially. Those students touched upon their parents’ debt and the negative consequences that have resulted from it, strained relationships marked by stress and unrelenting tension. Being well-to-do is more important to them than to my students who take their family’s financial stability for granted.

Many of these students describe the loans they decided to take out. “You have to spend money,” one explained, “to make money.” They are desperately in need of adults who model financial self discipline.

At age eighteen, they are eerily comfortable with five figure debt. And if statistics are any guide, their precarious family foundations make graduating less likely. Even if they graduate, there’s no guarantee they’ll find work that pays enough for them to dig out of their debt.

It’s great they want to continue their education, and I like having them in class, but someone has to wake them from their slumber and tell them there are much less expensive paths to getting a good education. In particular, community colleges and public universities.

Their fallacies overlap and multiply. The first is that loans are a logical solution to financial problems. The second is that attending an expensive university leads to higher paying jobs.

Universities absolve themselves of this problem, saying it’s up to the lenders themselves to assess peoples’ ability to repay loans.

I don’t know what to do. If I tell the “loaners” that there are much less expensive paths, they’ll probably conclude that I don’t think they can cut it at our pricey, private university. And if I follow my university’s lead and simply close my eyes when I know the train is about to jump the track, the students will continue down a very treacherous path.

Minimize End-of-Life Regrets

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Writing faculty at my university get to choose their own seminar themes. When I chose “The Art of Living” for my first year writing seminar a few years ago, I wasn’t sure how it would go. Was I crazy to think that eighteen and nineteen year olds might find Epicurus, Seneca, and Stoicism almost as interesting as me?

I knew very few of their K-12 teachers had asked them to think about what they most want out of life. And psychologists say they have a sense of immortality. Why bother with how to live if you’re going to live forever?

One month in, I’m happy to report, they’re actively engaging with the reading material (primarily William Irvine’s The Guide to the Good Life and Roman Krznaric’s The Wonderbox) and one another. I love how comfortable they are disagreeing with our authors and one another. My greatest challenge is staying out of their way.

Some have experienced loss—one’s mother died a few years ago from breast cancer, another’s from a heart attack, and still another travelled to Winnipeg last week to attend her aunt’s funeral.

The first unit was on “philosophies of life”. More specifically, I asked the students to agree or disagree with Irvine’s thesis that to avoid major end-of-life regrets, everyone needs to have a grand goal of living and specific strategies to achieve the goal. Irvine argues most people have regrets at the end of their life because their primary pursuits—wealth, social status, and pleasure—are in the end, unfulfilling. His grand goal of living is to maximize tranquility and joy by reviving Stoicism for the modern era. Few people experience much tranquility, Irvine argues, because materialism, social status, and pleasure conspire against it.

The larger question we’ve grappled with is how intentional should we be in our day-to-day lives? What role, if any, should spontaneity and serendipity play? What’s the right balance?

The students fell evenly across the “intentionality/spontaneity” continuum, some quite certain that people need life goals, and associated philosophies with specific strategies for achieving them. Others pushed back saying, “Are you kidding? How can anyone expect people with our limited life experience to put forward grand goals for living let alone specific strategies for achieving them?” They thoughtfully argued that life would present unforeseen struggles and opportunities. For example, one said she never would’ve have fallen in love with French if she had been correctly placed in the middle or high school Spanish class for which she had actually registered.

When some of them argued for intentionality, I couldn’t help but think they’d have to recalibrate their specific goals and strategies (for example, to have a large loving family) if and when they commit to a life a partner with their somewhat different visions of the future.

What about your life? According to Irvine, your life is most likely an argument for spontaneity because our culture offers us an “endless stream of distractions” that keeps us from clearly identifying, and planning how to accomplish, what we most want out of life.

Be less distracted this week, and thanks, as always, for reading.

The Art of Living

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The hippy title of my first year writing seminar at Pacific Lutheran University.

I just read my 32 students’ initial essays in which they summarize what they think they know about the theme and then describe their writing process, strengths, and weaknesses.

Most of them hope the class and I will help them figure out what to study and do upon graduating. That’s not terribly realistic, but I suspect they will spend more time thinking and writing about how they want to live their lives during our seminar than throughout kindergarten through twelfth grade combined.

First Born, starting her last year in college, is also thinking with more urgency about what to do for work after graduating. She’s a religion major without any interest in seminary or much in teaching. Everyone tells me she’ll land on her feet and I think they’re right.

The GalPal and I took her out for pizza recently in her Minnesota college town where she spent the summer working full-time in the college’s library. I was happy she got the library gig because given her passion for books, I’ve thought she might end up a librarian. Over pizza she explained that she liked her job, but doesn’t want to be a librarian, because “It’s not creative enough.”

I was impressed with her self understanding. She doesn’t know what jobs to apply for yet, but she has a pretty good feel for what type of work she’d most enjoy—creative work that is sometimes team-based, sometimes solo.

Recently it was reported that 70% of US workers “are not particularly excited” about their jobs or “are actively disengaged” and “roam the halls spreading discontent”. If we use world history as our frame of reference, I’m guessing that number would be well north of 90%. Most of the world’s people most of the time do monotonous work to feed, clothe, and shelter themselves.

So when my students write that they want to enjoy their work and First Born says she wants creative work, they’re planting a distinct, 21st century, privileged stake in the ground. Normally, the concept of “privilege” has negative connections since it’s associated with preferential treatment and a sense of entitlement; however, in the case of my students and First Born, their preference for meaningful work is undeniably positive.

They want to earn enough money “not to have to worry about it all the time,” but beyond that, they want to be like me and 30% of US citizens for whom work is creative, engaging, and meaningful. Every young person should embrace that form of privilege.

My Not So Redeeming Personal Quality

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A better title would have been “ONE Of My Not So Redeeming Personal Qualities”.

To quote my eldest daughter, who just turned 21, from last night’s Skype session. “You routinely jump to erroneous conclusions based upon incomplete information.” Flattering stuff huh?

Some context. Growing up, my older brothers teased me mercilessly. And then my friends and I took turns ripping one another. That’s my excuse for being sarcastic, it’s the legacy of my childhood.

Sarcasm is a very tricky thing, because the line of how much is appropriate is always shifting. Every person, and therefore every small or large group, has a different level of tolerance and comfort with it. My hypothesis is that the more people grew up being teased, the more relaxed they are about it as adults. And vice versa. Some members of my fam have a low tolerance for teasing. I know that because I’ve crossed over their lines so many times.

Somehow, Eldest Daughter (ED) got accustomed to it, so much so, that she gives as well as she gets. With such a quick and keen wit, it’s almost impossible to ruffle her feathers.

A little more context. She’s living in a house just off her Midwest college campus with four roommates. She’s working full-time this summer. The GalPal and I are paying for all of her expenses including rent, utilities, and food in the hope that she can save what she’s earning.

And a final bit of context. Recently ED reconsidered her longstanding vow to never friend me on Facebook—one of my greatest life accomplishments. Last week on Facebook she posted a few pics from her birthday including one of her sitting on her nice lawn with a few girlfriends and a few six packs of CRAFT BEER.

Finally, now you’re ready to eavesdrop on our Skype exchange from last night.

Me: Regarding the Facebook birthday pics, there’s something I have to explain to you. Most college students, no make that most people in their 20’s drink beer that’s just one small step above horse urine.

ED: What?! What are you talking about? [Her head then dropped so that all I could see was a cascade of blonde hair. Which I interpreted as an admission of guilt. So I pressed the pedal to the metal.]

Me: Yeah, you’re normally SO articulate, and now, mired in guilt, all you can do is stammer and evade.

ED: [Smiling ear to ear.] No, no, you don’t understand.

Me: You don’t understand. You’ll remember we weren’t sure how much to allocate for food. Seeing pictures of your friends and you with CRAFT BEER convinced me we’ve allocated too much money for food and drink. Most college students, no make that most people throughout their twenties, drink beer that’s just one small step above horse urine. [Now she’s laughing hard, which I interpret as an obvious mea culpa.]

Me: [Yes, you’re right, it should be her turn, but the best defense is a good offense.] Most people wait until they’re making $50 large in their thirties before buying CRAFT BEER. We’ve given you too much money if you’ve already leap-frogged the decade-long horse urine stage altogether.

ED: No, you don’t understand. I and E were visiting [I was returning for her senior year at Notre Dame and E accompanied her from home base in Olympia, WA. Both are close high school friends who she never expected to see in her college town. Thus, excitement.] and they insisted on buying me craft beer for my b-day. I didn’t pay for any of it.

Me: Oh.

Me: Is this another example of me jumping to the wrong conclusion based upon incomplete information?

ED: YES, just ONE of MANY examples!

Sadly, you can find numerous posts in this blog’s archive on the pitfalls of prejudging people, and yet, there appears to be a log in my eye (Matthew 7:3). I hereby recommend taking any future “pitfall of prejudging people” posts with large grains of salt.

Now only three questions remain.

1) Is it only a matter of time before she unfriends me in order to keep her personal purchases more personal?

2) Is she bullshitting me?

3) Is my questioning her veracity just one more not so redeeming personal quality to add to the list?

What say you dear reader?

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What I’m Reading

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Book—College (Un)bound by Jeffrey Selingo. The subtitle, “The Future of Higher Education and What It Means for Students,” is representative of Selingo’s clear and descriptive writing. A must read for anyone interested in the present state and probable future course of higher education.

Magazine essay—Michael Lewis in Vanity Fair, Did Goldman Sachs Overstep in Criminally Charging Its Ex-Programmer? The central character, Sergey Aleynikov is a fascinating case study. And Lewis is on my list of writers who I read irrespective of the topic. On the surface this essay is about a computer programmer, high-speed trading, and Wall Street avarice. Deeper down it’s about human nature, passion, personal transformation, and happiness.

Blog post—The Surprising Effect of Small Efforts over Time by MMM. Here’s a three minute intro to MMM. Wonderful insight, small efforts, repeated over time, will almost always surprise you.

Embrace the Waste

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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?

Why I Ignore Stock Market Doomsayers

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Doomsayer—a person who predicts impending misfortune or disaster. Mike, a good friend and running partner, is a stock market doomsayer. Routinely, like this morning, he tells me to sell. The doomsayers are certain that the mother of all corrections is right around the corner.

What Mike and his ilk get wrong is that when it comes to personal finance, the value of the Dow, the S&P, and the Nasdaq aren’t nearly as important as one’s income, investment income, expenses, and “historical risk return”.

If you asked me to help you with your personal finances, I’d want to know four things. 1) What’s your take home pay? 2) If any, what’s your annual passive income? 3) On average, how much do you spend each month? 4) If any, how much of any stock market-based investments can you accept losing in the next few days?

1) Annual income. This is straight forward. In the new economy, nearly everyone’s challenge is increasing it without working inhumane hours. That’s why people continue their education, work hard for promotions, and sometimes decide to work long hours.

2) Passive income. This is the money your savings generate. Nearly everyone’s challenge is increasing it in our zero interest rate world. Historically, cash has generated 3-5%. Today money markets and certificate of deposits earn pennies, so when adjusted for inflation, they’re slowly losing value. That’s why people invest in stocks, bonds, and real estate. Passive income includes stock and bond dividends, capital gains, and rental income. I also consider company matches a type of passive income. And social security for the 67+ set.

3) Average monthly expenses. Few people know this. Start keeping track of every dollar you spend using MINT or something similar and then read this recent blog post from Mr. Money Mustache, The Principle of Constant Optimization, for a great tutorial on managing spending. In particular, I second this suggestion:

Make a list of your ten biggest monthly expenses and tape it to your fridge, just so you know they are all there, constantly using up your money, so they had darned well be worth the resources they are consuming. If they are worth the expense, continue to enjoy them. If they are not, optimize them away. Look at your daily routine from an outsider’s perspective, and figure out if you are really getting the most value from each one of your hours.

4) Historical risk return. Where I invest, I can see my entire portfolio online. And with one link I can see a detailed analysis of my holdings including the all important “historical risk return (1926-2012)”. Right now it says the worst year an investor with my assest allocation has experienced is -17.2% in 1931. Ironically, it also says investors with my asset allocation have experienced losses in 15 of those 87 years or 17.2% of the time. So if I round up, on average, I have to expect to lose money every fifth year. Also, if I have $100,000 invested, I have to be prepared for that to turn into $82,800 overnight. That’s the price of admission to a historic stock market run up.

Here’s what the stock market doomsayers won’t acknowledge. As of May 15, 2013, the S&P 500 is up 141.5% since March 5, 2009. While they’ve been crying wolf, someone that had $100,000 invested in the S&P 500 on March 5, 2009 now has $241,500. Here’s what you won’t hear the doomsayers say, “We missed a historic rally because we we’re too afraid of the downside.”

Nor will you hear them say this truism, they’re not smart enough to time the market. Despite Mike’s dire warnings, I’m going to stay partially invested in stocks because I can accept a 17.2% historical risk return in exchange for what my portfolio analysis reveals to be my 87 year average rate of return, 7.6%.

Tune out the doomsayers and forget trying to time the market. Instead, control what you can. Most importantly, whether your earned income and passive income regularly exceed your expenses.

How to Help Young Graduates Flourish

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High school and college graduation approaches. How will the graduates you know fare in the “real world”?

Historically, parents assumed their children would live more economically secure, comfortable, and enjoyable lives than themselves. Now, as a result of heightened global economic competition, the loss of manufacturing jobs, and higher education and health care inflation, many parents worry about whether their new graduates will live as well as them.

Apart from the vagaries of the national and global economy, and health care and higher education inflation, what will determine how the new graduates fare? Many believe people’s success is a result of their initiative, ability, and work ethic. Others highlight the importance of family background, gender, and ethnicity. I believe it’s both/and. 

But there’s one other indispensable variable—the vision young graduates have of their future. More specifically, how positive that vision is. Can they picture themselves educated, healthy, doing meaningful work, fulfilled? I wish I could interview all four hundred graduates at Olympia High School to discover patterns and themes in their personal visions. “Describe your 25 year old self,” I’d start. Initially at least, many would stare blankly at me, but with follow up questions and disciplined listening, I’d learn a lot.

Parents worry. Incessantly. Will their children be able to afford to continue their education and graduate college? Will they find a job that pays a livable wage? Will they have medical benefits? Are they going to manage money wisely? Will they avoid the pitfalls of addiction? Will they enjoy good mental and physical health? Will they make friends upon which they can depend? Will they be okay? Understandably, many young people internalize their parents’ anxiety.

One thing determines whether a young person enters the “real world” with a positive vision of their future—whether the adults they interact with on a daily basis transmit hope for the future. If young graduates are surrounded by people who live as if “things are getting better” the more likely they are to flourish.

This isn’t just positive thinking bullshit. What does it mean to live as if things are getting better? It means denying one self day-to-day in the interest of the future vision. People with positive visions get up and go to work and save money. They eat healthily. They exercise. Their careful with their money, meaning they spend most of it on essentials. They take care of their possessions. They care for the environment by picking up trash, recycling, and reducing their energy consumption. They volunteer their time to make others’ lives better. They live their day-to-day lives mindful of their children’s and grandchildren’s lives. And other people’s children and grandchildren.

Some young graduates are surrounded by adults—older siblings, parents, grandparents, teachers, coaches, youth pastors, neighbors—with positive visions of a better future. Adults who unwittingly teach delayed gratification. Those young grads can’t help but get caught up in the positive momentum. Their grades and test scores aren’t that important. Or how prestigious their college. They’ll be okay.

Others are surrounded by adults living day-to-day without any vision for a better future. They don’t have a feel for delayed gratification, and therefore, can’t help but get caught up in the negative momentum. They’ll struggle.

Give a graduate the best gift possible this year, model a positive vision of the future.

 

Job Prospects in the New Economy

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Last Sunday the family and I woke up at 3:45a to drive the college junior to the Portland airport to catch an early flight. The airport was the midway point of our ultimate destination, a vacation spot in central Oregon. Like a couple of comatose puppies, the high school senior was curled up with her older sissy in the back seat of the car. Picture overlapping blonde hair everywhere. While they dozed the GalPal and I listened to a BBC segment about job prospects in the new economy.

The participants were Oxford or MIT professors. Cut me some slack, at 4:30a.m. the world’s best universities all kind of blur together. They made two points, the first which I’ve been making for awhile. The more my daughters (and their friends) develop sophisticated data processing knowledge and skills, the more job opportunities they’ll have. Quantitative analysis is probably a better term since data processing might conjure up mindless keypadding. This turn towards numbers is not a fad, the Quantitative Era is here to stay. Nearly every organization is analyzing more data than ever before—hospitals, schools, businesses, prisons, college and pro athletic teams, churches, you name it. People steeped in statistics and adept at using SPSS will be able to write their own tickets.

Which doesn’t help the sound asleep sisters. They did well in math, but didn’t embrace it, and have and will stop as soon as they’re able. According to the egghead professors, all is not lost, there’s another strand in the economy that holds promise for secure employment. Work that requires empathy.

They highlighted the work of preschool teachers. I was surprised by the choice, but clearly, unlike most jobs today, skilled preschool teaching can’t be automated because it requires nonstop empathy. The problem of course is unlike most quantitative analysis jobs, preschool teaching doesn’t pay a livable wage.

This excellent BBC dialogue made me think about our empathetic daughters who may end up leveraging their empathy as teachers or counselors. Other empathy-dependent jobs include pastor, social worker, nursing home worker, and nurse.

Had the BBC invited me to participate in the dialogue I would have posed some questions.

• Given the breadth of probable work in the future, why do we emphasize STEM education (science, technology, engineering, and math) at the expense of the humanities and related disciplines?

• Certainly, empathy is part nature, but also part nurture. How do parents nurture empathy?

• How do primary and secondary teachers encourage it—without usurping parents’ rights?

• More specifically, how do we help young males be more empathetic?

As always it seems more questions than answers, for me, for you, for the sleeping sisters and their friends.