Saturday, November 26, 2016

One More Time: Follow the Money

I have already used the title, “If You Want to Know The Truth, Follow the Money,” for a post analyzing the student debt problem. If you want to know the truth, just look at where the money comes from, where it goes, who gets to keep it, and who has to accept what level of risk in the transaction. In this case, the money comes from the banks or the Government. The bank or Government is guaranteed a return on their investment by a law that doesn’t allow the debtor to discharge this obligation in bankruptcy and the power of the state to tax its citizens. The university gets all of their money in cash, up front. Only the student bears any substantial risk in this transaction.

Sadly, this past election has demonstrated that the commercial media, all of it, doesn’t even pretend to have a shred of journalistic integrity. Even if someone (like me) is making a serious effort to find the truth, I am beset by my own biases, world view, and life experiences.

Think about it. If you read two articles about the same football game in two different newspapers, the only point of agreement is likely to be the final score. If something so unimportant as a silly game can generate such different reports from professional eye-witnesses, how likely do think it is going to be that you will hear the truth from someone who is not only biased but has a personal interest in the outcome of a particular event when power, money, and his paycheck are at stake?

You can’t find a news source that doesn’t spin the news to further its own ends. Sometimes even reputable organizations publish outright lies, because they want to believe that they are true. The good ones apologize when they make such a mistake, usually in really small print on a back page after the damage has been done. The bad sources just lie and never apologize. Headlines exist to get you to read the article. Look at how they are written to make you angry or cause you to gloat in your own sense of moral superiority. Look at two different publications on the same day. What subjects are featured on the front page? What subjects are consigned to back of the section? What subjects are omitted on one source, but featured on the other source? What does the layout of the page tell you about the publisher’s opinions?

Early on in my quest to understand how to invest my money, I learned the importance of the Biblical truth, “In a multitude of counselors there is wisdom.” Often different professional, respected, objective research sources will produce different recommendations on how to best invest your money in the same situation. However, if you look at four or five different sources, you can usually ferret out something reasonably close to the truth. The same logic can be applied to any analysis of the news. Read a conservative journal. Then read the same story in liberal publication. Sometimes foreign sources, like the BBC or Al Jazeera, will provide a more balanced report on American news than any domestic source. I have even learned that RT, a Russian news service can do a pretty good job reporting on American economic news.

But if you really want to know the truth, if you are ready to deal with the truth, follow the money.

Money is the only news reporting service that never lies. Look at an individual, a politician, a corporation, a nation. Where did they get their money? What did they do with it once they had it in hand? What kind of obligations, contractual or implied, came with the transfer of that cash?

Nobody rides for free.

If I could analyze your finances, your income, your monthly expenses, your gifts to church or charity, your rate of savings, your investment choices, everything you do with money, I could paint a very clear picture of who you are and what you value. For example, the rate at which I wear out and replace expensive walking shoes combined with a record of my purchases of fast food and convenience food would expose one of my major psychological conflicts.

Remember. Money Always Tells the Truth.

Monday, November 21, 2016

What if Churches...

One of the simplest models for a budget suggests that a family divides all the money that comes into the household into three pots. Before spending the first penny, 10% goes into savings and 10% goes into giving to charity. Then the theory goes that if you consistently live on 80% of your take home pay, chances are pretty good that you are going to be OK.

What if churches operated under this simple rule? Many churches teach the tithe, that their members donate 10% of their income to their home church, but how many churches skim 10% of the take right off the top and give it to the poor, to windows, or to orphans in their congregation, or to other ministries in need of cash? Most churches have an “emergency fund” or two, a benevolent fund for the poor, a building fund for unexpected or large expenses, and a checking account for ongoing bills, but if they were all added up, how many churches would have the money for 3 to 6 months operating expenses sitting in the bank?

I hear a lot of readers thinking, “This is unrealistic,” and you would be correct. Most churches as well as most families spend every penny they get, but wait, it gets worse. The median household income is running about $56,000. A quick Google search didn’t turn up a figure for median household debt, but average household debt is reported in the $130K to $150K range. Curiously, the annual average interest expense for an American family is $6,658. That would be 9% of the average household income.

As a nation, we almost give a tithe of our gross (not net) income to the bank, before budgeting for our living expenses. Things are not quite as bad for churches, since they are classified as non-profit organizations they don’t have to pay taxes before they can buy food. However, many churches, like their members are paying the bank before God.

As for the emergency fund, 62% of Americans report having less than $1,000 and 30% of Americans report a zero balance in their savings account. 21% don’t even have a savings account. How many churches would issue a similar report?

OK, let’s be realistic. What is possible for your family? What is possible for your church? Could you commit to giving 1% of your take home pay to charity or 1% more if you are giving less than 10%? Could you commit to saving 1% of your income or 1% more if you are saving less than 10%? If you or your church can’t answer yes to both those questions, you are in trouble. It is time to take a hard look at your life. Try to understand what got you into this condition and what it would take to break even. Generally, we know the answer, but honestly and courageously dealing with the consequences of our bad decisions, in any area of our lives, isn’t a pleasant experience.

Imagine a church with a budget of $10,000 a week with $1,000,000 in the bank. What could be done with that kind of money? A scholarship fund for poor students? Monthly checks for faithful members who are windows or single moms? What could a check for $100,000 do for medical missionary operating in a third world country?

What if churches in America and their members, actually believed our God when he stated in Deuteronomy Chapter 28 that debt was a part of the curse and that the ability to lend money was a blessing?

Tuesday, November 15, 2016


There is a problem with hunger. The more you feed it, the more you want. This true of hunger for food, your drug of choice, and the hunger for whatever it is that you like to buy. Giving into hunger on a regular basis has something to do with my waist measure. It also just might have something to do with the balance you carry on your credit card.

Consider: Since I have inherited a few old watches that have some collectors’ value, I have developed an appreciation for fine watches. I have researched my watches (and some watches that I covet) on the Internet. I even read a book on the art of watch making I found at the Furman University library. Some days I hear one of those little bad angels sitting on my shoulder telling me, “Go ahead. Take a step into this cool new world. You could find a used Rolex or Omega in the $5,000 to $10,000 range. Think of it as an investment.”

Then, just for good measure, the little voice adds the kicker, “You deserve it.” How often do your bad little angels come up with that line?

Recently, I went to see the new Doctor Strange movie. In one of the early scenes, the brilliant rich arrogant neurosurgeon opens a drawer containing nine watches that cost about $20,000 apiece. This scene set up the, “pride cometh before a fall,” sequence that would ultimately land the good doctor, now penniless and alone, in Katmandu on the doorstep of the Ancient One. I wonder if any other person in the audience, like me, couldn’t wait to find out what kind of watch Doctor Strange likes to wear.

And the answer is, a Jaeger-LeCoultre Master Ultra Thin Perpetual Calendar, at $31,500!

Until the 1970s, men tended to buy a quality dress watch sometime around age 30. They expected to wear this watch for the rest of their life. I really like the 1951 Hamilton Darrell that belonged to my father-in-law. Watchmakers consider it a fine example of a quality American watch, but it isn’t anything that collectors are willing to pay a premium to own. You can find one in pretty good shape for $200. I can only remember my father-in-law wearing one of two watches, the Hamilton he bought in 1951 and a fancy quartz watch he was given as a premium for attending a time-share presentation. After the quartz watch quit working, it was consigned to the garbage can. After my father-in-law died, I had the Hamilton cleaned and serviced. After I wore the watch for about seven years, the crystal was scratched up, so I had it serviced for a second time. After 65 years, it still keeps excellent time. I believe that its classic art-deco look is still in good taste for a men’s dress watch.

When my father-in-law bought his watch, he was a professor at Georgia Tech, but he hadn’t yet completed his Ph.D. The retail price for this watch was $65, not an easy decision for professor just beginning his career. That is $605 in today’s money. You can buy a really good watch for $605, one that with proper maintenance would last the rest of your life. But today, we upgrade. We buy something new every time something new is available. How long do you keep a cell phone? A car? A husband? How many pairs of shoes are sitting in your closet? In our new home, we have not one, but two walk in closets to hold all our stuff. In our old home, we didn’t have any walk in closets.

Maybe the good little angel, sitting on our other shoulder, might be suggesting that it is time to fast for a few days or months from whatever hunger is causing us a problem. Hungers, no matter how legitimate, always lead to problems if overindulged.

James Bond prefers the Omega Seamaster at a paltry $3,875. Maybe if I just bought one of those things, I would finally be content.

Wednesday, November 2, 2016

The Stories We Tell Ourselves

At almost any moment of life we can be forced to make a decision based on inadequate information. P.S. Choosing not to make a decision is also a decision that can have far reaching consequences. We deal with uncertainty and the possibility of highly improbable events by plugging the facts as we know them into our metanarrative, the overarching story we tell ourselves about the universe and our place in it.

What if our metanarrative is no good? What if it is a bad model of reality? Every one of us has a metanarrative and although none are perfect, some are much closer to reality than others. What happens when reality conflicts with our metanarrative?

Let’s start with a relatively harmless example. I love cars. I read about cars I have no intention of ever buying just because I find pleasure in fantasying about high performance luxury sports cars while viewing glossy photoshopped images of automotive perfection.

Yes, I indented that last sentence to sound vaguely pornographic.

I also read about cars I could realistically afford to buy when the time comes. My metanarrative tells me that Honda Motor Company makes a reliable automobile. My 1996 Honda Prelude Si was the best car I have ever owned. It was fabulously reliable, fast, comfortable, fun to drive, and delivered good gas mileage. After 14 years I traded it in for a 2010 Acura TSX, a high end Honda product. After 6 years it is well on its way to overtaking my beloved Honda in my pantheon of automotive excellence. Unfortunately my metanarrative no longer lines up with reality. Consumer Reports has put the hoodoo on the nine speed transmission found in every Honda product I would consider buying. They are not alone. Other respected sources have lowered Honda’s standing from the top three manufacturers to the middle of the pack. This actually makes me angry, even though I believe Consumer Reports is not motivated by any conflict of interest to tell me lies. To be honest, if I had to replace my Acura today, I would have to look at a Lexus or an Audi. It almost feels like treason to make such a statement.

This election is messin’ with a whole lot of metanarratives. I haven’t seen this much commotion, anger, and confusion since the elections of 1968 and 1972. First, admit that you don’t have all the facts. Then do your research. Don’t just listen to sources that will feed your assumptions and prejudices. Try to look deeply into the facts, while ignoring the stories woven around the facts by self interested parties seeking power and money at your expense. Realize that there are no objective balanced news sources in America when it comes to reporting on this election. Sometimes foreign reporting is less filled with histrionics and folly than even the best known American media outlets, but it isn’t perfect. Look at your own values. Do they really reflect what you want for yourself, your children, your nation? Once you are truly comfortable in your own skin, this may take more reflection than you think, then compare your values to what you know of a potential candidate. Try to look at the entirety of their lives. Then cast your vote remembering that fear, greed, anger, and hatred are the enemies of good decisions.

It won’t be easy. There is much to consider and most of it isn’t good.

Once this election is over you and your metanarrative will have a more important problem, the rest of your life. Are the stories you tell yourself about the world you inhabit useful and accurate? Will your assumptions about the universe help you to enjoy a more abundant life or will they guarantee that you will never find financial freedom? Will they hinder the outcome of the more important aspects of a balanced life, like our relationships with our family, our friends, and our God?

How does this work? Suppose your boss ignores a report you send up the chain for review; does this mean that he thinks you are stupid and he hates you? Does it mean that he is busy and that you are a lower priority than some of the other irons he has in the fire? Does it mean he just forgot he told you to prepare it? How about instead of telling yourself all sorts of stories that involve your place at the center of the universe, you just ask? After allowing a reasonable amount of time to pass, this question will give you a little leverage, especially if your boss just forgot about your report.

One of the things I really enjoy about the more reputable sources for financial research is that they are all engaged in a genuine search for the truth, even when they disagree. There is a blessed absence of overheated rhetoric and psychological tricks designed to activate the lizard brain. Take in a deep breath then exhale. Relax the muscles in shoulders. Say a short prayer.

Then LIVE!

Wednesday, October 12, 2016

Three Secrets of Success

Fred Wilson, the real estate phenom introduced in the previous blog article has a list of three secrets to success. This is the shortest such list I have seen. Most of these lists seem to run either seven secrets, like mine, or ten secrets. I think the items in his list reflect his background in sales and competitive sports such as tennis.

1)The Law of Action—What you do
Wilson firmly believes in a cause and effect universe where you will reap as you sow. While it obvious that a salesman has goals, Fred Wilson believes that focusing on process is more important than focusing on the goal. The goal would be winning the match. Practicing the elements of your game under the supervision of a coach or mentor, then developing a game plan specifically for each contest will, naturally lead to the goal, winning the game.

2) The Law of Attraction—Where you place your attention
We have all heard about the law of attraction. All you have to do is sit around and visualize and whatever it is that you want will magically appear. Right. Wilson puts a different spin on this popular notion. Consider this example from my life: One morning, a little after dawn, about a mile into my walk, I noticed a mushroom growing next to the trail. Suddenly, I realized this was not the first mushroom of the morning. I had seen several earlier, but I wasn’t consciously aware of mushrooms until that moment. Subsequently, I discovered a multitude of mushrooms growing in the forest. Was this the law of attraction at work? Was a change in my spiritual vibration manifesting metaphysical mushrooms in my reality or was something more mundane at work in my life? Perhaps, because I was actively looking for mushrooms in places where mushrooms were likely to be growing, I found mushrooms.

Wilson believes that the law of attraction is about passion and purpose. When you are authentic; when you are clear about what you want and how badly you want it; your visualizations will reveal what was actually there all the time.

3) The Law of Acceleration—What I perceive
The law of acceleration is always looking for a combination of opportunity and benefit. Fred Wilson recounts a memorably bad day at work that ended in an ugly unnecessary argument with his wife. In the midst of this quarrel, he thought to ask himself the question, “Where is there an opportunity in this crisis?” He understood that there was an opportunity to apologize to his wife. He reaped the benefit of peace in his house when he exploited an available opportunity. Wilson firmly believes there are opportunities at all times everywhere you care to look. The difference between success and failure is in your perception of reality. He supports this proposition with many tales of how a casual conversation led to a profitable business relationship or the sale of some property.

Saturday, October 8, 2016

Are Your Internal Policemen Doing Their Job?

Appoint judges and officials for each of your tribes in every town the LORD your God is giving you, and they shall judge the people fairly. Do not pervert justice or show partiality. Do not accept a bribe, for a bribe blinds the eyes of the wise and twists the words of the innocent.
Deuteronomy 16:18-19

Fred Wilson is a Jewish American real estate mogul who practices Transcendental Meditation. He has a burden to teach others how to improve their lives in general and particularly their job performance. As a young man he brought the same competitive spirit that made him a successful tennis player to his job as a real estate salesman. Unfortunately, at this time of his life he was living the life of the rich and famous on borrowed money. He was such an outstanding salesman he could always make a few more calls and sell his way out of any financial problem. However, the stress of this lifestyle was taking its toll on his psychological health, his physical well being, and his marriage. When he finally reached the breaking point he told his employer he was leaving and he wasn’t sure he was ever coming back.

After a self imposed three week spiritual retreat, he decided to return, but there were going to be some changes. Taking these two verses from the Torah, he decided he needed to set up his own internal judges and policemen (here translated as officials) to keep himself on the straight and narrow. He also decided that living on borrowed money was tantamount to accepting a bribe. He reached this conclusion by reasoning buying something with borrowed money allowed him to enjoy benefits he hadn’t earned, just like a corrupt official accepting a bribe to pervert justice. It just wasn’t going to happen again in his life—and I thought Dave Ramsey was hard on debt!

As a part of his effort to judge and to improve his life, he came up with this test he takes once every three months. He gives himself a numerical score in each of five categories from 0-20 for a possible maximum score of 100.

1) Rest—This includes adequate amounts of sleep, breaks during work, and vacations to renew the soul.

2) Exercise—Appropriate balance physical exercise. In his case this meant not attempting to set a personal record every time he laced up his jogging shoes and stepped out of the door.

3) Administration—Time management, maintaining your personal financial responsibilities, and taking care of all the mundane everyday tasks of life such as cooking, housekeep chores, maintaining family automobiles, etc. etc.

4) Diet—As a competitive athlete he considers diet to be an important component of a healthy balance life.

5) Inner Work—Moving toward your goals, keeping your priorities straight, prayer, meditation, or other spiritual practices, and living according to your own moral standards.

The first time he took this test, I believe he scored himself at 56, a failing grade using the traditional ten point system. His most recent score was an 82, a B-. Was he too hard on himself or too easy? Who can say? If he maintains a constant scale over time it really doesn’t matter. I gave myself a 60, a D. My wife gave me 71, a C-. In both cases my grade point total was ruined by diet. There is only one word to describe my dietary habits, abysmal.

If I could ask Fred Wilson one question it would be, “Where does family and personal relationships figure into your five categories?” It is obvious that family and helping others are very high priorities to Wilson, but which categories are affected by service to others?

Tuesday, September 27, 2016

A Different Way to Think

Recently I was listening to a Brian Tracy video on methods to increase your income through focusing your personal efforts on what is important to the bottom line and delegating or outsourcing those activities that don’t generate income. Along the way Tracy went off on a unrelated rabbit trail that I found quite interesting. Brian Tracy actually knows Thomas Stanley and William Danko, the authors of the landmark study, The Millionaire Next Door. While talking with one of them, I believe it was Danko, Tracy learned that Danko overheard a conversation between several millionaires involved in his study. They were saying things like, “I have two.” Or, “I have four.” Puzzled Danko asked them to explain what they were discussing. The answer, the number of years they could support their current lifestyle without any additional income or capital gains.

Believe it or not, there are personal finance authors that encourage their readers not to have an emergency fund. I noticed one of these dreadful recommendations came from a website supported by (you guessed it) the banking industry. “Go ahead little girl, put that surprise auto repair on your credit card. It will not harm you.”

It turns out that Stanley and Danko’s self made millionaires don’t think like that. Instead of having the usually recommended three to eight months in an emergency fund, these individuals are thinking in terms of years. Of course, the classic emergency fund is money held in an insured near cash instrument like a savings account or money market fund. I am not suggesting that you put years of expense money in something that pays nearly nothing, but consider that various model portfolios suggest that retired folk keep as much as 10%-15% of their net worth in safe, near cash accounts.

Danko and Stanley discovered that financial freedom is a high priority to the men and women who actually achieve financial freedom. Their decisions are frequently made with the goal of freeing up cash for investment opportunities. Even though they could easily pay cash for new cars, they tend to buy relatively high priced late model used cars, taking advantage of the fact that a car’s value tends to depreciate about 19% in the first two years of ownership. Then they keep them for an average of ten years. This practice, alone, has the potential of freeing up significant amounts of money over the course of a forty year career while the allowing those millionaires next door to drive around in some pretty nice automobiles.

I consider The Millionaire Next Door a must read for anyone who wants to become financially literate. The subjects of their study are not remarkable people with unusual skill sets. They are your neighbors. They just don’t think about money the same way the average American thinks about money. Because their thoughts are different, their actions are different. Because their actions are different, they get different results. Because they get different results they end up living a different kind of life, one that includes financial freedom.

Go thou and do likewise.