Financial Compassion

Recently, I was driving along a dark country road on my way to the back gate at Furman University. As I approached a bend in the road I thought, “What if there is a car coming toward me?” I moved over closer to the edge of the road. A few seconds later I discovered that I had made the right move. I didn’t see that oncoming car or even its headlights, but I heard that little voice in the back of my head.

Back in December, I decided that I really needed to add some upper body exercises and stretching to my morning walks. In January I consulted with a Furman Health Science professor who recommended swimming and weight machines. Since I ruled out Yoga, he suggested the therapy tank for my lower back and leg problems.

Then one morning in early February, I started my walk confidently expecting to set a new five day record. However after 1.5 miles, just happily walking along the trail, minding my own business, I felt a sharp pain in my lower back, an infrequent reminder of an injury I suffered while working on a car about 29 years ago. Occasionally stopping to stretch the affected muscles, I was able to limp the ½ mile back to my car. I should have accepted the offer of a fellow walker to drive me back to the Sustainability Center parking lot. His car was parked nearby.

Life is like that. Often, that little voice lets us know when we are on a collision course with the universe. When that little voice conflicts with our desires, we tend to ignore it or come up with some kind of explanation excusing what we know is a bad decision.

Sometimes, we just say, “Screw it!” and do what we damn well please.

Then the day comes when we can’t make the minimum payment on all our credit card bills, the repo-man comes in the middle of the night to haul away that new pickup truck, or we realize that paying off those student loans might require a diet of Ramen Noodles and tuna fish for the next thirty years.

Now what? First, extend a little compassion and bit of loving kindness to yourself.

After throwing my back out, yelling at myself wasn’t going to help anything. Loving kindness included ice packs, heating pads, and two days spent primarily on the sofa and in the bed.

On the third day, I was able to hobble around the Furman Lake one time, less than one fourth of my normal distance. Over those two days of forced inactivity, I decided to listen to that little voice and pull the trigger on a more balanced exercise program.

If your finances have crashed and burned, whether it was your fault or the result of powers beyond your control, take a deep breath. Accept the reality of your situation. Stop pretending debt or a lack of money is not a problem. At the same time, avoid the temptation to engage in dramatic outbursts that aren’t going to make you a better person or the world a better place.

As the football players say, “It is what it is.”

I signed up as an alumni member at the Furman Fitness Center. I am swimming one day a week. I hope to increase that to two days a week, but not yet. One of the attendants taught me how to correctly use the eight weight machines that are currently a part of my every other day circuit. And yes, I am attending an easy Yoga class designed for pitiful old folks, like me.

I am not at all sure about this. I have a bad history with exercise, because exercise isn’t fun. Walking is fun, so it is not exercise. As for walking, I am still out there on the trail. I am not back to 30 or more miles a week, but with a little luck, I might hit 28 miles this week.

How fast? Don’t ask. If it is moving slower than me, it is a rock.

Don’t turn down help when you need it. Not accepting that ride was just a pointless display of machismo when a bit of humility would have better served my cause.

Be willing to learn. The Chinese say, “When the student is ready, the teacher will appear.” There is somebody out there who can help guide you, if you are willing to stop making demands of the universe and start listening to that little voice. Maybe a really physically fit Health Science professor who has spent his entire adult life studying exercise physiology might know a bit more about the subject than this retired engineer. I have found if you treat an expert with respect, he will usually be willing to give you the advice you need—for free.

The question now becomes, “What price are you willing to pay?” to achieve financial freedom, whatever that might mean to you. To get something, you always have to give up something. If I want to continue to lose weight, increasing the probability that my heart will return to a normal sinus rhythm, I will need to eat less or exercise more. It looks like, at least for the moment, I have maxed out on exercise.

What is the logical next step for you?

Food (Calories In) = Fat Stored + Exercise (Calories Out)

Money In = Money Stored + Money Spent

A Smarter Way to Give

A Charitable Donor Advised Fund is a simple vehicle that allows the investor an opportunity to receive a larger charitable deduction for the same gift while creating an opportunity to actually give more money to a charity than was placed in the fund. Many charities have no mechanism for receiving appreciated shares of stock or mutual funds, but any charity can deal with cash contributions issued by a Charitable Donor Advised Fund.

Here is how it works. Normally a donor would sell shares of stock, pay capital gains taxes on the increase, and give the balance to charity. In an example presented in OnInvesting, $100,000 in stock less $14,250 in capital gains tax would leave $85,750 for charity and $24,010 in personal income tax savings for the donor.

If the giver had a Charitable Donor Advised Fund with his broker, he could transfer $100,000 in appreciated shares directly to his account without paying any taxes. This would save him $28,000 in personal income taxes and leave the entire $100,000 for charity. But wait! It gets better. As trustee of the account, the donor can invest the $100,000 allowing him to give much more than $100,000 to designated charities over the course of time.

Once you transfer your money to the Charitable Donor Advised Fund, it is just as gone from your pocket as if you put the money in the plate on Sunday morning. You get the tax deduction. You still control it, but it can only be used for charitable purposes. The money growing in your charitable account grows tax free, just like the money in your 401(k). However unlike your 401(k), when the money is sent to a charity, it isn’t taxed.

Like the Charitable Remainder Unitrust, I have written about in a previous blog article,

Finishing Our Last Will and Testament

A Charitable Donor Advised Fund is another tool offered by our wretchedly complex tax code that allows even middle class folks the opportunity to utilize the same means routinely used by the rich to avoid taxes, increase their effective rate of giving in this life, and even leave a charitable legacy once they pass from this world into eternity.

This Old Car

Yesterday I needed to make one of those financial decisions that could be right or could be wrong. Only time will tell. We have two cars that have only required minor routine maintenance for about five years. Well, some noises started coming out from under the front end of our 2000 Altima that had to be investigated. The verdict was a few dollars shy of the $750 mark.

Now what? In retirement, we simply do not need a second car. However, my wife is not ready to accept that idea even though she now has a personal chauffeur on call 24/7. The Altima is 17 years old! But it only has 125,000 on the odometer. Since 1988, I buy new and then keep the car for twelve years or 180,000 miles—or more. The car is worth around $1,500 in a private sale. Obviously, putting more into a car than the car would be worth after it is repaired isn’t going to happen, but where to draw the line? I was expecting somewhere in the $400 to $500 range, but in my mind, I drew the line at $1,000.

My logic? If I don’t repair this car, my wife will want to purchase a second car. This will cost $20,000 or more to buy something that I don’t believe that we need. It will also reduce the available funds to purchase the planned “car of a lifetime” that I hope will replace our 2010 Acura at some time in the distant future. My wife, who happened to pick up on the other phone when I received the bad news, expressed her concerns in a manner that reflected her sentimental attachment to this particular automobile. My hope is that the repairs to the Altima will keep it on the road for at least another two or three years. Given how little we drive our cars in retirement, this is not an unreasonable expectation, but with a 17 year old car, I really can’t complain if this conclusion doesn’t pan out. Hopefully in that time, I will be able to convince my wife that we can get by with one car.

And then what? Since I was in junior high school, I have loved cars, expensive cars, fast cars, beautifully engineered cars. Like most people, I never had enough discretionary money to purchase one of these cars of my dreams. Now I am in a different chapter of my life, one where I have the free time, money, and health to indulge myself a bit. There is no guarantee that this will be true tomorrow. The car that replaces the Acura might well be the last car I ever buy. I want one that has a C or an E, or a 5 or a 6, or 400 on the back side of the trunk lid. If you know cars, you know what I am talking about.

Don’t worry. After a lifetime of pinching pennies and squeezing nickels, I don’t plan on doing anything silly. I have never made a car payment. I paid $600 cash for my first car and I have paid cash for every car we have purchased during our 42 years of married life. Avoiding the car payment is one of the secrets to finding financial freedom.