Patience Persistence Politeness (Part I)

I am (almost) finished with two experiences that were unnecessarily unpleasant and time consuming. I have been examining my performance and the results I obtained, hoping that I can come up with some lessons learned that I could share with others who find themselves entangled in similar quagmires. Both of these adventures started in early July, but weren’t resolved until late September.

Because our neighborhood seems to experience more than its share of power outages, three years ago, I bought a generator. Now, I will have power when the power goes out. I bought a big one that runs off our natural gas line. Power, or no power, I wanted to be able to run the air conditioner during our hot South Carolina summers.

One night in early July, we suffered three power losses in less than one hour. Twice my generator cycled on and off as it should. The last time it didn’t. During an extended phone call to the individual who installed and maintained the generator, we determined that the problem was the transfer switch. We also discovered a temporary manual solution that gave me power until the technician could come out the next morning.

After a thorough investigation, the electrician determined that the coil, an electromagnet that threw the transfer switch back to line power when power was restored, burned out and needed a replacement part.

A replacement part was ordered.

After a week passed, I checked in with the contractor. He told me four to six weeks.

After almost six weeks passed, I called again. This individual said he would check into it. A few minutes later he sent me a text message. I am not certain what was said in that phone call, but the man who installed and maintained my generator told me to find someone else to repair my generator. He was through dealing with that particular manufacturer. He suggested another company that might do the work. I checked out that recommendation with someone of my age who used to be in the business. My friend said he knew about that company, giving me a go ahead to work with what we will call Company II.

Company II sent out a junior technician who consulted over the phone with a senior technician, troubleshooting the problem just like I did with the individual who sold me the generator. He reached the same conclusion, a burned-out coil. He went back to his shop to order the part. About a week passed. I called the parts expediter. She told me four to six weeks. This is not what I wanted to hear. I was also given the choice of ordering a part for a total cost, including installation, of a bit under $2,000, or replacing the entire unit for a little over $2,000. I chose replacing the entire box and everything in it. Although I wasn’t happy with the price, at this point I just wanted my problem to disappear.

I came up with the bright idea of calling the manufacturer’s customer service line. In my nine years’ experience in American factories, I was familiar with calls from customers looking for some kind of odd ball part. Often, we could find one in a warehouse, somewhere in the supply chain, or on the shelf of another dealer. The conversation with this office lasted for 45 minutes. First the representative collected a great deal of information, consulted with the “team,” then collected some more information, and had another consultation with the team, before telling me they couldn’t do anything to help me. This exercise in futility ended with a conversation with a rude supervisor, who basically told me to go pound sand. I hung up the phone on him. This is something I have only done on two occasions that I can remember. Usually, I am not that rude.

At the time, I was juggling a number of problems. I was not a happy camper, so I wrote what might best be described as a controlled outburst of seething anger that I mailed to the president of the firm that manufactured the generator and the transfer switch. After a week, or so, passed, I received a phone call from an anxious engineer in their technical support office who wanted to know every detail of my problem and my experience with customer service. He told me Company II was in their system and that my problem would be fixed. After another week, or two, passed. I received a second call from the engineer. Company II was not in their system and so was not authorized to fix the problem. He told me I would hear from Company III who was an authorized dealer. Actually, a few minutes before receiving this phone call, I had already talked with Company III. They bragged that they had seven switches on the shelf, but were unwilling to ship one over to Company II. I was also informed that Company II could not perform the repair if it turned out to be a warranty repair.

I called Company II, asking to cancel the order. Gracefully, they confessed they were not authorized to perform warranty repairs. During week five of the second 4 to 6-week window for delivery, my order was successfully canceled.

After a few days of rain delay, a senior technician and his apprentice arrived at my house with an entire transfer switch. They planned on taking the parts they needed out of this unit and replacing them at some later time. At this point, I should note that a transfer switch is a big steel box about 2.5 feet in length, 2 feet in width, and about six inches deep filled with electrical gizmos, wires, and circuit boards. For the third time the coil was diagnosed as the problem. When it was replaced, the switch still did not perform as it should. It turned out the circuit board that controlled the coils was the culprit. It was replaced.

Now all is well. The final repair was covered by my warranty. I would say it didn’t cost anything, but that wouldn’t be true. I had to pay the contractor who sold me the unit and Company II to incorrectly diagnose the problem, but I am happy with the outcome.

Sometimes dealing with contractors and customer service representatives turns into an extended wrestling match. When the system breaks down, the victim needs to be persistent, patient, and maybe polite, at least most of the time.

Opt In? Opt Out?

How many of you are giving nothing at all? Not to charities of your choice? Not to individuals in your community, who are not members of your family? Do you have a giving problem?

Is it sin? Should I go into full bore Old Testament prophet mode? Well, not giving isn’t really a sin. Christianity is a religion of freedom and grace. We are free to give as much, or as little of God’s money back to God, as we wish. Make no mistake, whether you are a Christian, or something else, all the wealth of this world belongs to the Lord, both the silver and the gold, as well as the cattle on a thousand hills. For some reason, God has trusted me with a portion of His wealth for some undetermined amount of time, but it isn’t mine. At some point, all of it will pass into the hands of other people, who will use it in ways I may, or may not approve. The day will come when I will need to discuss the use of these funds with my Lord. On that day, my hope is that I will hear the words, “Well done good and faithful servant.”

OK? I have found it useful to differentiate between sin and unwise behavior. All sin is unwise behavior, but not all unwise behavior rises to the level of sin. Although, I can’t think of a Scripture to support my theory, somehow the idea that not giving out of what you have received seems a little worse than unwise behavior. Of course, there are exceptions. There were years that we weren’t giving to a church, because we weren’t attending a church. There were two occasions during our marriage when we were teetering on the edge of bankruptcy. I understand there are seasons of life when any giving would be sacrificial giving that would require an inordinate amount of faith.

In this case, I want to improve your life, by raising the level of your consciousness.

An example might be what corporations have learned about participation in their 401k programs. If this benefit is offered as “Opt In,” the employee is required to go to the personnel office, listen to a sales pitch, and fill out a form. Most employees seem to try and evade such experiences. What seems to work better is “Opt Out.” If a small contribution to a 401k starts on the first day on the job and a trip to the personnel office, sales pitches, and forms are required to get out of the program, people tend to let it ride.

So, how do I get you to understand God’s program, or if you prefer the universe’s program, is “Opt Out?”

The Law of the Harvest is real. “As ye sow, so shall ye reap,” is an abundantly clear statement. There are three components to the Law of the Harvest.

1)You will harvest whatever you have planted. If you have planted corn, you will harvest corn.

2)You will harvest more than you planted, perhaps 10 fold, perhaps 30 fold, perhaps 100 fold.
3)The harvest will occur sometime in future. The timing is in the hands of the Lord of the harvest.

While discussing the Law of the Harvest with a friend, he observed that it doesn’t matter to the soil what you plant. Not to go karmic on you, but if you plant hatred and fear, you will harvest…….

Back to the 401k, as an example of the Law of the Harvest. Let’s say the company has a 100% match on the first three percent of an employee’s salary that he contributes to his 401k. That means he gets an instantaneous 100% guaranteed return on that portion of his investment. Try to beat that rate of return. Let’s assume 6.5%, the low end of the range termed Siegel’s Constant for after tax and inflation return on U.S. equities. The first dollar that new employee contributes to his 401k will likely be somewhere around $13 in thirty years.

Although we are now living in a different Covenant than the Law of Moses, the tithe, giving 10% of what comes into your hand is a good goal, or perhaps you might discover it is a good starting point, for giving back to your community and your world.

Don’t believe me. Try an experiment. Set a goal in your own heart that someday you want to give at least 10% of your income to organizations who will make the world a better place, or to individuals who are in need. Whatever you are giving today, negotiate a larger number with God, or even with your own conscience. Commit to giving more for a year. Then look at the results. If you are in a better place, commit to giving a little more. If not, you can ignore this blog post.

Due to my experiences in the Charismatic Renewal, I hesitate to believe that I am ever “hearing from God,” but as time goes on, I am becoming more convinced that if you want to attract blessings into your life, become a blessing to others. Of course, this principle isn’t limited to money, but it seems like a good place to begin. Start where you are. If you are giving nothing, don’t expect to reach 10% today, or tomorrow. Just commit to increasing that number, as the Lord provides.

From personal experience, I haven’t yet been able to out give God.

A Visionary Living in the Material World

I am reading the biography of Steve Jobs by Walter Isaacson, so far an excellent read. People who knew Steve Jobs and worked closely with him all report that he had a weird ability to, in their words, “Warp reality,” with his words and enthusiasm. He had the power to call those things which are not, as though they were.

It didn’t always work, even with a faith in himself that would match Abraham’s faith in God, Jobs still experienced some world class failures. He was deservedly fired by the company he founded. Some of his creations such as the Lisa and NeXT computers were technological and financial disasters.

Yet he persevered. In the book Isaacson states, "Jobs quoted the hockey star Wayne Gretzky's maxim, "Skate where the puck's going, not where it's been." He continued to revolutionize consumer products with the high-performance iMac. He changed the music world forever with the iPod and iTunes. We still don’t know the end results his greatest creation, the iPhone, will have on the world, but a product that he said people didn’t know they needed because it didn’t exist, seems to be changing everything.

What about your calling makes you so excited that your words and enthusiasm would have the potential to “warp reality?” Where do you see the puck going? Where do those two lines intersect? When you find that point, when you craft that vision of the future, maybe, just maybe, you can change the world.

A.B.L. (Always Be Learning)

I just ordered a book from Amazon, Commercial Real Estate Investing for Dummies. The title pretty well sums up my lack of knowledge on the subject. Last week I was catching up with one of my old friends; they all seem pretty old these days. Since our last phone call, he invested a good portion of his “nest egg” in a small office building located near a county court house in another state. He is happy with the income his property is generating and he is looking forward to watching his investment grow in value. Our conversation peaked my interest. There are really only two ways for the average American to build wealth, the stock market, or owning income-generating rental properties. While I have read a book or two on investing in real estate, my mind always came up with frightening stories that sent me scampering back to index funds and conservative dividend paying stocks.

Closing my eyes, I envisioned buying a small two bedroom home in an undervalued lower middle class suburban neighborhood. My first tenant is a young woman attending a local Bible college. Wait! She falls in love with a biker, who transforms my investment into a crack house. During a gun fight with the local police SWAT team, my house catches on fire and burns to the ground. So far, the idea of renting office space to a couple of legal firms, seems—safer.

I want to learn more about this subject.

My whole life I have wanted to learn more about something or the other. As well as completing two bachelor’s degrees, one with a double major, I have attended 17 for credit college courses funded by my employers on my time, 10 of those classes led to my MS. I have taken a variety of life enrichment courses from calligraphy to the National Guild of Hypnotists’ certification training. In addition, I have studied subjects like investing, finance, comparative religion, Tai Chi, and even a little bit about the law on my own time and dime.

At my age, I have regrets, both for what I have done and what I have failed to do. I am not a perfect person and I don’t live in a perfect world. However, I don’t regret any of the studies I have undertaken over the course of my lifetime. Some of these undertakings, like my BS in Mechanical Engineering, changed my life in a measurable way. Some of my efforts did little but make me a more entertaining guest at the dinner table, but all of them made me a better person and allowed me to live a fuller life.

In the first five years of retirement, I have felt like I have been slipping a bit, not learning enough. I thought about this subject as I went for my morning walk on the campus of my first Alma Mater. It isn’t quite true. My wife and I lost three parents in five and a half years. I have learned a lot about wills, power of attorney, taxes, probate, advanced directives, and hospice care. Now that chapter of my life, one that we will all have to face at some point, is drawing to a close. It still might take up to a couple of years to sort out every last detail, but the heavy lifting is almost finished.

I can face the future, start learning something new about this wonderful world, a world that seems more interesting and alive than it did in the waning years of my career. Neither my body or my brain works quite as well as it once did. I can tell the difference. There was a point in my life when I didn’t tell the same funny story to the same person more than two or three times, but I am thankful to be enjoying good health in a comfortable retirement.

I may or may not ever pull the trigger on my first commercial real estate deal. While I doubt that I will ever become the strip mall king of my new home town, I may, just may, diversify my portfolio into commercial real estate, after I have learned enough about the subject to have an intelligent conversation with someone smarter and more knowledgeable than your servant, the humble author of this blog.

Always Be Learning! Never Stop!

Yes, There Are Giants In The Land

As the Children of Israel were getting close to the Promised Land, Moses sent out an exploration and evaluation team consisting of twelve spies, one representative from each tribe, to explore Canaan. He wanted an intelligence report containing information on the soil, plant life, cities, and the current inhabitants of the land.

All twelve men came back with the same report. The land was exceedingly wealthy, flowing with milk and honey. They brought back a bunch of grapes that was so large it took two men to carry it, as well as samples of other high quality produce. However, they also saw large fortified cities and the giants who lived in those towns.

Two of the spies, Joshua and Caleb, thought that the Children of Israel would be well able to conquer the land. In fact, Caleb silenced the listening crowd when he said, "We should go up and take possession of the land, for we can certainly do it." Unfortunately, the other ten reported that the land was dangerous, that if they attacked, the land would devour the living. When describing the giants, they said, "We seemed like grasshoppers in our own eyes and we looked the same to them."

That night, after listening to the reports, the members of the community cried, wept, and complained. They were ready for a recall election to get rid of Moses and Aaron, so they could choose a new leader to take them back to slavery and Egypt, believing it a better option than dying in the wilderness, or getting annihilated by giants in Canaan.

So, there you have it.

At times in our life, we are called upon to choose to take on the role of a faith filled spy, a spy filled with doubt and fear, or just an innocent bystander who has to make a decision, "What report should I believe?" It isn't just about invasion planning. This story can find application in many of the important issues of life. Since this is a personal financial blog, consider any given economic situation. The facts can usually be sorted out from the speculations of the pundits. The interest rates, the gyrations of the stock market, the numbers of unemployed, housing sales, tax rates, and similar such information are the report of what was seen in the land.

Now what are you going to do with that information? Are you going to counsel others that, yes, there are some giants in that land, whoppin' big ones, and they live in strong fortified towers? I don't know about your city, but in my city, it seems that banks, insurance companies, and hospital systems own the largest, strongest fortifications. However, no matter what is happening, even during the worst day of the Great Depression, somebody was making money. Are you going to be like Caleb and say, "We can do it."

Or, are you going to report, "The little guy doesn't have a chance. The game is crooked. You can't find a decent job." In the glorious days after the end of World War II when the United States had the only industrial infrastructure that hadn't been bombed into rubble, there were losers, failures, and derelicts who had given up on life.

Most of time, you won't be one of the spies, someone who has actually seen the Promised Land of someone's successful marriage, a man with only a high school diploma, Bill Gates comes to mind, who is a wealthy businessman, or a formerly fat guy who just finished his third marathon, with your own eyes. You will just be one of the Children of Israel listening to the evening news or surfing the Internet out of boredom.

Be careful what you choose to believe. Be careful what words you choose to repeat. The ten men who spread a bad report were cut down by a plague and died before the Lord. The rest of the nation, excluding Joshua and Caleb, were condemned to continue wandering about in the wilderness for another forty years, until all of those who had seen the miracles performed by God on their behalf in Egypt and the desert, yet believed the bad report, were dead.

Of all those present, including Moses and Aaron, only the two, Joshua and Caleb, made it into the Promised Land. My prayer is that you will be one of those who makes it-to whatever financial freedom means to you.

The Ten Roads to Riches

I think I have read most of the personal finance books worth reading that can be found at our little local library. However, I am always on the lookout for anything new that comes through the door. When I found The Ten Roads to Riches written by Ken Fisher on the recent arrivals shelf, I gave it the once over. To tell the truth I was suspicious. Ken Fisher runs an investment service that is heavily advertised on TV and the Internet. I suspected it would be a thinly disguised sales pitch, but it looked interesting enough to make it home with me.

I was pleasantly surprised to discover it was actually a well written, humorous exploration of nine different ways to become seriously wealthy and one way to financial freedom that was unlikely to make you a member of the Forbes 400, but highly likely to allow you to live a comfortable retirement and leave a legacy to your children. The author includes not only stories about those who have succeeded, but tales of failure that ended up in bankruptcy court or jail.

"Don't you know that a man being rich is like a girl being pretty? You wouldn't marry a girl just because she's pretty, but my goodness, doesn't it help?"
Marilyn Monroe

Thus, the author begins his chapter on how to marry money. Not only is Cinderella looking for a well healed prince charming, but men, like John McCain and John Kerry, can play at that game as well as the gals. It turns out that in today's world, both men and women are calculating the financial condition of potential mates as an important component to increase the potential for future marital bliss. With a sometimes-wry sense of humor that can become a bit tongue in cheek, the author explores the complexity of state divorce laws and the importance of prenuptial agreements, especially in community property states. As in every chapter, the author supplies a short bibliography of recommended texts on the subject. From my knowledge of books that appear on these lists that I have actual read, the bibliographies alone are probably worth the price of a used copy of this book. He ends all his chapters with a brief guide summarizing the contents of that chapter. He begins The Guide to Marrying well with, "Jane Austen told us it is a truth universally acknowledged that a single man in possession of a good fortune must be in need of a wife." Then lists some must dos, like working (or playing) in places where you are most likely to come in contact with rich singles and don't do anything stupid that will land you on the short end of the stick in divorce court.

In the chapter on Inventing Income, using creativity to earn money, the author explores a number of topics, including one that is of interest to me, Writing for Dollars. As a writer, the author recommends choosing another vocation if you want to become wealthy. Even if you grab the brass ring and make the New York Times Bestseller List, as he did, you will not earn enough to become wealthy. His most successful book generated $400,000 in royalties, enough to fund a very comfortable lifestyle for a year or two, but hardly enough to become a billionaire. Taking two examples of spectacularly successful authors, Stephen King and JK Rowling, Fisher sadly concludes that unless your deathless prose can be converted into a two hour movie, it is unlikely you will ever earn enough at your craft to become rich. If you must write, Fisher suggests that you always think, lunch boxes and action figures. A cheap lunch box sells for $5.00. The same box painted with the images of Harry Potter and his magical world can go for $25.00. Every time one of these items is sold, JK gets to dip her beak. That, Fisher concludes is where one can find riches in writing.

The final chapter, The Road More Traveled, covers pretty much the same topics as this blog and a host of classic texts on the subject. Although, the author would recommend keeping a much higher percentage of my liquid net worth in stocks and mutual funds than the amount that would allow me to sleep soundly at night, but if you want to retire with a couple of million in the bank (no-at your broker or his investment service) this is an option that is available to many Americans.

His summary Guide to Saving and Investing:

1)Get a decent job paying a good wage
2) Figure out how much you want/need to achieve your goal
3) Calculate what you need to save each month
4) Now save
5) Make your money work

Of course, the chapter itself explores all these topics in detail that pretty easy to understand. Even when the math might seem a bit obscure to those who didn't have four years of math in high school, the author does a pretty good job of explaining what the formulas actually mean.

All in all, a fun entertaining book that contains enough nuggets of wisdom and paths for the curious to explore, to more than justify the time I spent reading it. I might even buy a copy-if I can get it cheap.

Because! There Will Be a Tomorrow

Not too long ago, I was pitching the Charitable Remainder Trust (CRT) to a close friend whom I thought might benefit from understanding such a tax avoidance option. In simple terms, the money in your 401(k) has never felt the icy breath of the tax man. The initial deposits from your paycheck, matching money from your employer, interest, dividends, and capital gains have all been growing in a tax free greenhouse. They will remain tax free until you begin to withdraw these funds. Then you will be taxed at whatever rate is appropriate, given your income in retirement. In my particular case, I don't intend to use these funds unless it becomes absolutely necessary. Instead, I plan on allowing the CRT that will contain these funds to start after my death. Then until my wife passes away, she will draw 5% per year from these funds. After her death, my heir will draw 5% per year for the next twenty years. Then all remaining funds, and there should be plenty in the CRT managers are even halfway prudent, will go, tax free, to the charities specified by me. In summary, I hope to leave my wife with an increase to the guaranteed portion of her income in my absence, plan for the retirement of someone from the next generation, and still be a blessing in this unhappy world, long after I have left it.

My friend chuckled, observing that I must know a lot about the future. I assured him that I didn't have a clue about the future, but it was my duty to prepare for the future to the best of my abilities, given the information that I currently possess. He bought that argument and the conversation passed on to other subjects.

Tomorrow will come, if not for you, for someone whom you love.

Which brings us to the wild gyrations of a stock market that lost over 10% of its value in a just a few days, then started climbing again as if that was nothing unusual. The market will go up. The market will go down. The problem is I don't know what is going to happen or when it is going to happen. If I knew these things, I would be placing a large bet on next year's Super Bowl, on the day when I knew I would be getting the best odds.

There are signs that have proven meaningful over more than a century, like the Shiller PE Ratio.

Current Shiller PE Ratio: 33.06 +0.01 (0.03%)

4:00 pm EST, Fri Feb 16
Mean: 16.83
Median: 16.15
Min: 4.78 (Dec 1920)
Max: 44.19 (Dec 1999)

Today, that historic index is in nosebleed territory, screaming that the market is overvalued. At the end of the day, buying shares in a company is nothing more than buying shares in an imaginary future. Will Coca Cola still be selling bottled sugar water or some other nonalcoholic beverages in tomorrow's thirsty world? Will they still be paying their shareholders a respectable dividend? Do you want a piece of that action? What are you willing to pay to play in that game?

What is different today? The world's central banks from the Federal Reserve, to the European Central Bank, to the People's Bank of China have been dumping unprecedented amounts of funny money into the world economy. All that money has to go somewhere, so why not the stock market and real estate? In London, there are whole neighborhoods of highly desirable houses that are mostly empty. They have been purchased by foreign syndicates and shell companies as an investment. Not many people who actually work in London could afford to live in one of these houses, so they sit there, unused, but going up in value. Insanity! But if you are an older Englishman who has owned and lived in one of these houses for a long time, you will be enjoying a luxurious retirement in the suburbs after you sell your home. One man mentioned in this report, traded his small apartment in London for a large farm in the countryside. He was an amoral stockbroker, who didn't much like the man he had become or the life he was living. Now, he earns his daily bread writing about the machinations of dubious characters who live and work in the London financial district.

Because we don't know what the future will hold, it is very important to have a contract with yourself. My contract tells me I should hold about half my money in shares of conservative dividend paying companies and low cost stock or hybrid mutual funds. I should never invest too much in any one company (5%?), or sector (15%?). I have been burned by holding too much in energy stocks when the price of oil took a nosedive. I have also learned that I should stay away from technology stocks, as I tend to fall in love with the technology, rather than the business plan and management of the company producing the technology.

If I am true to my contract, my net worth will increase slowly when the market is headed up, but when it goes down 40%, as it did in 2008, my net worth only drops 20%, and I will have free cash to buy undervalued shares, when everyone else is selling, terrified they will lose everything. This seems to be the best plan I can come up with for a couple still in the early years of retirement with our lifestyle, guaranteed income (pension and Social Security), and investments. Am I right? Who knows? I don't know what the future will hold, I can only make prudent, educated guesses based on the best information I can find.

The rest of it, like the life and death of your humble blogger, lies in the hands of God.

Schadenfreude

"Schadenfreude is the experience of pleasure, joy, or self-satisfaction that comes from learning of or witnessing the troubles, failures, or humiliation of another." (wiki)

Schadenfreude is an all too human failing, one that I believe contributes to failure in our own lives and in the lives of our friends and family members.

Who isn't going to laugh when Moe hits Curly in the back of the head with a dead fish? Slapstick is one of the two universal sources of comedy that appear in all cultures on earth from the jungles of Borneo to the caverns of Wall Street. The second widespread source of comedy would be the dirty joke. We are all human.

The more insidious form of schadenfreude has its roots in envy, one of the seven deadly sins. Because we covet every good thing our neighbor possesses, when our neighbor fails, it becomes a source of self-satisfaction.

I have found that achieving anything of lasting value is extremely difficult. On and off, over the course of a lifetime, I have pursued a variety of worthy goals like financial freedom, physical fitness, weight control, healthy personal relationships, and my spiritual path with varying degrees of effort and success. In chasing my dreams of becoming a better person, it seems that at best I take one step back for every two steps I take forward. In 2008, it was difficult watching years of savings disappear into a black hole of falling stock prices. My efforts at physical fitness? Well, sometimes, I just quit, for years. After I hit some kind of wall, morose self-pity can seem to be the most natural response. My efforts at controlling my diet are so pitifully small and sporadic that-I am not currently losing any weight. Am I God's man of faith and power? Don't ask my wife, she knows my shortcomings all too well.

When I can say, "Rise up and walk," on even a semi-regular basis, I will let you know.

What kind of people do you want surrounding you when you are working toward a better life, people who find pleasure in the failures and shortcomings of others, or people who comfort and encourage one another whether in times of success or in moments of difficulty and failure?

When I see someone, who has succeeded in building something wonderful, achieving a goal that is at least something I understand as difficult and praiseworthy, I try to remember, that in most cases, people are rewarded in public for thousands of hours of hard work performed in private. How on earth would it benefit me to gloat when such a person, who just like me wants a good life for himself and those he loves, stumbles or falls?

Even if that person is your real or imagined enemy there is a better way.

"You have heard that it was said, 'Love your neighbor and hate your enemy.' But I tell you, love your enemies and pray for those who persecute you, that you may be children of your Father in heaven."

"Muditā: means joy; especially sympathetic or vicarious joy…the pleasure that comes from delighting in other people's well-being…Mudita is a pure joy unadulterated by self-interest." (wiki)

Buddhism teaches that there are Four Sublime States, compassion, loving kindness, sympathetic joy, and equanimity. Of the four, many teachers believe that highest and most difficult to achieve would be living in the condition of finding pleasure in the success and well-being of others. Look into your own heart whenever you gloat over the sufferings of others-even if they deserve to suffer. What you will find there is dark and burns like fire. When you escape your own lusts and desires for even a moment, like when watching your child learn how to walk, what is there, deep in your heart? How does that feeling compare to rejoicing in the suffering and mistakes of others?

Which state of mind is more likely to be a blessing to yourself and others, as we all deal with the difficulties and setbacks of life in this material world?

One more warning, when you are tempted to indulge in schadenfreude, remember.

"Rejoice not when thine enemy falleth, and let not thine heart be glad when he stumbleth: Lest the LORD see it, and it displease him, and he turn away his wrath from him." (Proverbs 24:17-18)

Boom and Bust Explained

The economy is nothing more than the commercial interactions of everyone with everyone. The sum total of all these exchanges of value, forced or voluntary, creates consequences, both at the individual and global levels. Over time, you and I create the business cycle.

Conventional wisdom, tells us that during our working years, we should save somewhere between 10% and 15% of our pretax income for emergencies, a down payment on that first home, college educations for the kids, and retirement. There are reasons why this doesn't happen. Most of those reasons, that are a matter of individual choice, involve debt fueled consumption. Debt allows us to purchase more in the present moment without having the money in hand. Multiplied by millions, your Christmas credit card purchases are helping to fuel a boom already juiced by about $1 trillion of new Federal funny money that enters the economy every year.

The stock market is running wild. Unemployment is down. Happy days are here again.

For about thirty years, the national savings rate was somewhere near sanity, even during the wretched decade of the 1970s. During that unhappy time of high unemployment, stagflation, oil shocks, and disco music there were some years I was unable to save at anything near an acceptable rate, but at least I managed to stay out of debt when either my wife or I were unemployed. But, changes were happening in the national psyche. In my childhood, debt other than a mortgage, was a scarlet badge of shame. Try to remember, the first general purpose credit card that allowed the consumer to carry a monthly balance appeared in 1958. Today, debt is viewed as a rite of passage into becoming an adult. Over the course of 60 years we have bought into a lie taught to us by banks and corporations who sell us consumables and depreciating assets, like cars.

However, the time will come to pay the piper. At the individual level, first the consumer saves less than the recommended 10% to 15%. We have many excuses for what we know is unwise behavior. The money I borrow to get a degree in Italian Film Art is an investment that will guarantee my future in the movie industry. Everyone I know has an iPhone10, how can I be expected to live without a $1,000 cell phone that will be obsolete in a year. The cost of our house is more than 3 times our annual income, but it is an investment that will fund my retirement, not an expense. My neighbors all drive new BMWs and Subarus, how can I be seen in public driving a ten year old minivan? Hey, I'm only thirty years old, my salary will increase without pause forever.

I can save tomorrow, but we all know, tomorrow never comes.

Then the consumer will add their debt at a slower level, as their monthly payment burden increases. Finally, consumers are tapped out. They can't add any more debt fuel to the economy, so everything begins to slow down. Business close, layoffs happen, then the repo man comes in the early morning hours to seize your Subaru. Since I left home for work before 5:00 AM I saw the Jerr-Dan tow trucks prowling the neighborhood on more than one occasion. Finally, the foreclosure sign appears on your neighbor's abandoned home.

There are only three things that can be done with debt, public debt, commercial debt, or individual debt. The debt can be repaid. This is painful. The debtor is slave to the lender. I have seen too many young people strapped with student loans that will keep them in servitude to others for decades, before they can begin their lives as free adults. Owing more on a car than the car is worth, happens the moment you drive the thing off the lot. During the train wreck of 2006-2008 couples couldn't sell their underwater home in one city to find a job in a new city, because they didn't have the cash to cover the shortfall.

When the debt can't be repaid, the debtor defaults. It is good to remember that debt that can't be repaid won't be repaid. In a country that allows individual bankruptcy, the lenders go out of business. There is nothing like a widespread bank panic to really wreck an economy. This has happened many times throughout history. Although, I don't know when, it will happen again, count on it. At this point during a business cycle in places like Southeast Asia and India, the borrower can really become the slave of the lender. Do a Google search. Prepare to be horrified.

Finally, if you are fortunate enough to control the printing presses, you can inflate debt denominated in your currency out of existence. I am the proud possessor of a $100 trillion bill from Zimbabwe. When it was legal tender, that would have been enough to buy a stick of chewing gum. Now it is worthless, except as a teaching tool to people like me.

The problem with the last two options is that they generally lead to blood in the streets. Revolutions, civil wars, dirty wars in places like Argentina, and even a World War all had their roots in unpaid debt. Think about that the next time you don't pay off your credit card balance.

You Got to Walk that Lonesome Valley

You've got to walk that lonesome valley
Well you gotta go by yourself
Well there ain't nobody else gonna go there for you
You gotta go there by yourself

This morning, as is my custom, I was listening to a psychologist delivering a lecture on the elements of success, as I sipped my daily cup of coffee. For some reason, perhaps it was my frame of mind, it wasn't working, at least not for me. Losing interest, I began to surf the Internet in another window while the speaker droned on in the background. While looking at some other personal finance blogs, I was reminded that there are no silver bullets, no magic cures. Others can help your progress or hold you back, but ultimately no one, not your friends, neither personal finance gurus, nor politicians have the answers that will release you from accepting personal responsibility for how you choose to live your life.

There is a reason they call it personal finance. It's personal. You can't escape the money equation:

Money In = Money Stored + Money Spent

But how you chose to fill in those numbers over the course of a lifetime is up to you.

You get make the decisions and take the actions that will become your career. You can choose to follow the impossible dream, whatever the cost, you can make the "Great Compromise" that is finding the least objectionable way to earn what you and your wife consider an acceptable amount of money, or become an entrepreneur, striking out on your own quest to earn more money by becoming a greater blessing to your neighbor.

Once your basics are covered, how you spend your money is up to you. After all it is your money. If you want to live in a trailer park, so that you can dine at the finest restaurants in town, that is your business. If making a fashion statement with a pair of $600 shoes rings your chimes, go for it. If you want to give your surplus money away to charity or use it to benefit individuals in need, if you have it to spend, who or what organizations get your money is totally up to you. At this point, let me add that from my personal experience, you can give away more to help others than you are likely to think is prudent or possible.

Some people, like me, choose to place shares in conservative dividend paying companies and low cost index funds in their money stored column. Others prefer income generating rental properties. Some are not comfortable beyond insured savings accounts and Government bond funds. Some bury gold and silver coins in their basements, right under their stores of emergency freeze dried rations and boxes of shotgun shells. How you envision the future, will determine how you prepare for the future.

How you define financial freedom is your decision. It is likely that your definition will evolve over time. I would say, my first experience of financial freedom occurred the month I paid off my mortgage. Suddenly, I had an extra $1,000 to spend or invest-every month! It was exhilarating to be able to dramatically increase the amount of money going into investments and take my wife to places like Hawaii, Santa Fe, and Las Vegas.

I remember the day I understood, really understood, that I had reached my goal, financial freedom. During my annual performance evaluation held sometime back in September/October 2011, I told my boss it was clear that barring a major stock market meltdown, I would be gone by January 2013 when I would turn 62. I suggested that he start training some folks to replace me. Of course, I volunteered to help in this process. Then after the death of my mother in law in the spring of 2012, we inherited enough extra to kick us over the top. At the time, my employer was offering "buy-outs" to encourage old folks like me to take early retirement. In a meeting with my supervisor, I told him that for the first time in my life, I no longer had to work for a living. If he wanted to offer me the buy-out, I would take it. He was horrified at the possibility of that option, so I worked until the day after my 62nd birthday, as planned, since that would be the first day I could retire without penalty to my pension.

P.S. I had enough vacation time on the books to take off the last two months of my career with the Government. Roughly 47 years after taking my first job as a caddy at an exclusive nearby golf course, I reached one of my goals, financial freedom. My prayer is that you will achieve this goal in less than half that time.

The Eighteen Year Old Car

Last summer, I reported on a decision to put over $600 into the front end of our 2000 Nissan Altima GXE. At that time, I promised a future update, letting, you the reader, know how things worked out. Over the course of the last 13 months, I have also replaced the battery (less than $100) and the tires ($300). Today, the odometer reads 129,148.

To put things in perspective, I did a little research. The last time this car required maintenance beyond changing oil and filters occurred in September 2010. At that time the odometer read 92,852 miles. Back then, I replaced the brake pads, exhaust pipes, muffler, timing belt, transmission fluid, antifreeze, and probably some other items I don't remember, the typical 90,000 mile maintenance required by a modern Japanese car. In my mind, if I decide to keep it that long, our Nissan probably has 50,000 miles left in it.

Back in late September, we experienced a bit of a scare. At 5:45 on the morning before we were planning to leave for Florida, the car alarm went off while the unlocked car was sitting inside our garage. I could turn the alarm off with the key fob, but as soon as I turned it off, it would start up again. Finally, I solved the problem by disconnecting the car battery. I called my mechanic. He said the alarm was a part of the computer system and that he wouldn't touch it. He recommended a locksmith who specializes in car alarms. That gentleman sent me off on a series of phone calls that produced only two offers to look at my car at $70 per hour with no guarantee of anything, if and only I had it towed to their location. The Nissan dealer who helpfully told me that the events of the morning, as I reported them, were impossible, mentioned that sometimes the key fobs go bad. He suggested removing the battery from the key fob. This same advice was given by a locksmith who wouldn't go near my car. When I returned from Florida, I reconnected the car battery. Everything has worked perfectly ever since then. I don't know if doing away with the key fob solved the problem, or if disconnecting the car battery long enough for the capacitors to discharge, allowing the computer to reboot solved the problem, but the problem has been solved.

Of course, there is an emotional dimension to any money decision. Now that we are retired, I don't believe we need two cars. My wife is unwilling to become a one car family. That is fine by me. She is also attached to this particular car, feeling safe and comfortable behind the wheel. If the computer needed replacing, that would have been the end of our Nissan. I located a 2010 Acura TSX, the same car I drive, with half the miles for a reasonable price. I would have purchased that car to replace the Nissan, unless my wife wanted a new car. If she had wanted a new car, that would have not been a difficulty.

Today, everything on the Nissan works. It has a new battery and new tires. The body is in above average condition with only a few parking lot dings and a spot or two of rust down by the rocker panels. The interior has a few permanent stains, but all of the fabric is intact. I would expect to get $500 on trade in or maybe $1,000 to $1,500 in a private sale. The person who bought my car at that price would have a bargain that I expect would go at least two or three years without any major problems, but even though the mileage is low for an eighteen year old car, it is an eighteen year old car.

I bought our Altima new in November 1999. While not quite as good as my beloved 1996 Honda, it has proven a practical, reliable automobile for over eighteen years. I buy cars that are endorsed by publications like Consumer Report, believing that reliability is the most important factor when buying a car, assuming that its affordability allows you to pay cash.

Don't fall for the great middle class delusion. You don't have to carry a car note.

Here is how doing things differently, can help to change your life. Let's assume you keep one new car for twenty years or buy a couple of low mileage used cars over that same time period. Compare this to purchasing a new car every four or five years on credit. Given interest rates and the cost of depreciation, it would be easy to save $80,000 over twenty years. $80,000 divided by 20 years equals $4,000. That number, divided by 12 months in a year would allow you to put $333.33 a month into savings. For a reality check, note that the average monthly car payment is $479. Siegel's constant (6.5%-7.0% return on long term equity investments) tells us that if you placed $333.33 a month into a low cost index fund that returned 6.5%, compounded quarterly, that at the end of twenty years, you could expect to have an additional $163,999.83.

Now multiply that number by a second car.

Don't get me wrong, I love cars. Someday, when it is time to replace my Acura, I will be looking at cars like a Lexus GS 350 or a BMW 540i. It's your money. If you are taking care of your family and preparing for retirement, spend what remains on what gives you pleasure. As long as you are using cash, it is unlikely that the occasional splurge on luxury will cause you any problems. The danger is in using other people's money to indulge your appetite for consumables and depreciating assets.

Joseph in Egypt

The market has been on a hell of a run. The investment newsletters and the commercial media, focusing on the market's momentum, the promises of a better business climate from reduced regulation, a return to something approaching theoretical full employment, and the icing on the cake, the recent tax cut, can say nothing but, "Let the good times roll."

Perhaps, we should revisit the story of Joseph in Egypt.

Joseph, to be fair, something of a bratty little brother, his father's favorite, was sold into slavery by his siblings. They told dad a wild beast ate him. Down in Egypt Joseph was purchased by Potiphar, the captain of Pharaoh's guards. God blessed the captain and everything Joseph did until Potiphar's wife falsely accused him of rape. Joseph was thrown into prison. There he interpreted dreams for two of Pharaoh's servants who were not currently in their master's good graces. One of them lived to tell the tale to Pharaoh when the ruler had a bad dream about seven fat healthy cows and seven sick cows. Dragged out of prison to interpret the king's dream, Joseph prophesized seven prosperous years to be followed by seven years of drought and famine. He counseled Pharaoh to set aside as much surplus grain as possible to prepare for the bad years. As a result, Pharaoh was just about the only source of food to be had in the Middle East. By this time Joseph was the Chief Operating Officer of Egypt, Inc. He sold grain to other countries at exorbitant prices. Joseph also came up with the bright idea of supplying seed corn to Egyptian citizens in exchange for a 20% tax to be paid on everything they grew-forever. The tax was still in effect hundreds of years after the end of the famine. Listening to Joseph, made Pharaoh rich and Egypt rich. To be fair, it doesn't seem that Main Street benefitted quite as much as the palace in this story, but it does give one pause.

When the roller coaster is on the way up, put aside some of those profits for a rainy day or a dry year, depending on where you live. Maintain that age appropriate balance between stocks, bonds, and cash. Do not use an increase in your home equity as an opportunity to take out a second mortgage for a new SUV or a trip to the Bahamas. Every bull market will inevitably be followed by a bear. Unlike Joseph, I don't know when the crash is coming, but I know that it will come. Nobody has figured out how to keep the business cycle from turning. If you have liquidity, meaning cash available at the bottom of the bust, then you will be able to buy shares in profitable corporations and rental properties for pennies on the dollar. Those assets will then pay you income for the rest of your life, and hopefully, leave your family a legacy that could last for several generations.

There is another lesson to be learned from the story of Joseph in Egypt. Just as he dreamed when he was still a spoiled child, his starving brothers bowed down before him to beg for food when he was the master of Egypt. Joseph knew who they were, but they didn't recognize their supposedly deceased brother. After Joseph revealed who he was and forgave his brothers, he told them, "You intended to harm me, but God intended it all for good. He brought me to this position so I could save the lives of many people."

Twice in my life, after unfortunate and unfair setbacks, someone "spoke Joseph" into my life, "They meant evil against you, but God meant it for good." It wasn't obvious at the time, but in one case, it spurred me to earn an engineering degree, giving me an entirely new career. In the other instance, I was driven by circumstances to learn enough about investment basics that I was able to find both financial freedom and early retirement.

Never give up. Good luck? Bad luck? Sometimes, we just don't know.

Who is the Other?

A Zen master once asked his students the question, “Who is the other?”

As I have studied investment questions, I am beginning to come to the somewhat Buddhistic understanding that on at least on some level, criticism directed at our perceived enemy is often self criticism. To understand a problem or the actions of “the other,” I only need to look into a mirror.

This morning I read a politically charged column denouncing Pfizer for planning to use some of the additional profits excepted from the recent changes in the tax law for share buy-backs and an increase in the dividend, rather than using all of it to hire additional employees. The author also seemed annoyed the Pfizer was shifting its research budget away from Parkinson’s and Alzheimer’s to other areas. It was clear that the author was convinced that nothing but bad behavior could come from cutting the corporate tax rate, as leaving more money in corporate coffers simply gave bad people an additional opportunity to engage in wicked antisocial behavior.

Institutions own about 70% of Pfizer shares. That means if you are the beneficiary of a pension fund, or expect to become the beneficiary of a pension fund there is close to a 100% chance you own shares in Pfizer. If you own shares in a well-diversified, managed mutual fund there is close to a 100% chance you own Pfizer. If you own shares in an index fund that invests in large-cap American companies, there is a 100% chance you own shares in Pfizer.

As an individual share holder, the prudent manager of a pension fund, or a computer program that buys and sells shares of stock in order to maintain a desired model portfolio you are interested in having corporate managers who act with your interest in their hearts and minds. Currently Pfizer holds a AA credit rating while paying a 3.75% dividend. Compare this to a ten-year treasury note paying 2.5% with no possibility of capital gains, remembering that U.S. debt was downgraded to AA+ back in 2011. If you voted for Obama, or for that matter Bush in 2004, you share in responsibility for the creation of over $10 trillion in new money, out of thin air, by an increase in our national debt.

That money had to go somewhere.

In the current regulatory environment, financial engineering is often more profitable than actually producing real wealth in the material world, with products such as new drugs to combat Alzheimer’s or Parkinson’s. I suspect that Pfizer had no experimental Alzheimer’s or Parkinson’s drugs in its R&D pipeline that merited the further investment of either time or money, given that they are guaranteed a 3.75% return by simply buying shares in their own company. It also wouldn’t surprise me to hear one of Pfizer’s competitors proudly announce a major breakthrough in one of these areas sometime in the near future. Companies, as well as nation states, have been known to engage in espionage.

When it comes to the economy, we are all in this together. Every decision, every action, or reaction by everyone in the world contributes to the constantly changing ebb and flow of money. As we all try to pursue what we understand to be our rational self interest, buying, selling, working, contributing, or even engaging in criminal enterprises, the actions of everyone effect—everyone. Unless you are a hermit living in a treehouse somewhere completely off the grid, you are a part of that nonduality we call choose to call the economy.

As I believe that money is a spiritual commodity, I also believe that our individual actions, our use of our money and our time will have, if you will allow me to use the term, karmic consequences not only in this world, but in the world to come. I would like to suggest that the author of the article, look deeply into his own heart, before criticizing the actions of a company with a much better than average record of socially desirable behavior.

Voodoo Child

"I tell you the truth, if you had faith even as small as a mustard seed, you could say to this mountain, 'Move from here to there,' and it would move. Nothing would be impossible."

Baker Mayfield, this year’s Heisman Trophy winner, is too small to play quarterback. He wasn’t offered a scholarship at any top tier school, so, as a freshman, he walked on to the campus of the University of Oklahoma, his first choice, and took the starting job away from students who had been given full athletic scholarships.

Lord knows, he’s a voodoo child.

In an interview, a sports announcer stated that he had heard Mayfield started keeping a list of things people told him he couldn’t when he was in grade school. Mayfield acknowledged that he has such a list. He uses it for motivation. Nobody has the right to tell you what you can’t do. Nobody has the right to tell you about your limitations and weaknesses. Often people are inclined to make statements of this sort, especially in financial matters, because of the limitations they have chosen for their lives.

“A man's heart plans his way, But the LORD directs his steps.”

If you hang around conservative Christians, you will hear this proverb presented in a way that focuses on the Sovereignty of God and the limitations of man. Recently, I heard Wayne Cordeiro, the founding pastor of New Hope Christian Fellowship in Honolulu, Hawaii put a different spin on this aphorism. He believes, that plans and stepping belong to man and directing the steps of a man in motion belongs to God. He emphasizes individual responsibility, telling a leadership training class not to wait for instructions or a job description from the senior pastor, but to make a plan, and then, just do it. He assures his audience that once in motion, God will be faithful to direct your steps and correct your plans.

“Then he answered and spake unto me, saying, This is the word of the Lord unto Zerubbabel, saying, Not by might, nor by power, but by my spirit, saith the Lord of hosts. Who art thou, O great mountain? before Zerubbabel thou shalt become a plain: and he shall bring forth the headstone thereof with shoutings, crying, Grace, grace unto it.”

Zerubbabel was the leader of the first Jews to return to Jerusalem from the Babylonian captivity. For two years, he started rebuilding the temple of God. After completing the foundation, local tribes, Samaritan immigrants returning from Babylon, and a lack of financial support for the Persian empire stopped construction for seventeen years, a great mountain indeed. Then the Lord sent the prophet, Zechariah, to encourage Zerubbabel and his construction crew. The Second Temple was completed, dedicated, and once again Israel celebrated the Passover in the presence of God in his temple.

If my Christian readers will offer me a little literary freedom and grace, let me say, “Lord knows, he was a voodoo child.”

What can you accomplish, not only in this new year, but in the rest of your life? I don’t know. That is between you, God, and the people who love, support, and encourage you. Today, right now, pick out something that you want to do, something you believe you can do, then put on your shoes, open the door, and start walking.

Who knows how far you can travel before it is time to move on to the world to come. Maybe, at your funeral, one of your friends will shake her head and say, “Lord knows, he was a voodoo child.”

Well, I stand up next to a mountain
And I chop it down with the edge of my hand
Well, I stand up next to a mountain
Chop it down with the edge of my hand
Well, I pick up all the pieces and make an island
Might even raise just a little sand
'Cause I'm a voodoo child
Lord knows I'm a voodoo child
Jimi Hendrix

The Values Gap (Part III)

Thrift (noun) 1.the quality of using money and other resources carefully and not wastefully.

Thrift is a virtue, a value that can practiced by anyone. Not everyone has the ability to earn large sums of money. Even with a degree in engineering, I only managed to barely broach the top quintile late in my career. The Apostle Paul observed, “I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want.” I don’t know if I ever will discover the secret of being content in any and every situation, but with the exception of buying our first home, I have managed to live on less than I earned. That is my definition of thrift. If you practice this virtue with patience and perseverance over the course of a lifetime, it is highly probable that you will find financial freedom.

But, freedom is never free. We live in an immediate gratification society that constantly tells us we can have everything our minds can possibly desire without effort. We are told, credit is easy, without the Biblical reminder that the borrower is slave to the lender. As long as you are spending your money, chances are, you are going to be OK. It is when you start spending other people’s money that you are likely to get yourself into trouble. What are you willing to give up? Your mind is full of screaming little demons demanding that you fulfill their every desire regardless of the cost. When do you say, “No!”

How can you tell if one of your desires is in keeping with your highest values?

If your spending patterns are truly aligning with your highest values, it is likely that you are on the path to financial freedom. If you are working to satisfy the agendas of all the two year old brats living in your subconscious mind, you are on the road to a lifetime of financial slavery. How does that work out in 21st century America? Let’s consider a hypothetical two income family. Both husband and wife earn $30,000 a year, putting them right at the current median household income of, $57,617. Remembering that rules of thumb are rules that work thumb of the time, let’s, let’s apply a few financial rules of thumb to this couple.

Rule of Thumb: Your house should not cost more than 3 times your annual income. The median selling price of a home is $225,262. Strike one! Unless they are lucky enough to be living in a low cost area of the country, it looks like our hypothetical couple is house poor.

Rule of Thumb: Your car should not cost more than 1/3 of your annual income. Since they both have jobs, it is likely that we are looking at a two income family, so we shouldn’t expect them to buy a car that costs over $10,000. The average price for new car is $34,968, so they can forget about buying a new car. Given that the average cost of a used car is running at $19,227, the chances are good that our family is spending too much on a depreciating asset that only generates costs.

Rule of Thumb: If you graduate with student debt that exceeds your projected first year salary, you have too much student debt. The average student loan debt burden for a 2016 graduate would be $37,172. Strike three! You’re out!

No one is asking you to wear a loin cloth and live in a cave, just spend less than you earn. If you value gourmet meals, go ahead, drop $250 on a steak and a bottle of wine. If you want to shoot targets in your spare time, a CZ-75 can be found for less than $1,000. If you want a BMW 540I, it will likely run you somewhere around $65,000. If you have the cash and it won’t damage your higher values, like feeding your family, providing for your retirement, or sending your kids to the college of their choice, go ahead, you’ve earned it.

This brings us back to the 80/10/10 rule, a simple rule of thumb for budgeting your income. Live on 80% of your income. Give 10% to the charities that line up with your highest values, the ones that you believe will follow you into eternity. Put 10% in savings. What that last number will mean is that, sooner or later, you will have enough in savings to buy assets that generate income. As those assets begin to pile up the income that they generate will buy more assets that generate income. You have now have the miracle of compound interest working for you instead of working for another person’s financial freedom.

Before you make that next purchase, that next financial decision that could possibly be at a crossroad in your life, stop, look at what you are about to do, and above all take the time to listen to your heart. If you do this on a regular basis, with patience and perseverance, over the course of a lifetime, I believe you will find your way to financial freedom.

The Values Gap (Part II)

The Zen master, Thich Nhat Hanh once observed that anyone wanting to understand the Buddhist concept of the Hungry Ghost need only visit Las Vegas. The Hungry Ghosts are souls tortured in a specific hell realm for particularly evil deeds driven by desire, greed, anger, or ignorance. Hungry Ghosts are pictured as having gigantic bloated stomachs with necks that are too thin to swallow food. Attempting to eat is extremely painful, as is the insatiable desire to feed a hunger that can never be appeased.

Steve Wynn, the owner of several hotel casinos in Las Vegas and Macau, the new Chinese Las Vegas, revolutionized the business. Before Wynn started building large spectacularly luxurious casinos, most of the hotels in Vegas were little more than glorified motels attached to casinos, show rooms, and famously inexpensive restaurants. Everything was subsidized to bring players into the casino. Gambling paid for the hotel, restaurants, and the shows. Wynn changed the rules. He decided that every aspect of the business should generate a profit. He built hotels that were an order of magnitude more expensive than anything seen before. He charged an appropriate price for that kind of room. The occupancy rate for this new kind of hotel proved that Wynn’s business model was sound. No more free food! Wynn opened world class restaurants with world class prices. They made money. He once observed, “There are people who rather have a bottle of wine than $1,000 in their pocket. I want to be certain that I am the one who provides that special bottle of wine to my customer.” Steve Wynn correctly guessed that people are willing to pay—a lot—for the things they really value whether that would be the adrenalin rush of high stakes roulette or the gourmet who wants to eat a meal prepared by a celebrity chef in a five star restaurant.

The reality TV show, Pawn Stars is set in Las Vegas. The owners of the pawn shop are willing to buy anything that they can resell for a profit. The entertainment value comes from watching people try to sell their prize possessions, guessing the value (if any) of bizarre items like a WWII hand grenade signed by general George Patton (OK, I made that one up). An expert is consulted to authenticate the signature and the bomb. If it is the real deal, the owner and the pawn broker argue over the price until an agreement is reached, or the disappointed seller walks sadly away from the store. The visitors always tell the camera why they are willing to part with their treasure. The reason given tells a lot about the values of the seller. Since this is Las Vegas, many of the Pawn Stars customers are raising money for the slots, the opportunity to take their wife to an expensive restaurant, or upgrade their hotel room. Others are raising money for their wedding or their grandchildren’s college educations. Some are collectors, selling one antique firearm to get the money to buy the next antique firearm. They are making enough money to feed their habit without infuriating the wife. The owners of the pawn shop value money. Typically, they are looking for 100% profit before taxes and overhead. If it is something they know they can flip with a phone call to an existing customer, they will take less, as they understand the time value of money.

This morning, I listened to another video explaining that almost half of American families could not cover a $400 emergency without hitting the credit card or selling something of value. The author, who lives in one of the most expensive zip codes in America, admits that frequently he is one of those Americans, even though he has earned significant amounts of money. He values an address in the Hamptons and expensive private schools for his daughters more than he values $400 in the bank. I simply can’t understand people who can live without any contingency plans. When I was earning little more than minimum wage bagging cloth in a textile mill, I would volunteer to work overtime to make certain I had money in the bank. I was willing to scrimp on food, drive an aging rust bucket, and share a small apartment with a roommate, but if my bank balance dropped below $1,000 (which it did) I took immediate, radical action to rectify the situation.

It’s all a question of your values. If you value getting high, you will be willing to risk your freedom or even your life to satisfy that desire. If you value your child’s education, you will live in a small house, drive old cars, or take a part time job to cover the tuition to the best private school in town. If you show me your credit card records and your checkbook register, I will have a pretty clear picture of what you really value.

But America is Las Vegas.

I once heard Doyle Brunson, a superstar poker player, interviewed on the radio. He told the hosts of the show that while he had earned millions at the poker table he lost it all gambling on sporting events. In a voice that was both sad and wise, he assured the audience that no matter what your weakness, whether it was alcohol, drugs, gambling, or women, Las Vegas would take you down. Where else in the world would you find a luxury car dealership in or right next to a hotel?

The Values Gap

Recently, I have been listening to Ray Dalio, creator of the world’s largest hedge fund, opine about lessons he has learned from life, investment strategies, and our current economic situation. He believes that our economic stability faces two major threats the wealth gap and a values gap. The wealth gap has been discussed endlessly over the last ten years. Basically, the current economy works well for the top 20%, but not so well for the bottom 40%. In addition, the middle is being squeezed out of existence by the deindustrialization of America, free trade, and other macroeconomic forces that are beyond the control of any single individual. My ears perked up when I heard the term, “values gap.” How was he going to define that term? I couldn’t imagine a deeply analytical investment cyborg, like Ray Dalio, launching into a Dave Ramsey rant about debt, thrift, and hard work. He went on to explain that 50 years ago, almost all Americans basically shared the same Judeo-Christian understanding of morality. Today, as in the book of Judges when Israel had no king, all the people are doing what seems right in their own eyes. Dalio believes that a culture that is so deeply divided on a fundamental understanding of good and evil will be fundamentally—unstable.

While I understand and agree with Dalio’s “values gap,” there is another values gap at work in the economy that correlates strongly with individual outcome. Our personal financial values drive our behaviors. Our behaviors become habits. Our habits eventually define the outcome of our lives. Of course, there are exceptions. Winos win the lottery. Hardworking honest families can be wiped out by war, illness, or even by something like a factory closing. We live in what is basically, a cause and effect universe that has been corrupted by the fall. Given there are limits to free will, the question becomes, what kind of values based actions that are within the control of an individual can lead to financial freedom?

Family is most fundamental value that leads to financial freedom. The dice are loaded against a child born into a single parent home. A Stanford study discovered that children from single parent homes are 5 times more likely to grow up in poverty than children with intact families featuring both a father and a mother. The absence of a father also correlates with drug addiction, teenaged pregnancy, and criminal behavior. Beyond the nuclear family, our culture has forgotten about the importance of the extended family. Although grandparents are still sources of high quality, free day care, it is unusual for multiple generations to live in the same house or work in the same business. There are exceptions to this rule. Asian immigrant families frequently live in multi-generational households. One of the main reasons Asian unemployment tracks below that of other ethnic groups are family owned businesses. When junior losses his job that required a college degree, he can always come back to work at his parents’ convenience store until the economy turns. Strong family connections are one of the reasons I have seen first generation Asian immigrants move from poverty to the upper middle class in less than a generation. There are some groups that have a history of extending the definition of family to those who share their belief system. Mormons are well known for supporting church members who have fallen on hard times, not only by bringing over a casserole when the news hits the church email chain, but by providing them with employment in some business owned by a fellow member of the Church of Latter Day Saints. Jewish Americans refer their customers to other businessmen in their community. I guess that any group that has faced so much persecution understands the concept of, “We are all in this together.” Would that all churches understand the importance of supporting one another’s financial wellbeing as well as worrying about correcting our brother’s understanding of theological minutiae.

I am privileged to know a young man who is always hustling work, no matter what the current economic condition. If he cannot find work he invents it. As far as I know he has walked dogs, been a house sitter, worked, installed, and maintained sound boards for various organizations and events, installed car stereos, and even driven my wife’s car to our new home in SC. A killer work ethic is almost enough all by itself to raise someone out of poverty. I am frequently amazed at the number of ways excellence can find to generate wealth. Yesterday, I watched a reality TV show about a man who makes his living rebuilding and flipping cars. In this particular episode, he paid the best car detailer in his city $3,500 to clean a 1938 Aston Martin that had been sitting in a barn for over forty years. That was all it needed to net the car guy a handsome profit. Imagine paying someone $50.00 an hour to wash your car and believing that the price was a bargain.

Solomon observed, “Do you see someone skilled in their work? They will serve before kings; they will not serve before officials of low rank.” Traditionally, this trait has been called the Protestant Work Ethic. It includes the ability to defer gratification, a critical component in staying out of debt and finding your way to financial freedom. Now the name of this value is changing to the Confucian work ethic. Asian American have highest median household income of any racial group in our country. They are simply outworking other Americans.

Although I left the workforce for a few years to get an engineering degree, my work life has been limited because I never really learned how to take a calculated risk. There is a very famous story about the owner of the largest chain of truck junkyards in the Southern United States. After graduation with a MBA, he found employment in a fast track program for young executives with a major manufacturing company. His first assignment was at a dealership. There was a wrecked truck in the dealership’s lot. His boss told him to sell it to a local junkyard. He received $600 for the truck. Two weeks later his boss sent him to the same junkyard to buy a used part to repair a similar truck. The junkman went to the same truck sold to him two weeks earlier, removed the part, and sold it to the young man for (you guessed it) $600. The young man found the love of his life. After buying his first wrecked truck for $2,000 he quit his job and never looked back. I was raised and trained to be a cog in a great corporate or governmental machine. I never learned how to take the kind of risks that make a successful entrepreneur. I think in the future, this skill will become more and more valuable.

Education is no longer a guarantee of a good job, but the love of and respect for education and educators seems to be a common thread in the lives of people who are generally employed. I won’t waste your time with stories about overeducated failures I have met. I am sure you have seen plenty of these unfortunate stories in your life. However, communities that traditionally placed a high value on education (Jewish and Asian come to mind) have lower unemployment rates than the general population.

Keith Cameron Smith discovered one of the significant differences between the rich and the poor is their sense of time. We all plan, but our timescales are different. Smith makes the following observations concerning different groups.

“The very poor think day to day.” At the extreme end of the scale drug addicts have a time horizon limited to the distance to the next fix, but many of the world’s poor are forced by circumstance to think on a day to day basis. If they are unable to obtain food today, they will die. Making it to sundown is an accomplishment in this world.

“Poor people think week to week.” I have seen this in the factories of South Carolina during the 1970s, people literally living paycheck to paycheck. If they had money they spent it, sometimes irresponsibly and extravagantly. The idea of deferred gratification only appeared when Christmas was drawing near. Starting sometime around November 1 everyone, especially the moms, wanted overtime. Their time horizon jumped from a week to a couple of months.

“The middle class thinks month to month.” Smith believes the middle class focus is on comfort. What can they buy today to make their life comfortable? If they think they can make the monthly payments, “It’s all good, bruda.”

“The rich think year to year.” Smith believes one of the key strengths of the rich is an ability to defer gratification in order to achieve freedom. This long term thinking gives them an edge over time.

“The very rich (like Ray Dalio) think decade to decade.”

Sometimes, one wise decision is all that it takes to escape poverty. If you live in sinkhole of poverty in rural West Virginia, moving over the mountains to a city with jobs can change a life in a few hours. Sometimes, a single minded commitment to changing your family tree can move a man, like my grandfather, from extreme poverty to more than enough wealth to provide all his children with their own farms. He achieved this goal over the course of a couple of decades. The math, as well as numerous examples, demonstrate that a two income family can reasonably expect to achieve millionaire status over the course of a working lifetime. Holding the right financial values and acting upon them can change not only the destiny of an individual or a family, but an entire nation. Ray Dalio notes that in a single generation, Lee Kuan Yew turned Singapore from an impoverished city with serious drug and crime problems into one of the Asian Tigers, a center of global commerce, finance, and transportation, known as the most technologically ready country in the world. All of these considerable achievements required some combination of a stable family, a strong work ethic, the ability to take a calculated risk, a love of and respect for education, and a willingness to change your sense of time.

Look around, then ask yourself the questions, “What is working? What doesn’t work?” Sometimes, you might find the answers surprisingly obvious and simple.

Cash, Cash, and Near Cash

Cash is trash. Cash is king. Which of these two common statements are correct? What do they mean? What is cash? How much do we really need?

Holding cash is a liability in the current environment. Government policy guarantees that the cash you hold today will lose its value over time. Economists are pleased to call this phenomenon, inflation. Politicians call it, monetizing the debt. I call it theft. Cash (money) is a spiritual commodity. Gold, paper, or bitcoin, it only has value because buyer, seller, and holder all believe it has worth both as a medium for exchange and a store of value. To intentionally debase a currency is at best theft. At worst, it is sin.

There is nothing more fungible than cash. It can be transformed into a mutually accepted amount of just about anything. If you want to buy from the corner drug dealer, you better bring cash. When the bottom falls out of the market, those who have cash reserves can buy the future profits of great corporations for pennies on the dollar. Those who do not have cash, sell to those who do have cash at the very time when they should be buying everything in sight. Closer to the life of the average American, cash means that a flat tire or a trip to the dentist won’t result in a credit card bill that will hang around for 36 months at a 12% to 20% interest rate.

The most basic form of cash—is—cash, greenbacks, federal reserve notes, pieces of paper featuring the portraits of dead noteworthy (a joke) Americans. I think just about everyone should have at least $20.00 or so in their wallet and some change in their purse or pocket. Using plastic for fast food, vending machines, and things like football pools and office charity drives seems silly or downright impossible. Beyond what is called, “walkin’ around money,” I think it wise to have a few hundred dollars hidden in a drawer or a closet somewhere in the house, both as a convenient in-home ATM and for contingencies, like pizza delivery or a neighborhood handyman who works on a cash only basis.

The next form of cash, is found in checking accounts, money market funds, and the old fashioned FDIC insured savings account. Conventional wisdom dictates that a family should have 3 to 6 months’ worth of expenses in an emergency fund that can be tapped more or less immediately, but isn’t too easy to grab when handling “emergencies” like the afore mentioned pizza delivery man. Sometime following the crash of 2006-2008, Suze Orman bumped her recommendation to 8 months reserve, due to the dramatic increase in the length of time required to find a new job during what has come to be known as the Great Recession. To me, three months seems like a high priority goal. Six months is desirable, but reaching that goal can be discouraging for a young family when there are so many competing needs for money.

The use of a little common sense can help. If you have ten years of seniority in a government job, you might focus more on paying down your student loans and less on building your reserves past the six month level. If they just eliminated all overtime and shut down the night shift at your factory, you might want to buckle down on building that emergency fund and start filling out some job applications.

Retirement is a little different. Hopefully, your Social Security, and an inflation adjusted four percent per year draw from a lifetime of savings is providing you with a comfortable lifestyle. How much of that nest egg should be in cash? While there doesn’t seem to be any general agreement among the “experts,” I have seen the number, two years’ expenses in cash, bandied about. I think that sounds about right. Two years’ in cash or maybe something like 10% of your net worth sounds good to me. Remember, you are no longer receiving a regular paycheck. You don’t want to “need the market,” meaning you don’t want to be forced to sell when the market crashes. In fact, you want to be able to buy at the bottom. If you are retired and have investments, even a 401(k) that only offers a handful of mutual funds, you want to be able to shift your holdings to undervalued assets when the opportunity presents itself.

Finally, a word about “near cash” assets. These are investment vehicles like Certificates of Deposit, Treasury Notes, and bond funds, such as my Ginnie Maes that are “full faith and credit” guaranteed by you, the American tax payer. These assets go up and down—a little bit—with changes in the prevailing interest rates, but they are highly liquid, meaning they can be converted to cash in your money market fund in a day or less with only the possibility of minimal loss. It is very handy to have a goodly percentage of your net worth in such boring assets when facing a major stock market crash, something that happens every twelve years or so.

Ask the Rabbi

“The story is told of Zusha, the great Chassidic master, who lay crying on his deathbed. His students asked him, "Rebbe, why are you so sad? After all the mitzvahs and good deeds you have done, you will surely get a great reward in heaven!"
"I'm afraid!" said Zusha. "Because when I get to heaven, I know God's not going to ask me 'Why weren't you more like Moses?' or 'Why weren't you more like King David?' But I'm afraid that God will ask 'Zusha, why weren't you more like Zusha?' And then what will I say?!"
Quoted from the Ask the Rabbi website

Somewhere on the inside, you have a pretty good picture of what you are and who you want to become. All by itself, how you handle money would be an important part of that picture, but money is funny stuff. How you earn it and how you handle what passes through your hands are inextricably intertwined with who you will become, in this world and in eternity.

We all want financial freedom, the point at which money is no longer a concern that consumes an unhealthy amount of our time and emotional energy. As the French say, “Money makes a good servant, but a bad master.” Rich or poor, money can be your servant or your master. The tests you will face are different on every unique rung on the ladder of your life.

How you define financial freedom is a reflection of your experiences, your unique God given ability, and the meaning that you choose to inculcate into that mixture we call life.

Is your behavior congruent with your vision of yourself? In retirement, I have chosen to spend more time and energy on my health than I did during my working years. The desired image of my physical self has changed over the last five years. Is eating another fast food grease bomb for breakfast or drinking my mandatory evening beer congruent with that new vision of myself?

Apply that kind of reasoning whenever you are faced with choice concerning your money. If you want to become a hedge fund manager who can write a $100 million check to endow a university hospital with a new research facility, how will you live your life—today. Carl Icahn started life as a kid in a tough working class neighborhood. To hear him tell the story, half of his boyhood friends ended up in reform school, but that wasn’t the end of the story. Icahn managed to put himself through Princeton with proceeds from playing poker with the members of a club where he had a part time job, pretty good training for his future life on Wall Street.

That isn’t your dream? OK. How would a successful businessman who wants to run a small, off the grid, organic farm chose to bless his neighbors and the world?

It isn’t about what you have. It’s about how you use what you have.

In the parable of the shrewd manager, Jesus observes, “Whoever is faithful with very little will also be faithful with much, and whoever is dishonest with very little will also be dishonest with much.”

Then he asks, “If then, you have not been faithful with worldly wealth, who will entrust you with true riches? And if you have not been faithful with the belongings of another, who will give you belongings of your own?”

Maybe, today you will face a decision point that will help define your future. Do I loan that friend enough money to help with the power bill? Not an easy question. Why can’t your friend cover his power bill? Would it be better to offer him a job, if that is in your power? When would it be correct to just say no?

This job or that job? Which career path is congruent with my vision of myself? Perhaps, becoming a husband who is willing to lay down his life for his family is more important than reaching self actualization as an artist. Perhaps in laying down his life for his family, he will reach a higher level, both in this world and the world to come than he could dream would be possible.

It’s your life. Large or small, you have been given a canvas, some brushes, and a selection of different colors. What you choose to paint, well that is your decision.

Hebrews 12:11

“No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness and peace for those who have been trained by it.”

Yesterday morning, I over did it. From time to time, I press my luck with the weight machines or distance on the trail. Sometimes I pay the price with sore muscles and joints for a day or two. I once heard a preacher say that he wished he could become physically fit by hiring a high school student at minimum wage to perform his exercises. This morning, I think that is an excellent idea.

Unfortunately, the world doesn’t work that way. Even if you hire a personal trainer or a financial advisor, you are the only one who can find financial freedom for yourself. It is primarily your effort and decisions that will ultimately create the outcome of your life. Dave Ramsey is fond of comparing our financial journey to a small boy riding a one speed bicycle up a long hill. Sometimes, he has to ride at an angle, back and forth across the street, because the hill is too steep for a direct frontal assault. Sometimes, he just has to get off the bike and walk it up the hill. If he persists, the time will come when he can coast down the hill, enjoying the fruits of his labor. This is a pretty good analogy, but the reality is both better and worse than the story. With a little luck, your one speed bicycle will someday become a motorcycle that generates its own fuel. If you try to ride down the hill, before starting up the hill, student loans, car notes, and credit cards will condemn you to years of debt slavery before you can break even.

Not everyone is born with the body of a Michael Jordan, but nobody, whatever their talent level outworked Michael Jordan, a man who said, “If you do the work, you get rewarded. There are no shortcuts in life.”

I remember listening to the story of a retired man who once worked in the same textile mill where I started my career. He never earned that much more than minimum wage, but he provided for his family, supported himself and his wife in retirement, and left a small legacy to his children. My own grandfather, a dustbowl farmer that just barely held on to his land during the depression, managed to leave a farm without a mortgage to each of his four children before his death. You don’t need the brain of a Warren Buffet to find financial freedom.

Money is funny stuff. Even if you are storing your money in Mason Jars and burying them in the Wooly Swamp, it is increasing or decreasing in value. Inflation, deflation, dividends, and interest are constantly changing the value of your stash. Albert Einstein stated that compound interest was the strongest force in the universe. While I expect this oft quoted statement was delivered with tongue firmly in cheek, nuclear fission and financial freedom both require a critical mass, enough money or fissionable material to produce a self-sustaining reaction.

“A critical mass is the smallest amount of fissile material needed for a sustained nuclear chain reaction. The critical mass of a fissionable material depends upon its nuclear properties (specifically, the nuclear fission cross-section), its density, its shape, its enrichment, its purity, its temperature, and its surroundings. The concept is important in nuclear weapon design.” Wiki

Like money, the nature of a nuclear reaction is defined by equations. Unfortunately, it is hard to quantify the effects of irrational human behavior on the price of objects of value until after the fact.

Even given our inability to predict the future of the economy,

Money In = Money Stored + Money Out

Mastering that equation is the work of a lifetime, but unlike physical exercise, the benefits of years of financial discipline won’t end with your death. The wise use of your money can not only provide blessings for yourself, your family, and others while you are alive, but those funds can continue to be a source of blessing for generations yet unborn.