Archive for Danielle

Read more, spend less: financial planning lessons from novels

The No. 1 Ladies' Detective Agency (TV series)

The No. 1 Ladies’ Detective Agency (Photo credit: Wikipedia)

That would be one of my many, many New Year’s resolutions. But I already read tons of professional journals, work-related books, and general non-fiction. Like so many people since November, I need a little happy talk to counteract the general mood. So lately I’ve been popping a series of mystery books instead of OxyContin. I might add that these are all available from my local library as free ebooks, so I haven’t violated the second half of the resolution.

But, I guess everything looks to me like financial planning. If you want to have some fun while getting a very small dose of good financial decision making, I strongly suggest taking a look at the book series The No. 1 Ladies Detective Agency. Before I get into the books, let me say that the brief TV series of the same name was delightful, but the books are somewhat a different experience. The financial insights are a little more prominent in the books because, like all good novels, we get to roam around inside the characters’ heads.

I’ve popped 4 of these delightful happiness pills since Christmas, at the rate of about ½ hour invested per night—so you can see this isn’t going to take much time and you’ll be able to sleep nights.

The first book in the series is titled, not surprisingly, The No. 1 Ladies Detective Agency. Briefly, the books are set in Botswana, and are highly descriptive of the physical setting and culture. N.B. I have no idea whether it’s an accurate description of the real-world Botswana, but it seems like a near-Eden, albeit with cobras, scorpions, and mambas. (The tone of the thing reminds me a lot of the movie Mathilda—realistic, but it’s indeterminable whether it’s actually real).The protagonist is Mma Ramotswe, an extremely practical and sweet-natured 30-something with a “traditional” build (love it!)

What I am so struck by, looking through the lens of a financial planner, is how absolutely down-to-earth is Mma Ramotswe’s decision making process. To whit, her adored father dies and leaves her—more than 100 cattle. Maybe not the inheritance most of us hope for, but in Botswana cattle appear to be extremely beloved and are the best evidence of wealth.

However, unlike some people I see who seem to view their inheritance as sacred (yes, you CAN sell grandpa’s municipal bonds and stock in what, 30 years ago, was a good company), Mma Ramotswe has an immediate plan to use her inheritance to do what’s right for her, not her father. She views the inheritance as an expression of the love her father had for her, not a specific legacy that must be enshrined. She sells the cattle.

With the proceeds, she buys a nice but modest house (at one point she decides to wear bedroom slippers after stepping on a scorpion in the middle of the night) and set herself up in business—which is something she has thought through pretty carefully when she is faced with needing to be an independent woman outside the traditional role of caring for a family.

What’s perhaps more notable is what she doesn’t do: no extravagant vacation, spending spree of any kind, no dramatic upgrading of her life style. She invests in herself. Mma Ramotswe appears to be quite content with a very modest level of possessions: her prizes are a picture of her father, a commemorative plate of the founder of modern Botswana, a teacup with Queen Elizabeth II’s picture on it. What is so moving is that these possessions actually mean something to her, and she looks at them every day—constructing a home environment with objects that carry meaning for her, not something professionally decorated for the benefit of impressing others. She chooses furnishings that will make her comfortable. In a later book, another character comments on how delightful it is to have a rug underfoot—so soft and grass-like, instead of a concrete or beaten dirt floor. Would that ever occur to any of us?

Mma Ramotswe spends her evenings sitting on her porch, listening to night sounds, and talking to people. Again—no cost at all (except for tea). What would our lives be like if we did this? Would we be better connected? Would we be closer to our families and neighbors? Would we be bored out of our gourds? The relative silence allows her the pleasure of her own thoughts, a sensuous enjoyment of the natural world, and a connection with family that endures.

What I admire here is just how well Mma Ramotswe has decided to use her windfall to secure the (modest) life she wants, set her up for independence, and find contentment in a very frugal lifestyle, salient characteristics I see in people who (even with our more complicated lifestyles) manage to quietly amass a secure financial foundation. And is any life really more complicated than any other, except by our choices? More in subsequent posts about the other books I’ve so far read (all with financial lessons)…

 

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Giving to charity: doing the best you can

By now, your mailboxes (IRL and virtual) are probably crammed with year-end catalogs and heart-rending appeals for donations. But just as with spending, we want to maximize the use of our hard-earned dollars when we make charitable donations.

As I’ve suggested before, it’s worth checking out any potential charity with Guidestar.org and Charity Navigator. These ratings groups aren’t infallible, but they can give you some idea of how well your money will be spent. There are lots of well-known charities whose funds seem to go mainly to publicity and their CEO’s salary. Really, look up a few that come to mind—you’ll be shocked. And just because the charity says they focus on minorities, or women, or autism, or your favorite religious orientation doesn’t mean they’re good stewards. As Harry Truman once said, when anyone prayed too loud in the Amen corner, you’d better go home and lock your smokehouse.

Many of us are considering directing more of our charitable contributions to advocacy organizations this year and going forward.  However desirable and necessary such donations are, they may not be tax-deductible. For example, donations to the American Civil Liberties Union are not tax deductible, although donations to their information and education arm, the ACLU Foundation, are. Another organization that interests me greatly, the National Lawyers Guild (motto: Human Rights Over Property Interests) is also an advocacy organization, and donations are not deductible except to their foundation. However, the Southern Poverty Law Center, which constitutes its mission as fighting hate through education, is a tax-deductible charity organization. You want to look for the term ” 501 (c) 3″ if you’re looking for the tax deduction.  Of course, if you care passionately about current issues, you may not feel the tax deductibility of your gift is the most important factor, or you can allocate some portion to advocacy and the rest to educational or service delivery organizations.

Most of us have a tendency to give small amounts to any request that crosses our paths. However, I’d encourage you to consider a more planned approach. Giving larger amounts to fewer charities actually helps them: it saves on fundraising, processing, and other administrative costs.  Consider where your priorities lie or where you believe there is the most need: rights advocacy (disability, women’s, ethnic & racial groups); international poverty; animal rescue; anti-violence; gun control; legal change are all areas to consider.  While you’re at it, try not to use a credit card until you determine if the charity will be charged the fee for use by that card company (some don’t charge charities, some do).

As with any money management, there will always be more demand than funds available, so do think about your priorities. Many of these organizations will be particularly embattled or short of funds under the next administration, so need for your thoughtful contributions can only grow.

The Affordable Care Act and an alternate future

I’m one of those people who had a policy I liked, and I’ve been able to keep it. Sounds great? Not so fast. Look how lack of regulation has affected the premiums I pay per month:

Year Beginning of year End of year (September increase)
2011 $360.87
2012 $405.32 $437.77
2013 $507.67 $559.99
2014 $588.72 $641.04
2015 $845.35
2016 $934.50 $1,180.95
2017 (notified of increase) $1,669.87

 

I cover my daughter and myself, with a $3,500 per year family deductible, a 100% coverage (no co-pay) after the deductible is met, and the plan is Health Savings Account compliant. Nothing being offered to me via HealthCare.gov is even close—all have co-pays and out of pocket maximums that would double my paid out amount because my daughter has a chronic illness where medications and doctor visits total more than $1,000 per month. No matter the plan, we’ll meet the deductible and out of pocket maximums every year.  None of the ACA plans include the three doctors nor the hospital we most frequently use, and the “best” of them equal or exceed our highest monthly cost.

Yes, it’s dismal. I was and remain a supporter of the Affordable Care Act, because so many friends, family, and clients couldn’t have gotten insurance except in a high risk (and high cost) pool before the ACA, due to pre-existing conditions. In fact, I’ve heard more than one story about people staying legally separated but not divorced, so that a spouse could continue health coverage pre-ACA. But without universal participation in health coverage, rates are exploding. Why?

  • Many more sick people are now getting health issues addressed. This has been a bonanza for hospitals, who can now actually get paid, but a drag on insurance companies who now have to cover these people and payments
  • If you have a non-ACA policy that you’ve had for a long time, you’re aging, and you’re likely keeping it because it covers more than the ACA policies, ergo you’re costing the company more
  • There are no breaks on costs—it’s a “free” market after all.
  • Many doctors are exiting acceptance of ACA insurance. These are doctors who want to be able to bill at an even higher rate, and do. Many are choosing to be completely out-of-network, which means the consumer will bear all the higher costs, making the insurance supplementary rather than full coverage.

 

Actually, I think my premiums are a pretty good representation of what we’ll see if we lose the ACA rather than improve it—after all, these premiums are from the unregulated segment of the market. We’re in a horrible mess, particularly in Illinois. I laugh when I hear that vouchers are the solution. My prediction is that this will drive consumer costs up even further, because the system will become  bill +voucher add on. It’s like selling a house by owner to save the commission—the seller think he’s saving the commission, but the buyer also is expecting a lower price because the seller is “saving the commission”. In the end, nobody saves, but everyone gets less service.

I see the terrible effect of these stratospheric increases. My clients who are self-employed, or run small businesses, professional services, or consultancies are being priced not only out of the market but out of running their own businesses by these astounding increases. If we want a climate of business start up, expansion, or new ventures, something has to be done to contain the nuclear explosions. The inability to get individual health coverage for business start ups was one of the benefits the ACA was supposed to provide, but the current toxic effect of sky high premiums is instead crushing those same entrepreneurs.

We planners struggle to estimate foreseeable costs for retirees, entrepreneurs, and early retirees, but I don’t think anyone in 2011 was contemplating a 462% increase in premiums (which is what mine have increased). Just to put that payment in perspective, my 2017 monthly payment for health insurance would support a mortgage of about $350,000. I’m buying a house with no equity to show, and no term end in sight.

From my point of view, the only way to rein in costs and get a rational health care system is a single payer system, sometimes known as Medicare-for-all. Unfortunately, it looks like the current administration and Congress is hell bent on taking us in the other direction—solving the problem by forcing people off health care, or providing poorer and fewer services, rather than focusing on a way to provide better, more efficient care. Unless you can Pay. A. Lot.  Why can every other Western democracy solve this, but not the U.S.?