Archive for General Financial Planning

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)…

 

Save

Save

How will the election affect your financial plans?

What now? It’s very early to make predictions but I have at least as good a chance as the pollsters, right? We really don’t know what this incoming president will do, since his policy statements have been so thin, simplistic, and utterly without actionable detail. Nevertheless, some things seem obvious, so here are my thoughts on possible steps.

Never has saving been so important

One thing that seems pretty clear is that support for the vulnerable, the disabled, the elderly, and the ill will be diminished or eliminated. Even under Republican presidents there was opposition to much of the social support network, but now that the mandate seems to be for the ultra-conservative right wing, social programs and benefits are likely to be drastically cut. Certainly we’ll be unlikely to see any new initiatives. This means:

  • You won’t see any assistance to make education more affordable. If you have school loans, you’re not going to get any breaks. If you have children, saving for college will be critical. Without savings, it’s very likely you won’t see your children in college.
  • The incoming president has absolutely no plan to remedy the problems in Social Security. I can say with near certainty that you won’t see any impetus to bring benefits up to an actually livable retirement income. Without your own savings, you’re going to have a bleak old age.
  • Health care costs will be on you. Since the incoming president is unlikely to favor cost containment, single payer options, or public provision of service, we may well see a free-for-all where service providers scramble to snare the people who can actually pay out of pocket. Same goes for colleges, now that I think about it.
  • Charities won’t pick up the slack. The national mood to support the vulnerable seems to have disappeared. One of the most shocking things I’ve learned as a financial planner is how few people give to charities at all, and how small some of our contributions are. Especially in an economic downturn, charitable donations will lessen. Most charities are not able to float extensive programs for continuing care on their own, and depend on public, government support which is unlikely to continue.

Money, as always, gives you flexibility and protects you even in severe economic downturns. If you have to pay, yourself, for all the services most Western democracies provide their citizens, you must have savings.

Try to arrange catastrophic protection on your own

There is unlikely to be any movement toward increasing protection of the elderly and disabled. Long-term care insurance appears to be a necessity for anyone but the super rich. There certainly won’t be any type of long-term care insurance provision at the government level, and most likely no regulation of the industry. Unless you want to face complete impoverishment in needy old age, you should consider the catastrophic protection long-term care insurance provides. Medicaid, for when you’re completely broke, is unlikely to receive enough funding to provide enough care for enough people.

Similarly, disability insurance becomes even more important. Getting Social Security disability, already extremely difficult, will certainly not become easier or more generous. Even those with some savings could easily be wiped out by a disability.

I can’t comment on health insurance, because all the alternatives look so bleak to me that I have no idea what may still be available in the next years. This is a significant drain on entrepreneurship and small businesses. One of the biggest blocks to people starting new ventures has always been the inability to secure individual health insurance. The insurance safety net now becomes more important while simultaneously becoming more damaged.

Review your employment situation

Even if laws protecting workers are still on the books, the federal agencies still have plenty of options on how to enforce them (or not). A professor of mine once said that the most important thing a president does is make the 250 or so critical appointments to agencies that actually run the government. I think it’s pretty safe to say that anti-discrimination provisions, OSHA protections, affirmative action efforts, and environmental protections will be dismantled as much as possible. If you get in an employment situation where legal protections might be important…well, I hope you have the savings and insurance to tide you over a long legal sojourn with a potentially poor outcome. Don’t forget, a president gets to appoint judges and prosecutors.

Do whatever you can to develop your technical skills. The only way to make yourself valuable in a recessionary economy is to acquire skills that are so in demand no one will care who you are: computer, health care, accounting, and engineering come to mind. These are skills that are valuable world wide.

If you’re in college or have children who are, it is with a heavy heart that I say it appears to be a poor idea to concentrate on the liberal arts. My own daughter majored in Anthropology, and my long-ago degree is in Sociology, and I have (all my life) rigorously defended the value of a liberal education. I still believe in it, because I don’t think education should be job-training; it should be developing the life of the mind. However, with the reality of the current developments, any student needs to think about how to add technical or in-demand skills to their education, at least as a minor or certificate program. This is the time to add pragmatic skills to education, because you can’t count on any help or justice except what you can muster on your own.

If you are part of any vulnerable group—women, minorities, immigrants, disabled, LGBTQ, to name a few—this advice goes double. As Cal Newport has said, be so good they can’t resist you. It didn’t work for Hillary Clinton, but I’m hoping your luck will be better.

Stay with diversified investments

I don’t know what the impact will be on markets as yet. I’m guessing socially responsible investments, green energy, and anything dependent on health care funding are going to take a hit, while military contractors will see windfalls. I doubt that defunct industries can be brought back. Will Europe become more attractive? Will the Fed have any tools left? As always, the only mitigation of catastrophe is to have eggs in many baskets.

It all depends on your personal situation, of course, but this may not be the time to pay off a house (locking up your cash). You may need it—it’s easier to lose a house than to go without critical health care. However, it may be the time to nail down a low-interest mortgage, because rates aren’t going any lower.

Take care of yourself

The future looks stressful beyond anything I have encountered in my lifetime, while the quality and availability of health care is almost certain to be drastically impacted. Try to improve what is in your control: lose weight, eat healthy (and don’t be a victim of the corporate manufactured pseudo food complex), try to get exercise. You’re going to need to try to stay as healthy as possible, as long as possible.

I hope it will be possible to compartmentalize some of this, to get relief by pursuing craft, authentic relationships, the pleasure of pets. I almost said the joys of nature, but the impact on our natural world and climate is likely to be catastrophic.

Think realistically about emigrating

 For most of us, it’s not going to be easy or even possible. Without significant money to take with you, and skills so in-demand that you’d be embraced by any country in the world, you’re probably not going to be obtain residency, particularly if you need to work. And if you own a house, who do you think is going to buy it? Those immigrants that are being deported? It’s going to take a lot of planning and forethought to actually accomplish this.

Darn, tried to keep out that bitter tone. Did avoid naming He Who Must Not Be Named. I’ll do my best to help puzzle through how all this relates to your own personal financial picture. It’s never been a better time to shore up and plan for what is in your control, and take steps to protect yourself. Let’s work on this together.

Is the Mexican peso a bellweather for the US election?

Mexican peso

Mexican peso (Photo credit: Wikipedia)

This is just too good to miss–apparently, the more likely it appears that Hillary Clinton will win, the more positive effect on the Mexican peso, so analysts are considering the price of the peso as an indicator of possible election results. The markets hate uncertainty, and Clinton is by far the more known actor.

Warning: an annoying video starts up on this link, so have your finger ready to mute if you wish. Peso story here.

Save