For me, giving back to others is part of my personal financial plan. As I have said most people that are actually able to read this are financially much better off than billions of other people today. At least they have the potential to be if they don’t chose to live beyond their means. Here are some of the ways I give back to others.
Kiva is a wonderful organization and particularly well suited to discuss because they do a great job of using the internet to make the experience rewarding for people looking to help - as I have mentioned before: Using Capitalism to Make a Better World. One of my goals for this blog is to increase the number of readers participating in Kiva - see current Curious Cat Kivans. I have also created a lending team on Kiva. Kiva added a feature that allows people to connect online. When you make a loan you may link you loan to a group.
I actually give more to Trickle Up (even though I write about Kiva much more). I have been giving to them for a long time. They appeal to my same desire to help people help themselves. I believe in the power of capitalism and people to provide long term increases in standards of living. I love the idea of providing support that grows over time. I like investing and reaping the rewards myself later (with investment I make for myself). But I also like to do that with my gifts. I would like to be able to provide opportunities to many people and have many of them take advantage of that to build a better life for themselves, their families and their children.
The photo shows Frew Wube, Haimanot and Melkan (brother and two sisters), an entrepreneur that received a grant from Trickle up. Trickle Up provides grants to entrepreneur, similar to micro loans, except the entrepreneur does not have to pay back the grant. They are able to use the full funds to invest in their business and use all the income they are able to generate to increase their standard of living and re-invest in the business.
“I also save every month,” says Frew, who has over $40 stored in a cooperative savings fund. The capital he has saved with other people in his group is used to provide loans to group members at a low interest rate. Frew, now able to access credit thanks to his Trickle Up clothing business, has taken progressively larger loans from the group, including his latest loan of $300 to start a candle business.
Americans need to save much more money. This is true for people’s personal financial health. And it is true for the long term health of the economy. Of course the credit card immediate gratification culture doesn’t put much weight on those factors. And if Americans actually do reduce their consumption to save more that will harm the economy in the short term. But since those reading this are people (the economy can’t read) the smart thing for most readers is to save more to create a stronger financial future for themselves.
Turmoil May Make Americans Savers, Worsening ‘Nasty’ Recession
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From 1960 until 1990, households socked away an average of about 9 percent of their after-tax income, Commerce Department figures show. But Americans got out of the saving habit starting in the 1990s
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“Consumers are starting to realize that they’ve been living in a fantasy world,” says Lyle Gramley, a former Fed governor who is now senior economic adviser at Stanford Group Co. in Washington. “They will have to begin salting away money for retirement, their children’s education and other reasons.”
Americans have a way to go to catch up with their counterparts in other countries. The 0.4 percent of disposable income that U.S. households saved last year compares with 10.9 percent for Germany and 3.1 percent for Japan
Related: Americans are Drowning in Debt - Too Much Stuff - Financial Illiteracy Credit Trap
What Is Frugality? What Are The Best Examples?
* Money - less money on replacements and monthly utilities.
* Time - less time at hardware stores and climbing ladders.
* Earth - less burning of fossil fuels to generate electricity.
Very nice example. I do think including time in personal finance discussions makes sense. At times people seem to spend far too long on minimal savings (and/or buy things that break, don’t work well, require extra time to use…), in my opinion.
Related: New Graduates Should Live Frugally - Frugality Versus Better Returns - Too Much Stuff
There are ways to get more vacation time
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According to Robinson, mentioning to your boss that you are willing to go on vacation without any pay can often be a very effective way to get some time off.
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Take what you get: It may seem obvious, but many people don’t check how much time they are entitled to take off. Many others are reluctant to take the average nine days of paid vacation to which they are entitled, often because they are afraid it will show weakness or lack of loyalty.
Joe Robinson said there may be “ongoing subtle discouragement” in the work force, but employees should remember that they are entitled to their vacation and should not be afraid to take it. In 2005, U.S. workers collectively turned down a staggering 1.6 million years of vacation time that was offered to them.
I find these discussions of how little time off we have interesting. Similar studies look further back, at hunter gathers and find similar patterns. Still they are a bit misleading. What about total hours worked during the year (for peasants). What about the conditions of work and life. What about life expectancy… Still I agree with the thought that more vacation is more important than more work to fund more spending. I would rather reduce my spending and have more free time. I have taken unpaid vacation myself, and have worked part time, at times, to buy myself more freedom to spend my time as I wished.
Related: Vacation: Systems Thinking - Workplace Experiments
I figure it is pretty easy to figure out if I can afford something. Do I have cash available (my paycheck already has retirement funds etc. deducted before it shows up in my checking account)? I also have a separate saving account for medium term savings and a separate brokerage account for long term investing (and a Roth IRA). So the money in my checking account basically is how much I have to spend. If I have the money and want to spend it, I can afford it. If I don’t have the money, I can’t afford it. I can just save until I can.
There is a nice post, How to find out if you can afford something, that explores when that simple concept isn’t quite enough.
I made this mistake when I decided to start a saltwater aquarium. I found a great deal on the tank and some supplies on Craigslist, and went ahead and bought it. What I didn’t factor in was the costs of additional supplies, fish and ongoing maintenance. Turns out, saltwater aquariums are an expensive hobby. In hindsight, I wish I had done my homework a little more.
Good Advice. Related: Americans are Drowning in Debt - Too Much Stuff - Add to Your Roth IRA - Teaching Children About Money Matters
Retirement planning is a huge financial need and one of the areas where financial literacy can pay off very well. Understanding the incredible power of compound interest can be used to start your retirement savings early and provide you with a huge benefit. Understanding the risks of inflation can guide your investment decisions. The recent Business Week Retirement Guide is very good. In Spending Safely, they explore how to spend while preserving your capital in retirement.
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Bengen now suggests that the 4% figure - actually 4.1% for a 60/40 portfolio of large caps and bonds and 4.5% if you toss in small caps - merely seems impressive when plugged into Excel (MSFT) spreadsheets. In practice, the strategy, which Bengen stopped using with his own clients about three years ago, is inflexible and unrealistic he says - and the formula is too stingy.
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Flexibility is factored into Bengen’s revised approach, which permits withdrawals to fluctuate within guidelines. His “floor-and-ceiling strategy” suggests that an initial withdrawal rate of 5.16% would be appropriate if a retiree pares back subsequent withdrawals by as much as 10% of the initial withdrawal during hard times (the floor). On the other hand, a retiree could withdraw extra cash equaling up to 25% of the first-year withdrawal (the ceiling) when the market is strong.
This adjusted thinking is correct I believe. People want simpler answers but some things just require a more complex understanding.
Related: How Much Retirement Income? - Add to Your Roth IRA - Retirement Tips from TIAA CREF - Our Only Hope: Retiring Later
New research confirms feeling powerless leads to expensive purchases. So in addition to learning about personal finance logically it can be important to build your self esteem in order to improve your financial position. For many people understanding human psychology helps them take more control of their own life. And can help when helping others.
In a study that may explain why so many Americans who are deeply in debt still spend beyond their means, authors Derek D. Rucker and Adam D. Galinsky (both Kellogg School of Management at Northwestern University) found that research subjects who were asked to recall times when someone else had power over them were willing to pay higher prices for status-symbol items.
“This increased willingness to pay for status-related objects stems from the belief that obtaining such objects will indeed restore a lost sense of power,” write the authors.
Instead of allowing yourself to submit to this impulse you will put yourself in a better position if you refrain from trying to buy a sense of power. Take a real look at your position and make changes that move your personal finances in the right direction.
Related: Buy Less Stuff - Too Much Personal Debt - Financial Illiteracy Credit Trap - Curious Cat Investing Library: Personal Loans