Your Charitable Dollar = The Rolling Stones

aka: When Is The Right Time To Start Giving (assuming you want to)?
Note: This is part 1 of the “Do Unto Others” series on charitable giving

A friend of mine, less than a year out of college, once said the following to me:

“I want to give to charity, but I’m only 23. If I give that money now, every dollar I give away is going to cost me like a hundred when it’s time to put my kids through college or retire. I could save that dollar today, give twenty down the road, and everyone wins!”

At first, I found his argument compelling. His math was accurate. Compounded at an annual rate of 5%, a single dollar today is going to be worth $65 when my friend turns 60. Saving money is smart- that’s something that your parents probably taught you (unless you were raised by Mike Tyson, Willie Nelson, or MC Hammer). I walked away thinking I had to re-address my belief that giving is a wise act, no matter one’s age.

I have toyed with this argument for years (oh, did I not mention that the previous conversation was three years ago?) and only this month have I been able to effectively craft a counter argument. I call it Compounding Charitable Returns.

The fundamental argument of my friend’s argument was that a dollar to charity is a dollar to charity, no matter when or where. I’ll briefly mention that this isn’t economically the case because you can have inflation & outflation, stagflation & doeflation, etc. The argument that a dollar donated today and a buck chucked in 2050 assumes that money only grows when we save it in our bank accounts.

If I give my dollar to charity today, will it be worth $65 when my friend turns 60? No and Yes. No, you can’t look up that dollar in a bank account to see that it’s grown to a larger amount, having mated and sired son-dollars, daughter-dollars, and grand-dollars. But the money you give today does pay off years from now- maybe even more so! Let me take a couple of my favorite charities as an example:

Anything where you sponsor medical care, education, etc for impoverished folks around the world- Money today means a child gets an education and proper medical care. Has any asset ever held its value longer than than an education? When that kid grows up and is a contributing member of society, creating more wealth, providing for its family, likely sponsoring others in need, that is your dollar still at work. Your gift is compounding. Not in a bank, but in real lives.

Anything where you sponsor a home for those who need it- Same deal. A family with a roof over its head is more likely to be safe and healthy than one on the streets or moving all over the place. Such a family can then focus its resources on education, work, and getting on with life. Housing can jump start lives, and as long as its impacting those lives your dollars are still at work. If those you impacted can go on to impact others, your dollars are still at work!

Microfinance & Entrpreneurship Charities- To financial types, this one is simple. Someone out there is going through tough times but is capable of starting a business which can support themselves and/or others if they can land just a little investment. Ever wanted to be a venture capitalist? You can invest in a goatskin slipper maker in The Congo for a hundred bucks. There is a good chance your hundred dollar business will go on to support a couple of families and their children. Perhaps those kids will get an education where they learn about AIDS prevention. Maybe they will go on to become the president who ends civil war. If we are lucky, they will learn the game of basketball and be the next Dikembe Mutombo (official name: Dikembe Mutombo Mpolondo Mukamba Jean-Jacques Wamutombo, I am not even joking).

By now, you probably get my point.
[As a side note, I am a fan of giving early in life because it fosters good habits. If ever there was an easy time to start giving, it was when we had little money to give. If ever there was a time when it meant the most to give, it was when we had little money to give.

Before I wrap it up, I also want to quickly note that this is not a "giving is good" post in the purest sense. That's a post for another day. This is a "rebuttal to the notion that giving later in life can enrich me and those I want to give to" post. Technically, you could say it is a "Robbie totally calling out his friend in a public forum for something he said three years ago" post, but that would be mean of you... Meanie.]

There are such things as Compound Charitable Returns.

When you invest money, that money goes to work for you. When you see the appreciation of your investment, its easy to see the benefit of that investment. It looks like you’ve achieved more than you would have achieved just by giving that money away because when you give it away, it doesn’t appear to grow. It doesn’t appear to do anything, in fact, other than go away.

Thing is, while that money has passed you by (much like the Rolling Stones have passed most of us by), its work is not finished (much like the Rolling Stones are not yet finished). If you’re giving to a trustworthy and successful organization, that money will be working long after you’re gone.

Just like the Rolling Stones.

Until Next Time, Later Y’all

-TYF

Friday Farmer #1: Pierre Omidyar

This is the first of many “Friday Farmer” posts, where I honor someone who has made the world a better place just by doing their job- even if their job was something other than making the world a better place. If that doesn’t make sense, just read on and hopefully it will come to you.

Today’s Friday Farmer is Pierre Omidyar, the founder and original CEO of EBay, who I believe has made an incredible contribution to the world.

The impression I get from many people is that they believe EBay to be the website where:

• You can buy all sorts of Pez Dispensers
• You can get screwed out of your money
• You can pay real Louis Vuitton prices to get fake Louis Vuitton merchandise

Are all these things true? Yes. But they are exceptions to the rule. What rule you ask?

• “I” Before “E” Except After “C”?
• No Shoes No Shirt No Service?
• No pooping?

None of the above.
The rule is “Earth + EBay > Regular Old Earth”

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Allow me to offer a couple of reasons as to why EBay makes the world a better place:

EBay is a platform which prolongs the useable life of goods, meaning there is less waste: If I no longer have a need for some old CDs, I would likely just throw them away to sit in an old landfill. But if I have the option to sell them on EBay, the CDs spend more time in use and avoid being thrown in a landfill (for now).

In addition to reducing overall waste by extending the useable life of products, EBay also helps the environment by reducing the amount of raw materials that we must take out of the environment to create new goods. Think about it, if I buy a used bike on EBay instead of buying a new one, the rocks and tree sap rubber that would have gone into that bike’s steel and rubber can stay where they are- in the ground and in the trees. Why deplete the Earth if we don’t have to?

EBay is a platform which reduces the real cost of goods, meaning we can own more stuff at the same cost to us: A couple of times a year, I will buy a video game to play. When I’m through with it, I put it up on EBay and sell it. If I play my cards right, I can sell a game for only ten to twenty dollars less than I paid for it. That means that, when it’s all said and done, the game only cost me twenty bucks or so- this despite a retail price of at least fifty! Because of this, I get buy more stuff at the same cost to me! Sweet!

EBay increases efficiency and lowers prices by eliminating the middle man. There are thousands, if not millions, of EBay stores which bring you right to wholesalers. Do you like Costco? All the wholesalers on EBay combined are like a super-mega-costco… without the free samples and two gallon jugs of mayonnaise.

EBay makes consumers happy by offering more selection and/or offering goods which are not readily available in brick-and-mortar stores. In general, having vendors compete for your business benefits consumers. EBay’s pure volume of sellers makes it a highly competitive and efficient market for goods which are typically available (my video game example, for one).

So there you have it, Pierre is our Friday Farmer… for making EBay, and for letting EBay make the world a better place.

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Are you thinking what I’m thinking?

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That I’m leaving out a crucial measurement of how cool EBay is?

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You know you are…

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Well here’s the moment you’ve all been waiting for…

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My favorite part of EBay is that you can find stuff on EBay which you would be screwed trying to find anywhere else.

A brief comparison of my local TargMart (Both Target & Wal-Mart) v. EBay:

These are real things that I am actively pursuing the purchase of…

• Authentic White Tony Romo Dallas Cowboys Jersey, White, Size L, Elastic Sleeves
  • TargMart: none,
  • EBay: 6, plus one of with pink numbers!

(note: There are 419 authentic Tony Romo jerseys of any size on EBay at the moment… and there continue to be zero at any store within 15 miles of me)

• MC Hammer Parachute Pants, Pref. Neon Green or Shiny Gold
  • TargMart: 4 (Kidding! They had none, dummy!)
  • EBay: 50+ (9 of which appear to be actually from the 80’s!)

• Santa Claus Costume, including suit, boots, belt, gloves, beard, wig, hat
  • TargMart: Sold Out of the only available model ($50).
  • EBay: About 400 ($30 to $560, including the crappy sold out one).

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Well that’s it for now. Until next time, later y’all.

-TYF

Money Lessons From “A Walk to Remember”

aka: Is Money the ‘Root of All Evil’?
Note: This is part 2 of the “Putting the Fun in Da Mental” series on personal finance fundamentals.

 

There’s a ridiculous line in the completely ridiculous teen date movie “A Walk to Remember” when Mandy Moore’s charming girl-next-door character says to Shane West’s smoldering wrong-side-of-the-tracks character, “You have to promise you won’t fall in love with me.” Sometimes I wish Ben Franklin looked out at us from the twenty dollar bill and said the same thing. Confused? Read on below. It’s time to put some more fun back in da mental.

I talk to friends and peers about money stuff a lot. Not so much talking about how much I have of they have, but more about all the internal questions and conflicts that money can dredge up.

 

Often I hear “Money is evil.” This, of course, is a long-standing notion- there’s the famous saying “Money is the Root of All Evil” and the slightly less quoted “’Money’ Is Latin for ‘Sucky’”

I wholeheartedly disagree with this notion that money is evil. Money is not evil. The love of money is.

 

Let’s quickly touch on some of the benefits of money:

• Money is a store of value- To save for retirement would you rather pile up years worth of food, clothes, and gold in your basement or make direct deposits into your bank account?
• Money facilitates trade by eliminating the barter system- If I raise cattle which I sell as tasty steaks, how the heck am I supposed to barter them for yoga lessons from that vegan lady in town???
• Current paper currencies are more practical means of commerce than other hard goods like salt, which was used as currency for centuries- Can you imagine a minimum wage of 6.25 pounds of salt an hour? It would suck…  Even if it would (1) make it way harder for people to embezzle lots of money and (2) reign in executive pay (I just can’t see the CEO of Exxon Mobil getting a year-end bonus of four hundred million pounds of salt).

Clearly money, at least the concept of money, is kind of a cool and efficient thing.

 

But the people I talk do don’t have a problem with the concept of money, they have a problem with the means by which it is acquired. Examples you often hear on TV:

• A big oil company spilled a bazillion gallons of crude in Alaska- why? To get richer, even if it means killing off fish and wildlife!
• Health Insurance Providers are denying benefits to their clients- why? To get richer, no matter how much it screws their policyholders!
• Joe Schmoe ignored his kids and family by working harder than he ever needed to- why? To get richer, even if it meant never being at home!
• Cigarette companies advertise their cancer sticks to kids- why? To generate a highly price inelastic revenue stream which lasts the lifetime of the consumer despite the potential life-shortening effects of the product! (translation: To get richer, even if it kills someone!)

What do these ridiculously oversimplified examples have in common? The parties involved were making their money by giving too little concern for the well-being of others. Their pursuit of money got out of control. They got greedy. They loved their money. I’d define loving something as “caring for that one thing above all else, willing to sacrifice anybody or anything to protect or acquire it.” When you apply this definition to a love of a person, it sounds warm and fuzzy. When you apply it to a love of money, it sounds cruel and tragic.

 

To further make the point, I’ll put it this way: It is the lust for money that often gets us in trouble. Lusting after money and acting on that lust. I think that even in today’s culture, lust is generally considered unhealthy– perhaps not in the movies, where drinking, drug use, profanity, violence,  etc are also generally glorified– but lust is still on the short list of things that are bad in real life. Lust and credit card debt. And terrorists.

However, the fact that some people hurt others by their zealous pursuit of money doesn’t necessarily make money bad. If a man cheats on his wife with a beautiful woman, do we say “Beauty is the Root of All Evil”? No. It was the pursuit of an unrealistic fantasy at the expense of others which was the issue. The same holds with money. Pursuing riches at the expense of others in order to strive for a life of lavishness is something I would consider immoral. In contrast, the honest pursuit of good hard work to provide for oneself and for others is a noble task.

By ‘good honest work,’ I don’t just mean farming or pulling up tree stumps or whatever else you see people do in Chevy commercials. I mean any job where you are adding value to the economy by providing a useful service. I don’t begrudge entrepreneurs for making tons of money. After all, I like driving a car. I like using a computer. I love making it sound like someone else farted. So as far as I’m concerned, Mr. Ford, Mr. Gates, and Mr. Whoopee can keep their billions. Speaking of Bill Gates, let’s give him some credit for becoming one of the greatest philanthropists in the history of this country.  Which reminds me…

The money that funds the Salvation Army, Habitat For Humanity, Doctors without Borders, the Red Cross, and every other major charity on earth is money which came from someone else. Someone who worked to earn it along the way and wasn’t so in love with it that they couldn’t use it to benefit someone else!

 

The point is, it’s not money that’s evil. It’s greed that’s evil. It all hinges on how one pursues money and how one values it.

Money is a pretty cool thing- it’s useful and convenient and no longer high in sodium.  So I say it’s just fine to like the stuff- just promise that you’ll never fall in love.

 

Until next time, Later y’all…

-TYF

Keep Yourself Regular: The Proposed Schedule for The Almanac

I’ve already written about the series I plan on writing (link here)… now I’ll give you some structure for when posts will appear here at The Almanac.

I should be writing twice a week until things get really hoppin’ and then I’ll try to write a third segment per week. Here’s what you can expect.

Tuesday is Harvest Day!

Tuesday is the day you can expect my main post for the week. Posts falling into the four series I’ve already laid out will be here. I reserve the right to revise my posts after they’re posted because I often realize my arguments are fallacious (dumb) only after readers have informed me of their dumbnaciousness. These posts will often stretch your patience to the breaking point, taking five minutes, ten minutes, maybe even twelve minutes (that’s more minutes than you have fingers!) to read! It’s tough, I know, but that’s why I give you a full three days of rest until…

Farmer Fridays!

Every Friday I am going to name a figure from popular culture an official “Friday Farmer”, a special honoree here at The Almanac. Friday Farmers (or FFs) will be famous-ish people who have inadvertently made an impact on the economic and moral landscape of the world (or even America, which is bigger than the world!). The special thing about these FFs is how they make an impact in a way often not recognized. Albert Gore Jr. can’t be named a Friday Farmer because he got much of his fame for trying to save El Mundo (which is Spanish for “The Mundo”). By contrast, Mr. Kool-Aid, provider of a thirst-quenching punch substitute with flavors like “Diabetes Delight” and “Outrageous Obesity” , is eligible to be elected Friday Farmer because he never sought out to make the world a better place… he just did (though his penchant for breaking walls is going to work against him).

The Farmer Friday posts will be short, probably just a bit longer than the previous paragraph… unless the FF is totally awesome, like Chuck Norris or Oprah. Ok, not Oprah. Maybe Rosie. Maaaaybe.

Knowledge Nuggets

Every now and again, there’s a subject that people want to know about which doesn’t really fit into the line of Tuesday posts. Simple subjects like:

“What’s this subprime thing I keep hearing about?” (Answer: I’ll explain later)

and

“Is it unhealthy to eat boogers?” (Answer: Not if they’re yours!)

These will pop up from time to time based largely on user requests. Please feel free to request away.

ThrowDown Thursdays (tentative)

There’s a chance my good friend Presh Talwalkar over at Mind Your Decisions Blog and I will start some sort of cross-blog debate format in the model of ESPN’s “Pardon the Interruption”, CNN’s “The Situation Room”, and Fox’s “Are You Smarter Than a Fifth Grader”. Perhaps we’ll call it “Pardon the Fifth Grader Situation”. We haven’t officially agreed to terms, but once The Almanac is off the ground we probably will give it a try. I make no guarantees that it will happen on a Thursday or even that it will happen weekly. It may not even be a ThrowDown. It may end up just being ThrowUp.

So now you know what you’re getting, and when you’re gonna get it.

Until Next Time, Later, Y’all

-TYF

Four Series (Serieses??) To Expect At The Almanac…

Until there are a bunch of posts here at The Almanac, you won’t really get a feel for the full breadth of topics I plan to post on. At the moment, I have four tracks I plan to start off on and then (hopefully) I will be able to choose topics largely on reader feedback. So here is where I see us going at least in the beginning:

“Putting The Fun Back In Da Mental”

This series is going to be on some fundamental principles that have to do with finance, charitable giving, and other topics I will be posting on. These posts will give us a good base as we move into more complex topics. I promise to do my best to put the “fun” back in “fundamental.” For the record, I have already put the fun back in “funeral” and “fungicide” so I think putting it in “fundamental” should be way easy. Example: what is a tax-deductible gift?

How I Made My First Million By Giving Cars to Churches…

aka: What the heck does “tax deductible” mean?
Note: This is part 1 of the “Putting the Fun in Da Mental” series on personal finance fundamentals.

I consistently hear ads on radios about how I can give my old car or laundry machine or other old metal thing to the local church or charity. The best part, the commercials say, is that THE WHOLE VALUE IS TAX DEDUCTIBLE!!

Often people ask me about giving money to charity because its something I openly support. Folks often want to know what it means when a gift is “tax deductible” because they are getting a confusing message from radio ads such as the one above. These ads make it sound like giving a gift to the Salvation Army is going to actually make you money AND provide some warm fuzzies for helping out The Army Of The Saved. That’s great in concept… but the concept is total Bollocks. Read below the fold for the facts.

Prepare to Meet Your Maker!! (okay, just meet your blog’s maker)

Before diving into all those topics I am just itching to write about, my I give you a little “Me Primer”?

I hope this doesn’t come off as arrogant- I don’t think the average reader needs to read more about me- I just want to give a little info on whose opinions you are reading. Do other bloggers do this? I don’t know. I don’t read blogs (really!).

I grew up in San Jose (that’s California, not Costa Rica)… I went to college at Stanford (you probably read that already)… I worked somewhere else (FTI Consulting)… and then I came back to Stanford where I work here. In case you’re wondering, I’m not some fourth generation Stanford touting aristocrat wearing a white tennis shirt and a cardigan over my shoulders while spewing bourgeoisie doctrine. I’m third generation! Seriously though, I am proud of having gone to Stanford and thankful for the opportunity to do so, but it’s not like it defines me. In fact, I decided to feature it on The Almanac mainly as a branding tool and because it gave me a cool option for a blog name. So what else is there to me than Stanford? Let’s see.

Welcome To The Almanac!

Hi all, welcome to The Almanac. As I note on the byline of the main page, this blog is going to be about “the seeds of money with morals.” The idea to start blogging comes from my friend Presh Talwalkar at Mind Your Decisions blog. There are many blogs out there about how to get rich. This isn’t one of them. There are many blogs about making good decisions with your finances (like Presh’s). This isn’t one of them- though we’re getting closer. I’ll be discussing the different influences on our decision making, especially when it comes to money matters. These influences? I’ll break it down as “finance, faith, and reason.”

By finance I mean the simple dollars and cents of the transaction. How much do my competing options cost? Will they cost me anything in the long-term? Do I expect my financial situation to increase or decrease? What the hell is a health savings account? What will most please my checkbook???

By faith I mean the considerations we may have beyond what is immediately profitable to us.  The morals and beliefs which are go beyond our physical or monetary needs. How much value do I attribute to the environmental impact of a given transaction? Do I give to charity- and if so, why? Are my actions as a consumer adversely affecting other consumers? Are my actions helping them? Is what I am doing right???

It is by reason that we incorporate these things into sound and complete decision making. And by reason, I mean economics. I know that word probably scares you, but don’t go running off… Let me give it to you straight: Economics is not the study of money. Economics is not the study of “supply and demand”… no matter how many Art History majors tell me it is. No, economics is really the study of making solid decisions which incorporate all of your preferences- be they faith, finances, or whatever else is on your mind. With a working knowledge of economics we can apply our reasoning logic to make decisions we are going to be happy with. When I put it all together, is this the best decision for me???