The Greatest Reward

So today was the first day of school for teachers. That means the same meetings as every year... ugh. It also means practice shifts back to the afternoons, which in Charleston heat is another big ugh. But today I got a reminder of why teaching (and especially coaching) is the most rewarding job on the planet. Four alumni of my team came by today, just to say "hi." All were superlatives, on and off the track, and all are now young adults that I am pleased to count as friends. There was Matthew, the best student I ever had and an all-conference runner on top of that, home from Yale. I still love to talk politics with him, even though our votes will almost certainly always cancel out (unless, of course, he ever runs for office, in which case I'll probably vote with my heart and not my head). Goose is getting ready to head back up to NC State. He was a state-caliber miler, and had an uncanny ability to run the race of his life when it counted. I can't believe he still has my number memorized. There was Soz, my best-ever miler, and without a doubt the nicest Christian kid I have ever coached. He's out of school now (Wake Forest) and has a real job... working for the local Episcopal camp, no less. I couldn't be prouder. And Kristen, an MVP and the best girls' team captain I've ever had. She's also out of school (Purdue) and getting ready to start an MBA. She once won an award for a paper she wrote about an adult who was a role model (3 guesses who was the adult). That was one of the nicest compliments I have ever received from anyone. To say I love these young people would be an understatement. I'm pretty sure that sometime between now and next May, I'll ask myself, "why the heck do I teach?" For days like today.

Tithing

Since I've been thinking so much about money and investment of late, here's a little thought on first principles. I mentioned earlier that some planned giving is a key component of a good financial plan. This is not because I believe that God will somehow "give it all (or more) back to you," that kind of "prosperity gospel" is naive and petty. I believe that giving is one of the key attitude changers--rich people give. So if you want to feel rich, you should do what the rich do. When you are giving, there is a "more than enough" mentality that permeates decisions and has a transformative power. Of course, I mean "cheerful" giving--a grudging, tight-fisted approach will not have the same psychological or spiritual effect. One of the best lines I ever heard about this topic on why God tells us to give was this: "God wants us to be like him, and He is a giver." Certainly, God doesn't need our gifts to accomplish His purposes (any more than He needs our prayers to determine what He is going to do). But it is a great and powerful mystery that in His sovereignty, He chooses to allow us to play a part in being His agents.

All that said, the whole process of actual tithing may seem impossible. By tithing I mean the giving of 10% of one's income (whether of gross or net pay is a conscience issue, as is the whole commitment to give). This is not an attempt to be legalistic; nobody is required to give even a dime, much less some particular percentage of their paycheck. It has simply become a tradition over 2000+ years of Christianity, based in guidelines set down for the Jews back in the Old Testament (part of a covenant which was never intended for the gentiles anyway). But here's the catch: If you make a decent living, 10% is a LOT of money. The last time I heard a number for what the average American family made was somewhere around $41,000 a year. A tithe of that would be over $340 a month. That looks suspiciously like a new car payment. It's what I paid for our first apartment rent many years ago. If you've never done that before and you wanted to commit to be a tither, that's formidable. Most of us couldn't just free up that kind of cash in our budget (indeed, most of us don't have a nickel to spare. Scratch that--most of us don't even have a budget).

So, what to do? Many years ago, my family committed to become givers. But we couldn't give what we wanted, as we had previously made binding commitments that precluded that (a mortgage, car note, student loans, other debts... oh, and eating on a semi-regular basis). I approached a good friend who was a Christian and a financial professional who I knew to be a good steward and asked him for advice, and he said something wise. He said, "Give what you can, even a little more than is comfortable. Don't worry about what percent that is, but start now. And then commit that you will increase your giving as you are able, before you give yourself lifestyle raises. you'll find that in time you catch up to your goals." Sure enough, it worked. As we gradually got raises and retired debt, we took great pride in increasing our giving gradually. Now, we've been able to tithe for years, and it feels great.

If I could give but two pieces of financial advice to Christians, this would be the second (the first is to actually have a budget--which you have to do if you're ever going to give or save). And even for non-Christians, I would strongly suggest giving to charities of your choice. It's hard to feel broke when you know you are able to give significant sums away.

More Real Estate Woes

A couple of days ago I posted about how hard it can be to get a mortgage. Sadly, this story is only going to get worse. For the past several years, buyers have bought homes with zero down on adjsutable rate, interest-only notes, because "everybody knew" that the housing market was going to expand forever and anybody could just cash out and "flip" 2 years later, pocketing the huge equity run-up. Now that the market is finally contracting, there are going to be way too many people who bought more house than they could afford facing foreclosure. It's not going to be pretty. (Indeed, today's paper showed a top-10 national lender has declared bankruptcy.)



I'm not sure where my sympathies lie here. To a certain extent, it's natural to say that if somebody borrows money, they are morally and legally obligated to pay it back, period. If they are not responsible enough to do so, they ought to be in trouble. On the other hand, banks and other lenders (especially these predatory sub-prime places and credit cards) have been giving loans to people who should never have qualified for them. There is an old, old joke that defined a bank as the place that will give you a loan if you can prove you don't need the money. Those days are long gone. I don't want to be in the position of excusing irresponsible borrowing, but at the same time, there is more than enough irresponsibility on the lending side to at least share in the negligence.



Regardless, this is one of the areas that itches me. My wife and I would have liked 4 children. We have three, because we knew we couldn't comfortably support a 4th. We would like new cars. We make do with (very) used ones. We had a decent-sized, brand-new house. We downsized to a 40+ year-old, 1600 square-foot ranch--you guessed it, because it was the "wise" thing to do. We do without certain luxuries so that we can maintain adequate health, life, disability, auto, and homeowners insurance. And it's still tight, each and every month. So whenever I hear about the poor schmo whose house blows away who had no insurance (or the 50 million uninsured for health care), or the people who are being beaten to death by an excessive mortgage, or are upside down in their new car and can't get out, I have to wrestle down the impulse to scream, "Be a man! Think long-term! Make a decent decision, for once!" Then I feel guilty for being so heartless. In general, I think that when we insulate people from the consequences of bad decisions, we remove the incentive to learn and make good ones down the road. On the 0ther hand, many people are never going to get it, and we don't want to pile on and make it worse.



Oh, well. If anything, I guess I should just be happy that when the housing bubble does burst, at least I will hopefully not be one of the victims.

Financial Peace

After posting yesterday about a guy in deep financial woe, I felt like saying a few words about some ideas on how to make a limited income stretch. I've often thought that Mrs. Sal and I could give financial planning tips--not investment advice for those who actually have enough money (or, unbelievably, more than they need), but rather how to make it in the hand-to-mouth world that most of us live in. If you've ever done any reading on this subject, you'll recognize some Larry Burkett, some Ron Blue, and a very healthy dollop of Dave Ramsey. But it's not about slavishly following a system--every family situation is different, and one-size-fits-all can't be the only answer. Here goes:

1. Commit to give, from the "first-fruits." As a Christian, this is not optional. From both a spiritual and a psychological perspective, it puts things in their proper order. It's hard to feel poor when you know that you are "rich" enough to give, off the top, every pay period. That doesn't mean that the family who has never given regularly should start tithing 10% and cut back on groceries, but you can commit to giving 10 or 20 bucks at a time and resolve to raise it as things get better (and there's no rule that you ever have to stop once the magic 10% number is reached, either). If you're not a Christian, give to a charity. But givers are happier. NOTE: I'm not saying that if you give to a church, that God will bless you with prosperity. That's bull. We give to change ourselves, not to change God.
2. Make a budget every month. This is key--if income doesn't equal outflow, that's bad. Some folks do that every month and don't even know it, and just get deeper and deeper. Even if the budget tells you that you're in over your head, at least you have the knowledge now to address the problem. And you make a NEW budget each month--different stuff comes due, there may be an odd number of pay periods, etc. Don't budget for a magic "average" month, instead budget by paycheck (how much of THIS check is going where, and how long will it last). If the money runs out before the paycheck does, decide in advance who or what gets put off. A budget like that prevents you from paying the less-important stuff before what really matters.
3. Try direct deposit and direct debit for recurring stuff, like rent/mortgage, utilities, etc. There's no chance you're not going to pay these things, but there's a chance you could miss the due date. Simplify, simplify.
4. Before you pay anything but minimum payments on anything, squirrel away an emergency fund of $1000 or so (have a garage sale, consign some clothes, spend a month without darkening the door of a McDonalds, but get it). Most of us are one surprise away from real trouble. Just a little cushion can make that blown water pump go from major crisis to minor irritation.
5. Avoid consumer debt. (OK, in some cases, this advice comes way too late.) Whether credit cards, car payments, student loans, or whatever, these payments are the biggest impediment to regular folks getting ahead. Make paying them off a priority. Most experts would suggest a "debt snowball" (see Dave's website above for details). But if you don't borrow any more and keep paying down, eventually they will go away. If possible, get rid of them sooner rather than later. And when they are gone, don't give yourselves all that saved budget space as a lifestyle increase, earmark some for savings.
6. As soon as possible, build a safety net of insurance. Many jobs will help take care of health, dental, and/or disability insurance. But make sure you're covered, and that you have adequate life insurance. It's cheap, and it kicks other potential crises down the road. If you have decent insurance and an emergency fund bigger than your deductible, you can handle a wreck, a hurricane, or a death in the family, or at least manage them far better.
7. Stay away from new cars. This goes with #5, but it gets its own topic. Dave Ramsey would say only pay cash for a car. That's wise, as we tend to borrow on this depreciating item and get upside down pretty quick. If you are not in love with the new car smell, you can really save a lot here. Buy used, pay off quick (or better, on the spot), and drive it until the doors come off.
8. Once the bills are paid, take the rest in cash. This is the best budget management tool of all. After your check has come in and the bills have been paid (electronically), take what's left over and use it for the day-to-day expenses (maybe leave your gas budget in the bank so you can pay at the pump by debit card). As the money dwindles, you'll get more and more frugal. When it's gone, it's gone, and you don't bounce anything. If, amazingly, you have some left over, decide whether you're going to throw that at a debt or sock it in savings. Don't roll it into the next pay period. If some month there's less and it's going to be tight, at least you're the one who gets to decide what to do. If every month there's not enough, you need to cut your bills (drop the digital HDTV, cut back on cell service, sell the new car and get a clunker) or make more money. That's the only way the math works.

That's a basic look at the monthly management. Later, if time permits, we'll look at more long-term stuff.

Poverty Redux

Sorry to be gone so long; it's been a wild summer. My first-ever series of posts on this blog was a look at poverty, and an admission that I am deeply conflicted about the issue. Today's Charleston newspaper has a story in it which fired me back up again to think about another related issue--buying a house. It seems that Charleston (my hometown) leads the nation in the disparity between whites and minorities in mortgage rates. Today's story is about a sympathetic young man who is married, has some kids (and twins on the way), works as a teacher and track coach (so my radar perked up immediately), and is having a very hard time buying a house. He also happens to be African-American, so he fits the narrative of Charleston as a predatory, discriminatory place. Sadly, this guy makes about $27k teaching. That stinks, of course--and articles could be written on the topic of teacher pay, as well. He also owes about $20k for student loans, some of which are in forbearance right now because he hasn't had the means to pay them off. He has found a great house that would be perfect for his growing family for a little over $140,000 (which is a steal in the crazy Charleston market), but can't get a loan. Sad story. Now let's do a little math. If you make $27k, you'll lose 7.6% in FICA tax off the top, and here in SC, teachers drop 6% involuntarily into the state retirement fund. You'll basically pay no federal tax if you have 2-4 kids, so let's say he claims all his dependents and gets totally off the hook for federal withholding. State tax will still cost you something, let's say 5%. And then you'll pay a little something for your benefits package for health and dental. Full family coverage, even in the state system is rough. But let's low-ball and just assume that his total payroll deductions are 20%. So here's a guy with about $1800 a month in take-home pay. Assuming he gets the house he wants, at a great 6% rate for 30 years, with nothing down, you're looking at about $850 just for the loan, plus another $200 or so for taxes, insurance, and the PMI (private mortgage insurance) he'll have to pay as a penalty for not putting down 20%. So we're looking at maybe $1050 in house payment. Oh, and don't forget, he's still got the student loan, which should be a low rate over 10 years, maybe $150-200 a month. Sorry for all the math, but here's the point: If he has zero other debt--no car payment, no credit card, nothing--his family of 4 (soon to be 6) will have--at best--about $600 a month total for food, gas, car insurance, doctor visit copays, prescriptions, clothing, etc. It can't be done. I feel for this guy, but I wouldn't lend him $140,000. Not if he was white, black, green, or purple. He's a foreclosure waiting to happen. Now, since he's been in the paper, somebody will likely write him a loan for the good publicity. And they will do him a disservice. A buddy of mine just got the same treatment yesterday (he's self-employed, and happens to be white). He's got non-standard credit due to his business and personal debts being all mixed up together. He was minutes away from signing the papers for a house, and they tried the old bait-and-switch: we can do it, but for an 11% adjustable sub-prime rate. Translation: "you are more risk, and you'll have to pay through the nose for a loan." Wisely, he told the banker to shove it. But again, as much as I love the guy, and I would trust him with my life--I wouldn't bank him. There's a reason the bank building is so much bigger than my house: they don't lend money that is likely not going to be repaid, on time, without drama (at least not without sharing that risk through higher fees and interest).

So, does this mean that there's no racism in Charleston, SC? I sure wouldn't say that. But in this case, at least, the math is the best reason not to write the loan. And on the other hand, if this guy was debt-free and made $75,000 a year, I'll bet he could walk in and buy this house if he was purple with green spots. So what's this fellow to do? I don't know. You could say, "why are you having so many kids if you make so little?" But it's a little late for that, now. Rent for a family his size is going be rough. The good news is, if he keeps on doing what he's doing, he'll get a raise and a step increase every year through the schools, and will gradually make a repsectable salary, and he can work over the summer (I think he already does) for extra. It's sad that a college-educated teacher should have to do that to put food on the table, but again, that's a different topic. I do know for sure that Charleston is a rotten place to be trying to buy a house--it's one of the worst real estate markets in the country, as an average house can't be afforded on an average local salary. The out-of-state retirees who come here have driven up values beyond the means of most "local" people, and unless you were in the market over 10 years ago before the big run-up and have ridden the equity elevator, it's darned-near impossible to not be house-poor.

So what's the moral of the story? Two-fold, I think. First, there might be a very could reason besides just evil, predatory businesspeople why some folks can't get a loan. But second, there's a lot more to the story than just lazy bums who won't get a job demanding handouts. This guy works his butt off doing a hard job from dark 'til dark, and I'm sure brings papers home to grade (and goes to track meets on weekends). And he did what it took to get a "professional" job--stayed in school, went to college, jumped through the innumerable hoops to get a job as a Charleston teacher. He's married, trying to provide for his wife and kids--and it's not like his wife can just leap into the workforce with 2 kids and twins on the way. It's folks like them that keep me awake nights. If you're reading this and have a clue, tell me what you would do.