What Color is the Sky? A Book Celebration (and review)

“It’s a wonderful thing to behold when you see someone take control of their finances AND their life.” – Finley

I finished my 2nd read of “What Color is the Sky” this weekend. What Color is the Sky is the 2nd book by a personal friend of mine, Michael Finley. As I said in the title, this is both a review and a celebration of a great book. I believe it is one of the best investment books available because it delivers useful, actionable, information instead of vague concepts. Because of this I have personally bought and given away over 40 copies of this book to friends and family  (and I hope to give more in the future, and that people read them!). A great feature of this book is that each chapter is 2 pages long and covers 1 topic. The book delivers a wealth of information in a short enough read for the average person. The average person doesn’t want to or have time to read 30 pages about stock market bubbles, timing the market or index investing. Finley delivers concise, precise, useful information that shouldn’t tax your attention span.

There are 5 stages in the book.

Stage 1 is simply Finley giving you a pep talk. He wants you to know that you are able to manage your own investing, or at least that you should be able to find someone to help you along but who won’t screw you (like 95% of financial “advisors” (salesmen) these days).

Stage 2 includes a lot of chapters informing you about what smart investing is NOT.
Smart investing is not trying to guess which one stock will do good each month.
Smart investing is not listening to your uncle who is not educated on investing.
Smart investing is not trying to find the best managed mutual fund and changing it each year or two.
Smart investing is not  investing in something because everyone else is (housing bubble, tech bubble, tulip mania).

Stage 3 includes a many chapters informing you about what smart investing IS.
Smart investing is investing in index funds (or target date funds which are made of index funds).
Smart investing means you are diversified through various classes of investments (US, international, bonds, REITS).
Smart investing is understanding opportunity cost, the rule of 72, taxes and different types of account you can save money in (401k, 403b, 529, IRA, ROTH or traditional).
You could skip right to stage 3 of the book if you are really bursting to get the knowledge of what you should do, but if you do you need to go back and read the start of the book. This whole book needs to be read, by everyone and I will buy it for you, if you need me too. As Mike often mentions in the book, he is not paid by Vanguard to promote their product, he just believes they are doing what they do the best. Similarly, I believe Mike is providing the most unbiased, useful, actionable (helps you actually make investment decisions) advice in an easy to understand format.


Stage 4 builds on stage 3 with more practical actionable advice.
Discusses buy and hold (vs selling constantly to buy “winners”), different asset classes such as large capitalization stocks, small capitalization stocks, REITS and bonds.
Discusses international vs domestic stocks.
It also discusses rebalancing your portfolio, asset allocation as well as one of my favorite topics the 1 and done fund, the Target Date Fund.

Stage 5 is rather short. It encourages you to continue your financial education with recommendations of some good books. It encourages you to seek fee-only advisors if necessary.

Finley also uses a chapter to provide his vision for the future. He speaks about institutional investors, who are collectively losing million of our dollars to fund “managers”. Many large state and company investment funds offer poor funds. He wants to change that. We must demand the change and to do that you must be informed.
Finally, Finley encourages you to share what you have learned. As is his life goal, educating and empowering others to become the best they can be, he encourages the readers to help others learn more about investing and personal growth. That is part of what I am trying to do by writing this blog and this post, teaching others what I have learned in hopes that it will make their lives better and ultimately, make the world a better place. Active fund “managers” are generally providing negative value to the world and we need to stop that, so do your part, learn, become educated, get rich and live a rich, fulfilling life.

You can find Finley’s book here on Amazon (as I said I get nothing from this, he doesn’t even know I wrote this until he will see it on Facebook). I will buy you the book if you don’t think you can afford it. Leave a comment below if you’d like me to buy you a copy. You can’t afford to not read this book and I can’t afford for you to not read this book! Changing the way the whole market operates is in my, your and the world’s best interest. Forward to a better future!

You Might Need $3 Million to Retire at Age 65

You might need $3 million to retire at age 65 (if you are 28 years old today, which I am). See how I came up with that number below.

The purpose of this post is not to scare you into thinking you’ll never save $3 million dollars. It’s to expose you to how to think about how much you need to save for retirement. You might not need $3 million. But how much do you need and how do you calculate that?

Most people have no idea how to save for retirement, how much to save, where to save that money, etc. In everyone’s defense, there seem to be a lot of questions and it seems daunting to learn. But in reality, it is not that difficult to invest your money for retirement. I have already written a blog post about how you should invest in a target date fund in your 401k (as much as you can a year) and call it good. You (may) not need any other investments.

But a good question people should have is “How much do I need to save for retirement?”
If you were to retire today some people say you need $1 million.
That number is created by using the 4% rule, meaning you can withdraw 4% of your money a year to live off of. $1 million x .04 = $40,000 a year to live off of (plus social security).

It can also be called the 25x rule. This means you need 25x the money you will need each year to live saved. If you want to live on $40,000 a year 25 x $40,000 = $1,000,000

This is fine for today’s retirees, but for people between the ages of 20 and 30 we might have a different number to shoot for.

We have to consider inflation. To account for inflation any number of year from now there is a very simple formula.

1.03^37 = 2.98 

(a quick review of powers, 1.03^37 means 1.03×1.03×1.03… 37 times)

$1,000,000×2.98=$2,980,000

What do the above numbers mean?

.03 shows an inflation rate of 3% per each year (which is a historical average of US inflation)

37 = 37 years in the future (when I’ll be 65)

2.98 gives you the answer of how much less money will be worth in those years (inflation).

So 37 years from now it will take $2.98 dollars to buy something that costs $1 today.

So you can take today’s money $1,000,000 and multiply it by the inflation rate 2.98 and get that you’ll need $2,980,000 (or basically $3 million) in 2054 to equal $1,000,000 today.

And that is why you might need $3 million dollars to retire.

So the basic formula

1.03^ (years until you turn 65) x how much you want to live on per year in today’s dollars x 25

Example:

(1.03^37) * $40,000 x 25 = $2,985,226

This means you would need $2.9 million dollars ($3 million) to retire.

Of course, this doesn’t take into account the fact that many basic services of today like food, healthcare, housing, transportation, will likely cost less in the future. You might not need near this much saved! But then again, you might. It never hurts to over plan. If you find yourself in a position with too much money you can always give it away.

I don’t want to scare people away from saving for retirement if they don’t think they’ll have $3 million. As this CNN article says, even though a lot of people say $1 million today the average person who’s 65 only has about $148,000 saved which would be $148,000 x 2.98 = $441,000 if you were to retire in 37 years. Now we agree that like CNN said, $148,000 is probably  a little low, but not starving low. So you likely want to shoot for between $441,000 and $3,000,000. Use the rule of 25x to think about how much you might need to withdraw from your investments but also remember to account for inflation!

If anyone would like to review their own personal retirement numbers with me don’t hesitate to contact me. I really enjoy reviewing these numbers with anyone.

My IRRATIONAL Fear – Short term market collapse

You NEED to understand that the market is risky, in the short term, but so is every other place to put your money, including under your mattress (inflation risk!). – Axel Hoogland (yes I quoted myself)

My IRRATIONAL fear is a short term stock market collapse (meaning stock prices go down for a year or 2, similar to 2008 market collapse) (Learn about what the stock market is here).I am afraid of this because I am continually telling people to invest their money in the stock market. Most people are already invested in the stock market (but don’t know how their money is being managed or what exactly they are invested in). Some are only invested in bonds (which is risky as you are losing money to inflation). Some will pull their money out of the stock market at the first sign of trouble or market dip, which happens often (dips) but usually the market recovers quickly and they would lose on the gains. When investing in the market people should always ask themselves “What do I need this money for?” You NEED to understand that the market is risky, in the short term, but so is every other place to put your money, including under your mattress (inflation risk!).

My greatest fear is being wrong. I hate to give people incorrect information. It is ok to be wrong on some things. If you recommend someone eat at a restaurant they will be upset with you if they don’t enjoy it they will choose to never eat there again and might just stop taking your advice on restaurants.

If you recommend something to do with investing people’s money, something that they don’t completely understand themselves, and they seem to lose money (even if it is only for a short time and then it comes back in a year or two) they may hate you forever. People will be sure that there was a better option for them to invest their money in. They will not know what that option was, but they will be sure it was better than following your advice.

Someone is is almost always better at doing something for you than you will be at doing it for yourself. Some things require training to learn how to do. Many people do not feel comfortable fixing their own car. They take it to an expert, a mechanic. They don’t feel they have access to the right tools or knowledge (and that’s often true) so they pay someone to do it for them.

Unfortunately many people are happy to let an “expert” manage their money, for a large fee! The problem is these people are not experts, they are “salespeople”! You don’t let the car salesman fix your car and you shouldn’t let a “financial salesman” manage your money. The truth is that as a whole all fund managers will underperform the stock market. This is because of the fees they charge and because they are bad at guessing (yes they are guessing) which companies will perform better than average on any given year. Whenever someone sells a stock remember someone is on the other side of that deal guessing that that stock is going up! As a whole, all managed money will underperform (measured by percent returns to clients after fees) the total amount of unmanaged (index funds) market. Certainly some money managers will pick good and outperform the market and many will underperform and pick worse stocks than the market average, but all charge high fees. That is why index funds generally are the best place to put your money. To further diversify you should put your money in a Target Date fund which automatically transfers your money to bonds (safer investments) as you reach retirement.

A question people often ask is

Q.The stock market is high, should I pull money out of the market?

A. I ask them “What will you do with your money it if you do “pull it out” of the stock market?” The stock market should always be at the highest it’s ever been because the world is growing in population, thus businesses are making more products to sell.

As Mr. Money Mustache recently posted about, there is always a recession coming, so instead of worrying about it, it is better to understand what might bring it about, understand what you are investing in and why, and ride the storm out. A benefit of all this is that if people understand what causes recessions, over spending followed by underspending, we (may) be able to avoid wild cycles and instead keep a nice steady rise in abundance in the future, that is my hope by helping to educate people on “The Stock Market”.

Now that I’ve shared my fear with everyone, and why it’s not a rational fear, you should continue to learn about investing and why it is probably one of the most important things you can understand for yourself and for the world. You can learn more about Target Date Funds (where everyone should start investing) from this post or this video.

Expense Ratio

If you could make an extra $1,000 a year would you? Of course you would! If you have a retirement account there is a good chance you are “giving away” over $1,000 a year in expenses to your fund adviser. The first thing you should do when you start looking into your investments is understand how much you are paying the people managing your money and how they are getting that money.

There are 2 main ways managers get money from you.

  • Loads
  • Expense ratio

Loads are ALWAYS bad.

Expense ratios are necessary but should always be low, less than 0.3% if necessary (meaning $3/$1000 invested) or less than 0.15% if possible $1.50/$1,000 invested.This is possible at Vanguard and many other places.
There are many places that will charge you a 1% expense ratio, $10/$1,000 invested! That’s 10x more money than places charging 0.1% (which is also very achievable).

Remember the expense ratio is taken out each year also, not only one time.  
Take an example where someone has $100,000 invested in a 401K.
If they are paying a 1% expense ratio they will pay $1,000 that year to their fund manager.
If they were paying a 0.1% expense ratio they would only be paying $100 a year, saving $900 a year! Does that sound important? It is!

In the Example below I share the result of a .2% expense ratio ($2/$1,000 invested per year) vs 0.6% ($6/$1,000 invested per year). You can see after 10 years you end up paying $836 more in fees with the 0.6% expense ratio.

For more information on expense ratios you should watch this video I made on expense ratios. Then you should go into your 401K or other investment accounts and try to find what expense ratio you are paying.

02016 Year End Review

You can read my 02015 year end review here, which I did in November 2015. Wow. For 02016 I am waited until the actual end of the year to complete it.  

Here is my 02016 year in review. You can check the contents below if you just want to skip to one section
YouTube
Simple Solar

Finances
Charities I Donate To
Microloans
            Kiva
            Zidasha
Books
Personal things I did this year
YouTube:
Earlier in the year as part of my quest to share information that I think will have a positive effect on the world I made a few videos about investing and money. They can be found on my Youtube Channel here. For 2016 I had a total of 680 views coming to 814 minutes or 13 hours and 34 minutes.  While that is not a record for YouTube by any means, it was an interesting experiment for me. I will continue to think about YouTube this year and see if there is any more interest on my part in using it.

02016youtubeviews

Simple Solar:

I believe almost 2 years ago I heard about a potential solar field that would be built by my local electricity provider. They called it Simple Solar. I really liked it for a few reasons.

  1. You could buy as many or as few shares as you wanted.
  2. You didn’t have to do your own maintenance (which most people don’t want to do, simple is better!)
  3. It would move with you if you moved houses, as long as you were in their provider area still. Not possible with a $20,000 home solar system.
  4. You didn’t have to worry about metering back into the grid it’s already part of the grid. This takes away a bit of hassle that you may have with a personal solar setup at your home.

The way it works after we purchased the credits and the field was build was that the shareholders will be credited each month on their bill for 20 years the amount that their shares produced when averaged over the whole solar field. There is no specific panel I own in the solar field.

I started receiving payments on my monthly bill in approximately July 2016. I also started paying for my panels, 4 shares of the whole project at $270/share for a total of $1080 or $90/month paid over 12 months. My monthly pay back rate is  $0.055002/KWH.  (Kilowatt hour). My 4 shares each generated 14.28 KWH in December (a not very sunny month). The normal rate I pay is $0.0579/KWH. While that is only $3.14 this month other months I have seen a payback of $6 or $7. Assuming a monthly payback of $5 = $60/year = $1200 over it’s lifetime. This just covers the $1080 investment. So at first it may not seem to be great money investment. $1,080 returning 7% a year for 20 years would be $3,869.  My calculation doesn’t take into account any raise in the electricity price that will surely happen over 20 years. It also doesn’t include a calculation for how much pollution is being reduced. Because of those reasons I see the money I put in this solar field as investing in the future. I see this as just as important as investing in your retirement accounts or perhaps even more important!

Here is an interesting website that shows the instantaneous and lifetime, and other facts, output of the solar field. Here is a video of the field.

I wrote 17 posts for www.MyWheelLife.com You can find the list of all posts here.

Finances:

Near the end of 02014 I was introduced to Mike Finley AKA “The Crazy Man In The Pink Wig”. He can be found here. He helped me learn a lot about investing and money management. One thing he encouraged was a yearly net worth statement. Here is what I’ve done over the year related to that.  

Start of Year 02016– 1-1-02016
401K – $60,383
HSA – $4,119.76  (none invested)
Vanguard – $14,268.47 ($3,000 to be part of 2016 ROTH $5,500 limit)
Bonds – $853
Total – $79,624.23

End of Year 02016 – 12-31-02016

401K -$85,896.34 (Change +$25,513.34)
HSA -$6,527.75 ($2,799.24 invested)   (Change +$2,407.99)
Vanguard -$17,933.78 (Change +$6,665.31)
Bonds – $882.01 (Change +$29.01)
Total – $111,239.88

My total 401K deferment was $17,399.20 between my own money and my company’s match. My personal ROTH IRA deferment was $5500, the max for someone under 55 years old. My HSA investment was $3350 but some of that was spent for health expenses, that’s why that is not $3,350 higher than the start of the year.

This gives a total of $22,899.20 into retirement accounts (401K + ROTH IRA).

You can see that my 401K balance rose more than the money I put in. This is due to growth of the economy. This is why it’s good to save money in the market, it grows faster than the market. You can see a great graph from Mr. Money Mustache here about how the market is always growing (over the long haul). If you checked the markets everyday, like I did, you will realize that most of the growth in stocks came after November 11th. Previous to this the return was hovering around 2% or 3%. This just goes to show that it is hard to know when to put money in which is why dollar cost averaging is a good strategy. With this strategy you don’t try to time the market. You just buy when you have money. This is how most 401K investments are set up if you have money deferred from a paycheck anyway since that is a regular payment.

On 7-6-02016 I purchased $2600 of FUSEX (a S&P 500 index fund) through my Health Savings Account which is held at Fidelity . The expense ratio is .09% or $0.90/$1,000 invested (Meaning if I have $2,600 total invested in that account I pay $2.34 per year to have that money in that investment. At the end of the year that $2,600 had grown to $2,799.24, which is a growth of $199.24/$2,600 = 7.6% growth. The Mad Fientist has a great post about the benefits of a HSA and investing it.

Digging further into my financial laundry, I will report that I do not own a house nor am I saving up for one. I am enjoying the limited amount of home repair time and cost that an apartment affords me. For most people you could include a house in your net worth calculation but you’d also have to include it in a debt calculation. I have no debt from vehicles, student loans or a house which puts me in a fairly good situation.

As for savings, I have a relatively small amount in cash at any one time. I do have my HSA which can cover any medical bills and the principle of my ROTH IRA can function as emergency cash at any time if I am in a real bind. If I need thousands of dollars in cash for anything besides a car or home loan I am probably in trouble. With my salary and  credit history and showing I have assets in a ROTH and 401K I should be able to secure a loan at any time with little down. This may not be an option for everyone but I believe it works for me.

I have a life insurance policy through work by default (2X my salary) and one extra one through work for $30,000 that costs about $2 a month. I have been meaning to cancel that but I have to physically send in paperwork and haven’t yet. Being a single male with no dependents I don’t see much need for life insurance on my part.

I wanted to share this information because a lot of people do not talk about money or retirement, but a lot of people are anxious about it. The less you talk about something the more anxiety comes from it because the less you know about it. I believe in the free sharing of information. I also believe if you don’t control your money it will control you. I understand that some people measure the value of others by how much money they have or make. This is true for people who don’t make or have a lot assuming that those who do have stolen it from them or others. It is also true for people who make or have a lot thinking that those who don’t are lazy or stupid. Both stereotypes are mostly wrong. Open dialogue between people would help clear up those misunderstandings. I also believe that knowing what you have should help you realize that you probably have more than you need. You can compare yourself to the rest of the world at the website “Global Rich List”. I found that (according to investments) I am in the top 7.6% of people in the world. That certainly makes you think.

global-rich-list

One thing that I am unsure about is how I am supposed to balance saving vs. spending vs investing in myself or others. I think about how selfish it is to consume so much energy, food, entertainment myself when there are many who are unable to get enough to eat. That lead me to read the book “Strangers Drowning: Impossible Idealism, Drastic Choices, and the Urge to Help”. While I am no saint, I wish I was better. One friend I talked to about this this year said that we should all do our best at whatever we are “called” to do. He thinks that if you are “called” to be the best race car driver in the world you should pursue that with passion. I am a bit skeptical if anyone is called to be the best race car driver. I understand that we can’t always be focused on helping others or we’ll get burned out or cynical. But how much more should we be trying to help others who are in a worse spot than us solely based on where they were born?

The tough thing about this line of reasoning is that you eventually end at that you shouldn’t have any fun and you are never doing enough because there is always someone else to help. At least that’s what others have told me. I want to take a bit more hopeful view of it. I hope for a time when we each care about one another more. We provide for those who don’t have enough and we aren’t to wrapped up in our own small lives. The book “Looking Backward” by Edward Bellamy has a pretty interesting outlook on this future.

In light of that, and while I am probably saving more than many people, I am also interested in many charities. Here is some information on those.

Charities I Donate To:

I read the book “The Life You Can Save”. You can read my review of that book here

That goal is possible. Here’s a seven point plan that will make you part of the solution to world poverty.

  1. Tell others what you have done. Spread the word in any way you can: talk, text, email, blog, use whatever online connections you have. Try to avoid being self-righteous or preachy, because you’re probably no saint, either, but let people know that they, too, can be part of the solution. Peter Singer (page 168 The Life You Can Save).

In working with that message, here is my list of charities for 2016 and a bit of justification for each.

Wikipedia – I uses this nearly every day. I appreciate that donating to charities allows you to choose how much you value it yourself and also allows you to pay as much as you can while not limiting access if you can’t pay.

Partners in Health – I read the book In the Company of the Poor: Conversations with Dr. Paul Farmer and Fr. Gustavo Gutierrez at the end of 2015 and into January 2016 at the request of a friend. I appreciate that Dr. Farmer is working to help those in need get basic services that we take for granted in the developed world.

Alternatives Pregnancy – Based in Waterloo, Iowa. This is a Christian based non-profit that helps women who are pregnant. They are a pro-life organization. I appreciate that they are working to help those who can be in a tough position (unplanned pregnancy) instead of just telling them to have a  baby but not supporting them.

St Augie – Platteville, WI – This is the church I went to in college. They asked me to donate to them so I do now since I didn’t have a lot of money in college. (This is a relatively small monthly amount).

Long Now Foundation – This is a non-profit dedicated to long term thinking. They are where I picked up the idea of using 02016 instead of 2016 for a year date. I like them because they are inherently selfless, planning for long after they are gone. ($8/month = minimum membership).

End 7 (sabin vaccine) – Similar to Partners in Health.

“Most people have never have heard of diseases like elephantiasis, river blindness, snail fever, trachoma, roundworm, whipworm or hookworm. But nearly one in six people globally, including more than half a billion children, have these diseases. Without treatment, NTDs can lead to lifelong disabilities and suffering. Just 50¢ can treat and protect a person against all seven of the most common NTDs for up to one year.” – From their site.

Focus – Being Catholic I supported a friend’s girlfriend and future spouse (now spouse) who was doing Focus at the time. Now I support one of her friends.

One Acre Fund – I read their book, The Last Hunger Season, and a few pages into the book I donated to their charity. Here is my review of their book. Their philosophy of giving a man (or woman) the tools and knowledge to take care of themselves vs. handing out charity is a great idea to me. This is supporting both immediate needs (within one growing season people get more food) as well as helping them provide for themselves long term.

Imagine Missions – A woman started an orphanage in Haiti. I went to a friends church one day this year and she was speaking there so I decided to donate to them. $25-$50 a month provides for a child’s education and food. They also make a Facebook post daily so you can keep up with what they are doing.

The Job Foundation – I both mentor kids through this local program and donate to them. I see it as an investment in the future. This is a local and long term program.

NPR – I had grown up listening to NPR and was on a resurgence about a year or 2 ago. Eventually I have transitioned to listening to audiobooks almost all the time when I’m driving but continue to contribute (a little) each month to NPR in the likely event I start listening to them in the future again. I also listen to some public radio content via podcasts so supporting my local NPR station is another way to support those. Similar to Wikipedia, if you can pay for something and you use it you should to help subsidise it for people who may not be able to afford to pay for it. I know I listened to NPR in my life when I couldn’t pay for it and others were.

Children International – This charity allows you to sponsor individual kids who otherwise wouldn’t be getting the schooling and some healthcare. This is an international and long term program.

House of Hope – This is a local charity that is helping women and children who are in a tough place. I like that it gives them 2 years to get back on their feet as well as helping with education. I think this is very similar to the idea of a basic income (in a limited capacity).

Charity:Water – This charity is working to provide clean water to people by providing wells. Clean water can provide so many benefits since it stops a lot of other issues related to dirty water. It also gives more free time since people shouldn’t have to walk as far to get water.

Give Directly – This is a charity interested in seeing what happens when you provide people with a basic income. I read the study, “Household Response to Income Changes: Evidence from an Unconditional Cash Transfer Program in Kenya”  about some people who received help from them. I am interested in what happens when a basic income in provided. Will people work harder at something they enjoy? I am interested in what would happen for a basic income if it was applied to everyone. It’s cheaper to provide that for people who have a lower standard of living to start out with. They are working on a basic income program this year in Kenya.

Cedar Valley Gearheads – I don’t donate to this charity but I was the Vice President this last year. I see their work as good for effecting a short term immediate need of some local residents. Each charity has it’s own focus, long or short term, local or distant. Ultimately all need support so we should just identify which we can help the most and do that.

Microloans:

Kiva

I had heard about micro-loans and microfinance for a while. I finally took the plunge and put my first $100 into Kiva January 28th, 2016. Since then I have put in a total of $608. Some of that was donated to Kiva for their own expenses. I have made a  total of 37 loans this year of $25 each for a  total of $925 loaned. That is one interesting thing about Kiva is that that money is not donated but only loaned. You can also pull that money back out of Kiva anytime after it’s been repaid to you. The money comes back but you don’t receive interest on it. I had one person die who I’d provided a loan to so that money was lost, but since it’s $25/loan (unless you choose to do more) it’s not a big loss. A much sadder loss for the man’s family that his life was lost.

kiva

I also read the book “Clay Water Brick: Finding Inspiration from Entrepreneurs Who Do the Most with the Least” which was sort of a memoir of one of the founders of Kiva.

Kiva is interesting because it gives you a lot of stats. You can keep track of how many countries you’ve loaned to (28 of 79 available countries to loan to for me this year). This could be a bit of a result of the gamification of everything. Another interesting aspect of their gamification is you can join lending teams. Fittingly the 2 largest teams with their stats are:

(A+) Atheists, Agnostics, Skeptics,… 36,404 members have lent $29,751,725 in 1,024,874 loans

We loan because… We care about human beings and understand that it takes people to help people.

And

Kiva Christians 18,557 members have lent $28,448,925 in 611,093 loans

We loan because… Pure and undefiled religion before God the Father is this: to care for orphans and widows in their misfortune and to keep oneself unstained by the world. (Jam. 1:27)

A little further down the list is Kiva Mormons 1,747 members have lent $3,877,725 in 111,031 loans

To spare you the math, and just for fun, that’s an average of $1533.06 from each Christian and $817.27 for each Atheists, Agnostics, Skeptics….
The Mormons come to $2219.65/person.

Another fun thing that Kiva will do for teams is make various graphs. For example the Kiva Christians seem to fund more loans by men (by some percentage) while the Atheists seem to fund loans to women by approximately 4x!

kiva-athiests-men-women

kiva-christians-men-women

Kiva’s microloan dollars are distributed by local banks and credit union partners in the countries it operates in. The lenders, such as myself, are only the capital. Some of the partners charge interest, others do not. The lenders (like me) do not get any interest though.

I am often quick to make a judgement about something like charging an interest rate to those who are asking for such small loans. To help offset some of those thoughts here is a FAQ page from Kiva. This can be seen as similar to the One Acre Fund policy of lending partners (people they are helping) money to purchase seed, fertilizer and other stuff from One Acre Fund and expecting to have that loan paid back. The borrowers are better off since they are able to produce more food for themselves and to sell. It is good for them to give that money back so someone else like themselves can receive that loan the next year. They are also free to get another loan from One Acre Fund to purchase more feed/fertilizer. Since they are likely to produce excess to be able to pay back the loan and have more for themselves overall the loan is a good thing. I believe the way Kiva’s partners operate with charging interest if they have to to survive may not always be a bad thing.

I am interested if Kiva and microloan is the right thing to do in general. I certainly believe that those people are probably being helped but one question is if the people who don’t receive loans are actually being hurt by the competition they are receiving from someone backed by a loan? Are the people receiving the loan getting an unfair advantage? I am not sure.

Another question I wondered was “Would there be an opportunity for ‘regular’ lenders like banks to make money from lending and gaining interest from a typical microloan user?” Again, perhaps but they may be more likely to lend at even higher rates than if the capital is coming from a relatively “rich” backer from Kiva. (Relatively rich since a typical loan on Kiva is a few hundred dollars compared to thousands or even hundreds of thousands for a typical USA loan for a car, house or education.

Kiva is also interested in other types of loans, such as their 0% loans available in the US here. Perhaps they are also available in other places?

Zidasha

I loaned my first money via Zidasha on August 21st, 2016. It is similar to Kiva (it was started by a former Kiva employee) in that it does micro loans. I can’t tell you exactly what is different. The way I have it set up it auto relends money as low as $1 (although you can go in and set it to relend at a certain date to allow more to get paid back to you for a larger loan to any one person). I sort of like have a little more ($25 vs $1) in each loan, but I suppose the way Zidisha does it, having even more people participate in each loan, donating as low as $1 spreads the risk out even more for the lenders. If you don’t particularly care which projects/businesses/school education gets your money the auto relending seems fine. It is probably more efficient. I mostly signed up for Zidisha just to see a different system from Kiva. My first loan through Zidisha was for $52 and now through repayments $78 total has been lent to 9 loans. I am not actively adding money to this like I have been to Kiva. I haven’t looked into it enough to determine which I really think is better. Kiva is certainly larger. You can find a lot more information about Zidisha here.

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Books:

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I finished reading 33 books in 2016. I started 2 books that I didn’t finish. Antiquities of the Jews (super long book, I got 100 pages in which is longer than most of the books on this list and Getting Things Done the art of stress-free productivity (2015 Edition) – David Allen This book I just found rather boring. A lot of people in the work group I read this with didn’t finish it either.) I also read 1 kindle book (Time and Regret). I had resisted reading Kindle books because I like being able to highlight in my books and find those references again. I found that it is even easier on a Kindle to do that. I also just like having a book in my hand. Maybe I’m old fashioned. I may try more Kindle books in the future.

I finished 21 audiobooks between audible and CD’s.  I have mainly given up listening to music or news on the radio. Perhaps current news would be good to listen to but I find it usually incomplete. I generally find that I can find more reliable information a few days after some real information is found out. I remember in 2015 listening as the Boston Marathon Bombers were being chased down. It sounded as though I was getting live updates from the officers chasing them. I was getting anxious just listening to it. I don’t really need that up-to-date news. I can hear it in a day or 2. Because of that I am now identifying things that will improve my understanding of how the world came to be as it is and things that will improve me. I read books on history and the future. On technology and religion, about science and pseudoscience and science fiction and a lot of books about space, Mars and astronauts! I listened to books about the governments of China, Russia and North Korea. I read a few books about the work certain nonprofits were doing (Kiva and One Acre Fund). I purchased 33 books from Amazon but only read 20 of them. I didn’t read 13 of the books I purchased (for myself to read). Of the other 12 books I did read some must have been purchased the previous year, some were purchased in person, a few came from a book study at work and at least a few were gifted to me by other people. I listened to 2 books by Walter Isaacson, read 2 by C.S. Lewis, 2 by Oliver Sacks and 3 by Scott Adams, one by Albert Einstein and one about him, 2 by astronauts (1 by Buzz Aldrin and 1 by Chris Hadfield) and one about the experiences of a lot of astronauts (The Overview Effect) and 2 books about Kiva (one by a person who started it and one by a man who loaned a lot of money via Kiva and interviewed some of the people who received that money).  I also read one book for the third time, Operating Manual For Spaceship Earth by Buckminster Fuller.

My complete reading list over the past few years can be found here.

Personal things I did this year:
In January I attended the Detroit Auto Show. One of my favorite vehicles shown there was the 3 wheel, 2 person Elio. It is not in production yet but I hope it eventually is!
In June I attended a wrestling Camp with my younger brother. He is a freshman this year.
Later in June I visited a friend in Texas. We went to the Johnson Space Center, 2 Lamborghini dealers and a Hindu Mandir (temple) in Houston.
In July I attended a family reunion where we celebrated the 100th birthday of one of my father’s aunts.
In July I also became a Godfather for the 2nd time.
In November I visited a friend in Chicago and went to the Museum of Industry and Science. The German U-boat there was incredible!
I visited the Performance Racing Industry Trade show in December 2016.

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Enough

“Some people are so poor all they have is money.” – Bob Marley (or Abe Lincoln, the internet will never know)

I was having lunch with some colleagues at work today. Of 6 people, 2 had done PhD work and the rest held Bachelor’s degrees, engineers and computer science folks. A few were talking about how they were in the wrong business and they wanted to get into something where they made more money. They decided that $300,000 a year was a place they could feel comfortable at. I almost fell out of my seat!

I am a mechanical engineer in the midwest I keep my expenses relatively low and I have a pretty good paying job, although nowhere near $300,000 a year.

I started the year with 3 concrete goals.

  1. Save $100,000 in my retirements accounts (cumulative, not this year alone!)
  2. Get a mentor
  3. Do 100 push ups a day

There are more but I haven’t structured them well enough to be shared yet.

Of the above I am already thinking about if the first one, have $100,000 in retirement account by the end of the year is a useful one or not.
I am 26 years old.

Having already saved between my 401K (pre tax), ROTH IRA (post tax, limit $5500/year) and HSA (Health Savings account) $75,000 as of Jan 1, 2015 I would have to save $25,000 to reach $100,000 by the end of the year. Now that is do-able but I am starting to question if that is a good goal or not.

If you have looked at anything I have done in the past you will see that I like to project forward. Here is how to “Retire A Millionaire, The Easy Way”.

Using the various numbers I already calculated from there (7% growth a year, 3% inflation) and the $75,000 I already have invested, that puts me at $1,049,612 at 65 years old (39 years from now), yielding $72,420 a year (at 7%) which is equivalent to $22,866 a year in 2015 dollars. Now if I was getting $23,000 a year for free what would I be doing? Probably anything I wanted! (This is before social security, assuming it’s still around).

You would calculate a future value using the below equation.

FV = PV*(1+r)^t

FV = future value of lump sum  

PV = future value of lump sum ($75,000)

r = interest rate per period  (7% = .07)

t = number of compounding periods (39 years)

FV = 75,000*(1+.07)^39 = $1,049,612

I’m a millionaire! time to start living like it!
Of course this equation is making plenty of assumptions based on the numbers I put in. Last year certainly did not return 7%, but again, referring to the previous article, there is good reason to assume 7% average over the long term.

This makes me question why I would even put any more in my retirement account? It already seems that I have enough! Now I will continue putting money in retirement accounts as long as I can not think of any other ways to invest it, certainly don’t take this as me telling YOU to stop investing in your retirement!

The next question is why do people live the way they do?
Do people really understand the simple math I laid out above and in my other article about how to calculate future and present worth?
Do people understand how to calculate a return?
Do people understand inflation?

Now I certainly don’t live like a king. I have monthly expenses of about $1200 and drive a used (2007) Prius. It’s reliable. Having taken the time to learn about finances from The Crazy Man In The Pink Wig and understanding the answers to the questions I asked above, I am very confident. I’d suggest you read one of his books, preferable “What Color Is The Sky?” I’d even purchase and mail it to you as I have done for many others, if you like. (Drop an email at hooglandaxel@gmail.com, or comment below!)

That all being said, back to the thought of enough. What does that mean? I guess each person has to figure that out for themselves, but it’s certainly something we should perhaps put a bit more thought into than we often do!

What is your “enough” number?
If you want to talk to me about what is enough, comment or drop me an email.