Speaking of organizational debt... (see May 14 post)

What great timing! Dave Ramsey published an eye-opening article today on the size of the federal deficit and debt and how that would translate into an average family's spending habits.

Personally, I don't distinguish between personal finance practices and government fiscal policy. Don't spend what you don't have. This also means I never bought into Keynesian economics either.

But IS there a difference? Is it good fiscal policy to carry out deficit spending on purpose? If you were in Congress, what would you do regarding the current debt ceiling/budget debate?

Is organizational debt ever 'necessary?"

"We don't have any debt-- what we have is a mortgage."

I am sitting at a finance meeting for a non-profit board on which I serve, listening to a kind, well meaning, and utterly convinced man explain that having a mortgage is not debt in any negative sense.  A stifled response welling up in my gut, all I could think as I listened to him go on was, "That is the silliest thing I have ever heard!"

But this blatant confrontation between the fiscal views popular on this board on which I serve, and my own financial practices, have made me do some thinking.  Should my stance on personal debt impact my stance on organizational debt?

I've been thinking about this a lot lately.

What do I mean by organizational debt?  Simply put, I define it as debt that is held in common by a non-profit, a company, or a government.  The latter have additional complexities that require a longer discussion, so I'll just stick with debt held by non-profits for today.

My work as member of both a non-profit board and my church's finance board have placed me in a position of responsibility to ensure that I make decisions that uphold the fiduciary interests of each organization.  Both organizations are actively looking to expand and build new buildings- one would cost less than $100,000 and the other could easily exceed $500,000*.  Given that popular opinion views debt as almost always a 'must' for capital investments like buildings, I have been forced to seriously consider how my personal views on debt should impact my responsibility to each of these organizations.

After some careful thought, I have concluded that even in these situations, my personal views should carry over to my role as a board member. Here are three reasons why.

1) My private views should be my public views and vice versa.  There should only be one version of 'me.'  Otherwise, I am a hypocrite.  I don't like politicians who say one thing in public and then do the opposite at home.  'Nuf said.

2) The reasons why I don't have any personal debt should also apply to these organizations and others.  Without debt and interest payments, the non-profit and the church have greater flexibility to pursue their mission.  Dave Ramsey cites one fact that the American church is $33 billion in debt.  $33 billion!  If any of you are churchgoers, how tired do you get of hearing about mortgage payments and wish that money would instead be used to help your local community and others around the world? 

3) Working with what you have ensures diligence and proper stewardship.  Others might hold different opinions and see 'leverage' through borrowing money as good stewardship and faster growth towards goals.  However, borrowing money places anyone, including non-profits, at risk.  Given that non-profits and churches typically have restrictions on how to generate revenues, taking on debt is even riskier and a miscalculation in expected grant money or church offerings could be disastrous.  Planning and saving for capital expenditures is not only less risky (is there even any risk?), it is also a good model for church-members to follow and possibly people that the non-profit serves (if that is part of its mission).

What do you think?  Is debt EVER okay for a non-profit or a church?
Is there any risk to not taking on debt?




*This might seem like pocket change to some folks out there, but for the communities that I am working with this is a lot of money.

Image: renjith krishnan / FreeDigitalPhotos.net

Go green to save green

Does going green mean this to you? 

Solar hot water heating. $
     A hybrid or even all electric car. $$
           Solar panels $$$


Going green doesn't have to mean spending a fortune.  Like with any major lifestyle change, you can take baby steps to lead a more green lifestyle.  This brief article can help you with beginning to brainstorm about ways you can reduce your consumption and thus spend less moolah.  And saving the environment is kinda cool, too.

Here are some of the things I do to help conserve and keep more money in my savings account.

1. We set the heat to 60 in the winter.  To stay warm and cozy, we wear layers in the house and use a small space heater in the room we are hanging out in.  Luckily, Texas winters aren't too cold.
2. Consolidate errands into one trip.  We live out in the country and this one really makes a difference for us.
3. Our garden has worked out really well for us.  Some nights, half of our dinner comes from our home-grown veggies- rewarding, organic, and delicious. 
4. Laundry and dishes are only done with full loads.

Remember- baby steps are the way to go so that you don't become overwhelmed.  

Financial literacy.. err.. sophistication courses required at college.

Champlain College is requiring students to attend financial literacy classes.  While I wish that strategies on obtaining a great credit score weren't part of the classes, I do think that knowing how all of this works is better than not knowing.  All things considered, I am so glad to hear that a college is finally preparing students for the real world in terms of personal finance, other than assisting them with gaining experience on paying back a loan.

Does growing your own food really save you money?

I started my first garden this summer and am now wrapping up my fall harvest of green beans, Swiss chard, radishes, carrots, some basil, and marigolds for the bees and butterflies.  I started my own garden so that I could have organic vegetables that are really hard to find in the grocery stores where I live.  (I often get dirty looks when I ask for organic, as though it were a four-letter word!)  I also thought it would be a great way to save money as I could replace a portion of my weekly groceries with what I grew.
The jury is still out for me on this one.  I really enjoy spending time in my garden (it's often only an hour a week, though it probably should be more) but for some people, time really is money and the time they spend gardening may be time they could be making more money that will pay for those veggies and then some. 

There's also the cost of getting your garden started and maintained- good soil, compost, fertilizer, watering, plant supports, seeds or seedlings, etc.  My garden is in our church's community garden so many of these items have been free for me thanks to donations. 

And if pests or a bad season devastate your crops (my poor zucchini succumbed to squash vine borer!) then you are out time and money.

For now, I think I will continue gardening and appreciate it for what it is right now- a hobby that can yield some fun and tasty treats.  If I become more skilled, I might get serious about treating my garden as an important food source for my family.

It's been awhile.... Here's something to get us started again

I've been so bad about updating on here.  My apologies to all of you.  We moved to the country about 8 weeks ago and have been trying to get settled ever since.  And by settled, I mean raising chickens (that's Full Moon, a Plymouth Barred Rock chicken, to the right), building a chicken tractor, starting a garden at home AND in a plot at our church's community garden, unpacking, etc.....


I had a conversation with a coworker recently who told me he didn't have any money saved.  And he has a good income!  Sure, he has money in stocks and some in retirement but how long would it take for him to get that money out if he really needed it?  At least a couple of days. 

I came across this article today on the excuses people give for not saving money.  I agree with most of what Liz says, but disagree with her 'wiggle room' on excuse #6 "I have credit cards to pay for emergencies." 

Emergencies are funny little life events that can often snowball into major DISASTERS!  Putting those emergency expenses on credit cards is like begging for a lot of high-interest debt that becomes a big hairy monster in your life for a long time.

Americans my age (young professionals) especially need to get with it on saving for emergencies.  Most of us have not lived long enough to know that life can throw some pretty gnarly curve balls.

Community banks and credit unions vs. BIG banks

In response to a comment on my last post, I am going to highlight some of the reasons why I think more people should take their business to a community bank or credit union.  Many of these reasons are based on recent history with the financial services and housing crisis that resulted in the 'Great Recession.'

First of all, big banks (Bank of America, Citigroup, Wells Fargo, etc.) are publicly traded corporations.  Their primary goal is to increase shareholder wealth.  Providing great customer service through charging lower (or no) fees, employing well-trained customer service representatives, and offering higher interest rates on accounts and lower interest rates on loans are all ways to NOT increase shareholder wealth as they are more expensive ways to do business.

To increase shareholder wealth, many of these banks charge exorbitant rates on credit cards after initially offering a lower teaser rate, invest in risky financial products that I have a hard time understanding how they work (sub-prime loans anyone?), and generally don't provide good customer service as a way to cut costs.  Many of these banks also took federal bailout money and did NOT use  it to help customers and thus the overall economy.  (There are many more details surrounding this but I will not delve into them here.)

Community banks and credit unions generally have to develop and maintain a good relationship with their customers or else they will not have customers for very long. I recently emailed the community bank that I opened an account with and within an hour I had a response from the same person I spoke to on the phone last week.  I think the reason that more people have not been using these smaller banks and credit unions is that bigger banks advertise more and have more physical locations that increase their visible presence in a community.  This is not to say that smaller financial institutions are not going to make mistakes or mistreat you- but if they do your decision to leave hurts them a lot more than it would a bigger bank.

You can also watch this interview from Fox Business with the CEO of a community bank on why people are leaving big banks.